The Co-Operative Bank Limited v Opai
[2024] NZHC 3951
•19 December 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-243
[2024] NZHC 3951
BETWEEN THE CO-OPERATIVE BANK LIMITED
Plaintiff
AND
MELISSA JEAN OPAI
Defendant
Hearing: On the papers Appearances:
RJ Gordon for the Plaintiff MJ Opai, Defendant in Person
Judgment:
19 December 2024
JUDGMENT OF ASSOCIATE JUDGE SUSSOCK
(Leave to appeal)
This judgment was delivered by me on 19 December 2024 at 4 pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
MinterEllisonRuddWatts, Wellington
CO-OPERATIVE BANK LIMITED v OPAI [2024] NZHC 3951 [19 December 2024]
Introduction
[1] The Co-operative Bank Limited (the Bank) has applied for leave to appeal my decision dated 20 August 2024 declining summary judgment of its claim against Melissa Jean Opai (Judgment).1
[2] The Bank’s claim is in respect of an unpaid loan advanced by the Bank to Ms Opai in May 2021 for $374,546.
[3] Leave is required pursuant to s 56(3) of the Senior Courts Act 2016. Ms Opai does not oppose the application for leave but the rationale behind the requirement is to serve as a filtering mechanism to prevent unnecessary delay caused by unmeritorious or insignificant appeals.2 Therefore, despite Ms Opai not opposing the application, I am still required to consider whether leave ought to be granted.
[4] After considering the factors discussed below, I grant leave as sought for the reasons set out.
Principles governing leave to appeal
[5] In Tomar v Tomar, the Court of Appeal summarised the approach to applications for leave to appeal pursuant to s 56(3), as follows:3
[6] In Finewood Upholstery Ltd v Vaughan, Fitzgerald J appropriately observed that the requirement for leave to appeal should serve as a filtering mechanism to ensure that unmeritorious appeals of interlocutory orders, or appeals of interlocutory orders of no great significance to either the parties or more generally, do not unnecessarily delay the proceedings in which the orders were made.4 The following considerations were recognised as relevant on an application for leave to appeal:5
(a)A high threshold exists.
(b)The applicant must identify an arguable error of law or fact.
(c)The alleged error should be of general or public importance warranting determination or otherwise of sufficient
1 The Cooperative Bank Limited v Opai [2024] NZHC 2286 [Judgment].
2 Auto Net v Tyler [2021] NZHC 542 at [15] (footnote omitted).
3 Tomar v Tomar [2021] NZCA 419.
4 Finewood Upholstery Ltd v Vaughan [2017] NZHC 1679 at [13].
5 At [9] and [14], citing A v Ministry of Internal Affairs [2017] NZHC 887.
importance to the applicant to outweigh the lack of general or precedential value.
(d)The circumstances must warrant incurring further delay.
(e)The ultimate question is whether the interests of justice are served by granting leave.
[7] This Court in Ngai Te Hapu Inc v Bay of Plenty Regional Council indicated that considerations similar to the principles applicable to applications under the former s 24G of the Judicature Act 1908, as explained in Meates v Taylor [Leave],6 apply to applications under s 56(5) of the Senior Courts Act, stating:
We agree that leave to appeal should only be granted where the significance or implications of an arguable error of fact or law, either for the particular case or for the applicant or as a matter of precedent, warrants the further delay which the appeal process would involve.
Background
[6] The loan agreement in issue was entered into between the Bank and Ms Opai following the consolidation of earlier loans originally owed jointly and severally by Ms Opai and her mother as co-borrowers. Ms Opai’s mother died in 2017 and after several years of difficulties in making repayments for various reasons, the Bank agreed to consolidate the earlier loans. This led to the Bank and Ms Opai entering into a new loan agreement on 20 May 2021 but in Ms Opai’s personal capacity only and not as co-borrower with her mother’s estate (May 2021 Agreement).
[7] The May 2021 Agreement was described as a home loan agreement, but the Bank is unable to enforce the security over the intended property because Ms Opai holds the property as executor of her mother’s estate and not in her personal capacity. This has precluded the Bank from taking the more usual path of a mortgagee sale to recover the outstanding debt.
[8] It is common ground that Ms Opai has breached the terms of the May 2021 Agreement by ceasing to make repayments (with the last weekly instalment of $161.58 paid on 19 May 2022).
