Mills v ASB Bank Ltd
[2019] NZHC 1505
•28 June 2019
IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY
I TE KŌTI MATUA O AOTEAROA AHURIRI ROHE
CIV-2018-441-78
[2019] NZHC 1505
UNDER THE Credit Contracts and Consumer Finance Act 2003 IN THE MATTER
Statutory breaches by the ASB Bank, lack of due care, and oppressive conduct
BETWEEN
LYNETTE JOY MILLS
Appellant
AND
THE ASB BANK LIMITED
Respondent
Hearing: 4 December 2018 Appearances:
Appellant in Person
B J Upton and S L Hawksworth for Respondent
Judgment:
28 June 2019
JUDGMENT OF CLARK J
Introduction
[1] The plaintiffs, Lynette Mills and Carl Peterson, sued ASB Bank Ltd (ASB or the bank) for losses caused to them, they claimed, by various defaults on the part of ASB.
[2] All of Mr Peterson’s claims were struck out as disclosing no reasonably arguable cause of action.1 In addition ASB was granted summary judgment against Ms Mills in respect of all of her causes of action except for a claim of breach of s 22
1 Peterson v ASB Bank Ltd [2018] NZDC 14505 [District Court decision].
MILLS v THE ASB BANK LIMITED [2019] NZHC 1505 [28 June 2019]
of the Credit Contracts and Consumer Finance Act 2003 (the Act).2 ASB was awarded costs. Ms Mills appeals the outcome in the District Court. Mr Peterson does not.
Background
[3] Ms Mills and her former husband Mr Mills had been longstanding customers of ASB. They had a facility agreement with the bank under which it agreed to provide them with a revolving credit facility to a limit of $50,000 on their Orbit home loan account.
[4] As joint account holders Mr and Ms Mills each had a mandate to operate the account independently of the other. Without the knowledge of the other each could, for example, withdraw all the money in the account, end a service or apply for an overdraft.
[5] The couple separated. At the time the relationship ended they owned two properties, which were subject to mortgage to ASB.
[6] Ms Mills entered into a relationship with Mr Peterson and in May 2015 Ms Mills, Mr Peterson and Mr Mills agreed to an arrangement whereby Mr Mills would assign his interest in the two properties to Mr Peterson. In consideration Mr Peterson would pay Mr Mills $100,000 in two instalments of $50,000, one in May 2015 and the second on or before 31 May 2016. Mr Peterson would assume Mr Mills’ responsibility to ASB under the mortgages and the Orbit account.3
[7] On 19 May 2015, Ms Mills and Mr Peterson met with Chenee Cotton, a customer services supervisor with the bank. Although she had no previous dealings with Mr Peterson, Ms Cotton’s review of the bank’s files prior to the meeting revealed he was a former customer of the bank.
[8] Mr Peterson explained to Ms Cotton that he was Ms Mills’ partner and that he was entering into an agreement with her former husband under which Mr Peterson would purchase Mr Mills’ share of their relationship property. Mr Peterson explained
2 At [88](b).
3 District Court decision at [2].
that under the terms of the agreement with Mr Mills, he would credit the Orbit account with the sum of $50,000. Mr Peterson sought financial assistance from ASB. The bank was not prepared to lend to Mr Peterson at that stage because of its previous dealings with him.4 Ms Cotton in fact entered the following work notes in the “Customer Detail Notes” after the meeting on 19 May:
Recommendations
1.Carl has a debt owing to ASB which is currently undergoing court proceedings. His account manager has said no lending until paid and at which point we would need to reassess.
2.Carl is wanting to pay off $50k toward the revolving credit and is entering into an undocumented “settlement/buy out” with [Mr Mills] I have heavily advised him to seek independent legal advice before doing so.
NFA can be taken.5
[9] Sometime between the meeting on 19 May 2015, and 28 May 2015, Mr Peterson and Mr Mills executed a document described as “Conditions of Purchase and Sale Agreement between Carl James Peterson (purchaser) and Graham Mills (vendor)”. For consistency with Judge Courtney’s decision I shall refer to this document as the Agreement or the SAPA. Pursuant to the Agreement, Mr Peterson agreed to:6
(a)Purchase Mr Mills’ half share in both properties, together with all fixed chattels;
(b)Assume all payments under the ASB mortgages together with the servicing and repayment of the ASB overdraft facility “… falling due from 15 May 2015 onwards pursuant to completion of this Sale and Purchase Agreement”.
(c)Retire Mr Mills’ obligations as mortgagee (sic) to ASB with regard to the mortgages held against the two properties, on or before 31 May 2016.
[10]Clause 15 of the Agreement provided:
The vendor undertakes to remove himself as signatory [with the consent of ASB] to the existing overdraft account relating to the properties as security and forming part of the mortgages held by the ASB on both properties, and to
4 At [5].
5 “NFA” meant “no further action”.
6 District Court decision at [7].
otherwise refrain from using that facility for his own benefit. Whatever overdraft facility continues will be for the benefit and use of Lynette Mills (and Carl Peterson, should the ASB consent to Carl Peterson being a signatory on that account) with full liability accepted for any such overdraft facility secured against the property by Lynette Mills and Carl Peterson with ASB consent.
