Co-Operative Bank Limited v Opai
[2023] NZHC 1027
•15 December 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-243
[2023] NZHC 1027
BETWEEN THE CO-OPERATIVE BANK LIMITED
Plaintiff
AND
MELISSA JEAN OPAI
Defendant
Hearing: 23 August 2023 Appearances:
R J Gordon for the Plaintiff
M J Opai, Defendant in Person
Judgment:
15 December 2023
JUDGMENT OF ASSOCIATE JUDGE SUSSOCK
This judgment was delivered by me on 15 December 2023 at 4.15 pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
MinterEllisonRuddWatts, Wellington
THE CO-OPERATIVE BANK LTD v OPAI [2023] NZHC 1027 [15 December 2023]
Table of Contents
Introduction [1]
Interim judgment [11]
Summary judgment principles [24]
Factual background [26]
Has liability for the outstanding debt owed been established on a prima facie basis? [55]
Does the failure of the Bank to provide a copy of the Standard Terms provide an arguable defence for Ms Opai? [63]
Do the mistakes made in respect of security or other discrepancies prevent summary judgment being entered? [69]CCCFA defences [84]
Has the Bank neglected, refused or failed to exercise the care, diligence and skill of a responsible lender in its dealings with Ms Opai? [88]
Is a defence available that the agreement was oppressive? [94]
Costs [106]
Result [107]
Introduction
[1] The Co-operative Bank Limited has applied for summary judgment in respect of a unpaid loan of $374,546. The loan agreement was entered into following the consolidation of earlier loans owed by the defendant, Melissa Jean Opai, and her mother as co-borrowers. Ms Opai’s mother sadly passed away in September 2017. Following her death, Ms Opai continued servicing the loans that had been entered into jointly and severally with her mother and that were secured over Ms Opai’s mother’s house in Papakura.
[2] After discussions prompted by Ms Opai, the Bank agreed to consolidate the loans. This led to a new loan agreement in May 2021 between the Bank and Ms Opai in her personal capacity only. This is the loan agreement that is the subject of this summary judgment application.
[3] The unusual aspect of this case is that although it is described as a home loan agreement, the bank says it is unable to enforce the security over the Papakura property because Ms Opai only holds the house in her capacity as executor of her mother’s estate and not in her personal capacity. The Bank says this has precluded it from taking the more usual path of a mortgagee sale of the property to recover the outstanding debt owed.
[4] The Bank submits the fact that it made a mistake in terms of whether it had security in respect of the loan does not affect the contractual bargain that was entered into in May 2021. The Bank says Ms Opai agreed to borrow money and it is common ground that she has defaulted on the agreed terms of repayment so summary judgment for the unpaid loan is appropriate.
[5] Ms Opai is representing herself and opposes summary judgment on several grounds including that the loan agreement is invalid because it was set up as a home loan yet no security was taken and because the Bank knew that Ms Opai held the property in her capacity as executor. Ms Opai says further that the Bank renewed an insurance policy over the property and deducted premiums from Ms Opai’s account without her consent.
[6] Ms Opai raises issues in respect of Property Law Act (PLA) notices served on her by the plaintiff in 2019 and questions whether these were lawful given her mother had passed away by the time they were served.
[7] In addition, Ms Opai says that she was not provided with a copy of the Standard Facility Terms & Conditions either when or after the May 2021 loan was advanced and nor has the Bank provided any evidence to suggest it did otherwise.
[8] Ms Opai also relies on discrepancies in the Bank’s pleadings and evidence including that one of the original loan facilities, loan facility “97”, is not referred to as one of the facilities consolidated into the May 2021 loan.
[9]Finally Ms Opai’s notice of opposition pleads that:
(a)the Bank neglected, refused or failed to exercise the care, diligence and skill of a responsible lender in all its dealings with the respondent (initial and subsequent) thereby breaching its lender responsibility and/or obligations; and
(b)the Bank neglected, refused or failed to make sure the loans (and its credit-related insurance) were not oppressive, that they did not induce
the borrower to enter into loans through oppressive means and that they did not exercise their rights under the loan oppressively.
[10] These pleadings reflect the wording of s 9C(2)(a) and s 9C(3)(e) (more directly) of the Credit Contracts and Consumer Finance Act 2003 (CCCFA). At the hearing, the focus in relation to these grounds was Ms Opai’s submission that she had been set up to fail, as well as her submission regarding the deduction of insurance monies from her account when she had decided not to renew the insurance.
Interim judgment
[11] On reflection, further consideration needs to be given to the question of whether the Bank breached the lender responsibility principles under the CCCFA by consolidating three loans into one personal loan owed by Ms Opai, when two of the previous loans were owed jointly by Ms Opai and Ms Opai’s mother’s estate. This change has apparently caused the issue with the ability to enforce the security. Because that outcome appears to have been inadvertent, Ms Opai may not have been advised of the full implications of this change.
[12] Section 9C(3)(b) of the CCCFA requires lenders to assist borrowers to reach informed decisions as to whether to enter into an agreement “and to be reasonably aware of the full implications” of doing so. Because neither the Bank nor Ms Opai appear to have been aware that the steps taken to consolidate the loans would change the position in respect of the security, this lender responsibility principle may not have been complied with.
[13] The impact on Ms Opai may be significant as previously she was a co-borrower with her mother’s estate. Ms Opai and her mother’s estate’s liability was joint and several and so the Bank may have been able to pursue only Ms Opai in any event. And so it may still be appropriate to enter summary judgment. However doing so may leave Ms Opai in a difficult position, perhaps having to bring proceedings to establish a right of contribution against the estate. I did not hear sufficiently from the parties on this question and nor is there sufficient evidence before me in relation to the entering into of the loan agreement in May 2021.