6 Meates v Taylor [Leave] (1992) 5 PRNZ 524 (CA) at 526.
[9] Ms Opai is acting for herself and raised a large number of defences. Following the hearing, I issued an interim judgment in which I determined that a number of the defences raised by Ms Opai were not reasonably arguable.7 However, I recorded that further consideration needed to be given to the defence raised that the implications of the lending going forward without a co-borrower had not been advised to her, in arguable breach of the lender responsibility principles in s 9C of the Credit Contract and Consumer Finance Act 2003 (CCCFA), or amounting to “oppressive conduct” as defined in s 118 of that Act. Because neither the Bank nor Ms Opai appeared to have been aware that the steps taken to consolidate the loans would change the position in respect of the security, I held that it may be arguable that the lender responsibility principles may not have been complied with.
[10] I directed further submissions and evidence on this question. In doing so, I allowed time for the parties to attempt to resolve matters by negotiation as prior to the hearing, Ms Opai had incorrectly understood that she was not able to negotiate once proceedings were before the Court.
[11]The attempts to settle were unsuccessful.
[12] The Bank then filed submissions and further evidence addressing whether Ms Opai had been assisted to be “reasonably aware of the full implications”8 of the May 2021 loan. The Bank’s submissions were essentially that Ms Opai is actually in the same position under the May 2021 Agreement as she was immediately preceding it, because the debt that was re-financed was a joint and several liability of the then co- borrowers. The Bank submitted that, put simply, Ms Opai was herself liable for the full amount of the pre-refinance debt owing to the Bank prior to May 2021 and that she is equally personally liable for the full amount of the debt owing to the Bank post 20 May 2021. The Bank submitted “[u]ltimately as concerns her legal liability for the debt owed, nothing has changed”.
[13] I accepted that prior to the May 2021 Agreement, the Bank could pursue Ms Opai for the whole of the loan because it was owed jointly and severally, but I held
7 The Cooperative Bank Limited v Opai [2023] NZHC 1027 (Interim Judgment)
8 Credit Contracts and Consumer Finance Act 2003, s 9C(3)(b).
that it was still arguable that the circumstances had changed because previously Ms Opai had a clear right of contribution against her mother’s estate, because they were co-borrowers, whereas once the May 2021 loan was entered into solely with Ms Opai in her personal capacity, Ms Opai no longer had such a clear right.
Is there an arguable error law or fact?
Bank’s submissions
[14] The Bank submits that the above finding represents a fundamental misstatement of the correct legal position on rights of contribution as between joint and several debtors as the equitable right to contribution arises upon the discharge of a jointly owed liability.9 The Bank says that this occurred in May 2021 when Ms Opai borrowed money from the Bank which she used to repay the September 2016 loans in full and that from this point in time and onwards, the defendant has had and continues to have rights of contribution as against her then co-borrower, that is, her deceased mother’s estate. The Bank further submits that, in any event, it has been repeatedly held that the rights of contribution that may or may not arise as between co-debtors provide no proper basis for the Court to deny judgment for a debt that is otherwise due and owing to a creditor.
[15] The Bank therefore submits that, while from a lay person’s perspective Ms Opai might think there has been a “change” arising out of her mother’s unfortunate passing, in reality she is in the same substantive legal position now under the May 2021 Agreement as she was under the September 2016 loan agreements. And to the extent that there were any “negative ‘implications’ from the security position not being as the defendant represented it was (refer clause 5 of the Facility Agreement), that prejudice was to the Bank not to her.”
[16] The Bank submits that I did not agree with the above analysis, instead considering, the Bank says critically, that Ms Opai “could not look to her mother’s deceased estate for rights of contribution (or subrogation).” The Bank refers to five
9 JD Heydon, MJ Leeming and PG Turner Meagher, Gummow & Lehane’s Equity: Doctrine and Remedies (5th ed, Lexis Nexis Butterworths, Australia 2015) at [10–140].
passages in the Judgment in support of this.10 The Bank therefore submits that the intended appeal has a very good chance of success.
Discussion
[17] The question when considering whether there was an arguable breach of the lender responsibility principles under the CCCFA is whether the Bank assisted Ms Opai to be reasonably aware of the full implications of entering into the Agreement in her personal name only and not with the estate as co-borrower.
[18] In the passages from the Judgment referred to by the Bank, I questioned whether Ms Opai’s right to contribution “may have been affected”,11 held that it was “not necessarily the case” that Ms Opai is still entitled to look to the estate for contribution12 and referred to there no longer being a “clear right of contribution.”13 I agree that in some instances I used the language of entitlement to contribution, but my focus was on whether there had been a change in terms of the implications of entering into the Agreement.