[11]The Agreement recorded Mr Peterson’s obligation to pay Mr Mills the sum of
$50,000 by way of deposit into his bank account by 31 May 2015 with the final payment of $50,000 on or before 31 May 2016.
[12] While not a named party to the Agreement, Ms Mills was a signatory in her capacity as “Joint Title Holder” and she initialled each page of the Agreement.
[13]On 28 May 2015, there was a second meeting with ASB.7
Once again, ASB was not prepared to enter into any arrangement with Mr Peterson as a result of what Ms Cotton understood to be a large outstanding sum due from him to the bank. The bank was prepared to reassess lending once the debt was cleared.
[14] On 19 June 2015, Mr Peterson deposited $40,000 into the Orbit account for later use by Ms Mills and himself.8
[15] Prior to the deposit the account balance was $48,413.63. The approved overdraft facility at that stage was $50,000.
[16] On 23 June 2015, Mr Mills emailed ASB and requested it to reduce the available overdraft credit facility on the account from $50,000 to $12,000. Mr Mills’ request was emailed to ASB’s lending team and on 26 June 2015 ASB actioned Mr Mills’ request by reducing the facility limit to $12,000.
[17] ASB accepts for the purposes of the strike-out application that it did not apprise Ms Mills of the reduction in the overdraft facility. Ms Mills said she found out when attempting to withdraw money on 10 July 2015.
7 At [11].
8 At [13].
[18] Ms Mills spoke to an ASB customer services representative on 11 July 2015. Ms Mills asserted the limit on the Orbit account had been reduced in error and requested that the $50,000 limit be reinstated.9 Jennifer Cocker, the Customer Care Manager with ASB who managed the complaint subsequently laid by Mr Peterson and Ms Mills, filed an affidavit in support of ASB’s applications. Ms Cocker attached to her affidavit the note made by Ms Ashford, a customer service representative, following the call from Ms Mills. The note states:
These funds are being used to renovate a home so are required, however as there was an error in deleting that facility clients are now left with no funds.
Client advised that at no time did they request to delete this facility …
[19] In accordance with Ms Mills’ request, ASB reinstated the original overdraft limit although as a result of a “loading error” the overdraft was increased by $2,000 more than the original facility limit. In other words, the limit was increased to $52,000 instead of $50,000.
[20] On 14 July 2015, Mr Mills, pursuant to the authority he had to operate the account, transferred $40,000 from the ASB account to his personal bank account.
[21] Although not recorded in the judgment, Mr Mills’ withdrawal of $40,000 is the subject of separate proceedings against him in the District Court for breach of the Agreement.
[22] As a consequence of Mr Mills’ withdrawal, Mr Peterson and Ms Mills were unable to access funds and claimed as a result costs and losses from ASB totalling around $200,000.
Statement of claim
[23] The plaintiff’s statement of claim is a discursive document running to 78 paragraphs. As Judge Courtney observed, the statement of claim is in large part a narrative of background information.
9 The suggestion at [15] of the District Court decision that Ms Ashford informed Ms Mills the reduction in the credit limit “may have been a mistake” is unsupported by the evidence.
[24] The Judge’s summary of the essence of the claim brought a coherence that the claim otherwise lacked:10
(a)ASB was negligent in failing to prevent Mr Mills from dealing with the facility account jointly held with Ms Mills;
(b)ASB breached its disclosure obligations under s 22 of the Credit Contracts and Consumer Finance Act 2003 … to Ms Mills when the overdraft was decreased at Mr Mills request and subsequently to Mr Mills when the overdraft was increased at Ms Mills request;
(c)ASB have acted oppressively against them, in particular by failing to consider the hardship to them in refusing to refinance.
(d)ASB acted oppressively against Mr Peterson in failing to acknowledge him as an assignee of Mr Mills’ rights and obligations with ASB.
(e)Reliance on a number of statutes, the law of equity and the law of torts.
District Court decision
[25] Having set out the background, Judge Courtney addressed the principles applicable to ASB’s interlocutory applications for summary judgment and strike out.
Standing
[26] The Judge addressed first Mr Peterson’s standing to bring his claims. Mr Peterson claimed he had rights against ASB pursuant to ss 4 and 11(b) of the Contractual Remedies Act 1979.11 As Mr Peterson had no contractual relationship with ASB, the Judge determined he could not advance allegations of breach by ASB of obligations to Mr Peterson as an account holder. Nor could Mr Peterson rely on any alleged breaches of the Act as Mr Peterson was never party to an agreement with ASB covered by that Act.12
[27] Similarly, Mr Peterson had no standing to claim any breach of duty of care in relation to the Orbit account “even if one exists for account holders”.13 Mr Peterson
10 At [16].
11 At [31].
12 At [46].
13 At [47].
therefore had no standing to bring any claims based on the assignment to him of Mr Mills’ rights as an ASB account holder.14
[28]As mentioned, Mr Peterson has not appealed the judgment.
Negligence
[29] Ms Mills sought to rely on cl 15 of the Agreement, which she had signed as a ‘joint title holder’, to support her claim in negligence against ASB. Clause 15 is set out above at [10].