[14] One option would be to decline summary judgment, but I do not consider it is in either party’s interests at this stage. It may be that the Bank has a clear basis for establishing it has complied with the lender responsibility principles. In addition (and importantly) issuing this judgment as an interim judgment may allow the parties to settle matters between themselves. As discussed in more detail below, the matters otherwise raised by Ms Opai do not provide an arguable defence. Issuing this interim judgment is intended to assist Ms Opai to realistically assess her position and may allow her to reach a settlement with the Bank.
[15] Equally if it becomes apparent that the Bank may have failed to comply with the lender responsibility principles, for example if the May 2021 loan may be found to be oppressive, then this interim judgment will allow the Bank to explore possible settlement options with Ms Opai that work for both parties.
[16] There is no question that the principal of the loan needs to be repaid. Ms Opai accepts this.
[17] The Bank’s position is that it is unable to undertake a mortgagee sale of the property because the loan is only in Ms Opai’s name, and the property is in the name of the estate. Accepting that is the position, if instead the consolidated loan had been in the names of both Ms Opai and her mother’s estate (as it was previously) then the Bank may have been able to exercise its power of mortgagee sale earlier. At that stage, the balance of the loan would have been lower, because not as much interest would have accrued, and the legal costs of these proceedings would not have been incurred. Furthermore, any repayment of the loan would have been required by Ms Opai and Ms Opai’s mother’s estate as co-borrowers, rather than just by Ms Opai personally.
[18] There is no evidence before me of whether there was an agreement between Ms Opai and her mother in terms of the repayment of the loan. The principal owing under the loans that were consolidated may have included the original mortgage of Ms Opai’s parents and potentially further borrowings for living expenses of Ms Opai’s mother. Ms Opai says she agreed to be a co-borrower to support her mother but there is no evidence as to whether the loan payments made by Ms Opai were a loan to her
mother (or her mother’s estate) or in lieu of rent or a combination of both. Ms Opai’s mother died intestate so there is no will to assist with this.
[19] Ms Opai has two brothers so if the loan is repaid by the estate, as opposed to Ms Opai personally, then it makes a significant difference to Ms Opai’s financial position. For example, if the loan of $374,461, being the amount that appears to have been owing on 19 May 2022 at the time of the last payment by Ms Opai 1, is paid by Ms Opai’s mother’s estate and the value of the Papakura property is $850,000 then the estate will have approximately $475,000 to distribute following repayment minus expenses. Unless matters have changed since the hearing, it does not appear that the loan will be able to be repaid without selling the property. If the remaining amount following a sale and repayment of the loan is then divided between the three siblings equally they would each receive approximately $140,000 (assuming expenses of around $50,000 including real estate commission).
[20] If instead the whole of the loan is repaid by Ms Opai personally (which may still require the property to be sold so Ms Opai can access her share to avoid bankruptcy) then Ms Opai would be indebted for the whole of the loan of $374,461 but would only receive approximately $265,000 for her third of the proceeds of sale of the house (again on the basis that expenses are $50,000), so her net position would be -$109,646. Although Ms Opai may then have a right to make a claim against her mother’s estate this is likely to put her in a difficult position in the meantime.
[21] Furthermore, it may not be appropriate for the Bank’s legal costs or further interest accruing as a result of these proceedings to be borne by Ms Opai if the Bank has potentially not complied with the lender responsibility principles in the first place.
[22] I am therefore issuing this judgment as an interim judgment as I consider it is appropriate to hear further from the parties before determining the summary judgment application. In doing so, I determine some of the matters that were raised in submissions before me so the parties know the position in terms of those matters. I then set out the questions that I wish to hear further from the parties on and the dates by which further submissions are to be filed. The timeframes are generous to allow
1 From the loan statement attached to Mr Gregory Andis’ affidavit in reply dated 18 May 2023.
the parties sufficient time to properly consider the alternatives and to attempt to agree a solution between themselves (and because of the time of year).
[23] I begin therefore by briefly setting out the principles relating to summary judgment and the factual background before discussing the issues raised by Ms Opai in opposition to summary judgment.
Summary judgment principles
[24] Rule 12.2(1) of the High Court Rules 2016 provides that summary judgment may be granted where the plaintiff satisfies the court that the defendant “has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.”
[25] The principles applying to summary judgment applications are well established. The following summary can be taken from the leading authority,
Krukziener v Hanover Finance Ltd, as follows:2
(a)The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried.3
(b)The court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated.4
(c)The court will not normally resolve material conflicts of evidence or assess the credibility of deponents. However, it need not uncritically accept evidence that is inherently lacking in credibility, as, for example, where the evidence is inconsistent with undisputed contemporary
2 Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26].
3 Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 3.
4 MacLean v Stewart (1997) 11 PRNZ 66 (CA).
documents or other statements by the same deponent, or is inherently improbable.5
(d)In the end the court’s assessment of the evidence is a matter of judgment. The court may take a robust and realistic approach where the facts warrant it.6
Factual background
[26] On 22 September 2016, the Bank entered into two home loan facility agreements with Ms Opai and her mother, Mrs Opai, as co-borrowers, for approximately $135,000 each:
(a)Home Loan Facility 8995753-94 (“94” facility); and
(b)Home Loan Facility 8995753-95 (“95” facility). (September 2016 loans).
[27] The September 2016 loans were secured by a first registered mortgage over a property in Goodwin Drive, Rosehill, Papakura (Property). Mrs Opai was, at that time, the sole owner and registered proprietor of the Property.