[19] The Bank’s submissions do not suggest that there was no change on entry into the May 2021 Agreement but, instead, that any right to contribution crystallised then. This may well be the case, but in my view it does not change the outcome that I reached—that it is arguable that the Bank did not assist Ms Opai to be “reasonably aware of the full implications of entering into the agreement”14 in May 2021.
[20] The Bank’s submissions appear to focus on the legal position but s 9C of the CCCFA does not confine the Bank’s responsibility to the legal implications but instead the “full implications”. Assuming the right to contribution did crystallise on entry into the May 2021 Agreement, it is arguable that Ms Opai ought to have been made aware of that as it may have affected the steps that she took as a consequence, including in relation to distribution of her mother’s estate. This is particularly the case where the full context of Ms Opai’s position and the position of the estate is not before the Court.
10 Judgment at [6], [28], [47], [60], and [64].
11 At [6].
12 At [28].
13 At [47], [60] and [64].
14 Credit Contracts and Consumer Finance Act, s 9C(3)(b).
[21] From Ms Opai’s perspective, the critical time at which she would be considering whether there was a right to contribution was when the loan was called up by the Bank which was not until August 2022.15 At that stage the loan was only in her name so it may not have been clear to Ms Opai, or any legal adviser who was not aware of the history, that a right of contribution had arisen in May 2021 when the loans were consolidated.
[22] I accept however that it is arguable that I erred in finding that Ms Opai had a reasonably arguable defence based on the lender responsibility principles.
Is the alleged error of sufficient importance either generally or to the parties to justify appeal?
[23] If the Court of Appeal considers that it is clear that the Bank did assist Ms Opai to reach an informed decision on whether to enter into the May 2021 Agreement, including that she was reasonably aware of the full implications of doing so, then it is likely to be determinative of the entire case. This is because the other defences that I held were reasonably arguable, that the May 2021 Agreement was oppressive and that the Bank did not assist Ms Opai to reach informed decisions in subsequent dealings in relation to the Agreement, may fall away as well. The alleged error is therefore of sufficient importance to the Bank to justify an appeal because the result will be known earlier and without the delay and expense of substantive proceedings.
[24] In addition, the Bank submits that the intended appeal involves a question of law that is of general and commercial importance, being “whether equitable rights of contribution do not arise upon one debtor’s discharge (in full of a joint and severally owed liability)” and that this is a significant commercial issue which ought to be clarified by the Court of Appeal.
[25] The focus in the judgment, as already discussed above, was whether there was a change in Ms Opai’s position as a result of entry into the May 2021 Agreement. I do not consider that it is likely that the judgment will be relied on for the proposition that the right to contribution does not arise upon one debtor’s discharge, because I do
15 The Cooperative Bank Limited v Opai [2023] NZHC 1027 [Interim Judgment].
not consider that the judgment clearly states that. However, granting leave may ensure there is no confusion in this regard.
[26] Furthermore, because there appears to be relatively little case law on the application of the lender responsibility principles, the outcome of the appeal may be of general importance. This factor therefore supports leave being granted.
Do the circumstances warrant the further delay of an appeal?
[27] I accept that the Bank is in a very difficult position as Ms Opai is not making payments on the loan and the Bank is unable to sell the original property which secured the loan by way of mortgagee sale. If leave is not granted, although the Bank will be able to raise the same arguments in the substantive hearing, the benefits of the summary judgment procedure will have been lost.
[28] Furthermore, the party that the delay is likely to impact upon the most is the Bank and it is the party seeking leave.
[29]Importantly, in relation to this factor, Ms Opai does not oppose leave.
[30] I therefore consider that the circumstances warrant the further delay that an appeal may involve as the appeal may result in a final resolution at an earlier time.
Are the interests of justice served by granting leave?
[31] As will be clear from the above I consider that the interests of justice are best served by granting leave.
Result
[32]The Bank’s application for leave to appeal is granted.
Costs
[33]Costs are reserved, as sought by the Bank.
Reissue of judgment on appeal
[34] Finally, I note that unfortunately there appears to have been a late global change to the reference to “principal” in the Judgment, changing it to “principle”. I am therefore reissuing the Judgment declining summary judgment together with this judgment on leave to correct this.
Associate Judge Sussock
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