ANZ Bank New Zealand Ltd v Bushline Trustees Ltd

• Jurisdiction: New Zealand
• Judge: O'Regan J
• Judgment Date: 24 July 2020
• Neutral Citation: [2020] NZSC 71
• Court: Supreme Court
• Docket Number: SC 64/2019
• Date: 24 July 2020

Between

ANZ Bank New Zealand Limited

Appellant

and

Bushline Trustees Limited and Stephen Daniel Coomey as Trustees of Bushline Trust One, and Bushline Trustees Limited and Sharon Louise Coomey as Trustees of Bushline Trust Two

First Respondents

Robert Lewis England

Second Respondent

[2020] NZSC 71

Court:

Winkelmann CJ, Glazebrook, O'Regan, Ellen France and Williams JJ

SC 64/2019

IN THE SUPREME COURT OF NEW ZEALAND

I TE KŌTI MANA NUI

Banking & Finance, Contract — appeal against a decision of the Court of Appeal which held that the appellant had breached an oral representation or undertaking not to revise an interest rate margin for five years — whether the entire agreement provision prevented the Court from giving effect to that representation or undertaking — whether the respondent's claim was made out of time.

Counsel:

S M Hunter QC, M C Sumpter and D T Street for Appellant

K F Shaw for First Respondents

A C Challis and D P Turnbull for Second Respondent

• A The appeal is allowed.

• B We make no award of costs in this Court.

• C We reserve leave for any party to apply for an order dealing with costs in the Courts below. Any such application should be made within 20 working days of the date of this judgment.

JUDGMENT OF THE COURT

REASONS

(Given by O'Regan J)

Table of Contents

	Para No
Loan of $19.466 million	[1]
Issues	[2]
Parties	[5]
Commerce Commission investigation	[10]
The proceedings so far	[11]
Scope of the appeal	[17]
BKBM interest rate	[20]
Interest rate swap	[21]
Factual background	[24]
Events in 2005–2007	[26]
February-April 2008	[31]
Events after April 2008	[39]
Loan agreement	[46]
18/19 March meetings	[50]
High Court's rejection of Bushline's case	[55]
Should the Court of Appeal have deferred to the High Court?	[57]
Question of fact	[62]
Bushline's case	[68]
Evidence relied on by Bushline	[70]
Context	[71]
Matching ASB	[72]
Mr Simcic's concession	[73]
Mr Graham's approval	[74]
ASB's offer	[76]
“Ongoing”	[78]
November 2009 file note	[81]
Evidence relied on by ANZ	[82]
ASB's offer did not involve a five-year commitment	[83]
No assertion of five-year commitment until third statement of claim	[89]
Case not put to Mr Simcic in cross-examination	[103]
Mr Harvey's evidence	[104]
ANZ's concern about negative cashflow	[105]
Position of Mr Schurr and Mr England	[110]
Swap context	[116]
Conclusion	[123]
Outcome	[126]
Section 50 of the Contract and Commercial Law Act 2017	[129]
Limitation	[133]
Result	[134]
Costs	[135]

Loan of $19.466 million

1 In April 2008, the appellant, ANZ Bank New Zealand Ltd (ANZ), entered into a loan agreement with the first respondents, the trustees of Bushline Trust One and the trustees of Bushline Trust Two. 1 The two trusts operated as a partnership. We will refer to the partnership as “Bushline”. Under the loan agreement, ANZ advanced $19.466 million dollars to Bushline for a loan period of 12 months. 2 The interest rate was a floating rate (the BKBM rate, explained below) 3 plus a margin of 0.7 per cent per annum (we will call this the 0.7 per cent margin). The interest rate clause in the loan agreement stated that the 0.7 per cent margin was “reviewable at any time”. 4 The loan agreement was accompanied by three related swap transactions, under which ANZ swapped the floating (BKBM) rate payable by Bushline for a fixed rate. We explain the nature of these swap transactions below. 5

Issues

2 As it transpired, ANZ did, in fact, review the 0.7 per cent margin. Bushline claims that this was contrary to a representation or undertaking that had been given by representatives of ANZ prior to the signing of the loan agreement that the 0.7 per cent margin would be fixed for a period of five years. The primary issue in the present appeal is whether such a representation was made or undertaking given.

3 Bushline's claim failed in the High Court. The High Court Judge found that there was no representation made, or agreement reached, to fix the margin for a period of five years. 6 However, the Court of Appeal overturned the High Court's factual finding and allowed Bushline's appeal. 7 At issue in the appeal to this Court is whether there was a proper basis for it to do so.

