The flock see RED
THE financial woes of Tonga’s Free Wesleyan Church drew so much attention that the elite Australian commercial law firm of Clayton Utz looked at the issue in detail. Founded 1833, it is one of the Big Six law firms in Australia, and is consistently ranked as one of the most prestigious firms in the Asia-Pacific region.
This article by Orla McCoy looks at what it described as a court, where possible, taking allegedly unconscionable interest rates on loans into account when exercising its discretion in an insolvency matter. The circumstances in Re Free Wesleyan Church of Tonga in Australia were as follows: The Free Wesleyan Church of Tonga (the Church) was an association incorporated under the Associations Incorporation Act 2009 (NSW). It wanted to build a church for its adherents in Sydney. To obtain funds to enable the completion of that project (having exhausted other sources), the Church borrowed $950,000 from Phoenix Lacquers & Paints (Phoenix).
The Phoenix loan was secured by second ranking securities and personal guarantees. Importantly, the interest rate was “between 5% and 7% per month, compounding monthly,” equivalent to a simple interest rate of 22% per month. Within three and a half years, the Church owed $9.5 million to Phoenix.
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