Westpac New Zealand Limited v Gordon HC Auckland CIV 2009-404-3873
[2009] NZHC 2580
•2 December 2009
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2009-404-003873
BETWEEN WESTPAC NEW ZEALAND LIMITED Plaintiff
ANDDEAN RICHARD GORDON First Defendant
ANDMARY ELIZABETH GORDON Second Defendant
Hearing: 30 November 2009
Appearances: S Gollin for the Plaintiff
G Kohler for the Second Defendant
Judgment: 2 December 2009
JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN
This judgment was delivered by me on
2 December 2009 at 3:30pm, pursuant to
Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
Solicitors/Council:
S Gollin, Minter Ellison Rudd Watts, Auckland – [email protected]
G Kohler, K Glover, Barrister, Auckland – [email protected]
WESTPAC NEW ZEALAND LIMITED V DEAN RICHARD GORDON AND ANOR HC AK CIV 2009-404-
003873 2 December 2009
Background
[1] Between July 2003 and February 2008 the defendants entered into various agreements for finance to be provided to them by Westpac. The agreements recorded seven loan arrangements together with four variations of those, in total some eleven agreements. Mortgage security was provided over the property situated at 2 Heke Street, Freemans Bay, Auckland which was registered in the name of the Gordon Family Trustee Limited, as trustee of the Gordon Family Trust. The mortgage secured the trust’s liability under its guarantee for the defendants’ obligations pursuant to their loan agreements.
[2] The defendants have been customers of Westpac since the 1980s. Mr Gordon was previously a business manager with Westpac and later became head of property finance with the ASB Bank. After that he set up his own business as a merchant banker. Mrs Gordon relinquished employment as CEO of a commercial industrial and design firm in 2005. It seems that about that time the defendants embarked on a substantial refurbishment of the Heke Street property which they occupied as their family home. As the renovations progressed over the next two or so years further funds were borrowed as was evidenced by the additional loan agreements completed.
[3] It appears that early in 2008 Mr Gordon’s merchant banking business was significantly affected by the economic downturn at that time. Because they were unable to meet the debt servicing cost the defendants placed their property on the market for sale. Eventually the trust sold the property for $2,950,000.00 with settlement occurring on 2 July 2008. This resulted in net proceeds of sale on settlement of $2,744,023.87. Without the knowledge of Westpac the defendants had applied the deposit payment of approximately $200,000.00 to the repayment of a family loan and to pay various trade creditors for work done on the property.
[4] As at the time of the sale approximately $3,127,455.00 was owing by the trust and by the defendants to Westpac. It was clear that the sale price of the Heke Street property would not be sufficient to clear all amounts owing to Westpac.
[5] For the sale of Heke Street to proceed Westpac was requested, and agreed to provide a discharge of its mortgage. In consideration of that agreement Westpac required a new loan agreement to be entered into by the defendants to formalise the terms for the repayment of $370,000.00 of the $383,383.23 that remained to be paid to Westpac following the sale. Westpac agreed to writeoff the difference.
[6] Upon settlement of the sale of Heke Street Westpac received the net sale proceeds and applied these in reduction of the defendants’ loans. This claim has been pursued because payments due under the new loan agreement have fallen into default.
[7] It is in that outcome that issues have surfaced upon Westpac’s summary judgment application. In this case it appears plain from the relevant documents that both defendants signed the new loan agreement by which each jointly and severally agreed to repay the sum of $370,000.00 plus any interest accrued.
[8] But the defendants do not accept they are bound by that agreement to repay for reasons relevant to its making.
[9] Mr Gordon who acknowledges signing the agreement now challenges the level of interest and costs required by it to be paid. He says they breached the provisions of the Credit Contracts and Consumer Finance Act 2003 (CCCFA). Mrs Gordon’s opposition reiterates credit contracts oppression arguments but argues also that she was not a party to the new loan agreement and the advance was made contrary to her express instructions that it was not to proceed. Her case is that any indebtedness she owed to Westpac was repaid/extinguished at about the time of the agreement to repay the sum of $370,000.00.
[10] It is implicit in the oppositions filed for the defendants that they claim, as they must, that they have an arguable defence to Westpac’s claim. Mr Gordon accepts he signed the new loan agreement but claims:
a) He was pressured to do so;
b)The interest rates and costs were far greater than he should have had to pay.
[11] Mrs Gordon’s position is supported by claims that:
a) She signed the agreement (although not in her usual signature) without particular knowledge of it, without advice and in a situation of distress but overall in circumstances when she should not have been asked at all to sign it;
b)Though she may have signed it she says her signature was obtained in circumstances amounting to oppression and therefore she should be given the opportunity to reopen the contract.
[12] Her position is supported by Mr Gordon. Indeed at the beginning of the hearing of this fixture Mr Webb appeared for him to advise he had no further instructions from Mr Gordon who was prepared to abide the decision of the Court. At that time I granted leave to Mr Webb to be excused from the hearing and he then left.
[13] It is apparent that in that period leading up to the sale of the Heke Street property the Gordons marriage situation deteriorated.
Mr Gordon’s account
[14] Mr Gordon deposes that in December 2007 whilst he and Mrs Gordon were completing their house at Heke Street they were also discussing a trial separation. He adds that by March 2008 he and Mrs Gordon agreed the house should be placed on the market and sold and that by that time they had agreed they “would divorce”. When in May 2008 they received an offer at $2,950,000.00 for Heke Street he advised Mrs Gordon that “We needed to accept the offer as my income was dropping and that it was becoming difficult to service the loan repayments at the current level...” At that time he said Mrs Gordon did not know that the offer would not cover the existing loan agreement.
[15] Mr Gordon states:
“That in advance of the new term loan application including the ‘many emails and telephone calls’ Mr Banks of Westpac never asked for [Mrs Gordon] to be present or include [her] details in the new loan application. This was consistent with my understanding the loan would be in my name only...
At this time I was still clearly under the impression that the loan was to be in my name as I had been in effect the sole income producer for the last four years and Westpac had not requested [Mrs Gordon] to be present at the meetings or included in any discussions...