[30] The plaintiffs alleged ASB was negligent in not placing a “red flag” on the account and by allowing Mr Mills to withdraw the $40,000. Yet, as Judge Courtney observed, Ms Mills acknowledged she did not ever request ASB to terminate Mr Mills’ ability to use the account.15 After referring to the right of parties in a contractual relationship to determine their respective obligations to the other, the Judge recorded the advice given to the plaintiffs by Ms Cotton:
[57] The plaintiffs specifically acknowledge in their statement of claim that Ms Cotton, when made aware of paragraph 15 of the SAPA, informed the plaintiffs:
…that the ASB could not prevent Mr Mills from accessing or using the ASB overdraft account in spite of the contract stipulation preventing that unless complete refinance was arranged.
[58] Ms Cotton has recorded that at the meeting on 19 May 2015, having been advised of Mr Peterson’s plans to pay $50,000 towards the overdraft and to enter into what she understood to be an undocumented agreement with Mr Mills, she heavily advised him to seek independent legal advice before doing so.
[59] No authority has been provided to me demonstrating a general duty in tort requiring a bank to freeze a credit limit on an account or to “red flag” the legitimate use of an account by a joint account holder in these circumstances.
14 At [48].
15 At [53].
[31] Judge Courtney could see no basis upon which Ms Mills could found a claim in negligence against ASB for failing to prevent Mr Mills from dealing with the Orbit account given the circumstances, namely:16
(a)the clear terms of the facility agreement, which allowed either party to withdraw funds on the account;
(b)the fact cl 15 of the Agreement recognised Mr Mills could continue to use the account for his own benefit although he agreed to refrain from doing so;
(c)the plaintiffs’ acknowledgment of Ms Cotton’s advice that ASB could not prevent Mr Mills from accessing or using the facility notwithstanding his contractual agreement not to do so; and
(d)against this background, Ms Mills’ specific request to reinstate the overdraft limit of $50,000.
Breach of disclosure obligations to Ms Mills?
[32] Ms Mills alleged ASB breached its obligations under s 22 of the Act by failing to give her prior disclosure when the overdraft limit was decreased at Mr Mills’ request.17
[33]In written submissions on behalf of ASB, the bank acknowledged:18
… it is arguable there was technical breach by ASB of its disclosure obligation to Mrs Mills when the credit limit was reduced on 26 June 2015 without giving her prior notice of that reduction …
[34] The Judge concluded ASB had not established it had a complete legal answer to Ms Mills’ claim and she had an arguable cause of action against ASB for breach of s 22.19 Judge Courtney returned to the s 22 claim at the very end of his judgment to
16 At [60].
17 At [63].
18 At [67].
19 At [68].
make some observations (which ASB characterises as “obiter comments”) as to the likely level of damages that would be awarded as a result of a breach of s 22. Acknowledging he was not required to determine the matter, Judge Courtney recorded his view “that s 89 sets out an amount of statutory damages which, in these circumstances is $2500”.20 Judge Courtney concluded by observing Ms Mills might “well wish to take those comments into account in determining whether or not she wishes to pursue any sum other than the statutory damages applicable under the Act”. The Judge understood ASB had already offered to pay $2500 to Ms Mills.21 The sealed order records:
[3](b) ASB Bank Limited is granted summary judgment against the second plaintiff’s causes of action except for the claim for breach of s 22 of the Credit Contracts and Consumer Finance Act 2003.
Oppressive conduct?
[35] The plaintiffs relied on ss 3 and 9 of the Act in arguing ASB acted oppressively in particular in failing to consider the hardship to them in ASB’s refusal to refinance. Judge Courtney observed at the outset that the provisions of the Act could have no application to Mr Peterson as he was not in a contractual relationship with ASB. Accordingly, the Judge analysed and determined only Ms Mills’ claim that, in refusing to provide finance to Mr Peterson to enable him to complete the Agreement with Mr Mills, and in refusing to provide Ms Mills with a “set-off” account in circumstances where ASB knew Ms Mills would suffer significant undue hardship, ASB had acted oppressively. Judge Courtney considered the various subsections of s 3 that Ms Mills had relied upon and ss 118 and 120, the substantive statutory provisions governing oppression under the Act. His Honour determined the bank was not obliged to advance funds to the plaintiffs; it was not obliged to open a set-off account; and it was always open to either or both plaintiffs to open a separate account into which the $40,000 could have been paid thereby avoiding any risk of withdrawal by Mr Mills:
[78] None of ASB’s actions have been identified as oppressive within s 120 CCCFA. There is no doubt the plaintiffs face significant financial hardship, but that does [not] mean ASB has been oppressive in dealing with the plaintiffs.
20 At [93].
21 At [94]
[36] Accordingly, the plaintiffs’ statement of claim disclosed no reasonably arguable cause of action based on oppressive behaviour on the part of ASB refusing to refinance.22
[37] The Judge also dealt with Mr Peterson’s claim that the ASB had acted oppressively against him in failing to acknowledge him as an assignee of Mr Mills’ rights and obligations, but it is unnecessary to discuss this aspect of Judge Courtney’s decision, as Mr Peterson does not appeal it.