[28] Ms Opai’s evidence is that her intention in entering into the September 2016 loans as a co-borrower with her mother was to support her mother as much as she could as her father had passed away in December 2013. Ms Opai’s mother and father had been joint registered owners of the Property originally, but the property had passed to her mother as survivor on or about February 2015.
[29] The Bank does not include these details in its evidence, but Ms Opai’s evidence is that the “94” facility was refinanced on 28 April 2017 and became Home Loan Facility 8995736-96 (“96” facility). Again, both Ms Opai and her mother were co- borrowers to this facility.
5 Eng Mee Yong v Letchumanan [1980] AC 331 (PC) at 341.
6 Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).
[30] On 10 September 2017, Mrs Opai sadly passed away. Ms Opai says this was a particularly difficult time for her given that she had lost both parents within a five-year period and was facing personal struggles of her own.
[31] On 6 July 2018, Ms Opai was appointed the administrator of her mother’s estate and on 16 July 2018 the Property was transferred to Ms Opai as executor of the estate.
[32] Ms Opai continued to service both home loans on the existing terms and conditions until 2019. Ms Opai lost her full-time employment of 12 years on 3 November 2018. Ms Opai had previously lodged proceedings in the Employment Relations Authority against her employer in March 2017 regarding unfair treatment. At the time of the hearing of this summary judgment application, Ms Opai was still awaiting a final determination from the Authority following a week-long hearing in May 2022. Ms Opai has already succeeded with two unjustified disadvantage claims, following which her former employer was ordered to pay compensation and costs.
[33] In May 2019, the Bank issued PLA notices in respect of the home loans due to Ms Opai’s default. The Bank approved a hardship application in November 2019 and approved further lending of $40,800 solely in Ms Opai’s name to assist her in remedying the PLA notices. This added a third facility to the facilities in her name; Home Loan Facility 8995736-97 (“97” facility).
[34] The Bank confirmed by email on 4 August 2020 that the Bank considered the expired PLA notices had been fully remedied. The email warned however that if the mortgage fell into default any time in the future, fresh default notices would be served. Unfortunately, at around this time Ms Opai was diagnosed with cancer.
[35] In November 2020 the Bank sent two letters informing Ms Opai that the fixed rate interest periods for the loan facilities were about to expire and from those dates a floating annual interest rate would apply. Ms Opai’s evidence is that this letter initiated the refinancing in May 2021.
[36] Ms Opai agrees that prior to and on 20 May 2021, the Bank agreed that it would advance one loan to Ms Opai personally to repay:
(a) Home Loan Facility 8995753-95 — $129,084.48 (b) Home Loan Facility 8995736-96 — $202,140.50 (c) Home Loan Facility 8995736-97 — $40,451.73
(d)Auckland Council Land Rates — $2,645.47
(e)Loan Administration Fee — $200 Total $374,522.18 (May 2021 loan)
[37] Ms Opai attended an appointment with the Bank on 20 May 2021 and says she was transparent in her dealings regarding her personal circumstances, including her health, existing proceedings in the Employment Relations Authority and work prospects.
[38] Ms Opai recalls discussing the letters of administration regarding her mother’s estate at the meeting and saying that she still needed to instruct her solicitor further regarding the title to the Property.
[39] Ms Opai accepts that prior to leaving her appointment on 20 May 2021, she received a copy of the loan facility schedule for the May 2021 loan (Facility Schedule) but says she did not receive a copy of the Standard Facility Terms & Conditions (Standard Terms). Ms Opai says that this was on the basis that a full set of documents would be sent to her home address in due course, as had happened previously, but the Standard Terms were never received.
[40] At the time of the refinancing in May 2021, Ms Opai says she understood the May 2021 loan could not be advanced without the original security over the Property. However, she says that at no time did she ever inform the Bank, verbally or in writing,
that she was the title holder of the Property. The Bank requested a copy of the letters of administration for record purposes in December 2021.
[41] The Bank does not in fact suggest that there was any attempt by Ms Opai to mislead the Bank in this regard. It appears simply to have been a failure to properly consider the position following the death of Ms Opai’s mother. The Bank, for example, has a copy of an e-valuer report by CoreLogic on the Property in its file that the Bank says it had in its possession when preparing the documentation for the May 2021 loan. This report records the current owner as “Melissa Jean Opai” without mentioning that she held the Property in her capacity as executor. The certificate of title to the Property however recorded that the registered owner was “Melissa Jean Opai as Executor”.
[42] Ms Opai and the Bank both signed the Facility Schedule on 20 May 2021. This recorded that a fixed interest rate of 2.25 per cent per annum would apply for one year, that the loan repayments would be interest only for that year and thereafter a new interest rate would be agreed and set, and repayments of interest and principal would be made.
[43] Ms Opai says that between May 2021 and May 2022, she serviced the May 2021 loan as agreed, making weekly payments of $161.62. This amounts to approximately $650 per month. On or about 13 May 2022 Ms Opai made enquiries with the Bank regarding the new interest rate that would apply once the fixed term interest rate expired. The Bank advised that the monthly payment on the basis of the current floating rate of 5.45 per cent would be $2,987.31 or on a fixed rate for one year of 4.29 per cent, $2,760.59.
[44] Ms Opai explains that this was a very substantial increase and that the Bank knew that the reset of the interest rates would cause her dire financial hardship as her personal circumstances had not changed. The amount she was receiving from Work and Income at the time amounted to approximately $450 per week only.
[45] However, one of the special conditions in the Facility Schedule for the May 2021 loan (which Ms Opai refers to herself in submissions) was:
At the expiry of the interest only period, the borrowing will transfer to a principal and interest term loan. If your financial situation has not improved to meet these payments, you will need to consider other options as the bank may not be able to assist with any further restructures or interest only extensions.
