Family Protection Act claims and litigation funding

What happens when a mortgagor defaults and when can a mortgagee exercise a power of sale: In circumstances where a loan advance is secured by a mortgage over land and the borrower (Mortgagor) defaults in their payment or other obligations owed to the lender (Mortgagee), the Mortgagee’s right of action against the Mortgagor becomes exercisable, entitling the Mortgagee to take steps to enforce its mortgage security to recover the outstanding loan amount. The exercise of a Mortgagee’s rights and powers against a Mortgagor in default are governed by strict requirements under the Property Law Act 2007 (Act) and are subject to the terms of the underlying loan agreement and/or security documentation (together, the Loan Agreement). Importantly though, any term of a Loan Agreement that conflicts with certain provisions of the Act is considered ineffective and unenforceable – these provisions of the Act cannot be contracted out of and will prevail over any inconsistent terms in a Loan Agreement. Notice Requirements When a Mortgagor is in default of the terms of their Loan Agreement, the rights and powers conferred on the Mortgagee are considerable and can have a significant impact on a Mortgagor. Therefore, a Mortgagee may only exercise its powers of enforcement after giving valid and effective notice to the Mortgagor of the default, or defaults, (Default Notice) and the Mortgagor has been given an opportunity to remedy the default(s) within a specified period of time from service of the Default Notice (the Remedial Period). Thus the Act provides statutory safeguards against arbitrary enforcement action by a Mortgagee against a defaulting Mortgagor, whilst preserving and codifying a Mortgagee’s rights and powers. The Act specifies that a Default Notice must “adequately inform” the Mortgagor of: the nature and extent of the default; the action required to remedy the default (if it can be remedied); the timeframe in which the default must be remedied, being not less than 20 working days (or 60 working days in certain circumstances) after service of the Default Notice on the Mortgagor; and the consequences that will follow if the default cannot be or is not remedied within the timeframe specified. Mortgagee’s Powers If a Default Notice has been issued, and following expiry of the Remedial Period the default remains unremedied, the Mortgagee becomes entitled to exercise its “powers” by doing any or all of the following: selling the mortgaged property or any part of it (commonly known as a mortgagee sale); entering into possession of the mortgaged property; appointing a receiver to manage the mortgaged property and recover income from the mortgaged property; and/or calling up as due and payable all amounts secured by the mortgage prior to the term expiry date (in circumstances were the term of the loan has not yet expired). Any attempt by a Mortgagee to exercise such powers prior to issuance and expiry, without remedy, of a Default Notice will be unlawful and can expose a Mortgagee to a claim for damages and/or injunctive relief by the Mortgagor. For this reason, a Mortgagee seeking to exercise its powers against a Mortgagor in default must take care to ensure strict compliance with the notice requirements in the Act. Acceleration Most standard form loan agreements contain an “acceleration clause” providing that on default by the Mortgagor all amounts secured by the mortgage become payable, or may be called up as payable, earlier than would be the case if the Mortgagor was not in default. So, for example, a Mortgagee and a Mortgagor have agreed that the term of a loan is 20 years from the date of advance of the principal sum, meaning the Mortgagor has 20 years to make scheduled repayments of the principal sum plus interest, costs and any other charges. The Mortgagor agrees to make fortnightly repayments to the Mortgagee during the term of the loan. However, five years into the 20 year term, the Mortgagor defaults in their obligations by failing to make the agreed fortnightly repayments when due. This means the Mortgagee is contractually entitled to “accelerate” the repayment of the loan by requiring the Mortgagor to repay the full principal sum (together with interest, costs and other charges) immediately, without having to wait for the 20 year term to expire. However, before a Mortgagee can rely on an acceleration clause, a valid and effective Default Notice must first be issued to the Mortgagor and have expired without remedy. Extended Remedial Period In most cases, the minimum Remedial Period will be 20 working days after the date of service of the Default Notice. However, in situations where the Mortgagor has defaulted in repayment of the principal sum on the term expiry date but has continued to pay interest, and the Mortgagee has accepted those interest payments, for a period of three months or more after the term expiry date (and so long as there are no other defaults existing) then the Default Notice must allow a Remedial Period of at least 60 working days after service, before the Mortgagee may exercise its powers of enforcement. Service A Mortgagee will be expected to prove that it has formally served the Mortgagor with a Default Notice, which has expired without remedy, before the Mortgagee is entitled to exercise any of the powers. In addition to service of the Default Notice on the Mortgagor, the Act requires that other specified