Claims under Consumer Guarantees Act 1993, equity and tort
[38] In his concluding paragraph, Judge Courtney found no basis for any cause of action under these heads. The statement of claim and one paragraph of the plaintiffs’ submissions referred to their reliance on the Consumer Guarantees Act, the law of equity and the law of torts, but no detail was given in support of the submission.23
Costs
[39] Judge Courtney awarded scale costs to ASB on a 2B basis, excluding an allowance for second counsel.
Application for recall of judgment
[40] Ms Mills and Mr Peterson applied for recall of the judgment on the basis the Judge had ordered Ms Mills to pay costs yet she had been partially successful. The application stated:
The plaintiffs consider that this is either a simple oversight by the presiding judge, or an act of malfeasance or misfeasance against the plaintiffs. In either case, that judgment must be recalled in order to restore justice to the parties, and, prevent the courts from hearing an otherwise needless court appeal.
[41] The plaintiffs also invited the court to revisit its findings about oppression on the grounds Mr Peterson clearly had standing under the Act.
22 At [79].
23 At [87].
[42] Judge Courtney declined the application for recall.24 ASB had succeeded on all but one of its claims and accordingly the Judge determined it was entitled to costs. Judge Courtney referred to the comments he had made regarding the s 22 claim, the limited damages available, and the fact statutory damages had already been offered to Ms Mills, which she declined. While ASB did not achieve summary judgment on this aspect of the claim, he did not consider Ms Mills was entitled to costs. That did not amount to a special reason why justice required the judgment to be recalled and the balance of the application for recall raised points that could be appealed if the plaintiffs disagreed with them.25
Grounds of appeal
[43] Ms Mills’ amended notice of appeal dated 6 September 2018 states she is appealing against the costs order. Fifteen grounds of appeal are notified. Ms Mills seeks the following relief:
(a)a reversal of the costs order;
(b)an order that ASB’s actions were oppressive under the Act; and
(c)an order “reopening the credit contract to provide remedy for the plaintiff and the beneficial interest of [Mr Peterson]”.
[44] Not all of the so-called grounds of appeal are able to be advanced. Before turning to the substantive appeal points that this judgment determines, I briefly address each of the grounds and whether or not it is legitimately raised as an appeal point.
[45] Ground one contends that had the Judge enquired further into specific statutory provisions he would have been aware the plaintiffs had a legitimate claim exceeding the statutory damages “allowed”. The Judge did not determine or “allow” any damages. Judge Courtney concluded Ms Mills had an arguable cause of action against ASB for breach of s 22 of the Act.26 And the sealed order records that summary
24 Peterson v ASB Bank Ltd DC Hastings CIV-2016-020-247, 14 August 2018.
25 At [10]–[11].
26 District Court decision at [68].
judgment was granted to ASB against Ms Mills’ causes of action except the claim for breach of s 22 of the Act. Accordingly, ground one is for trial and not properly raised on appeal.
[46] Ground two relies on breaches of s 22 and s 9C of the Act. Again, the issue of a s 22 breach is for trial. The alleged breach of s 9C is a new claim. Allegations of misleading, deceptive or confusing information are all new and not for determination on appeal. In that regard, I note at this point that a document dated 6 September 2018, entitled “Second Amended Statement of Claim in CIV-2016-020-000427”, has been included in the common bundle of documents. Dominant in the pleaded causes of action are allegations ASB gave Ms Mills and Mr Peterson “deceptive, misleading and confusing information”. Apparently, the document was rejected for filing. The point for present purposes is that these allegations of breach of s 9C are made in the context of a separate proceeding in the District Court, were not made in the claim that Judge Courtney determined, and are not able to be raised for the first time in this proceeding on appeal.
[47] Ground three relates to the alleged failure to disclose the overdraft reduction to Ms Mills. Ground three is a s 22 issue for trial.
[48] Ground four, as with ground two, relies upon allegations of misleading and deceptive information, which are new allegations and not therefore amenable to determination on appeal.
[49] Grounds five to nine all concern damages or loss and are matters for trial along with the s 22 breach cause of action.
[50]Grounds 10 and 11 relate to costs and are properly raised as appeal points.
[51] Grounds 12, 13 and 14 relate to “oppression” under the Act and, likewise, are proper appeal points except for the contention ASB breached s 9C of the Act. That is new.
[52] Ground 15 is concerned with Mr Peterson’s standing. That ground cannot be advanced as Mr Peterson did not appeal.
Preliminary point
[53] Although Mr Peterson did not appeal Judge Courtney’s decision, he attempted, nevertheless, to advance his case at the hearing of the appeal.
[54] Ms Mills appeared in person with Mr Peterson accompanying her as her McKenzie friend. Ms Mills commenced her appeal by providing an overview. The overview included a submission that the High Court had authority to reinstate Mr Peterson’s right to be heard. But at the end of her overview Ms Mills applied to have Mr Peterson speak for himself “and in support under the [Act] so that justice can be seen to be done”. I declined Ms Mills’ request.