After lengthy discussions Westpac agreed they would provide me a loan to cover the shortfall between that sale proceeds and the Westpac debt... On 19
June 2008 Warren Banks emailed me an offer letter...
I was shocked that [Mrs Gordon] was included in this due to the previous discussions I had with Warren Banks. I decided that I would simply amend the loan offer and return it but then I saw the extraordinary high interest rate of 12.5 percent. I questioned this with Warren Banks and requested a standard housing rate, or one of the fixed rates currently in place. This was declined...
On 23 June 2008 I again questioned the interest rate as it was so extraordinarily high. The answer from Warren Banks was “unless you accept the Bank’s offer, the Bank will NOT consent to your Sale and Purchase Agreement and you will be liable to repay the deposit you have utilised.”...
On 25 June 2008 Warren Banks send me an email stating he has advised my solicitor... that the Bank has not consented to the sale due to my non acceptance of the Bank’s formal offer...
On 30 June 2008 Warren Banks again emailed me saying that due to no response, “you have decided not to accept the Bank’s offer. Can I please confirm?”... Later the same day (30 June 2008) I crossed out [Mrs Gordon’s name], signed the loan offer and faxed it to Westpac, attention Warren Banks and posted the original to Westpac, attention Warren Banks...
Again this was on the basis that Westpac knew that we were separated from discussions I had had with Warren Banks and at no time for any of the meetings, emailed correspondence or telephone calls did he ask for [Mrs Gordon] to be present at out meeting or include [Mrs Gordon’s] details in the new term loan.”
[16] According to Mr Gordon when on 1 July new loan documents were couriered to him for signing he was surprised to see Mrs Gordon’s name on them. He said he immediately contacted Mr Banks and asked him how Mrs Gordon could be asked to sign when she had not been included in any of the discussions nor her details taken for the new loan agreement. Accordingly to Mr Gordon, Mr Banks informed him that he had changed his mind and now wanted her included on the new loan.
[17] The defendants were at this time living apart. Mr Gordon said that when he turned up at Mrs Gordon’s house he explained the situation to her and asked her to sign the loan documents. He said that Mrs Gordon would not sign. He said they had a “massive disagreement and she was extremely upset that she was expected to sign documents she knew nothing about. She again refused to sign the documents. I applied excessive pressure on her and in the end she printed her name on the documents. I asked her to sign her verified signature and she refused... At this point we had a huge argument and [Mrs Gordon] asked for the documents back as she wanted to destroy the page on which she had printed her name. I refused to give them to her and left the house. I then couriered the documents to Warren Banks. This pressure on [Mrs Gordon] is something that I am not proud of...”
[18] Mr Gordon said that Mr Banks then contacted him within half an hour and advised him that Westpac would not accept the new loan documents as Mrs Gordon’s signature did not match her verified signature. He advised that Mrs Gordon needed to re-sign them otherwise he would not drawdown the loan. Mr Gordon states that he told Mr Banks that she would not sign the documents and had tried to destroy them but he had not allowed her to.
[19] Mr Gordon’s account continues. He said he called Mrs Gordon and asked her to phone Mr Banks regarding the new loan documents. They were in telephone contact and the next morning she arrived at his place to discuss the new loan agreement. He heard parts of Mrs Gordon’s telephone conversation to Mr Banks later. He supports Mrs Gordon’s account of that call.
[20] Mr Gordon states that later that day his solicitor told him the old loan had been repaid and the new loan drawn. He said this came as a complete surprise to him given the conversation that he heard when Mrs Gordon told Mr Banks not to settle the old loans or to drawdown the new loan.”
[21] Subsequently Mr Gordon wrote to Westpac seeking assistance in restructuring the loan onto a residential interest rate. About a month later Westpac wrote to him demanding repayment. It included a copy of letter Mr Gordon said he had not received which indicated Westpac was unwilling to consider his request for a
standard housing interest rate. Subsequently he submitted a plan for repayment of the loan but received a letter from Westpac declining his proposal.
[22] Mr Gordon says he has been and remains committed to repaying the loan. He acknowledges the impact of the economic downturn but asserts he will again be in a position to begin principal repayments when the market restores itself.
Mrs Gordon’s account
[23] Mrs Gordon’s account is similar but, it seems to me in significant respects it also differs. I intend identifying those differences and others where I consider it is appropriate. She said Mr Gordon made all the arrangements with Westpac for the further advances of funds for their renovation program. She said she never discussed any details with Westpac employees. Documents were always posted to Mr Gordon. They would sign the documents alone at home.
[24] She said she and Mr Gordon separated in January 2008.
[25] When the house was put on the market for sale she had not been informed they were having difficulty meeting mortgage repayments. She said initially that the main reason for putting the house on the market was because of their separation. Then she was shocked to learn that their indebtedness to Westpac was about $3M “and that it was also necessary to sell the property to satisfy that indebtedness”.
[26] She added “we had massive arguments about the amount of the debt and how it got so high without my knowledge.” She said she had no knowledge of a letter written on 27 May 2008 by Mr Gordon on his own behalf in which their financial situation was set out in that letter and accounted in detail the defendants’ financial position. It explained their boat had been sold and stated how the deposit from the sale of the house had been applied. It concluded:
“It is a very unfortunate position for us to be in, however we look forward to your continued support and in return you will have my support.”
[27] Mrs Gordon deposes that Mr Gordon advised her there was a small shortfall in the settlement amount but that he had been dealing with Westpac and was taking full responsibility for this. She added:
“[Mr Gordon] advised me that he had already discussed this with Westpac and that as I had no income, and my income had not been used in the past by Westpac in their credit approvals, Westpac had agreed to him paying this amount and I was not required to be involved.
I accepted this was true and correct as [Mr Gordon] had told me that he had informed the Bank during previous discussions with Mr Banks that we were separated. If I was to be involved in further loan arrangements I would have expected Westpac to have contacted me separately to discuss the situation prior to the settlement date. I have received no letters of offer or any other form of communication from Westpac, neither written nor verbal, regarding the shortfall or any other financial transactions with it.”
