King v ASB Bank Ltd
[2013] NZHC 2914
•5 November 2013
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2013-404-561 [2013] NZHC 2914
BETWEEN BRUCE JAMES KING
Plaintiff
AND
ASB BANK LIMITED Defendant
Hearing: 25 July 2013 Appearances:
B J King in person
P V Shackleton and M A Powell for defendantJudgment:
5 November 2013
JUDGMENT OF KATZ J
This judgment was delivered by me on 5 November 2013 at 4 pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date: ...................................
Solicitors: Simpson Grierson, Auckland
Copy to: B J King, Auckland
KING v ASB BANK LIMITED [2013] NZHC 2914 [5 November 2013]
Introduction
[1] The ASB Bank Limited (“Bank”) lent money to the plaintiff, Mr Bruce King. The loans were secured over a property in Sandringham, Auckland (“Property”). The Property was sold by the Bank, pursuant to its rights as mortgagee. However, the proceeds of sale were not sufficient to discharge all of Mr King’s indebtedness to the Bank. The Bank now seeks to recover the shortfall.
[2] Mr King seeks to reopen the loan agreements or obtain other relief, primarily on the basis that the Bank has breached the Credit Contracts and Consumer Finance Act 2003 (“CCCFA”) and/or the Fair Trading Act 1986 (“FTA”).
[3] Mr King says that the Bank has exercised its powers or rights under the loan agreements in an oppressive way.1 “Oppressive” means oppressive, harsh, unjustly burdensome, unconscionable or in breach of reasonable standards of commercial practice.2 There must be some oppressive quality relating to the manner in which the right or power is being exercised, such as giving an oppressively short time to meet a demand for repayment, or making collateral unlawful threats.3 The Court is required to take into account all of the circumstances relating to the exercise of the right or power.4
[4] Mr King also claims that the Bank breached ss 9 and/or 13 of the FTA. Section 9 provides that no person shall, in trade, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. Section 13 provides that no person, in trade, shall make a false or misleading representation concerning the existence, exclusion, or effect of any condition, warranty, guarantee, right or remedy.
[5] The Bank seeks summary judgment in respect of its counterclaim, as well as
defendant’s summary judgment in respect of Mr King’s own claims against the
Bank.
1 A breach of s 120(b) of the CCCFA
2 CCCFA, s 118. The terms used to define “oppression” are discussed in the decision of Vautier J in
Italia Holdings (Properties) Limited v Lonsdale Holdings (Auckland) Ltd [1984] 2 NZLR 1 (HC).
3 Shotter v Westpac Banking Corp [1988] 2 NZLR 316 (HC);
4 CCCFA, s 124(a).
[6] Mr King (who is self represented) did not file a separate defence to the counterclaim. Rather, he relied on his claim as also setting out the various matters on which he relied by way of defence to the Bank’s counterclaim. In particular, Mr King alleges that:
(a) The Bank sold the Property in retribution for Mr King complaining about the Bank, both directly and to the Banking Ombudsman. Mr King alleges that this was oppressive in terms of the CCCFA.
(b)The Bank made false, misleading or deceptive representations to the Banking Ombudsman concerning a November 2008 loan, in breach of the FTA.
(c) The Bank summarily dismissed a repayment offer made by Mr King, also said to breach the CCCFA and FTA.
(d)The Bank failed to hold accurate information about Mr King, which prevented the Bank from being able to make informed judgments about his repayment offers, in breach of both the CCCFA and the Code of Banking Practice (“Code”).
(e) The Bank negotiated in bad faith in relation to a repayment proposal
Mr King put forward, again in breach of the CCCFA and the FTA.
[7] To succeed in the summary judgment application on its counterclaim, the Bank must establish that Mr King has no defence to its claim, in other words, that there is no serious question to be tried. The Court must be left without any real doubt or uncertainty.5 To succeed in its defendants’ summary judgment application in relation to Mr King’s claim, the Bank must prove on the balance of probabilities that Mr King cannot succeed.6 The standard imposed on a defendant is high, as a
plaintiff’s fundamental right to his or her “day in court” is not to be lightly denied.7
5 Krukziener v Hanover Finance Ltd (2008) 19 PRNZ 162 (CA) at [26]; Pemberton v Chappell [1987]
1 NZLR 1 (CA) at 3.
6 Westpac Banking Corp v M M Kembla New Zealand Ltd (CA) [2001] 2 NZLR 298 at [61].
7 Bernard v Space 2000 Ltd (2001) 15 PRNZ 338 (CA) at [22].
Factual background
[8] There is little dispute about the key facts of this case, with one exception, which I address further below.