[46] The last weekly instalment payment of $161.62 was made by Ms Opai on 19 May 2022. Ms Opai says that she was not in a position to financially sustain the repayments and verbally notified the Bank of this in May 2022.
[47] The Bank issued a final demand notice on Ms Opai on 4 August 2022 informing Ms Opai that:
(a)her arrears then stood at $7,719.71, with another weekly instalment of
$737.09 due on 11 August 2022;
(b)she had until 4 pm 18 August 2022 to clear her loan arrears in full, failing which (inter alia) legal action may ensue; and
(c)if the Bank had to take legal action, all costs incurred by the Bank would be payable by Ms Opai under clause 9 of the Standard Terms.
[48] No payment or part-payment was made by Ms Opai following the Bank’s final demand.
[49] On 11 October 2022, the Bank’s lawyers, MinterEllisonRuddWatts, notified Ms Opai that, pursuant to clause 12.2(b) of the Standard Terms, the entire balance of the May 2021 loan was now immediately due and payable. Demand was made for payment of the total sum owed, which as at 6 October 2022 stood at $383,293.27.
[50] On 30 January 2023, the Bank commenced proceedings by way of summary judgment, which were served on Ms Opai on 14 March 2023.
[51] In Mr Andis’ affidavit in reply dated 18 May 2023 (the manager of credit control at the Bank), Mr Andis says that in a telephone conversation with Ms Opai on 28 March 2023, Mr Andis asked Ms Opai what was ultimately to happen with the Property under the administration of her mother’s estate. Mr Andis’ evidence is that
Ms Opai told him that her two brothers had agreed to sign over their one-third shares in the Property and that documentation to that effect was currently with her lawyer. Mr Andis says that he indicated to Ms Opai that if she was to become the sole owner of the Property in her own right, the Bank would be prepared to restructure the debt owed using the Property as security. Mr Andis sent a letter to Ms Opai confirming this on 31 March 2023 but there was no reply.
[52] Ms Opai said in submissions that she did not think it was appropriate to correspond with the Bank when the Bank had commenced litigation against her and while the matter was before the Court.
[53] An updating affidavit was filed by Mr Andis on 17 August 2023, prior to the hearing. This affidavit confirms that there had been no further payments by Ms Opai and attaches letters sent to Ms Opai in relation to rates and insurance over the Property dated 15 June 2023 and 4 August 2023, to which the Bank says it received no response. Despite the Bank having commenced proceedings against Ms Opai as it could not enforce its security, these letters appear to be written on the basis that Ms Opai is required to insure the Property and to pay rates under her agreement with the Bank.
[54] I discuss the question of whether liability arises on the face of the loan agreement first before considering the impact of Ms Opai’s evidence that she did not receive a copy of the Standard Terms, and the other defences raised.
Has liability for the outstanding debt owed been established on a prima facie basis?
[55]The Facility Schedule begins by saying:
We offer, and you accept, this Facility, on the terms and conditions contained in this Facility Schedule and our Standard Facility Terms and Conditions applicable as at the date of this Facility Schedule (available on our website at or from any of our branches) which together form the Facility Agreement.
[56] The Facility Schedule records that the facility amount was $374,546 and that the term of the loan facility is 16 years and six months from the date of availability which was 19 July 2021.
[57]Under the heading “Repayments” the Facility Schedule records:
You must pay the Facility Amount and all interest by making:
52 consecutive Weekly Interest Only Repayments of $161.62, commencing on 27 May 2021 and on each Weekly anniversary thereafter, followed by;
809 consecutive Weekly Principal and Interest Repayments of $548.57, on each Weekly anniversary.
The amount, frequency and number of Repayments may change both before and after the Date of Availability.
You authorise and direct us to deduct the Repayments from the Facility Account.
After the Date of Availability, if your repayment amount has changed, we will provide you with written confirmation of your repayment amount.
The total amount of all Repayments payable under the Facility is $452,197.37.
[58] The Standard Terms provide for events of default. Under clause 12.1 an event of default occurs if (inter alia):
(a)the borrower defaults in the payment of any amount due under the Facility Agreement (clause 12.1(a)); and/or
(b)default is made in the compliance with any term or condition of the Facility Agreement (clause 12.1(b)).
[59] Clause 12.2 of the Standard Terms provides that when an event of default occurs, the Bank may then (with immediate effect and by giving notice to the borrower):
(a)cancel the Facility Agreement (clause 12.2(a));
(b)declare that all or any part of the facility balance, and/or such other amount under the Facility Agreement, are immediately due and payable, in which case the debt will be immediately due and payable (clause 12.2(b)); and/or
(c)exercise all or any of the Bank’s rights under the Facility Agreement, any guarantee and any of the securities or at law (clause 12.2(d)).
[60] Ms Opai accepts that she has not made any payments since the last weekly instalment payment of $161.62 on 19 May 2022, the final interest only payment. She also candidly accepts:
In all the circumstances, if the Court accepts that I am bound by the terms and the conditions of Loan Facility Agreement 8995736-98 as it currently stands, then I accept that I defaulted on the Loan Facility repayments from 26 May 2022.
[61] Ms Opai also admits that she did not respond to the demand notice the plaintiff served on her and that she did not pay the loan arrears the Bank demanded she pay.
[62] The Bank therefore says this is a straightforward case of an unpaid loan, the liability for which has clearly been established.
Does the failure of the Bank to provide a copy of the Standard Terms provide an arguable defence for Ms Opai?
