ANZ BANK NEW ZEALAND LIMITED v BUSHLINE TRUSTEES LIMITED [2020] NZSC 71

ANZ BANK NEW ZEALAND LIMITED v BUSHLINE TRUSTEES LIMITED [2020] NZSC 71 [24 July 2020]IN THE SUPREME COURT OF NEW ZEALANDI TE KŌTI MANA NUISC 64/2019[2020] NZSC 71BETWEEN ANZ BANK NEW ZEALAND LIMITEDAppellantAND BUSHLINE TRUSTEES LIMITED ANDSTEPHEN DANIEL COOMEY ASTRUSTEES OF BUSHLINE TRUST ONE,AND BUSHLINE TRUSTEES LIMITEDAND SHARON LOUISE COOMEY ASTRUSTEES OF BUSHLINE TRUST TWOFirst RespondentsROBERT LEWIS ENGLANDSecond RespondentHearing: 12 March 2020Court: Winkelmann CJ, Glazebrook, O'Regan, Ellen France andWilliams JJCounsel: S M Hunter QC, M C Sumpter and D T Street for AppellantM D Branch and K F Shaw for First RespondentsA C Challis and D P Turnbull for Second RespondentJudgment: 24 July 2020JUDGMENT OF THE COURTA 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 orderdealing with costs in the Courts below. Any suchapplication should be made within 20 working days of thedate of this judgment.____________________________________________________________________REASONS(Given by O'Regan J)Table of ContentsPara NoLoan 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 intoa loan agreement with the first respondents, the trustees of Bushline Trust One and thetrustees of Bushline Trust Two.1 The two trusts operated as a partnership. We willrefer 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 ratewas a floating rate (the BKBM rate, explained below)3 plus a margin of 0.7 per centper annum (we will call this the 0.7 per cent margin). The interest rate clause in theloan agreement stated that the 0.7 per cent margin was "reviewable at any time".4 Theloan agreement was accompanied by three related swap transactions, under whichANZ swapped the floating (BKBM) rate payable by Bushline for a fixed rate. Weexplain the nature of these swap transactions below.5Issues[2] As it transpired, ANZ did, in fact, review the 0.7 per cent margin. Bushlineclaims that this was contrary to a representation or undertaking that had been given byrepresentatives of ANZ prior to the signing of the loan agreement that the 0.7 per centmargin would be fixed for a period of five years. The primary issue in the presentappeal is whether such a representation was made or undertaking given.[3] Bushline's claim failed in the High Court. The High Court Judge found thatthere was no representation made, or agreement reached, to fix the margin for a periodof five years.6 However, the Court of Appeal overturned the High Court's factualfinding and allowed Bushline's appeal.7 At issue in the appeal to this Court is whetherthere was a proper basis for it to do so.1 ANZ was called "ANZ National Bank Ltd" at the time of the transaction.2 All figures in this judgment have been rounded to the nearest $1,000.3 See below at [20].4 This appeared twice in the interest rate clause.5 See below at [21]–[23] and [36].6 Bushline Trustees Ltd v ANZ Bank New Zealand Ltd [2017] NZHC 2520, [2018] NZCCLR 19(Edwards J) [HC judgment]. An application by Bushline for recall of the High Court judgmentwas dismissed: Bushline Trustees Ltd v ANZ Bank New Zealand Ltd [2017] NZHC 829.7 Bushline Trustees Ltd v ANZ Bank New Zealand Ltd [2019] NZCA 245, [2019] 3 NZLR 455(Miller, Asher and Clifford JJ) [CA judgment].[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 enteredinto.[6] The Bushline trusts are associated with Stephen Coomey (known as Bill) andhis wife, Sharon Coomey. The partnership comprising the two Bushline trusts is thevehicle through which the substantial dairy farming operations associated with Mr andMrs Coomey were run at the time of the events in issue.[7] At the time of the transaction, the trustees of Bushline Trust One wereMr Coomey, Robert England (the second respondent), and Christopher Schurr. Thetrustees 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 forthe 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 Schurrwere replaced as trustees of both trusts in 2013 by Bushline Trustees Ltd. Mr Schurris now the sole director of Bushline Trustees Ltd.[8] Although much of the dispute centres on communications between Mr andMrs Coomey and representatives of ANZ, the contractual relationship in issue is, asnoted 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 basisthat, if ANZ were liable to Bushline in tort, Mr England would be a joint tortfeasor.8 The entire agreement provision is set out below at [48]. The agreement also included a clauseproviding that Bushline acknowledged it had not received or relied upon any advice given onbehalf of ANZ, but that provision is not relevant to the issues before us.ANZ's third party claim against him was not addressed in the High Court becauseBushline's negligence claim against ANZ failed, rendering the third party claim moot.9It 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 ofAppeal found it unnecessary to address the negligence claim but observed that, to theextent its judgment raised any issue as to Mr England's liability, ANZ's claim againsthim was remitted for determination by the High Court.10 There is no appeal before usagainst the order remitting that claim to the High Court and so no need for us to addressit.Commerce Commission investigation[10] The practices of ANZ in relation to the provision of funding involving loanagreements with floating rates, accompanied by swaps under which ANZ swapped thefloating rate for a fixed rate, have become the centre of controversy. ANZ's conductin relation to swaps (and that of other banks) was the subject of an investigation by theCommerce Commission. After that investigation, ANZ reached a settlement with theCommission under which it agreed to consent to the High Court making a declarationthat ANZ's conduct was misleading and deceptive conduct in breach of the FairTrading Act 1986. The declaration said the misleading and deceptive conduct was thatANZ understated some of the risks and/or overstated some of the benefits of interestrate swap arrangements to specified customers.11 ANZ also agreed to paycompensation of up to $18.5 million to specified customers that were affected by itsconduct. 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 issuesarising out of the combination of the loans made by ANZ to Bushline and the swaptransactions entered into by ANZ and Bushline. Bushline's claim against ANZincluded claims for negligence, breach of contract, misrepresentation under the9 HC judgment, above n 6, at [202].10 CA judgment, above n 7, at [15] and [292].11 Commerce Commission v ANZ Bank New Zealand Ltd [2015] NZHC 1168, (2015) 14 TCLR 71at [19]–[20]. See also at [4].Contractual Remedies Act 1979,12 breach of the Fair Trading Act and oppressiveconduct in terms of the Credit Contracts and Consumer Finance Act 2003. As firstpleaded, Bushline's claim focused on the overall effect of the loan and swaptransactions.