[9] On 9 August 2002, the Bank lent Mr King $65,000 pursuant to a term loan agreement dated 16 July 2002 (“001 Loan”). The loan was secured over the Property. Subsequently, the Bank made available a facility of $75,000 to Mr King under an Orbit home loan agreement dated 15 March 2006 (“Orbit Facility”).
[10] On 28 November 2008, the Bank advanced Mr King the sum of $75,000 under a Term Loan Agreement dated 27 November 2008 (“November 2008 Loan”). There is a factual dispute regarding the November 2008 Loan. The Bank’s position was that the November 2008 Loan was intended to partially repay the Orbit Facility, the limit of which was to then be reduced to $35,000. Mr King denied this. There was no dispute, however, that whatever the original intention may have been, the limit of the Orbit Facility was not actually reduced.
[11] In mid-2010, Mr King defaulted in his obligations to the Bank. On
29 September 2010, the Bank made demand on Mr King for the arrears then owing of $5,893.28. The demand made it clear that if the arrears were not paid, a notice under s 119 of the Property Law Act 2007 (“PLA Notice”) would be issued. On
7 October 2010, the Bank made further demand on Mr King for payment of the arrears, which were now $6,539.70. Again, the demand advised that a PLA Notice would be issued if the arrears were not paid. The demands appear to have had the desired result, and in December 2010 a repayment arrangement was agreed between the Bank and Mr King that resulted in his arrears being paid.
[12] Unfortunately, by November 2011, Mr King was again in default. On
22 November 2011 the Bank made demand on Mr King for arrears of $6,325 owing under the Orbit Facility and $7,066.00 owing on his credit card. Correspondence ensued.
[13] In April 2012, the Bank agreed to a repayment arrangement whereby
Mr King would pay $400 per week from 6 April 2012 to 25 May 2012, increasing to
$700 per week on 1 June 2012. The Bank’s letter of 3 April 2012, setting out this proposal, made it clear that failure to adhere to these terms would result in Mr King’s account being transferred to the Bank’s recoveries team without further notice.
[14] Mr King made the initial weekly $400 payments. However, he defaulted on the first payment of $700. As a consequence, on 11 June 2012, the Bank made demand on Mr King for arrears of $9,185.45. The demand expired unremedied. On
11 July 2012, the Bank issued a further notice of demand for arrears of $18,156.95. That demand also expired unremedied. The Bank received notice the following day that Mr King had filed a complaint with the Banking Ombudsman.
[15] On 24 July 2012, the Bank served a PLA Notice on Mr King. The PLA Notice expired unremedied. Nevertheless, in September 2012, at Mr King’s request, the Bank agreed to allow him two months to sell the Property himself. Mr King was unable to do so.
[16] On 17 October 2012, the Banking Ombudsman released her initial assessment, ruling in favour of the Bank.
[17] In November 2012, the Bank instructed Barfoot & Thompson to market the
Property. An auction date of 7 February 2013 was set.
[18] On Wednesday, 30 January 2013, Mr King sent a letter to the Bank advising that a long term friend, Mr Reid, had proposed in writing an arrangement where he would take 50% ownership of the Property (and 50 per cent of the mortgage) along with paying down $50,000 in cash. The Bank responded by email the same day, advising that Property would be withdrawn from auction if Mr King paid $33,330.23 by 4.30 pm on Tuesday 5 February 2013, notwithstanding that all amounts owing were now due and payable.
[19] On Friday, 1 February 2013, Mr Reid contacted the Bank and left a message. Following that, the Bank emailed Mr King advising that the Bank would require Mr King’s permission before it could discuss Mr King’s affairs with Mr Reid. On Monday, 4 February 2013, Mr King emailed through his consent for the Bank to talk
to Mr Reid. Later that day, the Bank emailed Mr King and advised that the conditions set out in the Bank’s 30 January 2013 email still applied.