[55] I explained to Ms Mills that Mr Peterson was not a party. As a McKenzie friend he could sit beside her, take notes and assist her, but he could not speak as though he were a party. Mr Upton, counsel for ASB, said there had been a discussion about Mr Peterson appearing as a McKenzie friend and ASB agreed to the arrangement. But if Mr Peterson now wished to submit the District Court Judge was wrong to decide he did not have standing, he should have appealed.
[56] Ms Mills said Mr Peterson sits and researches and it would save the Court a lot of time because things “roll off the top of his head” and because she did not comprehend dates and times and her memory did not hold such information. I asked Ms Mills who presented her case before Judge Courtney. Ms Mills confirmed that Mr Peterson spoke predominately but that she presented her case and Mr Peterson presented his.
[57] I ruled that it was for Ms Mills to present her appeal. Mr Peterson could support her in the ways I had indicated but she was responsible for the carriage of her appeal and we would proceed on that basis.
[58] Ms Mills presented her appeal competently, an observation I made to her during the hearing when, once more, Mr Peterson sought to interrupt her. But I had to
pause during her reply when it became very clear that Ms Mills was simply reading out what Mr Peterson was writing down and handing up to her. I told Mr Peterson he could no longer do that; that Ms Mills could not be a mouthpiece for the submissions he was making while seated.
[59] I turn now to the oppression claim and costs issue, which are the only two grounds properly raised for determination on appeal.
Alleged oppressive conduct by ASB
[60] As Mr Upton observed, it is extremely difficult to distil from the pleaded case the nature of the oppressive conduct alleged against ASB. Referring to the submissions filed on behalf of both plaintiffs, Judge Courtney said the following aspects of s 3 of the Act are specifically relied on:27
(a)Section 3(2)(c) provides that a purpose of the CCCFA is to protect interests of consumers under credit contracts for the duration of the contract. Nothing further is submitted with regard to this section which establishes a reasonably arguable cause of action on the part of Ms Mills.
(b)Section 3(2)(d)(ii) provides remedies for debtors in relation to oppressive conduct by creditors under credit contracts. It is said the banks failure to disclose the overdraft limit reduction has made it impossible for the plaintiffs to fulfil their obligations under the PASA. Such argument cannot succeed as the overdraft limit was later reinstated at Ms Mills’ request. It was the withdrawal of funds by Mr Mills which has caused difficulties for the plaintiffs.
(c)Section 3(3)(a) requires creditors to be responsible lenders for the duration of the contract. It is alleged ASB was irresponsible by not enquiring further into Mr Mills’ purported assignment of rights and obligations under the PASA when it was aware “there was the potential for damaging controversy affecting their customers.” It is not for ASB to take steps to ensure their client complies with, or can comply with, a contract to which the bank is not a party.
(d)Section 3(3)(b) requires disclosure before variation of a credit contract. This has been addressed above. This is a breach of the CCCFA, but it does not amount to oppressive conduct on the part of ASB.
(e)Section 3(3)(d) enables consumers to seek reasonable changes to consumer credit contracts on the grounds of unforeseen hardship. The Court of Appeal has held there is no obligation on a lender to provide
27 At [72].
further funding to a customer and that a refusal to finance by the lender cannot be regarded as in any way oppressive.28
[61] It is also difficult to discern from the written appeal submissions the nature of Ms Mills’ case on appeal. In an appeal such as the present, an appellant is entitled to judgment in accordance with the opinion of the appellate court.29 The appellate court has the responsibility of considering the merits of the case afresh.30 The weight to be given to the reasoning of the court below is a matter for the appellate court’s assessment.31 The appellate court should form its own opinion of the acceptability and weight to be accorded to the evidence rather than deferring to the lower court’s assessment of the evidence.32
[62] Mr Upton’s fulsome description of the events and matters that, on Ms Mills’ case, seem to give rise to the alleged oppression have assisted me in considering the merits of Ms Mills’ case. Ms Mills’ case against ASB for alleged oppression appears to arise out of the following events or failures:
(a)ASB’s apparent refusal to refinance to Mr Peterson; that is, allow Mr Peterson to take over Mr Mill’s obligations under the existing joint facilities that Mr and Ms Mills had at that time.
(b)ASB’s apparently misleading statement that Mr Peterson had an outstanding judgment debt, which needed to be paid prior to any consideration of refinancing involving him.
(c)ASB’s apparent refusal to set up some sort of ‘set-off’ account which would have ‘ring fenced’ the $40,000 which Mr Peterson had deposited into the Orbit account.
(d)ASB’s decrease in the Orbit account overdraft limit to $12,000 at Mr Mills’ request.
28 Judge Courtney cited: Colley v Westpac New Zealand Ltd [2013] NZCA 57 at [22].
29 Austin Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [16].
30 Kacem v Bashir [2010] NZSC 112; [2011] 2 NZLR 1 at [31].
31 Austin Nichols & Co Inc v Stichting Lodestar, above n 29, at [3].
32 McKay v Sandman [2018] NZCA 103; [2018] NZAR 707 at [29]–[31].
(e)ASB’s failure to immediately notify Ms Mills of Mr Mills’ instruction to decrease the level of overdraft to the Orbit account.
(f)ASB’s apparent failure to inform Ms Mills when she contacted ASB about the decrease that it was Mr Mills who had made that request. It is said the ASB Bank officer involved misled Ms Mills into the belief that this was due to a bank error, not a customer request.