[12] The claims that were pursued at trial were based on allegations ofrepresentations or undertakings by ANZ that:(a) the 0.7 per cent margin would be held for five years on all of ANZ'slending to Bushline;(b) swaps operated like a fixed rate loan, except with greater flexibility andbenefits (the allegation being that there were important differences thatwere adverse to Bushline);(c) swaps were transferable and ANZ would not prevent Bushline fromrefinancing if Bushline desired to do so;(d) ANZ could and would monitor and/or manage Bushline's swaps on anongoing basis to ensure that Bushline was able to take advantage of theflexibility 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 ofclaim was filed in November 2015. Neither of these statements of claim contained anexpress allegation that ANZ had made a representation or given an undertaking to fix12 The Contractual Remedies Act 1979 has been repealed and replaced by pt 2, subpt 3 of theContract and Commercial Law Act 2017 (CCLA). The CCLA is a revision Act for the purposesof s 35 of the Legislation Act 2012 (s 4(1)), and the provisions relating to contractual remediesapply to all contracts made on or after 1 April 1980: s 6 and sch 1 cl 4. See Kawarau VillageHoldings Ltd v Ho [2017] NZSC 150, [2018] 1 NZLR 378 at [73], n 101 per Ellen France J (withwhom Elias CJ agreed: at [1]) and [214], n 255 per William Young and O'Regan JJ. We thereforedisagree with the Court of Appeal's statement that the Contractual Remedies Act applied in thiscase: CA judgment, above n 7, at [138]. We will apply the CCLA. As the relevant provisions ofthe Contractual Remedies Act and the CCLA do not differ in any material respect, this makes nodifference to the analysis or the outcome.the margin at 0.7 per cent for five years. Bushline filed a further amended statementof claim (the third statement of claim) in September 2016. For the first time, the thirdstatement of claim included a pleading that there was such a representation orundertaking. ANZ argues that the fact that this claim was made only in the thirdstatement of claim is significant because it undermines the argument that there was, infact, such a representation or undertaking. We will discuss this point later.13 A furtheramended statement of claim was filed in March 2017.[14] All of Bushline's claims were dismissed by Edwards J in the High Court.14She awarded increased costs to ANZ in a separate costs judgment.15[15] However, Bushline's appeal to the Court of Appeal was allowed. The HighCourt judgment was reversed and the costs determination was quashed.16 Of relevanceto the present appeal, the Court of Appeal found that ANZ agreed that it would fixBushline's margin at 0.7 per cent for five years.17 The Court of Appeal said thisundertaking applied to the loan made under the April 2008 loan agreement (which hada one year term) and any re-advances of that loan over the five-year period.18 In effect,this means the undertaking to fix the 0.7 per cent margin for five years must have alsobeen an undertaking that ANZ would continue to lend the principal amount for fiveyears, notwithstanding the term of the loan as set out in the loan agreement was oneyear.[16] The Court of Appeal also found that ANZ's defence based on the entireagreement clause in the loan agreement failed. That was because, for the purposes ofs 4 of the Contractual Remedies Act (now s 50 of the Contract and Commercial LawAct 2017 (CCLA)), it was not fair and reasonable that these provisions would beconclusive between the parties.19 ANZ's limitation defence also failed.20 The Court13 See below at [95]–[102].14 HC judgment, above n 6, at [201]–[202].15 Bushline Trustees Ltd v ANZ Bank New Zealand Ltd [2018] NZHC 454 at [57(c)].16 CA judgment, above n 7, at [295] and [297].17 At [218].18 At [220].19 At [275].20 At [289].remitted the matter to the High Court for the determination of the amount ofdamages.21Scope of the appeal[17] ANZ was granted leave to appeal to this Court against all aspects of the Courtof Appeal decision.22 Since the granting of leave, however, the parties have settled allissues apart from that involving the "margin undertaking". What remains in issue iswhether ANZ undertook or represented to Bushline that the 0.7 per cent margin wouldbe fixed for a five-year period and, if so, whether ANZ was bound not to raise themargin during that five-year period. These are the only aspects of the original claimstill alive. Connected with them is whether, even if Bushline proves the existence ofa binding representation or undertaking to fix the 0.7 per cent margin for five years,its claim is nevertheless time-barred in whole or in part.[18] On the face of it, the claim now relates only to the terms of the loans made byANZ to Bushline and no longer concerns the swaps. But the Court of Appealconsidered that ANZ's conduct in relation to the swaps was relevant to the applicationof s 4 of the Contractual Remedies Act (s 50 of the CCLA) and the arguments beforeus addressed the swap transactions as well.[19] This Court granted leave primarily because of the issues relating to s 50 of theCCLA, which it considered were issues of public importance and in respect of whichthe challenge to the findings of the Court of Appeal appeared to have some substance.As will become apparent, our conclusion on the primary factual issue renders thoseissues moot. However, we briefly address s 50 below.23BKBM interest rate[20] As noted earlier, the rate of interest specified in the loan agreement for the$19.466 million loan was a floating rate. The rate was defined as "the rate of interest21 At [293].22 ANZ Bank New Zealand Ltd v Bushline Trustees Ltd [2019] NZSC 115. The approved questionwas "whether the Court of Appeal was correct to allow the appeal from the judgment of the HighCourt".23 See below at [129]–[132]. for New Zealand Dollar bills of exchange for [the specified period] which appearson the Reuters Screen BKBM Page opposite the caption 'BID' as of 11.00am on [therelevant] date". The BKBM rate is a rate derived from the rate applicable to bank bills(that is, bills on which a bank is liable). The 0.7 per cent margin was added to theBKBM rate to reflect the credit risk attaching to the customer (Bushline).Interest rate swap[21] The operation of interest rate swaps is explained in some detail in the HighCourt24 and Court of Appeal judgments.25 It is not necessary for us to go into anydetail on the swaps, given their peripheral role in the issue now before us. In thebroadest terms, the swap agreement allows the customer, having borrowed money ata floating rate (BKBM rate) plus a margin, to obtain some certainty about the amountof interest it will have to pay by swapping its obligation to pay that floating rate for anobligation to pay a fixed rate. So when a swap agreement is entered into, the customerswaps its obligation to pay the floating rate for an agreed fixed rate on a notionalamount. It is best practice for the payments to be timed to match the interest paymentdates on the loan. Under the swap agreements linked to the $19.466 million loan,Bushline remained liable to pay the credit margin.[22] Swap agreements are used in connection with loans with the objective ofproviding the customer with an end result similar to that which would have beenobtained by borrowing money at a fixed rate of interest, but with a degree of flexibilitybecause of the tradability of swaps and the ability to extend them. But swaps alsoinvolve risks, particularly when the terms of the loan and the swaps do not align. Partof the dispute between the parties that has now been settled concerned the allegationthat ANZ misled Bushline as to the nature of these risks.[23] In the case of the arrangement between ANZ and Bushline, the paymentobligations were effected as two separate transactions, rather than by way of a nettingoff. So Bushline would pay ANZ the floating interest rate payable under the loan plusthe margin, and then there would be an adjustment payment reflecting the difference24 HC judgment, above n 6, at [45]–[51].25 CA judgment, above n 7, at [23]–[28].between the floating rate and the fixed rate. If the swap was "in the money" fromBushline's point of view, the adjustment payment would be made by ANZ to Bushline.If the swap was "out of the money" the adjustment payment would be from Bushlineto ANZ. This meant that the operation of the swaps was clearly recorded in Bushline'sbank statements.Factual background[24] There are detailed accounts of the factual background in both the High Courtand Court of Appeal judgments. Given the more limited scope of the issues nowbefore us, we describe the background more briefly. The key event in the factualbackground is the exchanges between Mr and Mrs Coomey and two executives ofANZ, Robert Simcic and Christopher Harvey, on 18 and 19 March 2008 (the18/19 March meetings).