[28] The day before the property sale was to settle on 2 July 2008 Mr Gordon met her and told her that Westpac had couriered loan documents to him for the residual liability of $370,000.00 and was insisting that she signed them also. She deposes:
“I told [Mr Gordon] that I was not going to sign as I had not been a party to any discussions with the Bank, nobody had made contact with me to explain anything, and I did not have an income with which to service a loan. We had a huge argument. I was already terribly upset at having to leave my home. Now [Mr Gordon] was telling me that I had to sign the loan documents as the bank was threatening to bankrupt him and possibly me. [Mr Gordon] told me that he had requested that the loan be in his name only, which Westpac had agreed to until the loan documents arrived that day and my name had been included.
[Mr Gordon] exerted considerable pressure on me to try and get me to sign the documents. I was in a very upset state, and crying. I took the documents into the laundry, and started to write my name. I simply began to write my name, and did not sign my usual signature as a form of protest, nor did I initial each page of the loan agreement. I simply left the documents in the laundry when I left the house. I then drove to Hamilton to stay the night with friends.
[This account is significantly different from that of Mr Gordon – referred to in paragraph herein wherein he states they were together when she signed the agreement.]
Later that afternoon [Mr Gordon] telephoned me and said he had been contacted by Mr Banks of Westpac, who was concerned that my name did not match the verified signature on the Bank’s records – which was not surprising. He said that I had to telephone Mr Banks immediately to sign the documents. I was in the course of driving to Hamilton when this conversation took place.
I immediately telephoned Mr Banks. This would have been at about
5:00pm. I told him I was in the process of driving to Hamilton and then onto the Hawkes Bay the next day and that I was incredibly upset. I said that I
did not want to sign the documents. I could not believe that nobody from
Westpac had contacted me prior to this. I explained to him that I did not know the details of what he expected me to sign, and that I wanted to meet him to discuss the options. I wanted full disclosure of what had happened and why there was a loan agreement with my name on it. I asked why I was only being contacted now at such a late stage, had not been previously advised of the shortfall and subsequent loan if Westpac had intended to involve me.
Mr Banks had no answer to this. He just said that I had to sign a new loan agreement properly with a signature that could be verified, as the current signature could not be verified. I maintained that he had an obligation to discuss this with me as I did not agree to anything.
Mr Banks’ allegation that I agreed I had “signed” the loan agreement is not correct. I told him that I had written my name on the loan agreement but had not actually signed the loan agreement...
[Mr Gordon] rang me a short time later and advised that in order for the transaction to proceed, I would need to go to a Westpac branch the following date to properly sign the loan agreement or verify it in some way. Once this was done Westpac would be able to settle a loan otherwise it would not proceed....
I had a sleepless night worrying about the situation. I drove back to Auckland from Hamilton and met with [Mr Gordon] on 2 July 2008. I advised [Mr Gordon] that I had considered the situation that I was not prepared to sign the loan documents. I telephoned Mr Banks about 9:00am the following morning in the presence of [Mr Gordon]. I advised that I had thought things over during the night and that I would not be going into a Bank to sign or to verify that what I had written was my signature. I told him that I had written my name on the documents the previous day under extreme duress, and felt that I had been bullied into this without adequate disclosure. Unless and until I had a meeting with Westpac where everything was explained to me, I was not prepared to sign anything. I told Mr Banks that I had returned to Auckland to do just this and wanted to meet with him.
I asked him whether the sale was a mortgagee sale, and he replied that it was not. [Mr Gordon] and I still own the property and the Bank was not in possession. I said that as a co-owner of the property, the Bank could not make the decisions concerning the property without my consent. I told him I did not want to settle a loan until I had the chance to meet with him and look at the various options. I pointed out that he did not have my proper or verified signature on the documents, and my instructions to him were not to settle the loan. I did not care about his threats about bankruptcy or whatever.
Mr Banks refused to meet with me, and said that after discussion with Westpac’s legal team he had already made up his mind to drawdown the loan with or without my signature. I told him not to proceed, but Mr Banks hung up on me...
Later that day [Mr Gordon] told me that the settlement had proceeded nevertheless.”
[29] Subsequently Mrs Gordon lodged a complaint with the banking ombudsman on 27 February 2009. She identified concerns about what she said was Mr Banks’ behaviour and the way “he had treated me”. Mrs Gordon deposes that the complaint could not proceed because insufficient evidence had been found in order for the complaint to be taken further. It was as she claimed simply a case of “my word against that of Mr Banks”.
[30] It is to be noted in Mrs Gordon’s complaint to the banking ombudsman that she mentioned that by January/February 2008 Mr Gordon’s income was severely reduced by economic events affecting his business. He told her he had asked the Bank for help at that time but was advised there could be no offer of assistance and that the home would have to be sold. She recalls that at that time Mr Gordon advised that the borrowings he had taken out were at $3M. At that time she said the house went up for sale. Although it was valued at $3.9M they couldn’t hold it any longer as the Bank would not give financial assistance and the market was dropping rapidly.
[31] I mentioned this account of Mrs Gordon’s knowledge of the reasons for the property going onto the market and her knowledge of the extent of the indebtedness to Westpac to highlight the contrast to that account given by her affidavit where she stated the main reason for putting the house on the market was because of her marriage separation.
[32] Mrs Gordon’s position is summed up in the final paragraph of her affidavit:
“A loan of $370,000.00 which is the subject of the summary judgment application, was advanced contrary to my specific instructions to Westpac and I do not accept that I am responsible for its repayment. I did not sign the loan agreement with my proper signature and deny that I ever confirmed to Mr Banks that I did. I wrote my name on the document without using my usual signature as a form of protest. Westpac advised that it did not accept the document as it did not contain my verified signature. Prior of the funds being advanced I made it clear to Mr Banks that I did not agree to the loan being drawn down and that I would not provide a verifiable signature as Westpac had agreed. Westpac simply went ahead and made the advance, contrary to my instructions at a time it knew that any consent I had
previously given under duress (and I deny I had previously given such consent) had been withdrawn.”