[20] On 5 February 2013, Mr King commenced proceedings against the Bank and applied for (and was granted), on a without notice basis, an interim injunction restraining the sale of the Property. Courtney J held that is was arguable that the Bank’s email requesting permission to discuss Mr King’s financial affairs with Mr Reid was capable of being read as conveying that the Bank would not proceed further until that step had been taken.
[21] On 14 February 2013, the Bank’s solicitors sought Mr King’s permission to discuss Mr Reid’s proposal with him. However, the following day Mr King advised that Mr Reid had withdrawn his proposal. Accordingly, on 21 February 2013, Ellis J issued a minute lifting the interim injunction on the basis that there was no longer any basis to sustain the injunction following the Reid proposal being withdrawn. The Bank subsequently instructed Barfoot & Thompson to remarket the Property, which was rescheduled for auction on 3 April 2013.
[22] Mr King sought to injunct the new auction. The application was dismissed by Lang J and the Property was sold at auction. Following allocation of the net proceeds of sale, a shortfall remained owing by Mr King.
Allegation that Property was sold in retribution for Mr King complaining about the Bank
[23] Mr King claims that the Bank sold the Property in retribution for him complaining about the Bank, both directly and to the Banking Ombudsman. This is said to be the oppressive exercise of a right or power in terms of the CCCFA, in that such conduct breached reasonable standards of commercial practice.
[24] In support of this claim Mr King relied on an entry in the Bank’s internal log
(dated 11 July 2012) which stated that:
[Property Law Act Notice] in file issue in 7 days once served proceed to judgment customer has a history of complaints.
[25] The Bank’s response was that its enforcement process was not oppressive, in breach of reasonable standards of commercial practice, or in retribution for Mr King’s complaints. It was, in fact, necessary to minimise the eventual shortfall to the Bank.
[26] The internal note Mr King relies on cannot be viewed in isolation, but must be seen in the context of the history of the dealings between the parties. This includes Mr King’s history of defaults and of failing to honour the repayment arrangements entered into. Viewed in that context, it is not credibly arguable that the internal file note evidences an intention on the part of the Bank to sell the Property in retribution for Mr King’s complaints. Indeed the Bank itself advised Mr King how to contact the Banking Ombudsman.
[27] The Bank’s motives were purely commercial. It did not issue a PLA notice in response to Mr King’s complaints, but was simply continuing to follow a process it had already embarked upon. The Bank simply wanted to try and recover the sums owing to it, in circumstances where its security position was deteriorating as arrears mounted. Nevertheless, the Bank worked constructively with Mr King and reached agreement on two separate repayment agreements. Mr King cannot have been under any illusion, however, that if he did not honour the agreements he had entered into, enforcement action was likely.
[28] The contemporaneous documents, when viewed as a whole, indicate that the Bank was far from “heavy-handed” in enforcing its contractual rights. Even following the expiry of the PLA Notice, the Bank sought to assist Mr King by acceding to his request for a two month “reprieve” in which to try and sell the Property himself. Furthermore, despite the fact that all monies had been accelerated under the mortgage, the Bank offered to stop the sale process on more than one occasion, if Mr King simply paid the arrears then owing. He was not able to do so and the Bank ultimately had no option but to enforce its security.
[29] There is no factual foundation to the allegation that the Bank sold the
Property as retribution for Mr King having complained about the Bank. It is
therefore not necessary to consider what, if any, the legal consequences of such conduct would be.
Allegation that the Bank made false, misleading or deceptive representations to the Banking Ombudsman concerning the November 2008 Loan
[30] There is a factual dispute regarding the November 2008 Loan. The Bank’s position was that the November 2008 Loan was intended to partially repay the Orbit Facility, the limit of which was to then be reduced to $35,000. Mr King denied this in correspondence with the Bank and took the position that the November 2008 Loan was intended to be for the full $75,000.
[31] It appears that before the Banking Ombudsman, however, Mr King adopted the Bank’s position and used it as a basis for a submission that the Bank should not have advanced him the further $40,000. The Banking Ombudsman accepted the Bank’s advice that the error had gone unnoticed. However, she also concluded that Mr King should have realised the mistake, but instead elected to use the money, only raising a complaint some years afterwards.