[25] We will describe the facts by outlining the history of the relationship betweenMr and Mrs Coomey, Bushline and ANZ leading up to the 18/19 March meetings, the18/19 March meetings themselves, the completion of the transaction discussed at thosemeetings and the subsequent interactions between Bushline and ANZ.Events in 2005–2007[26] ANZ began promoting interest rate swaps to rural customers in July 2005.Stuart Esquilant, a dealer at ANZ, made presentations to potential customers. Hisevidence was that he made such a presentation to the Coomeys in 2005. This wasconfirmed in his calendar and by the evidence of an ANZ manager, Nicholas Lawn,who accompanied Mr Esquilant. The Coomeys contend the presentation was in 2008.[27] Bushline entered into its first swap on 7 October 2005.26 ANZ instructedMr England to act on its behalf in relation to the legal documentation for the swap(and future swaps). Mr England certified to ANZ that he had explained the nature andeffect of the swap terms to Bushline. However, the advice he gave when he met with26 The swap was for a notional sum of $975,000 (increasing incrementally to $2,905,000) forfive years from 20 December 2005. As the Court of Appeal noted, the swap confirmationincorrectly records Bushline as the "Floating Rate Payer" under the swap. The whole point of thetransaction was for Bushline to become the fixed rate payer: CA judgment, above n 7, at [37], n 8.the Coomeys prior to completing this certificate is privileged. Privilege has not beenwaived. The swap terms were provided to Bushline by ANZ in December 2005.Clause 10.1 of the relevant swap document provides that the customer enters into thetransaction in reliance on its own independent advice and that ANZ will not be liablefor the customer's loss in any circumstances.[28] ANZ issued a swap confirmation for the first swap on 23 February 2006. Thiswas a standard form document, which was to be signed by the customer when a swapwas entered into. It stated that by signing the confirmation, the customer confirmedthat the terms and conditions that it had previously been provided with governed theswap. The confirmation also included the following statement, set out in capital lettersand framed with bold black lines:EACH PARTY AGREES THAT IT HAS NOT RELIED ON ANY ADVICE(WHETHER ORAL OR WRITTEN) FROM THE OTHER PARTY (OTHERTHAN AS SET OUT IN THIS CONFIRMATION) AND THAT (A) IT HASTHE CAPACITY TO EVALUATE THE TRANSACTION AND (B) ITUNDERSTANDS AND ACCEPTS THE RISKS AND OBLIGATIONSINVOLVED.[29] Bushline entered into further swap transactions on 21 March 2006 and28 September 2006. Confirmations on the standard form just referred to were signedon behalf of Bushline in respect of both of these transactions. The transcript of thetelephone call between an ANZ dealer and Mr Coomey confirming the details of theMarch 2006 swap was in evidence. In that conversation, Mr Coomey confirmed tothe dealer that he had done a swap transaction before. When asked about hisunderstanding of the transaction, he said "it's not so bad this time". In his evidence atthe trial, Mr Coomey said that, looking back, he had very little idea what the dealerwas talking about in that phone call and did not understand what swaps were before2008.[30] By early 2008, Bushline had a total debt to ANZ of $11.97 million recorded ina number of loan agreements. None of these loan agreements referred to a margin, aswas the case in relation to the loan agreement at issue in this appeal. Rather, thefloating interest rate was defined in broad terms such as "[ANZ's] floating interest rateapplicable to the Customer (as determined by [ANZ])" or "[ANZ's] 30 day bill-pricedinterest rate applicable to the Customer (as determined by [ANZ]) then [ANZ's]90 day bill-priced interest rate applicable to the Customer (as determined by [ANZ])"which was to be reviewed every 90 days. These formulations apparently included amargin over the bill rate payable by ANZ itself, but this was not expressly identifiedin the relevant agreement and therefore not obvious to Bushline. This also meant thatthe swap transactions relating to the pre-2008 loans related to the full floating rate(including the implicit but unstated margin) in contrast to the swaps relating to theloan at issue in this case.February–April 2008[31] The important events in February and March 2008 centred on the purchase byBushline of a farm in Waverley, which was to be incorporated into Bushline's dairyfarming business as a run-off block with potential for development into a dairy farm.The purchase price was $7.25 million.[32] ANZ's relationship manager dealing with the Bushline account wasMr Harvey. He prepared a lending proposal for the Waverley purchase to go to ANZ'scredit department. This recorded that, as a result of the purchase, the Bushlinebusiness would have a cashflow deficit in future years. ANZ agreed to lend the amountrequired to purchase the farm on 28 February 2008, without any specification of theterms. Mr Harvey communicated this approval to Mr and Mrs Coomey. That verbalcommitment was sufficient for Bushline to enter into an unconditional sale andpurchase agreement the following day. One of the conditions on which approval wasgiven was a requirement that ANZ advise Bushline in writing about ANZ's concernregarding the viability of their business and the need for intensification to achievesustainability. This was done by a letter dated 18 March 2008.[33] ANZ lent Bushline the amount needed to pay the deposit. However,Mr Coomey made it clear to ANZ that he was considering refinancing with one ofANZ's competitors, ASB Bank Ltd (ASB). There was also mention of a possiblerefinancing with Bank of New Zealand (BNZ). This was a matter of concern for ANZbecause Bushline was a significant customer. Mr Harvey described Bushline as his"largest customer". Mr Simcic described Bushline as a "key client".[34] This was the backdrop for the crucial 18/19 March meetings involving Mr andMrs Coomey for Bushline and Mr Harvey and his senior manager, Mr Simcic, forANZ, at which the terms on which ANZ would finance the purchase of the Waverleyfarm were agreed. The evidence of what occurred at this meeting is at the heart of thekey issue in the case and we will discuss it in detail later. There is no doubt ANZagreed to lend the required money on a floating rate basis with a margin over theBKBM rate of 0.7 per cent. The duration of any commitment by ANZ to hold thatmargin at 0.7 per cent is disputed.[35] Continuing the narrative, attention then turned to the loan structure and theswaps that would be entered into. There was a meeting between Mr Harvey andMr Esquilant of ANZ with the Coomeys on 28 March. Mr Harvey made a note of themeeting which said, "look @ refinancing all debt into a three year SWAP". However,Mr Esquilant's evidence was that he had suggested a mixture of three and five-yearswaps but that Mr Coomey had not wished to enter into a swap for a period as long asfive years.[36] In early April it was agreed that two of the three existing swap contractsbetween ANZ and Bushline would be restructured so that the amount of the loan wouldbe covered by three swaps. The two restructured swaps had terms of approximatelytwo years eight months, maturing in December 2010 ($7.905 million) (theDecember 2010 swap) and three years six months, maturing in October 2011($8.847 million) (the October 2011 swap). One of the existing swaps ($3.15 million)remained in place. It had just over a year to run, maturing in June 2009 (the June 2009swap). In August 2008, the notional amount of the June 2009 swap was reduced to$3.041 million.