(g)ASB’s increase of the overdraft (at Ms Mills’ request) to $52,000, when it should have only have been $50,000.
(h)ASB allowed Mr Mills to withdraw $40,000 from the Orbit account once the overdraft limit had been reinstated at Ms Mills’ request. It seems to be said that ASB should have placed a stop on the account given that it knew of the Agreement between Mr Peterson and Mr Mills and that such a withdrawal was a breach of that Agreement. It also seems to be alleged that that Agreement is somehow a collateral contract under section 119 CCCFA and therefore part of ASB’s loan and account operating contracts.
(i)ASB’s alleged failure to resolve the matter as between Mr Mills, Ms Mills and Mr Peterson when Mr Mills refused to return the $40,000, which Ms Mills and Mr Peterson claimed as theirs.
(j)ASB allegedly allowing the bad credit ratings which Mr Peterson and Ms Mills allegedly have as a result of the above.
[63] Mr Upton submitted the Judge correctly directed himself on the law and applicable provisions in the Act. Mr Upton submitted that unless one of the three forms of oppression described in s 120 of the Act is present, the Court has no jurisdiction to reopen a contract or give any relief.
Discussion
[64] The power to reopen oppressive credit contracts, consumer leases and buy- back transactions is conferred under Part 5 of the Act. The power to reopen extends to collateral contracts and linked transactions.33
[65]Section 118 provides the meaning of “oppressive”:
In this Act, oppressive means oppressive, harsh, unjustly burdensome, unconscionable, or in breach of reasonable standards of commercial practice.
[66] Under s 120 of the Act the court may reopen a credit contract, consumer lease, or buy-back transaction if it considers that —
(a)the contract, lease, or transaction is oppressive; or
(b)a party has exercised, or intends to exercise, a right or power conferred by the contract, lease, or transaction in an oppressive manner; or
(c)a party has induced another party to enter into the contract, lease, or transaction by oppressive means.
[67] The court is to be guided in its application of s 120 by having regard to the matters set out in s 124(1) to the extent they are applicable:
124 Guidelines for reopening credit contracts, consumer leases, and buy-back transactions
(1)In deciding whether section 120 applies and whether to reopen a credit contract, consumer lease, or buy-back transaction (an arrangement), the court must, to the extent that the following matters are applicable in the particular circumstances, have regard to:
(a)all the circumstances relating to the making of the arrangement, or the exercise of any right or power conferred by the arrangement, or the inducement to enter into the arrangement; and
(b)whether the creditor or transferee has, in relation to any aspect of the arrangement (including the creditor’s or transferee’s conduct in entering into the arrangement), complied with the lender responsibility principles (see section 9C(2)); and
(c)the relative bargaining power of the parties; and
33 Credit Contracts and Consumer Finance Act 2003, s 119.
(d)whether, taking account of the particular characteristics of the debtor, lessee, or occupier (for example, his or her age or physical or mental condition), that person, or the person’s representative, was reasonably able to protect that person’s interests; and
(e)in the case of a credit contract, whether the contract is a consumer credit contract; and
(f)whether, before entering into the arrangement, the debtor, lessee, or occupier obtained independent legal or other professional advice in relation to that arrangement; and
(g)whether the creditor, lessor, or transferee, or any person acting in the interests of that person, subjected the debtor, lessee, or occupier to unfair pressure or tactics or otherwise unfairly influenced the debtor, lessee, or occupier to enter into the arrangement and, if so, the nature and extent of that unfair conduct; and
(h)the terms of other arrangements under which the debtor, lessee, or occupier could have obtained the same or substantially similar credit, hired goods, or finance from a person other than the creditor, lessor, or transferee, including—
(i)the costs of borrowing, costs of the lease, or costs of the buy-back transaction (as the case may be) under those other arrangements; and
(ii)whether the arrangement under consideration imposes significantly more onerous terms on the debtor, lessee, or occupier than would be imposed under those other arrangements; and
(i)the amount payable by the debtor, lessee, or occupier under the arrangement; and
(j)the amount of any payment required as a condition of the full prepayment under the arrangement, including the creditor’s expenses and the likelihood that the amount repaid could be reinvested on similar terms; and
(k)the form of the arrangement, including whether it is expressed in plain language in a clear, concise, and intelligible manner; and
(l)whether the terms of the arrangement—
(i)allow the debtor, lessee, or transferee to be reasonably able to comply with his or her obligations under the arrangement; and
(ii)are reasonably necessary to protect the interests of the creditor, lessor, or transferee; and
(m)the length of time the debtor, lessee, or occupier has had to remedy any default; and
(n)if the creditor, lessor, or transferee has refused to release, or has agreed to release subject to conditions, a security interest relating to the arrangement, the obligations secured by the security interest and the extent of security that remains after the release or conditional release; and
(o)whether action by the creditor, lessor, or transferee in relation to the enforcement of, or recovery under, the arrangement was lawful in the circumstances; and
(p)any other matters that the court thinks fit.