[32] In these proceedings Mr King alleges that the Bank misrepresented the position to the Banking Ombudsman and as a result she was misled into believing that the November 2008 Loan had been governed by an informal understanding that the loan amounted, in effect, to a $35,000 loan. This is a somewhat puzzling submission in circumstances where the Bank’s evidence effectively supported the argument Mr King was seeking to advance before the Banking Ombudsman.
[33] The practical reality, however, is that nothing turns on the issue. Whatever the original intention may have been, the limit of the Orbit Facility was not actually reduced. As a result the Bank lent Mr King the full $75,000 which, on his version of events, the Bank had agreed to. Any confusion or misunderstanding as to what the quantum of the loan was intended to be is not causative of any loss suffered by Mr King. Mr King apparently intended to borrow a further $75,000 and has done so. Unfortunately, however, he did not repay the loan.
[34] For completeness I noted that the Banking Ombudsman’s findings in relation to the November 2008 Loan did not affect her findings in relation to the other allegations that she dismissed.
Allegation that the Bank summarily dismissed a repayment offer made by
Mr King.
[35] On 20 February 2012 Mr King put a proposal to the Bank regarding payment of his loan arrears. He offered to pay the arrears over a period of six months on certain terms including a six month loan holiday on two loans and that the Bank suspend the interest charges on the Orbit facility during the six month period.
[36] The Bank declined Mr King’s offer, by letter dated 5 March 2012. The letter advised that the Bank had reviewed the available information and carefully considered Mr King’s request. However, given the history of defaults, the fact that total borrowings were by now almost the same as the government valuation of the Property, and the Bank’s position under a deed of priority, it was not willing to provide further credit.
[37] Mr King alleges that the Bank summarily dismissed his repayment offer in a way that constituted an oppressive exercise of a right or power under the loan agreements. Alternatively, Mr King contends that the Bank’s actions breached commitments set out on its website under the heading “Our Commitments” to the effect that the Bank would consider all reasonable payment offers from customers in financial difficulties.
[38] In my view such assertions are not seriously arguable and do not give rise to any grounds for relief under either the CCCFA or the FTA. It is apparent on the face of the Bank’s 5 March 2012 letter that it carefully considered his proposal. It declined it for sound commercial reasons, as it was entitled to do.
[39] Further, no loss can have arisen from the Bank’s refusal to accept Mr King’s February 2012 proposal in circumstances where the Bank entered into a subsequent repayment agreement with Mr King, which he failed to honour, resulting in the Property eventually being sold.
Allegation that the Bank failed to hold accurate information about Mr King, which prevented the Bank from being able to make informed judgments about his repayment offers
[40] Mr King alleged that the Bank failed to hold accurate information about him, which prevented the Bank from being able to make informed judgments about his repayment offers. This was said to amount to the oppressive exercise of a right or power under the CCCFA and also to be a breach of the Code of Banking Practice.
[41] Mr King’s pleading relies on an entry in the ASB online log database of 7
February 2012 in support of this claim. That entry states “customer was trying to sell caravan parks, since 2010 notes??”
[42] The existence and content of this entry was not in dispute. The Bank noted, however, that it holds a vast amount of information regarding Mr King. This includes letters and file notes confirming that Mr King in fact sold solar heaters to caravan parks, rather than caravan parks themselves. The Bank submitted that it has not breached any legal duties to Mr King in relation to the information it held about him. The Bank had sufficient information to assess any repayment proposal Mr King put forward.
[43] I am satisfied that the Bank had ample material on which to assess any repayment proposals Mr King might put forward. The error in the Bank’s records was minor and not directly relevant to the assessment of any repayment proposals. The Bank possessed more recent (and more accurate) information regarding Mr King’s financial position and employment status. This included that Mr King was in default (and had been for some time) and was currently unemployed.
[44] In my view it is not remotely arguable that a passing reference in the Bank’s internal log to incorrect information of a relatively minor nature could constitute the oppressive exercise of a right or power sufficient to justify re-opening the loan agreements. Such facts fall far short of meeting the oppressive conduct threshold.