[37] The documentation for the loan was finalised on 21 April 2008. The loan wasadvanced on 1 May 2008, and was repayable on 1 May 2009. Mr England acted forANZ and gave a certificate to ANZ that he had advised Bushline on the terms of theloan agreement. Privilege was not waived in relation to the advice he gave.Mr England signed the loan agreement himself as a trustee of both of the Bushlinetrusts.[38] There was an obvious mismatch between the end date of the loan and the enddates of the December 2010 and October 2011 swaps. Given the link between the loanand the swaps, the parties must have anticipated that ongoing funding would beavailable from ANZ to Bushline until the swaps matured, all things being equal.27Mr Esquilant confirmed in evidence that entering into a three-year swap contractanticipated the loan being rolled over three times. In the event that the loan was notrolled over, the swaps would need to be closed out, which would give rise to acontingent risk to both parties.Events after April 2008[39] The purchase of the Waverley farm was not a success for Bushline. Like otherdairy farmers they faced difficult conditions after 2008, in part because of the globalfinancial crisis (GFC) that affected the market for the provision of finance inNew Zealand. ANZ became concerned about the sustainability of Bushline'sbusiness. Bushline attempted to sell assets to reduce debt, and in mid-2012 it wassuccessful in selling 12 out of 15 certificates of title of the Waverley property, whichreduced its overall debt to about $16 million.[40] During this time Bushline continued to borrow from ANZ, but always onshort-term arrangements. We set out the details below. These loan agreementsprovided that ANZ was entitled to call up the loan if "in the Bank's opinion, anunsatisfactory feature develops in the affairs of the Customer or any Guarantor, or theCustomer or any Guarantor does not continue to conduct their affairs to the Bank'ssatisfaction". As the Court of Appeal pointed out, this meant Bushline had littlenegotiating power given ANZ's concern about its operations and about the dairyindustry itself.28[41] Up until October 2008, the swaps worked in Bushline's favour, with theamount payable by Bushline to ANZ on the swap transactions being less than the27 The term of the loan was significant to ANZ because, as Mr Esquilant explained, it had to provisionless capital against short-term loans to meet regulatory requirements than required for loans oflonger duration. This may mean that, if ANZ had in fact agreed to a five-year term as the Courtof Appeal found, it had not made adequate provision for the loan.28 CA judgment, above n 7, at [80].amount payable by ANZ to Bushline. However, that changed in October 2008, andfrom then on, the reverse was true.[42] As mentioned earlier, ANZ did, in fact, increase the margin on its loans toBushline above the 0.7 per cent that had been agreed in March 2008. InDecember 2008, ANZ increased the margin on the $19.466 million loan from0.7 per cent to 0.85 per cent. It increased it again in March 2009 to 0.97 per cent.[43] During the GFC, the BKBM rate fell significantly. At the time of the 21 April2008 agreement, the BKBM rate was 8.88 per cent (as provided in the agreement). ByApril 2009, the BKBM rate was only 3.27 per cent. Bushline's fixed rate paymentobligation under the swaps for April 2009 alone was over $70,000 more than thefloating (BKBM) rate amount payable by ANZ to Bushline under the swaps.[44] The $19.466 million loan was refinanced for a further 12 months on 4 May2009 at a rate of BKBM plus 0.97 per cent. As the swaps matured, the loan wasgradually transferred from a BKBM plus margin rate to a full floating rate (a rate thatdid not identify a margin) to reduce Bushline's interest expense. By agreement dated9 September 2009, the $3.041 million which had rolled off the June 2009 swap wasrefinanced at BKBM plus 3.45 per cent. This amount was switched to a full floatingrate by agreement dated 17 May 2010. A further $7.905 million was switched to a fullfloating rate by agreement dated 22 November 2010. A further $8.847 million, whichincluded the balance of the original loan, was refinanced for a further 10 months at arate of BKBM plus 0.97 per cent by agreement dated 21 December 2010. This finalportion was transferred to a full floating rate by agreement dated 20 October 2011.29In 2013, Bushline refinanced its debt with another bank.[45] The margin increases in December 2008 and March 2009 resulted in Bushlinepaying approximately $76,000 more in interest than it would have if the margin hadbeen held at 0.7 per cent for the term of the swaps. So that would be the measure ofits loss if ANZ's commitment to maintain the 0.7 per cent margin was for the periodof the swaps, rather than for five years, as Bushline alleges. If the commitment was29 These are the agreements of which there were copies in evidence. There is nothing to indicatethere were others.to maintain the margin for five years, the loss is said to be nearly $3.8 million. Thisillustrates the significance of the issue to the parties.Loan agreement[46] As mentioned earlier, the loan agreement dated 21 April 2008 provided for afloating interest rate. The relevant part of the interest rate clause in the agreementprovided:The interest rate for the Loan is:Floating interest rate (BKBM-priced)for the first 19 days from the Date of Advance, the 1 month BKBM rate as atthe Date of Advance (which at the date of this agreement would be 8.88% perannum) plus a margin of 0.70% per annum (reviewable at any time), then from20 May 2008 the 1 month BKBM rate as at that date (which will be reviewedevery 1 month) plus a margin of 0.70% per annum (reviewable at any time).In this agreement, the term "BKBM rate", when used in relation to any periodexpressed as a number of months (such as 'the 3 month BKBM Rate'), means,on any date, the rate of interest (expressed as a percentage per annum) forNew Zealand Dollar bills of exchange for a period equal to that number ofmonths which appears on the Reuters Screen BKBM Page opposite thecaption "BID" as of 11.00am on that date.[47] That the margin is reviewable at any time is stated twice.30[48] The loan agreement also included an entire agreement provision, on whichANZ seeks to rely:The Customer acknowledges that:(c) no representation, warranty or undertaking has been made by or onbehalf of [ANZ] in relation to the Loan which is not expressly set outin this agreement;[49] A similar clause appeared in the loan agreements for all of the loans made byANZ to Bushline.30 The loan agreement dated 4 May 2009, relating to the rollover of the $19.466 million loan, andthe loan agreement of 21 December 2010, refinancing part of that loan, had similar interest rateclauses, except the margin in both cases was 0.97 per cent, rather than 0.7 per cent.18/19 March meetings[50] We now turn to the events surrounding the agreement on the terms of the loanthat was said to have been reached at the 18/19 March meetings.[51] On 18 March 2008, Mr Harvey and Mr Simcic met with Mr and Mrs Coomey.The focus of the discussion was on the margin. Mr Coomey said he had favourablefixed margin offers from both ASB and BNZ. He wanted ANZ to match thesecompeting offers. Mr Harvey's note of the meeting was as follows:18/3/2008 – Chris H & RSNegot[ia]tionBNZ offering 60 points on ongoing.ASB 8.1%Waiting for Bill to confirm offers from other banks to lock in margin with us.The reference to "Chris H & RS" is to Mr Harvey and Mr Simcic. The reference to"Bill" is to Mr Coomey. As Mr Coomey had no evidence of ASB's or BNZ's offers,no agreement was reached on 18 March.