[68] Mr Upton drew my attention to the “considerable body of case law” dealing with “oppression” and from which the following general principles can be distilled:34
(a)Oppression requires something more than a disadvantage or unfairness. A “… right or power conferred by the contract covered by the Credit Contracts Act is not exercised in an oppressive manner simply because it is thought, even by the Court, that it is unfair”.35
(b)The fact that performance of the contract is difficult for the party seeking to claim oppression is insufficient. There must be a clear injustice.36
(c)The seriousness of the conduct is emphasised. The courts talk of policing “serious abuse of crediting contracting”.37
[69] In GE Custodians v Bartle the Supreme Court endorsed the Court of Appeal’s approach to the definition of “oppressive”:38
… the various words which together form the definition of the term “oppressive” all contain different shades of meaning but they all contain the underlying idea that the transaction or some term of it is in contravention of reasonable standards of commercial practice.
34 See Ian Gault (ed) Gault on Commercial Law (online ed, Thomson Reuters) at [FC7.02].
35 Taylor v Westpac Banking Corp Ltd (1996) 7 TCLR 177, 104 (CA) at 184.
36 Italia Holdings (Properties) Ltd v Lonsdale Holdings (Auckland) Ltd [1984] 2 NZLR 1 (HC) at 16.
37 Bartle v GE Custodians Ltd [2010] NZCA 174, [2010] 3 NZLR 601 at [49].
38 GE Custodians v Bartle [2010] NZSC 146, [2011] 2 NZLR 31 at [46], citing Greenbank New Zealand Ltd v Haas [2000] 3 NZLR 341 (CA) at [24].
[70] The scope of oppression under the Act is broader than the equitable doctrine of unconscionability.39 This follows from the fact the definition of “oppressive” is wider than unconscionable conduct and includes a “breach of reasonable standards of commercial practice”.40
[71] Before turning to the specific allegations of oppression, I address the argument that the Agreement between Mr Mills and Mr Peterson (signed by Ms Mills as a “Joint Title Holder”) forms part of the ASB credit contract concerning the Orbit account.
[72] Ms Mills relies on s 119 Act in support of her argument that the agreement must be considered as part of the credit contract and ought to have been treated as such by ASB.
[73] The essential difficulty with Ms Mills’ argument is that the Agreement was not a security interest or guarantee taken by ASB in connection with the Orbit account.41 Nor was the Agreement entered into as a term of the credit contract with the bank such that it formed part of the credit contract for the purposes of Part 5.42 Nor does s 119(3) apply. There was no consumer lease or buy-back transaction at all, let alone a lease or transaction to which the Agreement related.
[74] Section 119 allows the court to treat linked agreements as part of a transaction in order to consider the totality of a transaction.43 The Agreement was a contract between Mr Mills and Mr Peterson (who as ASB emphasises, was not the bank’s customer at the time). Crucially, the Agreement was conditional on ASB’s approval, which was never given, and it assumed Mr Mills would be removed as an account holder, which had not occurred at the time Mr Peterson deposited the $40,000. A further critical, relevant fact is that the bank warned the plaintiffs of the risks when it informed them it could not prevent Mr Mills from accessing the Orbit account notwithstanding his contractual agreement not to do so.44
39 At [46], approving the observation of Arnold J in Bartle v GE Custodians Ltd, above n 37, at [177].
40 At [46].
41 Section 119(1).
42 Section 119(2).
43 Gault on Commercial Law, above n 34, at [FC7.01(1)].
44 See [30] above.
[75] The Agreement cannot be viewed as a collateral contract or linked transaction for the purpose of s 119.
[76] As to the circumstances said to give rise to oppressive conduct on the part of the bank in refusing to refinance, I agree with Judge Courtney. Ms Mills’ statement of claim discloses no reasonably arguable cause of action based on oppressive behaviour by ASB in refusing to refinance.45
(a)ASB was under no obligation to refinance Mr and Ms Mills’ existing borrowing in the manner sought. Mr Peterson was a past customer of the bank and the bank obtained judgment against him for a debt he owed. Ms Cotton deposed to the following communication from Mr Peterson:
Mr Peterson frankly explained to me that ASB had previously obtained a judgment against him, and that he understood this might make it difficult for him to obtain a new loan from ASB.
Mr Peterson did not challenge that evidence.
(b)The bank was not obliged to advance funds to Ms Mills or Mr Peterson, nor was it obliged to open a set-off account. I agree with Judge Courtney’s observation that it was “always open to either or both plaintiffs to open a separate account into which the $40,000 could have been paid”.46
(c)As ASB submits, any assumption by its frontline staff that Mr Peterson may have owed money (admitted to be an incorrect assumption at the time due to a ‘full and final settlement agreement’ that was in place) cannot have been misleading or oppressive as Mr Peterson was fully aware of the true position. Mr Peterson was able to simply correct the bank officer’s assumption.
(d)The reduction in the overdraft limit was not a unilateral exercise of
45 District Court decision, above n 1, at [79].
46 At [77].
power by ASB but undertaken consistently with the terms and conditions applicable to the Orbit account and undertaken on instructions from one of the joint account holders. When the other joint account holder asked for the original overdraft limit to be reinstated, the bank executed that request.