[33] Mrs Gordon’s position is supported by an affidavit from Mr Shaun Laffey a retired banker, an independent company director and a consultant on business issues. The Court is asked to regard his evidence as if provided by an expert on banking protocols. He had been asked to address whether Westpac’s actions were oppressive as defined by section 118 of the CCCFA. In particular he enquired the Bank’s actions were in breach of reasonable standards of commercial practice within the banking industry. He identified the essential issue for his consideration as:
“Is it reasonable or usual for a bank manager in the position that Mr Banks was on 2 July 2008, with the knowledge he possessed at that time, to proceed with the advance?”
[34] Mr Laffey read the affidavits of Mr Banks and Mr and Mrs Gordon and noted there were factual disagreements. He also noted he had been instructed to assume:
a) That Mr and Mrs Gordon were jointly and severally indebted to
Westpac prior to 2 July 2008;
b) Their indebtedness was secured over their property at Heke Street.
c) They arranged a sale of their property by private treaty in a sum which was not going to fully clear the indebtedness to Westpac;
d)They did not obtain Westpac’s agreement to discharge the mortgage for less than the full sum outstanding prior to entering into a sale of the property;
e) Mr Gordon in particular was the party involved in negotiations with
Westpac and in an endeavour to obtain a discharge of the mortgage;
f) As a condition of agreeing to a discharge Westpac, through Mr Banks, indicated a preparedness to discharge the mortgage provided both Mr and Mrs Gordon agreed to enter into a new loan facility in the amount of $370,000.00.
g) There were differences and disagreements between the affidavits of Mr Banks on the one hand and Mr and Mrs Gordon on the other over certain issues;
h)Ultimately Westpac did advance $370,000.00 and that money was applied to clear the indebtedness owing under the previous loan agreements.
[35] Mr Laffey noted that where there were differences between Mr Banks’ version of events and Mr and Mrs Gordon’s version that his instructions were to base his opinion on Mr and Mrs Gordon’s version. He said the critical issue he was asked to consider was whether Mr Banks, having learned that Mr and Mrs Gordon were separated, and having become aware that Mrs Gordon did not wish to proceed with the loan transaction he nonetheless elected to proceed to make the advance. The question he asks is whether it was usual for a bank manager to proceed with an advance notwithstanding he/she has learned that one of the two joint debtors does not wish to proceed with that advance.
[36] In Mr Laffey’s view:
a) It is neither usual nor appropriate for a Bank to have proceeded in those circumstances;
b)Had the Bank already made the advance before learning of Mrs Gordon’s dissatisfaction things would have been different. He, however, having learned that Mrs Gordon did not wish to proceed, Mr Banks and Westpac could have reverted to its existing rights under the existing facilities and its existing security. It did not have to give a discharge of the mortgage in those circumstances and did not have to make a further advance and use that money to repay the existing indebtedness.
c) From a banking perspective Westpac becomes an unsecured creditor to Mr Gordon for the $370,000.00 fresh advance.
[37] There are assumptions of, and drawn by Mr Laffey in his view of matters which, as will shortly become clear, I do not accept.
Mr Banks’ account in response
[38] Mr Banks responds to the various claims of Mr and Mrs Gordon as follows:
a) That at no stage before the new loan agreement was entered into was he made aware that Mr and Mrs Gordon had separated. Mr Gordon had however previously advised that they were having marital difficulties;
b)As for not at any time asking for Mrs Gordon to be present he notes that on one occasion only did he meet with Mr Gordon when it was explained to him that Mrs Gordon did not want to attend because she was stressed by the situation they found themselves in;
c) As to Mr Gordon’s claim that he did not include Mrs Gordon’s details in the new loan application Mr Banks responds that the only document generated by Wetspac prior to the new loan agreement was addressed to both Mr and Mrs Gordon;
d)Contrary to Mr Gordon’s assertion Mr Banks says he never requested the loan be in his name only, nor did Westpac do anything to give the impression that this was to be the case. Westpac’s position was always that the loan was to be in both their names as it had been in the past and this was reflected by the fact that they were already jointly and severally liable for the anticipated shortfall on settlement. He said the new loan agreement was intended to formalise the terms upon which that existing liability was to be repaid. His email communications with Mr Gordon in relation to the proposed new loan were consistent with his understanding that the loan would again be in the name of both Mr and Mrs Gordon.
e) Regarding Mr Gordon’s concerns of the interest rate of 12.5 percent annum Mr Banks notes the loan was unsecured and the interest rate was lower than Westpac staff interest rates for unsecured loans at the time.
f) Regarding Mr Gordon’s claim that on 30 June 2008 he crossed out Mrs Gordon’s name and signed the loan offer, Mr Banks response is he never received the facsimile or the original of the amended and signed loan offer that Mr Gordon refers to. He notes that Mr Gordon has not provided confirmation of successful facsimile transmission to Westpac.
g) Instead, he says Mr Gordon had phoned him in response to his email of 30 June 2008 in which he noted he had not received any response to Westpac’s letter of offer and asked whether they had decided not to accept the offer. He said Mr Gordon reported they were not happy with Westpac’s decision on the interest rate but that they would proceed with the loan as they wanted to move on with the settlement of the sale of property. He said as settlement was due in a few days Mr Gordon asked him to courier the new loan agreement. He and Mrs Gordon would be at the house on 1 July removing the last of their things for settlement and would be able to sign the documents then. In response Mr Banks couriered the new loan agreement for signature as Mr Gordon had requested.
h)As to Mr Gordon’s claim that after receiving the new loan agreement by courier that he contacted Mr Banks, regarding Mrs Gordon’s name inclusion in the agreement documents, Mr Banks states there was no such call.
i)Regarding his conversation with Mr Gordon on 1 July after receiving the signed documents Mr Banks says he told Mr Gordon he could not verify Mrs Gordon’s signature against her specimen signature held on file and that she needed to come into the Bank to re-sign the
documents. Mr Banks says he was concerned that Mr Gordon may have written Mrs Gordon’s name on the agreement, although he did not say this.
[39] Referring to Mrs Gordon’s claim that she told Mr Banks clearly that she would not sign the new loan agreement until she had met with Mr Banks and found out the details of the loan, he denies being told not to settle the old loan that day. Likewise he denies Mrs Gordon’s account of her conversation with him on 1 July
2008 about requesting disclosure and not being previously advised of the shortfall or of the need for the new loan.