[63] This question can be answered relatively briefly. As set out above, the Facility Schedule, in the very first paragraph, expressly states that the Standard Terms applicable as at the date of the Facility Schedule are available on the Bank’s website or from any of its branches. It also states in the same paragraph that the Facility Agreement is comprised of both the Facility Schedule and the Standard Terms, and throughout refers to the Standard Terms including in relation to definitions of terms, calculating interest, default interest, rights to cancel and so forth.
[64] Furthermore, the Facility Schedule records in the final paragraph that Ms Opai acknowledges receipt of a copy of the Facility Agreement including the Standard Terms as follows:
You, the borrower, accept the Facility on the terms and conditions contained in this Facility Agreement and, including for the purpose of initial disclosure under the Credit Contracts and Consumer Finance Act 2003 (if it applies), acknowledge receipt of a copy of the Facility Agreement (including the Standard Facility Terms and Conditions) and any other documentation relating to the Facility on the respective date/s stated below.
[65] Ms Opai has then signed and dated the Facility Schedule recording her agreement to this.
[66] Where a document has been signed, the signatory may raise a defence that is referred to as “non est factum” where the signatory says that they executed the document under some mistake as to its effect arising from some erroneous (but not necessarily fraudulent) explanation of its contents and meaning. This defence amounts to a denial of consent to the transaction that would otherwise be evidenced by the signature.7 I do not consider that this defence is available here in respect of the alleged failure to provide the Standard Terms as Ms Opai does not refer to any provisions in the Standard Terms to which she would not have agreed if she had been provided with a copy of them or in respect of which she has been misled. The term recording that if Ms Opai’s financial position had not improved, the Bank may not be able to assist with any more restructures or interest only extensions, referred to at [45] above, is in the Facility Schedule which Ms Opai accepts she received a copy of (and signed).
[67] Furthermore, the default provisions in the Standard Terms appear relatively straightforward, essentially allowing the Bank to treat failure to make repayments as an event of default and requiring notice to the borrower when cancelling the agreement. I do not therefore consider that a defence of non est factum would be reasonably arguable.
[68] Failure to provide a physical copy of the Standard Terms in circumstances where Ms Opai has acknowledged receipt of those terms and conditions by signing the Facility Schedule and when the Facility Schedule states that the Standard Terms are available online or from any of the Bank’s branches, does not therefore provide an arguable defence to the summary judgment application.
Do the mistakes made in respect of security or other discrepancies prevent summary judgment being entered?
[69] There is no question that the Bank proceeded on the basis that it would have security over the Property. The May 2021 loan was extended on the basis that it was
7 Stephen Todd and Matthew Barker Burrows, Finn & Todd on the Law of Contract in New Zealand
(7th ed, LexisNexis, Wellington) at [10.6.2(a)].
a home loan facility rather than a personal loan. However the fact that no security was provided because Ms Opai only held the Property as executor of her mother’s estate does not necessarily invalidate the loan agreement. If this was the case every time a party failed to execute a mortgage properly or perhaps a guarantee, the loan itself would be invalidated.
[70] The context of the May 2021 loan is important. It is not a situation where this was a new loan entered into afresh. Instead, it was the consolidation of three loans already owing. Ms Opai accepts this, saying in her evidence that after receiving interest rate reset letters from the plaintiff in November 2020, she sought to consolidate the three home loan facilities into one manageable payment. The Bank agreed both to consolidate the loans into the May 2021 loan agreement and also to allow Ms Opai to make interest only payments for 12 months.
[71] If the Bank had realised Ms Opai did not own the Property in her personal capacity and so could not give security over the Property, the loan may have been a personal rather than a home loan. In those circumstances the loan may not have been extended at all or the interest rates charged may have been higher. Immediately prior to the Bank entering into the May 2021 loan agreement, the Bank still had security over the Property because at least two of the loans at that stage were in the joint names of Ms Opai and Mrs Opai’s estate. A mortgagee sale of the property would still therefore have been an option for the Bank at that point.
[72] Ms Opai disputes the submission that the Bank was not aware that she did not personally own the Property at the time because the Bank had sent letters addressed to both her and her mother, “care of Melissa Opai (executor)”. Furthermore, at the time of the re-financing in May 2021 the Bank requested, and Ms Opai provided, a current rates assessment generated by the Auckland Council for the Property and the ratepayer name on the assessment was “Estate of Patricia Margaret Ann Opai”. Ms Opai considers that she ought to have been made aware of the CoreLogic report on the Property that was held on file by the Bank, believing that this is key information that should have been provided to her prior to the May 2021 loan being entered into.
[73] Whilst the Bank has clearly made a mistake in respect of the security over the Property (or lack thereof), this does not by itself provide an arguable defence to the application for summary judgment. It may however be relevant to the question of whether the Bank has complied with the lender responsibility principles under the CCCFA. As I have indicated, this question is to be determined following further submissions.
[74] Ms Opai also points to the PLA notices served on her in 2019 as not being lawful. However, in 2019 the Bank was entitled to serve the notices as the borrowings were in the joint names of Ms Opai and Mrs Opai’s estate. The Bank agreed not to enforce the notices at that time by instead providing a further loan, the “97” facility, and thereafter considered the PLA notices remedied. No issue therefore arises from the 2019 service of the PLA notices.
[75] Another issue Ms Opai raises (and that apparently arises as a result of the mistake in relation to the ownership of the Property) is that the Bank renewed an insurance policy over the Property without Ms Opai’s express consent or authority.