parties be served with a copy of the Default Notice, but only if the Mortgagee as actual knowledge of those parties’ names and addresses. The parties required to be served include any former mortgagor, covenantor/guarantor, subsequent mortgagee, any holder of any other subsequent encumbrance, caveator or any person who has lodged a notice of claim under the Property (Relationships) Act 1976. Because a Mortgagee’s right to exercise its powers only becomes available following service of a Default Notice and expiry of the Remedial Period, the Default Notice must be validly and effectively served on the Mortgagor (and any other person required to be served). Compliance with the service provisions of the Act is mandatory and failure to adequately serve a Default Notice has the potential to restrict or delay the Mortgagee exercising its powers. Such a failure also allows scope for a Mortgagor to challenge the Default Notice and/or seek to prevent or injunct the Mortgagee’s exercise of the powers. Such steps can result in a Mortgagee having to restart the process of serving a Default Notice, costly delays, Mortgagee liability and/or litigation. A Mortgagor served with a Default Notice should contact the Mortgagee and seek legal advice without delay. Usually by the time a Mortgagee issues a Default Notice the Mortgagor has been in default of its obligations under the Loan Agreement for some time and the Mortgagee’s previous requests for remedy have been ignored. In our experience, proactive engagement by a Mortgagor is much more likely to lead to the parties being able to find mutually acceptable solutions. Holland Beckett can provide advice and assistance to Mortgagees and Mortgagors in respect of their rights and obligations under the Act.

Commercial activities on Lakes Rotorua and Rotoiti have been slapped with potential delays and prohibitions following Council’s recent vow to review consenting obligations of existing operators. For many, seeking a resource consent is costly, time consuming and uncertain. This can make or break businesses, but so too can a prohibition against operating. When a business is noncompliant with its consenting requirements enforcement is either at the whim of Council, or a time machine. What is unusual about the situation in Rotorua is the number of operations caught without a consent. So just how did so many companies get it wrong? Operating by right, until you’re not In 2016 the Rotorua District Plan introduced rule WTRZ-R12, requiring anyone wishing to operate “commercial outdoor recreation activities, including associated buildings and structures” on Lakes Rotorua or Rotoiti to obtain a discretionary resource consent. Prior to 2016 this resource consent was not needed. For existing operators, even those who have operated on the lakes for decades, section 10A of the Resource Management Act 1990 (RMA) could be followed. This section allows existing commercial activities to continue if: The activity began before rule WTRZ-R12 came into force; The activity’s effects have remained “the same or similar in character, intensity, and scale” after the rule’s commencement; and Consent under the new rule is applied for within 6 months of the rule becoming operative. If the above requirements are met the activity may continue to be carried out until the consent application is determined (including any appeals). The rule became operative in July 2016 along with the entire plan. This meant that, if no consent was applied for by January 2017, existing operators would be noncompliant and open to Council enforcement. ‘Forgotten’ consenting ≠ blind compliance It seems the Council hadn’t enforced the rule until the Lakeland Queen’s liquor licencing application in 2025. Launched in 1986, the Lakeland Queen dining cruiser has voyaged Lake Rotorua up until its recent hiatus to restore the vessel. After completion in 2025, its subsequent liquor licence application was denied as it did not hold the required consent under rule WTRZ-R12. The Council noted: “Now that this situation has come to light, we are also looking into the status of other operators and will work with anyone affected to address any consenting requirements.” In March 2026 the Council had identified 14 noncomplying businesses and had given them 14 days to lodge, or show evidence that they have begun to prepare, an application for consent. This was generous and not required by Council. Those 14 days are now up, leaving any remaining noncompliance issues to be worked through by Council. Navigating your planning risks Noncompliance with the RMA or local planning documents is not forgiven simply because the Council neglects to police it. They remain enforceable by Council whether the operator knows the rules or not. Businesses are responsible for their own education of the planning framework and compliance with it. At Holland Beckett we understand that navigating Aotearoa’s dense planning framework is a difficult, but necessary job for businesses. We help our clients stay updated with their planning responsibilities, plan changes, law reforms and other Governmental processes – we value proactivity wherever possible. Ensuring compliance with planning provisions is our bread and butter. Our advice is steeped in a sound understanding of the law and commercial risks to find sensible solutions for our clients. To get ahead of your commercial planning risks, contact our specialist environment and planning team.