[52] However, ANZ did deliver two letters to the Coomeys at the 18 March meeting.The Coomeys also signed a standard form "acceptance of finance offer" document.Rather enigmatically, this document referred to the offer of finance set in ANZ's "letterof 18th March 2008". No such letter has ever been found. The Court of Appeal foundthat it was more likely than not that no such letter existed at that time.31[53] Mr Harvey and Mr Simcic met with the Coomeys again on 19 March. Duringthat meeting Mr Coomey showed them a copy of the offer he had received from ASB.Mr Simcic went to his car and called the responsible officer in ANZ, Charlie Graham.While in his car, he photographed certain pages of ASB's offer (the photographs werein evidence). He returned and confirmed an offer of funding at a margin of 0.7 per centabove BKBM. Mr Harvey recorded the outcome in a handwritten note on the agendaof that day as being "Agreed – 70pts ongoing". Mr Simcic emailed the photographshe had taken of the ASB offer to Mr Graham the following day.31 CA judgment, above n 7, at [62].[54] Bushline's case is that ANZ's offer involved not only a commitment to amargin of 0.7 per cent but also a commitment to fix that margin for five years, therebylargely matching what it says was the terms of ASB's offer.High Court's rejection of Bushline's case[55] The High Court Judge found that no representation was made, or agreementreached, to hold the 0.7 per cent margin for five years. Rather, she found that ANZagreed to set the margin at 0.7 per cent, but did not agree to fix that margin for fiveyears.32[56] Her reasons were:(a) ANZ's offer was made in response to the competing offers from BNZand ASB, and those offers did not include a margin that was fixed for afive-year term.33(b) It was unlikely that ANZ would have agreed to fix the margin at thatlevel for a five-year term given the context of the 18/19 Marchmeetings. In particular, credit approval for the new lending was grantedon the condition that written advice was provided to Bushline outliningANZ's concerns about the impact of the Waverley purchase on equitygiven the forecast cashflow deficits.34(c) There was no written record of such an important and far reaching term.Even in an environment where handshake deals were common, this wasa significant transaction and if the five-year commitment had beenmade, then Mr Harvey would have been likely to record it in his notes.3532 HC judgment, above n 6, at [77]. The High Court Judge also found that this offer related only tolending which would be subject to swaps.33 At [78]–[79].34 At [80].35 At [81].(d) Neither Mr Schurr nor Mr England was made aware of the allegedagreement.36(e) Bushline made this claim for the first time in the third statement ofclaim filed in September 2016. It had not mentioned this agreementwhen it had entered into loan arrangements with ANZ in the periodbetween 2008 and 2012 after ANZ had increased the margins.37(f) The discussion around margins was in the context of an interest rate tobe hedged by swaps. In that context, the reference to "ongoing" inMr Harvey's notes referred to the duration of the swaps.38Should the Court of Appeal have deferred to the High Court?[57] The Court of Appeal overturned this factual finding. The question we nowaddress is whether it had a proper basis for doing so. We will address the Court ofAppeal's findings as we deal with the submissions advanced by the parties.[58] For ANZ, Mr Hunter QC argued that the Court of Appeal, in overturning thisimportant finding of fact, failed to respect the advantages enjoyed by Edwards J.Mr Hunter referred us to the decision of the Court of Appeal in Green v Green whichapplied an earlier Court of Appeal decision, Rae v International Insurance Brokers(Nelson Marlborough) Ltd.39 The extract from Rae cited in Green refers to the factthat the advantages possessed by a trial judge in determining questions of fact areobvious. Mr Hunter said this was especially so where assessments of credibility andreliability are involved. Rae was the subject of comment by this Court in its leadingdecision on the nature of a civil appeal, Austin, Nichols & Co Inc v Stichting Lodestar,where the Court said:40The appeal court must be persuaded that the decision is wrong, but in reachingthat view no "deference" is required beyond the "customary" caution36 At [82].37 At [83].38 At [84].39 Green v Green [2016] NZCA 486, [2016] NZFLR 987 at [31], citing Rae v International InsuranceBrokers (Nelson Marlborough) Ltd [1998] 3 NZLR 190 (CA) at 199.40 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [13](footnotes omitted).appropriate when seeing the witnesses provides an advantage becausecredibility is important. Such caution when facts found by the trial judge turnon issues of credibility is illustrated by Rae v International Insurance Brokers(Nelson Marlborough) Ltd and Rangatira Ltd v Commissioner of InlandRevenue.[59] This Court made it clear that an appeal court is not required to show deferenceto the findings of fact of a lower court.41 It did say that caution is appropriate inappeals from findings of credibility.42 Rae is mentioned as an example, but thereasoning of Rae was not adopted by this Court (and certainly not with regard toreliability).43[60] We do not consider there was any reason for the Court of Appeal to exercisecaution in relation to the finding of fact now in issue. While the findings made byEdwards J related to oral statements made at a meeting nine years before the trial, therewas no suggestion that any of the witnesses lacked credibility. In relation to thereliability of their evidence, the assessment involved considering the evidence givenagainst the written record (substantially, the notes of Mr Harvey) and broader context.This did not involve the High Court having any advantage over the Court of Appeal.[61] We reject, therefore, ANZ's argument that the Court of Appeal should havedeferred to the High Court's finding of fact.Question of fact[62] We do, however, comment on one other aspect of the Court of Appeal'sanalysis before engaging directly with the evidence.[63] The focus of the Court of Appeal's analysis was the meaning of the term"70pts" and, more specifically, "ongoing".44 This referred to Mr Harvey'shandwritten note that the parties had agreed to "70pts ongoing".45 In order todetermine whether the bank had made a commitment to hold the 0.7 per cent margin41 See also Lodge Real Estate Ltd v Commerce Commission [2020] NZSC 25 at [60].42 This Court elaborated on the reasons for such caution with regard to credibility findings recentlyin Sena v Police [2019] NZSC 55, [2019] 1 NZLR 575 at [38]–[40].43 Rae should not therefore be cited, except as an example of the cautionary approach.44 CA judgment, above n 7, at [185].45 See above at [53].and, if so, for what period, the Court of Appeal applied the methodology for theconstruction of contracts set out in Investors Compensation Scheme Ltd v WestBromwich Building Society and Boat Park Ltd v Hutchinson.46 So the Court askeditself what the reasonable bystander would have understood was the meaning ofANZ's offer of 70 basis points ongoing. The Court concluded that a reasonablebystander would have understood the offer as being made by reference to the five-yearperiod Mr Coomey wanted to have Bushline's margins fixed for.47[64] We do not think that the methodology derived from Investors Compensationand Boat Park had a role to play in the determination of whether ANZ agreed to fixthe 0.7 per cent margin and, if so, for what period. Rather, the task was to determinewhether an oral contract (or undertaking, to use the Court of Appeal's term) wasentered into or a representation was made. Mr Harvey's note of "70pts ongoing" wasnot contractual language. Rather, it was his personal record of the discussion.48 It wascommon ground that the term "ongoing" had not been used during the 18/19 Marchmeetings. Mr Harvey's record was part of the evidence to be considered whendetermining whether ANZ had given an undertaking or made a representation to fixthe 0.7 per cent margin for five years. It was not the words of a contract about whichthe parties had differing interpretations.