[76] Ms Opai’s evidence is that she was unaware that the insurance had been renewed until she noticed her current account was in overdraft. Ms Opai says no one contacted her to advise her that this had been done and that she chose not to renew the insurance from August 2021 because of her difficult financial circumstances. Despite this, the Bank continued to charge her current account for insurance. Furthermore, in her “98” account (the May 2021 loan account) there appears to be a deduction in February 2023 for insurance.
[77] The Bank says the amount that it is seeking by way of summary judgment does not include the amount deducted for insurance from the “98” account as there is only one deduction on 14 February 2023, and the amount sought by way of summary judgment is the amount owing on 16 January 2023 (as set out in [21] of the statement of claim). The Bank has not filed any evidence disputing that Ms Opai did not, herself, renew the insurance policy over the Property. Mr Gregory Andis, for the Bank, says that at the time the Bank believed Ms Opai was the legal owner of the Property and
that the Property acted as security, which is why it renewed the insurance policy and deducted the premiums from Ms Opai’s account.
[78] As well as the insurance premiums, Ms Opai says that she has paid unauthorised overdraft fees and overdraft interest as a result of the deductions for insurance premiums from her current account. There appear to be entries in the bank statement for her current account that support this.
[79] Clause 16.1 of the Standard Terms requires a borrower to insure “any Security Property”. Clause 15.1(e) of the Standard Terms further appears to require a borrower to insure and keep insured “all of your assets of an insurable nature”.
[80] As the Property is not Ms Opai’s personal asset (as she holds it as executor of her mother’s estate) there may be no obligation on Ms Opai to insure the Property under the May 2021 loan agreement. If matters are not resolved and the summary judgment application is still required to be determined, it appears that the amount awarded may need to be reduced by the deductions made by the Bank to Ms Opai’s accounts for insurance and any consequential fees or interest as a result of those deductions. There is insufficient evidence before the Court at this stage to calculate the total amount of these deductions. I consider that it is appropriate to require the Bank, in the further submissions to be filed, to make submissions on this point and to advise the Court of the total quantum of insurance deductions, including the associated overdraft fees and overdraft interest. Ms Opai will then have an opportunity to respond before any decision is made. I include this direction at the end of the judgment.
[81] Another issue that Ms Opai submits ought to prevent summary judgment is that both the statement of claim and the affidavits of Mr Andis for the Bank do not refer to the “97” facility as being one of the loans consolidated into the May 2021 loan. This however does not affect the ability to enforce the May 2021 loan. There is no question that the amount of the May 2021 loan includes the amount owing in respect of the “97” account as the amount of the loan is the total of the “95”, “96” and “97” loan facilities added together.
[82] Another discrepancy referred to by Ms Opai is that the Bank describes the September 2016 loans as both being fixed rate. Ms Opai disputes this and says one was a floating rate facility and the other a fixed rate facility. Again, this does not provide an arguable defence to summary judgment because it does not in this case impact on the amount sought or whether there has been an event of default.
[83] I agree that it would have been preferable if the Bank had referred to the “97” facility and the correct loan details. These issues appear to have made it more difficult for Ms Opai to understand the Bank’s position. However, they do not affect the enforceability of the loan agreement and do not provide an arguable defence for Ms Opai in respect of the summary judgment application as they do not affect the amount owing or whether there has been an event of default.
CCCFA defences
[84] As stated above, Ms Opai includes two further defences in her notice of opposition:
(a)that the Bank neglected, refused or failed to exercise the care, diligence and skill of a responsible lender in its dealings with her; and
(b)that the Bank neglected, refused or failed to make sure the loan was not oppressive and to ensure that it did not exercise its rights under the loan agreement oppressively or induce Ms Opai to enter the loan through oppressive means.
[85] I discuss each of these briefly below, after setting out the relevant provisions of the CCCFA, but do not determine these issues until I hear further from the parties.
[86] I set out the relevant parts of s 9C in full in particular for the assistance of Ms Opai:
9C Lender responsibility principles
(1)Every lender must comply with the lender responsibility principles.
(2)The lender responsibility principles are that every lender must, at all times,—
(a)exercise the care, diligence, and skill of a responsible lender—
(i)in any advertisement for providing credit or finance under an agreement or for providing credit-related insurance under a relevant insurance contract; and
(ii)before entering into an agreement to provide credit or finance or a relevant insurance contract and before taking a relevant guarantee; and
(iii)in all subsequent dealings with a borrower in relation to an agreement or a relevant insurance contract or a guarantor in relation to a relevant guarantee; and
(b)comply with all the lender responsibilities specified in subsections (3), (4), and (5).
