Couch v Branch Investments (1969) Limited [1980] 2 NZLR 314 is an often cited case regarding the temporary forbearance of taking legal action on enforcing a debt as being consideration to enter into a new contract with the creditor.

This transaction was processed as a hire purchase, which was a sham, due to the fact that Branch Investments were not in the business of selling yachts, for which he personally guaranteed the debt.

Even more so as the debtor later discovered, when he realised that the original hire purchase agreement was illegal and not legally enforceable.

If it was later discovered that the creditor withheld evidence or made misleading statements during the legal proceedings, this would likely complicate the matter.

Richardson J said If the primary rule is that there is sufficient consideration where the party suing on the compromise or the forbearance honestly believed that he had a good or at least an arguable cause of action which he had genuinely intended to pursue, once that factual issue is decided affirmatively the merits of the original claim are no longer material.