[65] Ascertaining whether an oral contract (or a partly oral and partly writtencontract) was entered into and, if so, what its terms are, is a question of fact.49 Thismeans that all evidence to assist that task is admissible, including evidence of theparties' subjective intentions and subsequent conduct.5046 At [186], citing Investors Compensation Scheme Ltd v West Bromwich Building Society [1998]1 WLR 896 (HL); and Boat Park Ltd v Hutchinson [1999] 2 NZLR 74 (CA).47 CA judgment, above n 7, at [204]–[205].48 He had also used the term "ongoing" in his note of the 18 March meeting in relation to what theCoomeys had said was the offer made by BNZ: see above at [51].49 Carmichael v National Power plc [1999] 1 WLR 2042 (HL) at 2049 per Lord Hoffmann.50 At 2051 per Lord Hoffmann. For discussion see David McLauchlan "Contract Formation andSubjective Intention" (2017) 34 JCL 41.[66] In Thorner v Major, Lord Neuberger explained the reasons for this and for thecontrast with purely written contracts as follows:51This shows that (a) the interpretation of a purely written contract is a matterof law, and depends on a relatively objective contextual assessment, whichalmost always excludes evidence of the parties' subjective understanding ofwhat they were agreeing, but (b) the interpretation of an oral contract is amatter of fact (I suggest inference from primary fact), rather than one of law,on which the parties' subjective understanding of what they were agreeing isadmissible.[83] The reason for this dichotomy is partly historical. Juries were oftenilliterate, and could therefore not interpret written contracts, whereas theycould interpret oral ones. But it also has a good practical basis. If the contractis solely in writing, the parties rarely give evidence as to the terms of thecontract, so it is cost-effective and practical to exclude evidence of theirunderstanding as to its effect. On the other hand, if the contract was madeorally, the parties will inevitably be giving evidence as to what was said anddone at the relevant discussions or meetings, and it could be rather artificial toexclude evidence as to their contemporary understanding. Secondly, andperhaps more importantly, memory is often unreliable and self-serving, so itis better to exclude evidence of actual understanding when there is no doubtas to the terms of the contract, as when it is in writing. However, it is veryoften positively helpful to have such evidence to assist in the interpretation ofan oral contract, as the parties will rarely, if ever, be able to recollect all thedetails and circumstances of the relevant conversations.[67] The issue before the Court of Appeal, and now before us, is whether Bushlineproved its case that an oral contract was entered into on 19 March to fix the0.7 per cent margin for five years.52Bushline's case[68] Bushline's case is founded on Mr and Mrs Coomey's account of what occurredat the 18/19 March meetings and other evidence that, it says, supports that narrative.Mr Coomey's account was:(a) At the 18/19 March meetings, Mr Coomey told the ANZrepresentatives, Mr Simcic and Mr Harvey, that he had an offer from51 Thorner v Major [2009] UKHL 18, [2009] 1 WLR 776 at [82]–[83]. A similar view has beenexpressed in New Zealand: Bryson v Three Foot Six Ltd [2005] NZSC 34, [2005] 3 NZLR 721at [20].52 Or, alternatively, that ANZ had made a representation that the margin was fixed and Bushline hadrelied on that representation. These are also questions of fact.ASB which featured a margin of 0.65 per cent fixed for five years andthat ANZ needed to match that offer.(b) The ANZ representatives said they needed to get approval to do this.On 19 March, Mr Simcic, after talking to his superior at ANZ,Mr Graham, confirmed that ANZ was prepared to offer funding at amargin of 0.7 per cent (rather than 0.65 per cent). Bushline says that,as this was the only modification of the terms that Mr Coomey had putforward by reference to the ASB offer, it was implicit that ANZ's offeralso involved fixing the margin for a five-year term. This was, in effect,a counter-offer to the proposal that had been put forward byMr Coomey on behalf of Bushline.(c) Mr Coomey accepted this counter-offer on behalf of Bushline. He saidhe was prepared to live with the margin of 0.7 per cent, rather than0.65 per cent, because of his relationship with ANZ.[69] To make ANZ's undertaking to fix the 0.7 per cent margin for five yearsmeaningful, it also required a commitment by ANZ to keep funding Bushline throughthe five-year period. We consider there would also need to be an implicit commitmentthat such funding would be provided using the one-month BKBM rate as the base forcalculation of interest. Otherwise, adopting a different baseline (for example thethree-month BKBM rate, if higher than the one-month rate) could have a similar effecton Bushline as increasing the 0.7 per cent margin, unless the obligation to pay thefloating rate was the subject of a swap under which Bushline paid a fixed rate insteadof the BKBM rate.Evidence relied on by Bushline[70] Bushline points to the evidence described below in support of its case that theANZ representatives at the 18/19 March meetings agreed to fix the 0.7 per cent marginfor five years.Context[71] Bushline argues that this evidence must be seen in context. As acknowledgedby ANZ, Bushline was an important customer for ANZ.53 The market for rural lendingat the relevant time was highly competitive. And, as confirmed by an expert witness,Christopher Darlow, "handshake deals" were common at the time. We accept theevidence confirms all of these features applied at the time of the 18/19 Marchmeetings.Matching ASB[72] Mr Coomey's evidence was that he told Mr Simcic and Mr Harvey that he hadan offer from ASB that involved a margin of 0.65 per cent for a term of five years andthat he wanted ANZ to match this. Mrs Coomey, who was also present at the meeting,gave evidence to the same effect.Mr Simcic's concession[73] Mr Simcic confirmed that a competing offer from ASB had been put beforehim and Mr Harvey on 19 March and that Mr Coomey was seeking an immediatecommitment to a margin of 0.7 per cent.54 Mr Simcic thought when ANZ agreed tothe 0.7 per cent margin, it was agreeing to hold that margin for the term of the swaps.However, in cross-examination he accepted that Mr Coomey said to him that Bushlinehad a competing offer featuring a margin of 0.65 per cent and that this margin was tobe fixed for a five-year period. We accept this concession by Mr Simcic providessignificant support for Bushline's case as to what happened at the 18/19 Marchmeetings. As we will come to, it was not put to Mr Simcic in cross-examination thathe had, on behalf of ANZ, agreed to the 0.7 per cent margin for five years.55Mr Graham's approval[74] It was common ground that Mr Simcic and Mr Harvey needed approval of ahigher ranking ANZ manager, Mr Graham. Mr Simcic accepted that he had53 See above at [33].54 Mr Coomey's evidence was that he was actually seeking a margin of 0.65 per cent.55 See below at [103].photographed some of the pages of the offer made by ASB to Bushline, and had thenobtained Mr Graham's approval to offer a margin of 0.7 per cent (he emailed thephotos to Mr Graham the following day). However, his evidence was that the offerrelated to new lending to Bushline and that the period for which the margin would beheld would be the duration of a swap that would be matched with the BKBM lending.