4 If there was a representation or undertaking to fix the margin for five years, two further issues arise. First, whether the representation or undertaking bound ANZ, notwithstanding an “entire agreement” provision in the loan agreement. 8 Second, whether Bushline's claim is time-barred.

Parties

5 The transaction in issue in the appeal was between Bushline and ANZ. Bushline had been a customer of ANZ and The National Bank of New Zealand Ltd (which was purchased by ANZ) for many years before the transaction was entered into.

6 The Bushline trusts are associated with Stephen Coomey (known as Bill) and his wife, Sharon Coomey. The partnership comprising the two Bushline trusts is the vehicle through which the substantial dairy farming operations associated with Mr and Mrs Coomey were run at the time of the events in issue.

7 At the time of the transaction, the trustees of Bushline Trust One were Mr Coomey, Robert England (the second respondent), and Christopher Schurr. The trustees of Bushline Trust Two were Mrs Coomey, Mr England and Mr Schurr. Mr England is a partner in the Taranaki law firm Thomson O'Neil & Co. He acted for the Coomeys and the Bushline trusts at the relevant time. Mr Schurr is an accountant. He was the Coomeys' accountant at the relevant time. Mr England and Mr Schurr were replaced as trustees of both trusts in 2013 by Bushline Trustees Ltd. Mr Schurr is now the sole director of Bushline Trustees Ltd.

8 Although much of the dispute centres on communications between Mr and Mrs Coomey and representatives of ANZ, the contractual relationship in issue is, as noted earlier, between Bushline and ANZ, not the Coomeys and ANZ.

9 Mr England was joined to the proceeding as a third party by ANZ on the basis that, if ANZ were liable to Bushline in tort, Mr England would be a joint

tortfeasor. ANZ's third party claim against him was not addressed in the High Court because Bushline's negligence claim against ANZ failed, rendering the third party claim moot. 9 It was agreed in the Court of Appeal that, if the High Court decision was overturned, ANZ's claim against Mr England would be remitted to the High Court. The Court of Appeal found it unnecessary to address the negligence claim but observed that, to the extent its judgment raised any issue as to Mr England's liability, ANZ's claim against him was remitted for determination by the High Court. 10 There is no appeal before us against the order remitting that claim to the High Court and so no need for us to address it

Commerce Commission investigation

10 The practices of ANZ in relation to the provision of funding involving loan agreements with floating rates, accompanied by swaps under which ANZ swapped the floating rate for a fixed rate, have become the centre of controversy. ANZ's conduct in relation to swaps (and that of other banks) was the subject of an investigation by the Commerce Commission. After that investigation, ANZ reached a settlement with the Commission under which it agreed to consent to the High Court making a declaration that ANZ's conduct was misleading and deceptive conduct in breach of the Fair Trading Act 1986. The declaration said the misleading and deceptive conduct was that ANZ understated some of the risks and/or overstated some of the benefits of interest rate swap arrangements to specified customers. 11 ANZ also agreed to pay compensation of up to $18.5 million to specified customers that were affected by its conduct. ANZ subsequently offered Bushline a settlement of approximately $155,000, but that was declined by Bushline.

The proceedings so far

11 The litigation between ANZ and Bushline originally involved several issues arising out of the combination of the loans made by ANZ to Bushline and the swap transactions entered into by ANZ and Bushline. Bushline's claim against ANZ included claims for negligence, breach of contract, misrepresentation under the

Contractual Remedies Act 1979, 12 breach of the Fair Trading Act and oppressive conduct in terms of the Credit Contracts and Consumer Finance Act 2003. As first pleaded, Bushline's claim focused on the overall effect of the loan and swap transactions

12 The claims that were pursued at trial were based on allegations of representations or undertakings by ANZ that:

• (a) the 0.7 per cent margin would be held for five years on all of ANZ's lending to Bushline;

• (b) swaps operated like a fixed rate loan, except with greater flexibility and benefits (the allegation being that there were important differences that were adverse to Bushline);

• (c) swaps were transferable and ANZ would not prevent Bushline from refinancing if Bushline desired to do so;

• (d) ANZ could and would monitor and/or manage Bushline's swaps on an ongoing basis to ensure that Bushline was able to take advantage of the flexibility and benefits, and to manage its exposure to interest rate risk; and

• (e) ANZ would be there for Bushline “in good times and bad”.

13 Bushline's claim was commenced in May 2014. An amended statement of claim was filed in November 2015. Neither of these statements of claim contained an express allegation that ANZ had made a representation or given an undertaking to

fix the margin at 0.7 per cent for five years. Bushline filed a further amended statement of claim (the third statement of claim) in September 2016. For the first time, the third statement of claim included a pleading...