ANZ Bank New Zealand Ltd v Bushline Trustees Ltd

JurisdictionNew Zealand
CourtSupreme Court
JudgeO'Regan J
Judgment Date24 July 2020
Neutral Citation[2020] NZSC 71
Date24 July 2020
Docket NumberSC 64/2019

[2020] NZSC 71

IN THE SUPREME COURT OF NEW ZEALAND

I TE KŌTI MANA NUI

Court:

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

SC 64/2019

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
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

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.

The issues were: whether ANZ made a representation or gave an undertaking; if yes, whether the entire agreement provision prevented the Court from giving effect to that representation or undertaking under s50 CCLA; and if no, whether Bushline's claim was made out of time.

The Court held that the evidence had not established on the balance of probabilities that there was an agreement that ANZ would fix the 0.7 per cent margin for five years. Ascertaining whether an oral contract (or a partly oral and partly written contract) was entered into and, if so, what its terms were, was a question of fact. Bushline could not produce the documentation alleging showing handwritten amendment regarding the interest rate.

The failure of Bushline and its legal representatives to mention the alleged five-year commitment in the period between 2008 and 2016 counts against the existence of a contractual commitment by ANZ. There were many indications that both parties engaged with each other over a period of years on the basis that no such five-year commitment had been made. The professional trustees of Bushline were unaware of any such commitment and Bushline had not asserted that there was any agreement by ANZ to fix the margin for five years at any time until its third statement of claim. The evidence on behalf of other banks was that they were not offering such terms at that time (and one representative was not cross examined). At the very least, those factors lead to the conclusion that Bushline had not proved that aspect of its claim on the balance of probabilities.

Having found that there was no representation, undertaking or agreement, the Court found it was not necessary to address the issue under s50 CCLA. However, the Court noted that s50 CCLA did not mandate a general empowerment to determine the “true bargain” between the parties. Instead, the task of the court was to assess whether in all the circumstances, it was fair and reasonable for an entire agreement clause to be conclusive between the parties. The conclusion that there was no agreement or undertaking also made it unnecessary to address ANZ's limitation defence.

The appeal was allowed. The decision of the HC was restored.

  • 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...

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