[75] Mr Graham was not called to give evidence as to what was discussed betweenhim and Mr Simcic and there was no evidence of any document recordingMr Graham's approval of the offer to Bushline. Bushline argues that, in light of thefailure by ANZ to call Mr Graham, the Court should assume that his evidence wouldhave been unhelpful to ANZ's case.56 Even if such an assumption were made, aninference that his evidence would have been unhelpful does not of itself prove thatANZ offered to fix the 0.7 per cent margin for five years.ASB's offer[76] As we will come to, there was evidence from an ASB employee,Blair Robinson, that ASB's offer did not, in fact, involve a commitment to fix themargin for five years, as Mr and Mrs Coomey claimed. Mr Coomey said this evidencewas wrong, but we do not consider his evidence on that point (discussed belowat [83]–[88]) to be convincing in the face of the evidence to the contrary.[77] Counsel for Bushline, Mr Branch, argued that even if ASB had not offered tofix its 0.65 per cent margin for five years as Mr and Mrs Coomey suggested, this didnot necessarily undermine Bushline's case. What was important, he said, was whatANZ thought it had to match, rather than what ASB had actually offered. There wasno suggestion that Mr and Mrs Coomey had misled ANZ as to what ASB was offering;rather, their evidence was based on their recollection as to what ASB had actuallyoffered. This does leave open the possibility that Mr and Mrs Coomey thought ASBwas offering to fix the 0.65 per cent margin for five years, even though they weremistaken in that regard, and communicated this to Mr Simcic and Mr Harvey.56 It appears that Mr Graham left ANZ other than on good terms."Ongoing"[78] As mentioned earlier, Mr Harvey's handwritten note on the agenda for themeeting on 19 March recorded "Agreed – 70pts ongoing". Bushline argues that thissupports its case that the commitment was for a five-year period. It was commonground that the term "ongoing" was not discussed by the parties during the meeting.But the case for Bushline is that it must have referred to a period of five years, giventhat this was what was being proposed by ASB and what ANZ was matching.[79] As already mentioned, Mr Simcic said he thought that what had been agreedwas that the 0.7 per cent margin would be applicable for the term of the swaps relatedto the loans. Edwards J accepted this was correct.57 However, that assumes that all ofthe parties were working on the assumption that swaps would be entered into,something which Mr and Mrs Coomey both deny. Mr Harvey said he thought thatongoing meant that it was fixed until a review; that is, it was not a promotional rate.We do not see that as a plausible interpretation of "ongoing".[80] We accept that "ongoing" could refer to a five-year commitment. But it is opento many other interpretations. It was recorded by Mr Harvey, who had no recollectionof a five-year commitment being discussed at the 18/19 March meetings.November 2009 file note[81] An undated file note made by Mr Harvey, which appears to have been writtenin November 2009, records under the heading "Interest Rates": "ASB offer @ .65margin 5 yrs". This appears to be a record of what either Mr or Mrs Coomey toldMr Harvey at a time when the relationship between Bushline and ANZ was fracturedand ANZ had increased the margin on its lending to Bushline. Bushline points to thisas supporting its version of events, namely that this was what the Coomeys had toldANZ they had been offered by ASB, and what ANZ had agreed to match on 19 March.We accept this note may provide some corroboration for what Mr and Mrs Coomeythought the ASB offer had been. But we do not think a note of what Mr andMrs Coomey told Mr Harvey more than 18 months after the events in question57 HC judgment, above n 6, at [84].provides assistance in determining what was agreed at the 18/19 March meetings.And, if ANZ had, in fact, matched (or nearly matched) the ASB offer, it could havebeen expected that ANZ's contractual commitment would have been the topic ofdiscussion, rather than the ASB offer.Evidence relied on by ANZ[82] We now turn to the evidence relied on by ANZ in support of its case that noundertaking to fix the 0.7 per cent margin for five years was made at the 18/19 Marchmeetings. The essence of its case was that the High Court Judge was correct to findthere was no undertaking given to fix the margin for five years at the 18/19 Marchmeetings, for the reasons she gave. ANZ placed particular weight on two of thereasons given by Edwards J: that the ASB offer did not involve a commitment to fixthe margin for five years and that the allegation of a five-year commitment by ANZwas not made until the third statement of claim.ASB's offer did not involve a five-year commitment[83] There was evidence from an ASB manager, Mr Robinson, that ASB did not, infact, offer to fix its 0.65 per cent margin for five years, as claimed by Mr andMrs Coomey. His evidence was that this was not a product offered at the relevanttime.58 Bushline disputes Mr Robinson's evidence. But he was not cross examinedon this (or any other) aspect of his evidence.[84] The Court of Appeal referred to the record of the offer made by ASB. This wasthe document that was the subject of the photos taken by Mr Simcic, though a fullcopy was also in evidence, having been produced by Mr Robinson.59 Thephotographed pages set out a list of interest rates applicable for fixed terms, but ahandwritten notation "65 Points" had been added, with a different notation showingthe word "margin", preceded by an indistinct word that the Court of Appeal thoughtwas probably "includes". From this the Court deduced that the handwritten notations58 A representative of BNZ, William Purvis, confirmed that BNZ did not offer this sort of producteither, at least on an unhedged loan. Mr Harvey said he had been told by the Coomeys that BNZwas offering a margin of 0.6 per cent "ongoing" but was not asked what he understood that tomean.59 This was a copy retrieved from ASB's computer records, so it did not include the handwrittennotations that were visible in the photos taken by Mr Simcic.recorded Mr Coomey's understanding that the term loan and swap rates cited by ASBincluded a margin of 65 points or 0.65 per cent.60 As just mentioned, Mr Robinson'sevidence was that ASB did not offer to fix that margin for five years and there is noreference in the document itself or in the handwritten notation to the margin beingfixed for five years.[85] Mr Coomey's evidence was that he understood ASB's offer to be for a loanwith a floating rate based on BKBM with a margin of 65 points fixed for a five-yearperiod. He said there was an attachment to ASB's offer document that included ahandwritten amendment showing that the offer was for a floating interest rate ofBKBM plus a 65-point margin for a five-year period. Mrs Coomey said this was herrecollection too.[86] But Mr Coomey was unable to produce this attachment. He said he had puthis copy of the ASB offer (including the attachment) in a safe place but had since beenunable to find it. If the attachment to the offer document was the basis on which ANZformulated its competing offer, it could have been expected that Mr Simcic wouldhave photographed it. But he did not, and neither he nor Mr Harvey was askedwhether they recalled this attachment. Mr Robinson did not mention such anattachment in his evidence. He was not required to give evidence in person, so he alsowas not asked whether such an attachment existed.[87] Mr and Mrs Coomey's recollection is strongly based on their perception thatASB had offered to fix the margin for five years. But that is at odds with ASB's offer,the notations on the parts of the offer photographed by Mr Simcic, and Mr Robinson'sevidence. It is also contrary to Mr Harvey's note that ASB's offer was 8.1 per cent,which in turn is contrary to Mr Coomey's recollection, the ASB offer and thephotographs, none of which refers to that rate. When asked whether it was possiblethat ASB's offer was for a fixed rate, but with an assumed margin of 65 basis points,Mr Coomey answered that he was sure "it wasn't completely fixed". The fact that Mrand Mrs Coomey cannot produce the attachment they say included ASB's offer to fixthe margin for five years undermines their ability to prove that such an offer was made,60 CA judgment, above n 7, at [201].as does the failure to ask Mr Robinson, Mr Simcic or Mr Harvey whether they recalledseeing the attachment.