[40] After talking to Mr Chapman a fellow bank officer Mr Banks says it was decided Mrs Gordon would be requested to go into a Westpac branch to present photo identification to verify the signature. He telephoned Mr Gordon to relay this information on. He said Mrs Gordon did call him on the morning of 2 July but he denies her account of the conversation. He denies being informed that she would not go into a Bank with verification of her signature or that she had written in her name in a situation of extreme duress. He denies any “bullying”. He denies her saying that she was not prepared to sign anything. He denies her informing him that the Bank could not make any decisions concerning the property without her consent, or receiving instructions from her not to settle the loan. Instead and according to Mr Banks she had stated that Mr Gordon has passed onto her Westpac’s request to present herself to a Westpac branch and she had decided she would not do so. She reconfirmed that she had signed the agreement at her house the day before but was not going to do anything further. She concluded by saying Westpac could do what it liked and then she terminated the call. In summary he says at no time did she:
a) Advise she had signed her name under duress;
b) Request any kind of disclosure;
c) Ask to meet Mr Banks much less was that request denied. He did not know she was in Auckland when she called him on the morning of
2 July 2008. The previous afternoon she said she was on her way to
Hawkes Bay and had no wish to return to Auckland;
d) Discuss whether the sale was a mortgagee sale;
e) Herself nor did Mr Gordon nor their solicitor request Mr Banks not to proceed with settlement;
[41] He says he did not state he had made his mind up to drawdown the loan with or without Mrs Gordon’s signature. Rather she had confirmed that she had signed the new loan agreement. Although he would have preferred her to re-sign it or to provide photographic identification to verify her signature, she made it clear that she was not prepared to do this – that it appeared she had washed her hands of the matter. Given that, Mr Banks decided the verbal confirmation she had given was sufficient particularly as the new loan agreement only reflected the liability she and Mr Gordon already had for the shortfall remaining on the sale of the property.
[42] Mr Banks denies that Mrs Gordon told him that Westpac could not make decisions concerning the property without her consent. He adds that the property was not sold by Westpac but indeed by the mortgagor, i.e. the Gordon Family Trustee Limited of which Mrs Gordon was a director. In that capacity she signed the agreement for sale and purchase. Pertinently Mr Banks notes:
“The solicitor acting for the mortgagor in the sale was Richard Knight. Presumably, Mrs Gordon did not revoke his instructions to settle the sale as he certified on settlement that he had authority to transfer the title to the property...”
[43] Regarding Mr Laffey’s evidence that Westpac could have reverted to its existing rights under the existing facilities and its existing security, and that it did not have to give a discharge of the mortgage, Mr Banks says that it is the reality that those facilities:
a) Were not being serviced;
b) Were in default;
c) And that all the information provided indicated those facilities would not be able to be serviced at the levels required going forward.
[44] The property market was deteriorating. After six months the Gordon’s achieved the best price available. If the sale did not proceed a mortgagee sale was inevitable. This would have left the Gordon’s with a greater exposure to Westpac.
[45] Mr Banks asserts the reality is that the indebtedness owing after the sale was simply re-documented in the new loan agreement to allow a revised payment arrangement involving a six month interest only period. Accordingly there was no new liability incurred by the Gordon’s.
Considerations
[46] No submissions were filed on behalf of Mr Gordon. His counsel withdrew at the beginning of the hearing. It appears clear his purpose in filing his opposition and affidavit has been to support Mrs Gordon’s position in opposition to the summary judgment claim. As well his notice of opposition and affidavit raised an objection to the interest charges and costs claimed by Westpac in connection with its new loan agreement. I will deal with those issues shortly.
[47] I do not propose to review the general principles relating to a summary judgment jurisdiction save to identify that in this case:
a) Westpac has the burden of satisfying the Court that the defendants have or either of them has no arguable defence at all;
b)The Court should not attempt to resolve genuine conflicts of evidence and from assessing the credibility of the parties’ statements and their affidavits;
c) Usually a Court will not resolve conflicts between experts in the summary judgment context;
d)This Court is entitled to be robust in particular in rejecting assertions of factual conflict where there is no proper basis for accepting claims of conflict.
[48] I have reviewed in some length the evidence of the defendants and their witness Mr Laffey. Where I have deemed it appropriate I have highlighted any conflict in that evidence.
[49] For the defendants it is submitted that the evidence of Mr Laffey comes from an independent expert and as such stands unchallenged by Mr Banks’ reply affidavit. I do not consider it is not as simple as that, as I will later explain.
[50] In support of the defendants’ case that the interest rate of 12.5 percent charged by the new loan facility is oppressive Mr Kohler draws my attention to a comparison of that interest rate with those applying to the various loans that were substituted by the new loan facility after the sale of Heke Street. Of those loans replaced all but two had rates of between 6.3 and 10.45 percent. Higher interest rates pertaining to the other loans related to total indebtedness of around $55,000.00 only.
[51] For the defendants it is submitted that these prior loans were all repaid by the advance of $370,000.00. That therefore cleared all obligations owing under the previous loans and therefore Westpac’s rights in respect of the $370,000.00 advance depend on the agreement it has entered into pursuant to which that advance was made. Mr Kohler submits clearly Mr Gordon is liable pursuant to that advance but there is a question whether or not Mrs Gordon is liable.
[52] Mr Kohler submits the Court cannot attempt to make different factual findings in respect of the different claims between Mr and Mrs Gordon and cannot hold as a matter of fact that the loan advance was made to Mr Gordon but not made to Mrs Gordon.
[53] Mr Kohler then identifies the two issues for this Court:
a) Whether Mrs Gordon was a party to and liable in respect of the new loan facility; and
b)If she is then is she nonetheless entitled to seek a reopening of the loan contract pursuant to the CCCFA.