(3)The lender responsibilities are that a lender must, in relation to an agreement with a borrower,—
(a)make reasonable inquiries, before entering into the agreement, and before making a material change referred to in subsection (8), so as to be satisfied that it is likely that—
(i)the credit or finance provided under the agreement will meet the borrower’s requirements and objectives; and
(ii)the borrower will make the payments under the agreement without suffering substantial hardship; and
(b)assist the borrower to reach an informed decision as to whether or not to enter into the agreement and to be reasonably aware of the full implications of entering into the agreement, including by ensuring that—
(i)…
(ii)the terms of the agreement are expressed in plain language in a clear, concise, and intelligible manner; and
(iii)any information provided by the lender to the borrower is not presented in a manner that is, or is likely to be, misleading, deceptive, or confusing; and
(iv)…
(c)assist the borrower to reach informed decisions in all subsequent dealings in relation to the agreement, including by ensuring that—
(i)any variation to the agreement is expressed in plain language in a clear, concise, and intelligible manner; and
(ii)any information provided by the lender to the borrower after the agreement has been entered into is not presented in a manner that is, or is likely to be, misleading, deceptive, or confusing; and
(d)treat the borrower and their property (or property in their possession) reasonably and in an ethical manner, including—
(i)when breaches of the agreement have occurred or may occur or when other problems arise:
(ii)when a debtor under a consumer credit contract suffers unforeseen hardship (see section 55):
(iii)during a repossession process (including by taking all reasonable steps to ensure that goods and property are not damaged during the process, that repossessed goods are adequately stored and protected, and that the right to enter premises is not exercised in an unreasonable manner); and
(e)ensure, in the case of an agreement to which Part 5 applies, that—
(i)the agreement is not oppressive:
(ii)the lender does not exercise a right or power conferred by the agreement in an oppressive manner:
(iii)the lender does not induce the borrower to enter into the agreement by oppressive means; and
(f)meet all the lender’s legal obligations to the borrower, including under this Act, the Fair Trading Act 1986, the Consumer Guarantees Act 1993, the Financial Service Providers (Registration and Dispute Resolution) Act 2008, and subpart 5A of Part 6 of the Financial Markets Conduct Act 2013, which include—
(i)obligations in relation to disclosure, credit fees, unforeseen hardship applications, and credit repossession under this Act; and
(ii)prohibitions on false or misleading representations and unfair contract terms under the Fair Trading Act 1986; and
(iii)the guarantee that the service of providing credit and any other services will be carried out with reasonable care and skill under the Consumer Guarantees Act 1993.
…
(5)The lender responsibilities are also that a lender must, in relation to relevant insurance contract,—
(a)make reasonable inquiries, before the contract is entered into, so as to be satisfied that it is likely that—
(i)the insurance provided under the contract will meet the borrower’s requirements and objectives; and
(ii)the borrower will make the payments under the contract without suffering substantial hardship; and
(b)assist the borrower to reach an informed decision as to whether or not to enter into the contract and to be reasonably aware of the full implications of entering into the contract, including by ensuring that—
(i)any advertising is not, or is not likely to be, misleading, deceptive, or confusing to borrowers; and
(ii)any information provided by the lender to the borrower is not presented in a manner that is, or is likely to be, misleading, deceptive, or confusing.
…
(6)Subsections (3)(b)(iii) and (c)(ii), (4)(b)(ii), and (5)(b)(ii) do not apply to information that is subject to section 32(1).
[87] If a lender does not comply with these principles and a person has suffered loss or damage by the conduct of the lender, then the Court has the power to make orders under s 94 of the CCCFA.8
Has the Bank neglected, refused or failed to exercise the care, diligence and skill of a responsible lender in its dealings with Ms Opai?
[88] Ms Opai’s notice of opposition uses the words from s 9C(2)(a) of the CCCFA that every lender must, at all times, exercise the care, diligence and skill of a responsible lender.
[89] The Bank accepts that s 9C of the CCCFA imposes certain “lender responsibility principles” that every lender must comply with at all times.
8 Credit Contracts and Consumer Finance Act 2003, s 93.
[90] The Bank submits, however, that the evidence does not support any failure to exercise the care, diligence and skill of a responsible lender. Instead, the Bank says the evidence shows that over the years the Bank has been sympathetic to the personal difficulties that Ms Opai has faced (including her health and employment difficulties) and has repeatedly agreed to various measures to assist Ms Opai in restructuring her borrowings to work with her personal circumstances. The Bank gives as an example that it approved loan repayment deferments for three months in 2020 due to COVID- 19 related financial hardship, as well as approving an interim repayment arrangement in 2021 to attempt to address Ms Opai’s arrears in an affordable manner. Importantly, the Bank says the refinancing of Ms Opai’s debt by the May 2021 loan was also an attempt to support her. If the existing loans had been left to go into default without refinancing, then the Bank would have been able to undertake a mortgagee sale as it had security over the Property at that stage. Instead, it agreed to continue to work with Ms Opai to allow her to remain in the house. Furthermore, the May 2021 loan was structured so that Ms Opai had a 12-month interest only payment period to help support her through what was understood to be a temporary period of ill health and unemployment.
[91] Counsel for the Bank says that following Ms Opai’s default in repayments from May 2022 onwards, the Bank repeatedly sought to engage with Ms Opai to address the defaults. This included discussing with, and writing to, Ms Opai in March this year to see whether the title of the Property could be transferred solely into Ms Opai’s name so that the Bank could arrange a new registered first mortgage over the Property. This would have then allowed for the restructuring of the debt using the Property as security.
[92] Ms Opai did not focus on the issue of the May 2021 loan being entered into her name solely but instead submitted that the Bank was setting her up to fail, pointing to the fact that her circumstances had not changed at the end of the 12 month interest only period so there was no way she would be able then to afford to pay the interest and principal.
[93] The special conditions in the Facility Schedule expressly referred to this possibility and so I do not consider that the refusal of the Bank to extend the interest
only period would amount to a breach of the lender responsibility principles. However, the separate question of whether the Bank breached the lender responsibility principles by consolidating the loans into one personal loan to Ms Opai still needs to be considered, as I set out at the beginning of this judgment. I await the further submissions from the parties before determining this issue in terms of whether it provides a reasonably arguable defence to summary judgment.
Is a defence available that the agreement was oppressive?
[94] The final ground of opposition raised by Ms Opai is that the Bank neglected, refused or failed to make sure the loan (and its credit related insurance) was not oppressive and to ensure that it did not exercise its rights under the loan agreement oppressively or induce Ms Opai to enter into the loan through oppressive means.
[95] This is one of the lender responsibility principles that the Bank is required to comply with (s 9C(3)(e)). The Bank accepts that this means the Bank must ensure that:
(a)the loan agreement itself is not oppressive;
(b)it does not exercise a right or power contained in the loan agreement in an oppressive manner; and
(c)it did not induce Ms Opai as borrower to enter into the loan agreement by oppressive means.