When a company director signs an agreement on behalf of a company they may also be required to sign a personal guarantee, this means they are accepting personal liability for the obligations of the company. Personal guarantees are common in several types of agreements, for example leases, supply/trade agreements, or loans. They provide additional security for lenders, allowing lenders to bypass a company when there is a breach of the agreement and look to the assets of the guarantor. However, in certain circumstances a personal guarantee may not be enforceable, including when a director has only signed an agreement once, in their capacity as a company director, and not in a “dual” capacity. Where there is only one signature on an agreement, there is a presumption that a person who signs once is signing as an agent of the company – and not in their personal capacity. To hold that person liable as a guarantor, it must be shown that the person signed in a dual capacity: this means that they signed on behalf of the company and in their personal capacity. Factors in Determining Dual Capacity 1. Whether a person has signed an agreement in a dual capacity is circumstantial, however there are factors that assist with determining whether a person has signed in a dual capacity. These include: The structure of an agreement is an indicator of whether a director has signed in a dual capacity. Typically where there is a guarantee, an agreement will identify the contract’s parties – which will include the lender, the company (for example as borrower/principal debtor) and the guarantor. If the guarantor is not a listed party to the agreement this may indicate that the director did not sign in a dual capacity and is therefore not bound by any personal guarantee clauses within the agreement. The description of the signatory is another factor – however, this is not a straightforward indication as to whether a person has signed in a dual capacity.  If the person is listed merely as a “Director,” this typically suggests the signature was made only on behalf of the company. That said, context is important, and “Director” may also be used to describe someone who happens to be bound as a guarantor. The wording of the clause is also a key indication as to whether the guarantee is effective. If the clause includes clear acknowledgements by the guarantor, for example, inserting their name in the clause and/or an express acknowledgement that by signing the agreement they are accepting personal liability as a guarantor, can support enforcement. A guarantee clause may reference a separate document. Overall, the clauses should be read carefully as they may merely be an agreement to obtain the personal guarantee in the future in a separate document. While potentially more difficult to prove, evidence that the personal guarantee clause was explained to the individual prior to signing can support the argument that the individual understood and accepted the dual role. Oral or written statements may be used to demonstrate this, however the main issue with this comes down to evidence. 2. Whether a director has signed in a dual capacity can be a complex issue when there is not a separate signature section. These sorts of issues are unlikely to arise in modern agreements, but may still arise in older ongoing agreements where there is less clarity. Clarity is Key Determining whether a personal guarantee is enforceable when there is only one signature is a fact specific exercise – the language of the clause, the entire agreement and the circumstances need to be considered. A personal guarantee clause may be insufficient on its own to make a director or shareholder personally liable for company debts. For such a clause to be enforceable against an individual, the individual should sign the agreement twice (once in their capacity as director of the company and again in their capacity as a personal guarantor) or the agreement should be clear that an individual has signed in a dual capacity. To avoid any issues, clarity is key. Agreements should be clear when a director or shareholder is committing themselves personally, not just on behalf of the company.