[45] To the extent that Mr King also relies on the Code in support of this aspect of his claim, the conduct alleged does not appear to breach the Code. Further, the
authorities indicate that the Code, and its various provisions, are not implied into the contracts between the Bank and Mr King and do not impose any legal obligation on the Bank. In Dungey v ANZ Banking Group (New Zealand) Limited,8 Doogue J held that while he was “more than satisfied that there was a breach of the provision of the code”:9
It is quite one thing, however, to arrive at that conclusion and to jump to the position asserted on behalf of Mrs Dungey. The Code provides for a voluntary ethical code. It is not a statutory duty. It is not a common law duty.
[46] Similarly, in Clarke v Westpac Banking Corporation,10 Paterson J stated:
... the Code does not impose a duty of care which alters the equitable principles referred to above. They may be sound rules of business practice but they do not in my view, impose a legal obligation under which Mr Clarke can avoid liability under the guarantee or bring a counterclaim for a breach of duty of care.
Allegation that the Bank negotiated in bad faith in relation to the Reid proposal
[47] Mr King submitted that the Bank had negotiated in bad faith in relation to the Reid proposal and that the Bank was responsible for the withdrawal of Mr Reid’s offer.
[48] Mr King relied heavily on Courtney J’s decision on his injunction application. I note that the hearing before Courtney J took place urgently, on a “without notice” basis. The Bank was not represented and full argument did not take place. Her Honour’s observations must be seen in that context.
[49] Courtney J found that the Bank’s email to Mr King, requesting permission to discuss matters with Mr Reid, was capable of being interpreted as an indication that the Bank would not take further action until it had spoken to Mr Reid. Her Honour therefore provided a window of opportunity to enable that to occur. The Bank then endeavoured to follow up that opportunity. However, matters could not be
progressed due to Mr Reid withdrawing his proposal.
8 Dungey v ANZ Banking Group (New Zealand) Limited [1997] NZFLR 404 (HC).
9 At 412.
10 Clarke v Westpac Banking Corporation (1997) 6 NZBLC 102,182.
[50] There is no evidence that the Bank negotiated in bad faith with Mr King in relation to the Reid proposal. Furthermore, Mr Reid subsequently withdrew his proposal when the Bank sought to work through it, following which the injunction was lifted. The Bank could not compel Mr Reid to put his offer back on the table. Further, as Courtney J noted, any proposal (even if it had not been withdrawn) may have ultimately been unacceptable to the Bank. That was a matter within the Bank’s commercial discretion. The Bank was contractually entitled to insist on payment in full.
[51] There is nothing in these facts that gives rise to a seriously arguable claim that the Bank has exercised a right or power oppressively and that Mr Reid has suffered loss as a result.
Conclusion
[52] Mr King’s story is, sadly, not uncommon. He borrowed money from the Bank no doubt believing he would be able to service the debt and ultimately repay the capital. Unfortunately, however, he could not keep up with the repayments and fell into arrears. The Bank exercised considerable restraint in enforcing its security. Repayment arrangements were entered into, but Mr King was not able to honour them. Mr King was given time to try and sell the Property himself. Meanwhile, the Bank’s security position continued to deteriorate. Ultimately, the Bank sold the Property at mortgagee sale, but the proceeds were not sufficient to fully repay the loans. The Bank now seeks to recover the shortfall.
[53] The reality is that the cause of Mr Reid’s “loss” is that, for whatever reason, he found himself unable to meet his loan repayment obligations. It is not seriously arguable that any unlawful conduct on the part of the Bank (in breach of the CCCFA, FTA or otherwise) has resulted in the shortfall that is now owing or otherwise caused loss to Mr Reid.
Result
[54] I make orders:
(a) for summary judgment against the plaintiff in terms of the amended statement of defence;
(b)for summary judgment against the plaintiff in terms of the counterclaim filed by the defendant.
[55] As the successful party the defendant is entitled to costs. If quantum cannot be agreed between the parties then any memorandum from the defendant is to be filed within 15 working days of this judgment, with any memorandum from the plaintiff in response to be filed within 10 working days thereafter.
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Katz J
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