[54] Mr Kohler invites the Court to submit that on the basis of the evidence of Mrs Gordon, the Court might conclude that she did not reach an agreement regarding repayment of the new loan facility. He submits:
a) Mrs Gordon was not involved in direct discussions with Westpac and obviously there was no question of her having received legal advice regarding the loan having been obtained;
a) She was pressured by Mr Gordon to sign documents;
b) She made it clear she did not wish to proceed;
c) She wrote her name but did not sign – in a manner Westpac recognised that she had not signed properly;
d)When she spoke to Mr Banks in the afternoon on 1 July she says she explained her dissatisfaction and made it clear that she did not agree to anything;
e) She claimed that on the morning of 2 July she advised Mr Banks she was not prepared to sign the documents in the usual way and not prepared to agree to anything until she had a meeting with Westpac. She said she told Mr Banks not to proceed with the advance.
[55] Acknowledging there are factual disputes between the parties in respect of the affidavits Mr Kohler submits these cannot be resolved on the affidavits but further in any event despite Mr Banks’ evidence Mrs Gordon can rely on facts:
a) That Mr Banks never met with Mrs Gordon or discussed the proposed new loan prior to 1 July;
b)Westpac immediately realised “That Mary Gordon had not properly signed the agreement”;
c) It was aware of marital difficulties between Mr and Mrs Gordon at the time;
d)In the discussion on 1 July Mrs Gordon was upset, was driving on the motorway and did not want to see Mr Gordon again.
e) She would not re-sign the new loan documents in front of him;
f) On the morning of 2 July she advised she refused to present herself at a Westpac branch to confirm.
[56] Mr Kohler submits that even if the Court was to rely simply on Mr Banks’ evidence that there is sufficient for Mrs Gordon’s defence. Westpac did not have to make the new advance in order to provide a discharge of its mortgage over the Heke Street property. Westpac proceeded as it did despite Mrs Gordon’s refusals because Mr Banks believed the sale price for Heke Street was achieved at the best price available. Therefore it was in Westpac’s interest for the sale to proceed there and then. Moreover it was in Westpac’s interest to capitalise all the outstanding indebtedness in the various accounts under the new loan facility.
[57] Mr Kohler submits there is sufficient of an argument for Mrs Gordon to claim that she is not a party to the new loan facility.
[58] Westpac’s position is that if Mrs Gordon is not bound by the new loan agreement then she remains liable to one or more of the former loans. Mr Kohler’s submits this cannot be so because it is a matter of fact that an advance of
$370,000.00 was made albeit by electronic transfer and that those funds were then utilised to repay the former outstanding indebtedness. Westpac did not need to advance those funds pursuant to a new loan and it did not need to electronically
transfer/clear the indebtedness in the former accounts. Yet and knowing exactly Mrs Gordon’s objection to entering into the new loan facility Westpac chose to make the advance and to clear the outstanding indebtedness.
[59] In short Mrs Gordon concedes Westpac has a claim against Mr Gordon in connection with the new loan facility but if the Court agrees with that then it cannot hold that Mrs Gordon is liable under an earlier loan account.
[60] Mrs Gordon’s claim of oppression under the CCCFA is based on the following facts:
a) There has been an accumulation of debts and capitalisation of the interest rate and there has, by the new credit facility been an effective increase in the interest rate;
b)That in the circumstances she found herself in Mrs Gordon did not have equality of bargaining power over new loan terms;
c) There was no suggestion she obtained or was given an opportunity to obtain independent legal advice;
d)It is self evident that Westpac/Mr Banks’ behaviour was neither normal nor reasonable;
e) Mrs Gordon was given no time to meet or to enter into negotiations regarding Westpac’s new loan facility terms.
Reasons for judgment
[61] In brief this Court does not consider:
a) There is a conflict of evidence of a sufficient kind to compel the Court to refuse summary judgment;
b)It is not compelled to the conclusion of Mr Laffey which assumes Westpac knew that Mr and Mrs Gordon were separated and also assumes that Mrs Gordon did not wish to proceed with the advance at the time she signed the new loan agreement;
[62] Rather it is the Court’s view that if Mrs Gordon was not bound by the new loan facility then she remained liable under all previous loans because any payment of those by the new loan facility did not discharge her obligation under the earlier loan arrangements.
[63] The reality of the case is that the new loan facility was meant to restructure the state of the defendants’ debt following the sale of their home. The Court’s impression is that, complaints of interest rates and costs notwithstanding, significant consideration was provided to the defendants by the writing off of a sum of
$13,383.23. Also no principal repayments were required in the first six months.
[64] The defendants’ sold the house, Westpac did not sell it. The defendants sold it because their loan obligations were not being serviced by them, were in default, and that default was likely to continue.
[65] Returning to claims of oppression related to the 12.5 percent interest rate fixed at the time of the new loan agreement, there is no evidence suggesting this rate was inappropriate. Mr Laffey did not refer to the interest rate. Mr Gordon may have requested a rate in line with that available to Westpac’s home loan clients, but the Gordon’s no longer owned a home. Westpac’s claim that the rate of 12.5 percent at the time of entering into the agreement was less than Westpac’s standard rate for unsecured personal loans and was therefore a concessional rate, appears unchallengeable, as does its assertion that the interest rate of 12.5 percent was lower than Westpac’s staff interest rates for unsecured loans at that time.
[66] Certainly the terms for repayment documented in the new loan appeared more favourable than those attaching to the default interest rate in the old loan agreement, which previously bound the defendants.
[67] Fundamental to Mrs Gordon’s position is that she was not a party to the new loan agreement and the advance made by it was contrary to her express instructions that it was not to proceed and therefore any other indebtedness of Mrs Gordon to Westpac was repaid or extinguished with the making of the new loan agreement. Claims of oppression of conduct under the CCCFA arise in relation to the way in which Mrs Gordon asserts she was pressured to complete the new loan facility agreement.
[68] The word ‘oppressive’ as defined in section 118 of the CCCFA has been considered frequently by the Courts. Relevant to this case is the view expressed by Wallace J in Didsbury v Zion Farms Limited (1989) 1 NZConvC 190, 229 at page
190, 238. There the Learned Judge stated that the purpose of the oppression provisions is to give the Court the power to intervene in any case where there is a sufficiently serious element of unfairness. In that case it was also held that in determining whether a clause is oppressive, relevant facts include the relative status of the parties, the nature and extent of the default, the way in which the default arose, the implications for the borrower, the attitude of the lender, the existence of a collateral purpose and the general appearance of the contract throughout.
