‘Unpaid’ loan of Serepisos now worth $2.5m
$152,500 from an Auckland company balloons over six years
In 2018, property developer Terry Serepisos borrowed $152,500 from an Auckland company. That sum has ballooned to around $2.5 million in nearly six years, and the lender wants it repaid.
Gumdigger Limited is seeking a summary judgment from the High Court at Wellington on whether Serepisos is legally bound to repay the loan. Serepisos’ lawyer is arguing the dispute should go to full trial.
The court heard that Serepisos took out a three-month loan of $115,000 on August 24, 2018, including a $15,000 set up fee, from Gumdigger. On November 2 that year, and within the original loan term, Serepisos borrowed an extra $37,500, payable at the end of the original three-month term.
In 2024, the court heard that the $152,000 loan was now worth around $2.5m. There was some debate in court over the annual interest rate since the loan was taken out, but Gumdigger’s lawyer, Robert Hucker, said it was around 60 per cent.
The loan was guaranteed against three Wellington properties, although the court heard they had been sold.
Company records show that George Hunter is the sole director and shareholder of Gumdigger. Its official business classification is “residential property operation and development (excluding site construction)”.
Neither party attended the April 22 hearing before Associate Judge Andrew Skelton in person. A key part of the case was whether the loan was a business loan or a consumer loan covered by the Credit Contracts and Consumer Finance Act (CCCFA).
‘Oppressive’ loan terms
Serepisos's lawyer, Seth Fraser, argued that the loan's terms were oppressive because the interest had ballooned into the millions.
“We have a loan of [less than] $200,000 that has become $2.5m. There is no evidence of requests to repay interest.”
He said that, along with other issues, needed to be addressed in a full trial.
The CCCFA allows the courts to review a credit contract if it deems it oppressive, which the act defines as “oppressive, harsh, unjustly burdensome, unconscionable, or in breach of reasonable standards of commercial practice”.
Hucker countered that Serepisos was a well-known businessman. He must have been aware of the loan agreement terms, and the repayment was due within three months.
“He would know if he had repaid any part of the loan, and there is no evidence that he has.”
Loan document the key
Hucker said the loan agreement was the key document in the dispute because it clearly stated that the credit would be used for business, investment purposes, or a combination of the two.
That meant it wasn’t subject to consumer protection provisions provided by the CCCFA.
Under the CCCFA’s section 14, that proviso wouldn’t be valid if the lender knew, or had reason to believe, that the loan would be used for personal or domestic uses and would, therefore, be enforceable by the act.
Hucker said there was no evidence to suggest Gumdigger thought the loan would be used for anything other than business or investment. The only evidence from Serepisos was that the loan was used to repay a debt owed by his mother to General Finance, he said.
Fraser said under the CCCFA, the onus was on the loan provider to show they weren't a lender under the terms of the CCCFA.
There is no evidence before the court as to why Mrs Serepisos had to pay that debt to General Finance.
Associate Judge Andrew Skelton
He disputed the loan was a business loan as it was made so that Serepisos's mother could repay the loan to General Finance.
Associate Judge Skelton said whether the debt was for personal purposes was unknown.
“There is no evidence before the court as to why Mrs Serepisos had to pay that debt to General Finance,” the judge said.
Defining a lender
Another point of dispute was whether Gumdigger, which isn’t registered as a lender, needed to be registered under the Financial Service Providers (Registration and Dispute Resolution) Act.
Under section 99B of the CCCFA, such an unregistered lender can't enforce the repayment of a consumer credit contract.
Hucker disputed Serepisos’ case and said that Gumdigger did have to be registered. The argument against that was twofold.
One was that Gumdigger didn’t need to be registered because it wasn’t in the general business of making loans. Secondly, even if it did need to be registered, the loan wasn’t a consumer credit contract, as already stated.
Associate Judge Skelton said he would have to decide if that was at least arguable or not before agreeing to a summary judgment.
The court also heard arguments that a security-sharing arrangement Gumdigger had with another lender prevented enforcement of the loan, which Gumdigger disputed.
Hucker disputed the need for a full trial and said it was incumbent on a defendant to put its full case forward, even in a summary judgment case.
“The court must act on the evidence that is currently before it instead of speculating on what might come.”
Associate Judge Skelton reserved his judgment.