(e)The failure to notify Ms Mills of the decrease, while possibly breaching the Act, does not amount to oppressive conduct. The issue of breach of s 22 and the consequences of any such breach, are for trial. The bank highlights that “nothing had been transacted on the account to her detriment” between the time of the change in the overdraft limit and Ms Mills’ discovery of the change. That, however, is not determinative of oppression. As the Judge observed, whether a creditor has acted oppressively requires a focus on the acts of the creditor not personal hardship for the debtor.47 That said, I agree there was no oppression by virtue only of a failure to inform. The failure to inform Ms Mills of the decrease in the overdraft limit does not satisfy any of the three statutory pre-requisites in s 120 for the reopening of a credit contract.
(f)Ms Mills asserted it was ASB who acknowledged a mistake in reducing the overdraft limit. The contemporaneous note made by Ms Ashford suggests otherwise.48 ASB submits its evidence should be preferred over Ms Mills’ recollection recorded in an affidavit a year and a half after the event. I do not find it necessary to resolve the discrepancy in this evidence. The fundamental point is that the failure to inform Ms Mills that her joint account holder had requested a change to be made to the overdraft limit, does not, on the most benign view of the term, constitute oppression.
(g)As the increase to the overdraft was requested by Ms Mills, that increase cannot be regarded as oppressive conduct. Nor does the fact the overdraft was increased to $52,000 (rather than $50,000) make it
47 At [74], citing Colley v Westpac New Zealand Ltd, above n 28, at [36].
48 Set out in this judgment at [18].
so.
(h)“Allowing” Mr Mills to withdraw $40,000 from this account was not oppressive. He was exercising his entitlement as a joint account holder. Again, it is a relevant part of the factual matrix that ASB warned Ms Mills and Mr Peterson about that very possibility. In her reply, Ms Mills said she did take legal advice but that does not alter the fact the bank, and Mr Mills, acted in conformity with their respective rights and responsibilities with regard to Mr Mills’ withdrawal from the Orbit account.
(i)Mr Upton submitted that it cannot amount to oppression if a bank fails to resolve a contractual or other relationship property dispute as between customers (noting that Mr Peterson was not a customer). Mr Upton noted at this point that there is a court process afoot as between Ms Mills and Mr Peterson against Mr Mills, which was yet to be resolved at the time of hearing.
(j)The statement of claim pleads:
[44] Due to the continuing breaches of agreement by Graham Mills, as evidenced by his mis-appropriation of Mr. Peterson's $40,000 and other withdrawals in breach of the sale and purchase agreement, the plaintiffs have needed to be careful in not crediting the overdraft account prematurely for fear that Mr. Mills would misappropriate further funds. Consequently most such payments have been made several days after the bank has added its interest charges to the facility. This is prudent and responsible behavior considering all the circumstances.
Neither Ms Mills nor Mr Mills have made any payments towards their borrowing since February 2017. The alleged bad credit ratings did not result from the bank’s actions but, rather, from the decision not to put the Orbit account into credit for fear Mr Mills would withdraw the money. For this reason, Ms Mills let the account fall into default.
No oppression on the part of ASB arises.
[77] As a result of the foregoing analysis, I reach the same view as the Judge. Ms Mills’ claim discloses no reasonably arguable cause of action based on oppression by ASB.
Costs
[78]Ms Mills seeks a reversal of the costs order in favour of the bank.
[79] Ms Mills made no written or oral submissions in support of the outcome she seeks on appeal.
[80] I am unable to identify any basis, or reason, for disturbing the relatively modest costs award in the bank’s favour. The total sum awarded was $6,942.00, comprising the following costs allocations:
Preparing and filing interlocutory application for strike out and supporting affidavits $712 Preparing written submissions
$1,780
Preparation of bundle for hearing
$712
Preparing and filing summary
judgment application and supporting affidavits
$712
Preparing for hearing of defended summary judgment application
$1,335
Arguing defended summary judgment application
$1,335
Sealing order or judgment
$356
Total
$6,942
[81] The costs, of course, were awarded following the successful application against Mr Peterson (all claims struck out) and the successful application for summary judgment, other than the claim for breach of s 22 of the Act.
[82] The Court has a broad discretion in relation to costs and the Judge’s orders were well within his discretion in circumstances where:
(a)all of Mr Peterson’s causes of action were struck out;
(b)two of Ms Mills’ three causes of action were struck out; and
(c)in respect of the remaining cause of action, ASB has offered to pay twice as much as Ms Mills is likely to recover under the Act.
[83] I have already referred to Judge Courtney’s observations in this regard, but his final comments bear repeating:
Ms Mills may well wish to take those comments into account in determining whether or not she wishes to pursue any sum other than the statutory damages applicable under CCCFA. Conversely, ASB may consider whether or not it is worth proceeding to hearing in an endeavour to reduce statutory damages given, as I understand it, they have already offered to pay $2500 to Ms Mills.
Result
[84]The appeal is dismissed.
[85] The respondent is entitled to costs. I consider the proceeding is appropriately classified as a category 2 proceeding. Scale costs on a 2B basis are payable disallowing, as in the District Court, an allowance for second counsel.
Karen Clark J
Solicitors:
Simpson Grierson, Auckland
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