[69] Obviously each case must be considered in the light of its own circumstances.
[70] Mr Gollin has also helpfully drawn my attention to the authority of Vautier J in Italia Holdings (Properties) Limited v Longsdale Holdings (Auckland) Limited [1984] 2 NZLR 1 where he held (at pages 15 and 16):
“In each case ... something more than enquiry into whether a particular contract is advantageous or disadvantageous from the point of view of the party applying must certainly be intended. The word ‘oppressive’ clearly connotes that some real detriment or hardship is involved. The word “harsh” is indicative of something of the same nature. The phrase “unjustly burdensome” clearly shows, for example, that the fact that the performance of the contract is difficult for the party applying is insufficient. Injustice must be shown to exist as well... there are numerous decisions showing unconscionable was interpreted as requiring more than an enquiry into whether a contract was fair or unfair to one party or the other. The final phrase, “in contravention of reasonable standards of commercial practice” is admittedly a wide ranging concept and embraces something that was not included in the previous legislation. It surely in my view, however requires something more than a simple uninformed conclusion as to what is fair or unfair from the standpoint of commercial dealings.
[71] I have dealt in part with the objections raised by Mr Gordon on grounds of oppression. I should add in respect of his position that whilst he has raised the issue of oppression in this proceeding he has provided no evidence relating to interest or costs in support of his claim. As a former manager at Westpac he could be expected to know what would be required by way of evidence in support of his claims.
[72] Mrs Gordon presents her case as the unwilling victim of a financial disaster the fault for which lay with her husband. She claims not to have known about the extent of the debt. Overlying issues concerning the fact their home had to be sold by them, was the failure of her marriage.
[73] But, I think it is accurate to describe both Mr and Mr Gordon as commercially savvy. Both had positions of business employment at a high level. Also they had entered into many loan agreements with Westpac previously. The Heke Street property was the third they had bought and renovated with loans from Westpac. There was nothing unusual about those agreements entered into in relation to Heke Street. Their position is not different than any other borrower who had defaulted on a bank loan. But, oppression does not arise in situations where performance of a contract is difficult for the borrower. Something more must be demonstrated in the form of an injustice. No such injustice has occurred to Mr Gordon. The issue of whether or not such has occurred to Mrs Gordon involves the circumstances surrounding the execution of the new loan agreement.
[74] In emailed correspondence between Mr Gordon and Mr Banks in early June
2008 Mr Gordon clearly addressed the defendants’ circumstances on behalf of both he and Mrs Gordon usually by reference to the term “we”. There appears nothing in that correspondence to suggest Mrs Gordon’s interests were not being represented by Mr Gordon.
[75] Critical events occurred over the period 1 - 2 July 2008. Before then Mr Gordon stated that he had made Westpac aware that he intended to assume any mortgage shortfall obligation alone. But there is nothing to support this save for his claim it was so. He said he altered documents and returned them but he provided no proof of this in circumstances when it might be expected.
[76] Mr Gordon said that Mrs Gordon signed in his presence on 1 July because he pressured her to do so. Her evidence describes her signing at a time when she was alone, when she did so in a manner to disguise her normal signature. But, nonetheless she did sign, as on the morning of 2 July she acknowledged. By then Westpac had received the signed documents.
[77] Mrs Gordon purported to retract her signature/consent to the new loan agreement. That is the issue Mr Laffey took up in his affidavit. I will say more of that shortly.
[78] The fact is that the new loan agreement which clearly expresses itself to be an offer of a loan facility by Westpac in which the interest rate chargeable is clearly identified. Mr and Mrs Gordon have both, beneath the signature of an officer on behalf of Westpac, and below an inscription reading ‘I/we have read and understand this agreement, including the terms and conditions, and accept the offer made’, added signatures where indicated. It transpires that of Mrs Gordon is not her usual signature, although it does appear in the document as a signature.
[79] Within half an hour of Mr Banks receiving the signed document he telephoned Mr Gordon to advise that Mrs Gordon’s signature did not appear to be the same as that Westpac had on record. Although Mr Banks did not advise Mr Gordon of his particular concerns he requested Westpac’s concerns be relayed that Mrs Gordon present herself at a Westpac branch in order to verify her identity.
[80] Part of the telephone conversation between Mr Banks and Mrs Gordon the following morning, on 2 July 2008 reiterated Mr Banks request that Mrs Gordon present herself to confirm verification that she had signed. Whilst he did not accept much of what Mrs Gordon claims was said in that conversation, Mr Banks acknowledges Mrs Gordon made it clear that she was not prepared to do this. He accepted it appeared to him that she had washed her hands of the matter. Given this, he said that he decided that the verbal confirmation she had given was sufficient particularly as the new loan agreement was only reflecting the liability that she and Mr Gordon already had for the shortfall remaining from the sale of the property but, as he asserts, on more favourable repayment terms.
[81] There appears no real doubt that at the time of the conversation between Mrs Gordon and Mr Banks on the morning of 2 July, when Westpac had not yet processed a transfer of the sum of $370,000.00 from the new loan account in settlement of the old loan accounts, Westpac was aware that Mrs Gordon had clearly indicated:
a) She had signed the new loan agreement; and
b)She was no longer prepared to verify her signature in the manner Westpac prescribed and instead would not present herself to provide signature verification as requested.
[82] Even though Mrs Gordon has expressed this view of matters in much more assertive detail I am of the view that it matters not that she attempted to retract from the agreement she entered into.
[83] Mrs Gordon is an experienced businesswoman. She has signed many loan contracts in her personal capacity and concerning the property. She has senior administrative experience in business. Her disappointment in having to sell her home and because of the failure of her marriage is understandable but does not account in any legal sense for her signature to the new loan agreement. As a matter of contractual formation the contract for the new loan agreement was formed at a time when Mrs Gordon’s acceptance, along with Mr Gordon’s was conveyed to Westpac. The deal had been struck; Westpac was entitled to act upon it; while equivocations by Mrs Gordon regarding her commitment were no longer relevant. Her protestations of lack of legal assistance or of pressure to sign are to be balanced by the clear evidence of her previous business experience including the entering into of many loan obligations. The Court will hesitate to provide an exception in circumstances involving the sale of one’s own home or in the satisfaction of any shortfall arising in the outcome.