[96] Section 118 of the CCCFA defines “oppressive” as meaning “oppressive, harsh, unjustly burdensome, unconscionable, or in breach of reasonable standards of commercial practice”.
[97] Where the loan agreement is oppressive, the Court has the power under s 120 of the CCCFA to reopen the contract. Section 124 sets out the matters that the Court is required to have regard to in determining whether to reopen a contract. These matters include whether the lender has complied with the lender responsibility principles in s 9C, the relative bargaining power of the parties, whether after taking account of the particular characteristics of the debtor (for example age or physical or
mental condition) that person was reasonably able to protect their interests and whether the contract is a consumer credit contract.
[98] The Court then has broad powers under s 127, including to order that any obligation outstanding under the credit contract be extinguished and to revise or alter any term of the credit contract.
[99] In addition, under s 128 the Court has the power, if it has reopened a consumer credit contract, to make an order for payment by any party of the full costs incurred in connection with the proceedings by any other party to the proceedings. This could include ordering payment by the Bank of the whole or part of the full costs incurred by Ms Opai.
[100] Ms Opai submits again in respect of this ground that she would only ever have been able to service the May 2021 loan if her circumstances had changed. Again, the context in which Ms Opai entered into the May 2021 loan is critical.
[101] As referred to above, the agreement by the Bank to consolidate the loan and to allow interest only payments was to grant Ms Opai time for her circumstances to improve. The special condition in the Facility Schedule, quoted at [45] above, expressly states that the Bank may not be able to assist with any further restructures or interest-only exceptions.
[102] In my view it is not reasonably arguable that the May 2021 loan was oppressive because of the inclusion of the special condition or that the Bank acted oppressively by not agreeing to extend the interest only period.
[103] However, a question again arises whether by consolidating the three loans, two of which were payable jointly and severally by Ms Opai and her mother’s estate, into one loan payable only by Ms Opai, the Bank acted oppressively.
[104] For the assistance of the parties, I record that there does not appear to be any basis for the Court to write off the principal of the loan. Any reduction may instead relate to the interest costs incurred since May 2022, the costs of insurance (and the
associated overdraft fees and interest) and the legal fees incurred as a result of these proceedings. As noted above, the Court has the power to order that costs are to be paid by the lender if that appears consistent with the lender responsibility principles.9
[105] I encourage counsel for the Bank and Ms Opai to attempt to agree on a solution as it is likely to be in both parties’ interests to resolve matters between the parties if that is possible. There appears to be no question that the original principal owing when the loan was consolidated in May 2021 is repayable and it appears likely that the Property will be required to be sold unless Ms Opai can find another way to finance repayment. One option may be to agree to vary the May 2021 loan agreement so that the loan is entered into by Ms Opai and her mother’s estate as co-borrowers as they were previously.
Costs
[106] The Bank seeks indemnity costs on its summary judgment application relying on cl 9 of the Standard Terms. This clause provides that the borrower, Ms Opai, “shall jointly and severally indemnify [the Bank] in respect of all costs and expenses (including legal fees on a full solicitor/client basis and GST)… in the event of any default under the Facility Agreement and in the recovery or attempted recovery of any amount owing under or relating to the Facility Agreement by [Ms Opai]”. As I have said above, despite the agreement including such a clause, the Court has the power to order that the creditor is to pay the borrower’s costs under s 128 of the CCCFA if it reopens the contract. Determination of costs therefore needs to await determination of the summary judgment application.
Result
[107] I issue this interim judgment pursuant to r 11.2(d) of the High Court Rules adjourning the Bank’s application for summary judgment and requiring the following steps to be completed in order to determine whether summary judgment is available to the Bank:
9 Credit Contracts and Consumer Finance Act 2003, s 128.
(a)The Bank is to file and serve further submissions and any further affidavit evidence by 16 February 2024 addressing the following questions:
(i)whether the Bank has breached the lender responsibility principles in s 9C of the CCCFA when entering into the May 2021 loan with Ms Opai only and not with her mother’s estate as a co-borrower in terms of:
1. explaining the implications of that to Ms Opai (see s 9C(3)(b) and s 9C(3)(b)(iii) of the CCCFA);
2. assisting Ms Opai to reach informed decisions in all subsequent dealings in relation to the agreement including by ensuring that any information provided by the Bank to Ms Opai after the May 2021 loan had been entered into was not presented in a misleading, deceptive or confusing manner (see 9C(3)(c)(ii) of the CCCFA);
3. ensuring that:
a.the May 2021 loan agreement was not oppressive:
b.the Bank did not exercise a right or power conferred by the agreement in an oppressive manner:
c.the Bank did not induce the borrower to enter into the agreement by oppressive means; and
(ii)whether Ms Opai ought to be liable to pay for all or some of the insurance premiums in respect of the Property including evidence of the total amount of the deductions made from Ms Opai’s accounts for insurance of the Property after 20 May 2021, including the associated overdraft fees and overdraft interest (see s 9C(3)(e)(i) to (iii)); and
(iii)costs and whether s 128 of the CCCFA should apply.
(b)Ms Opai is to file and serve further submissions and any further affidavit evidence in response addressing the above issues in [107(a)] by 1 March 2024;
(c)The Bank is to file any submissions strictly in reply by 8 March 2024;
(d)A final decision will then be made on the papers (unless a hearing is necessary in which case the parties will be notified).
(e)Leave is reserved to seek extensions of time for the filing of submissions if negotiations between the parties are progressing and to seek further orders as necessary.
Associate Judge Sussock
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