[84] A strong point of the case presented for Mrs Gordon concerns the mechanics by which the new loan agreement was established and the earlier loan agreements were repaid. Mr Kohler submitted and in doing so relied upon the evidence of Mr
Laffey that if a Bank electronically transfers funds into an account then those funds have been transferred as a matter of fact even if they are used to satisfy other bank account debts. If that transfer is done as a matter of internal bank accounting only then no commitment is made by it but if a wholly new account is created for the purpose of the exercise and it involves the communication with and commitment of bank clients then as a matter of fact there has been a creation of a new account and the payment by that account into other accounts is a satisfaction of the debt of those other accounts. As Mr Kohler put it either funds were advanced to a new account for the purpose of satisfying old accounts or they were not. In this case he says as a matter of fact they were and thereby in that process the debt of the old accounts were satisfied. The fact that Westpac was prepared to do it in this instance without the appropriate authorisation from Mrs Gordon, is a consequence the Bank will have to deal with because in that outcome any liability for Mrs Gordon has been extinguished and only the liability of Mr Gordon remains.
[85] Mr Kohler submits there is good commercial purpose for the bank adopting an approach by which it creates a new loan account in order to pay the old. Westpac was in favour of the Gordon’s selling their home because if the Bank had taken mortgagee action it would have to have accounted for GST in the outcome. Further the creation of a new loan account would, Mr Kohler submits, have enabled the bank to have capitalised the interest outstanding for payment on the old accounts and in that result have charged interest (in effect upon unpaid interest) owing on the old accounts.
[86] I think all of the arguments raised by Mr Kohler can be answered and in that outcome, rejected. I have dealt with issues concerning Mrs Gordon’s signature. Even if I was to accept that there was a conflict of evidence regarding the extent to which Mrs Gordon made her reasons for not wishing to be bound by the indication of acceptance she gave, I am satisfied she was by that signature committed to replace the old loan arrangements with the new.
[87] In this context I should offer the Court’s views regarding the value of Mr
Laffey’s evidence.
[88] It was Mr Laffey’s assessment from a banking perspective, that Westpac became an unsecured creditor to Mr Gordon for the $370,000.00 fresh advance.
[89] I think Mr Laffey’s mistake is to deal with the issues as if it was an advance by the Bank to Mr and Mrs Gordon when what in essence is happening is that Westpac is dealing with an existing liability. There is no additional advance and there is no increased liability. Mr Laffey talks about a further advance but in this case it does not involve fresh money, but rather money that is already owed. Mr Laffey expresses an opinion as to what a Bank might do prior to proceeding with an advance. But Westpac is not proceeding with an advance, it is dealing with a debt. That is the reality of the situation which I accept is sidelined by Mr Laffey’s view of matters.
[90] Mr Kohler urges upon me that what has occurred in this case is the crediting of an account (the old loan accounts) by the debiting of another (the new loan accounts). He submits as a matter of fact that has occurred and in the process the old accounts have been extinguished and in turn in the process so too has Mrs Gordon’s liability under those old accounts.
[91] Mr Gollin submits that that is taking the factual enquiry too far, and with respect I agree. Factually Westpac is dealing with two accounts in the same names and under the same general account number. One is in debit and the other is in credit and by an internal process those positions were reversed. There is not in any analysis any additional funding that affected the net position between the parties. What is important in that process is the legal consequences. The legal affect of that transaction is not one for submission to the opinion of an experienced banker but, rather by reference to the law and as a matter of law the internal rearrangement of those accounts does not affect the external contractual arrangement and liability for the payment due to Westpac.
[92] The interest terms under the new loan agreement have been criticised for a number of reasons including that they enable Westpac to accrue interest on outstanding loans and in turn to charge interest upon that interest. I do not accept that in this instance and refer to the submissions of Mr Gollin that that perception
involves a basis misconception. It is explained in this way, namely in that upon the sale of the home the defendants’ Trust realised its primary asset. From the sale proceeds the Trust’s bank obligations were met and after that the defendants guarantee obligations were paid – to the extent that a shortfall existed. I accept that usually in this process outstanding interest is paid before principal but in any event it makes no difference if the reverse is applied because in the outcome the result is the same – the shortfall will be the same.
[93] Mr Kohler submitted that criticism may be levelled at the bank for taking advantage of the fact that Mr and Mrs Gordon marketed and sold the house themselves, rather than the Bank undertaking that process by mortgagee sale. Mr Kohler submitted that in the latter event the Bank would have to account for GST. But that submission presupposes that GST would in any event be payable. It is not clear in this case it would, indeed the sale settlement statement suggests that no GST was payable. That is not surprising because even thought the property was owned by the family trust it was in fact the family property of Mr and Mrs Gordon.
[94] I have dealt with the oppression argument in some detail already. In conclusion I can express the Court’s view is that no oppression has occurred even in the circumstances described by Mrs Gordon. No loan has been forced upon her in terms materially different from that she was bound by. No new funds have been advanced to her. The new loan was for a lesser amount than she was bound to repay. Differences of interest rate have not been shown to be oppressive. Probably they were concessionary. There was no case of forcing Mrs Gordon into an arrangement she did not want, but rather her being faced with a situation she could not avoid. Her distress was understandable but there is no basis for reopening the new loan agreement to which she has committed herself.
[95] Even if I was wrong that Mrs Gordon had committed herself to the new loan arrangement I am satisfied that in default she would be bound by the old loan arrangements.
Result
[96] Westpac is entitled to its claim for judgment against both defendants jointly and severally in the sum of $397,314.34 to 3 June 2009 together with interest at
17.75% (inclusive of default interest) from that date to the date of payment.
[97] The plaintiff is entitled also to costs calculated in accordance with scale 2B
and payable jointly and severally by the defendants.
Associate Judge Christiansen
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