[88] We are not satisfied there is sufficient evidence of what ASB offered and whatMr Simcic and Mr Harvey thought ASB was offering to conclude that when ANZagreed to a margin of 0.7 per cent, it was agreeing to fix that for a five-year period.Relevant to this conclusion is that the representatives of ASB and BNZ both deniedagreeing to fix the margin for five years and the latter indicated that no bank wasoffering that sort of commitment at the time.No assertion of five-year commitment until third statement of claim[89] As mentioned earlier, ANZ increased the margins on loans to Bushline in bothDecember 2008 and March 2009.61 Subsequent loans taken by Bushline were notpriced at a margin of 0.7 per cent (and, indeed, some were floating rate loans notinvolving a separately identified margin at all).62 The Coomeys complained aboutthese increases. But when doing so they did not suggest there was any agreement onthe part of ANZ to hold the margin at 0.7 per cent for five years on all of its lending toBushline. ANZ argues that, if it had made a contractual commitment to maintain the0.7 per cent margin for five years, Bushline would have said so when ANZ signalledits intention to increase the margin.[90] When ANZ first increased the margin in 2008, the Coomeys complained toMr Harvey that the margin was fixed and could not be raised, to which Mr Harveyreplied that it could. Mr Coomey said he could not believe this.[91] On 28 August 2009, Mr England wrote to ANZ in response to a loan offer. Inthat letter, he noted that the margin above the BKBM rate was somewhat higher thanprevious and added "however, we would consider this to be tolerable in thecircumstances whilst the BKBM rate remains as low as it is. Were the BKBM rate tolift we would be requesting [ANZ] to review its margin". The Court of Appealconsidered this "after-the-fact observation", which it said Mr Coomey was unaware61 See above at [42].62 See above at [44].of, was of no great significance.63 But Mr England confirmed he had written the letteron Bushline's behalf pursuant to an instruction from the Coomeys.[92] Malcolm Nitschke, an ANZ officer who dealt with the Coomeys when themargin was increased, said he could not recall the Coomeys mentioning that there wasa five-year commitment to hold the margin at 0.7 per cent. Notably, the Coomeys'complaint about increasing the margin did not refer to there being an agreement tohold the margin for five years. Their complaint was just as consistent with Bushline'sunderstanding that swaps operated like a fixed rate loan (and therefore the marginwould not increase), which formed the basis of a distinct cause of action.64[93] Bushline points to the file note of Mr Harvey (referred to above at [81]) toillustrate that the Coomeys did assert there was a commitment to hold the margin forfive years. It will be recalled this file note recorded that Mr Harvey had been told"ASB offer @ 65 margin 5 yrs". The context of this is unclear and it does not, in anyevent, record an assertion that ANZ was contractually bound to hold the 0.7 per centmargin for five years.[94] Bushline also entered into at least six loan agreements refinancing the original$19.466 million loan at a rate other than BKBM plus a margin of 0.7 per cent.65 It istrue that at this time, Bushline was in difficulties and was a price taker. But this wouldnot have prevented it enforcing a contractual term, or attempting to do so, had oneexisted.[95] There was no mention of an undertaking or representation to fix the margin forfive years in either the first or second iterations of the statement of claim.66 This wasfirst pleaded in the third statement of claim dated 23 September 2016. Edwards J63 CA judgment, above n 7, at [217].64 See above at [12](b).65 See above at [44].66 Nor was such a commitment mentioned in Mrs Coomey's affidavit of 20 May 2016 in support ofan interlocutory application concerning discovery matters and the possibility of a split trial. Thisaffidavit referred to the offer received from ASB (a 0.65 per cent margin for five years) andMr Harvey's file note recording this offer (referred to above at [81] and [93]). Mrs Coomey thencontinued: "We were very aggrieved later when ANZ continued to put our margins up when itknew that we had turned down a very good offer from ASB to stick with it." If there had been anagreement by ANZ to fix the margin for five years, it could have been expected that it would havebeen referred to in this affidavit.thought it was significant that Bushline had never suggested there was a commitmentto fix the margin for five years until its third version of the statement of claim despiteall of the earlier opportunities to raise the point.67[96] In contrast, the Court of Appeal did not consider it was of "particularsignificance" that Bushline's express pleading of an undertaking to fix the margin forfive years did not appear until the third statement of claim. The Court said that thecentral focus of the claim from the outset had been ANZ's promise to fix the marginalong with its characterisation of the combined effect of floating rate loans and fixedrate swaps. The Court noted that Bushline had pleaded that its loss could be measuredon the basis that, had it not entered into the swaps, it would have accepted ASB's offerto fix all borrowings for five years at a margin of 65 basis points (though it is hard tosee how it could have established this given that no such offer had ever been madeaccording to ASB). The Court said Bushline had also pleaded an implied term thatANZ would not increase margins to minimise its own losses and had argued thatincreasing margins had been oppressive conduct.68[97] We consider the Court of Appeal was wrong to discount the significance of thisfactor. We agree with Edwards J that it was not just the failure to plead this cause ofaction until the third statement of claim that was significant, but also the fact that therehad been a number of occasions on which it could have been expected that Bushlinewould have asserted an agreement to hold the margin for five years if such anagreement had been reached.[98] The Court of Appeal's analysis engages only with the pleading point. Wedisagree with the Court of Appeal that this was insignificant. It is true that, as theCourt of Appeal noted, the earlier pleading focused on a commitment of fixed marginsand the characterisation of the combined effect of floating rate loans and fixed rateswaps. But that says nothing about a commitment for a five-year duration and doesnot explain the omission of a pleading of a representation or undertaking that themargin would be fixed for five years. In fact, it could be seen as more consistent witha commitment for the period of the swaps only. Bushline's pleading that it would have67 HC judgment, above n 6, at [83].68 CA judgment, above n 7, at [216].taken up ASB's offer had it not entered into the swaps with ANZ does not say anythingabout whether ANZ agreed to match ASB's offer. It could have been expected thatthe express reference to ASB's offer as a yardstick for quantifying loss would haveprompted Bushline and its legal representatives to refer to ANZ's commitment to fixthe margin for five years if such a commitment had been made.[99] Similarly, the fact that Bushline pleaded an implied term that ANZ could notincrease margins to minimise its own losses seems to us to have the opposite effect tothat attributed to it by the Court of Appeal. The Court of Appeal saw this pleading assupporting Bushline's case that a five-year commitment had been entered into. Wesee it in the opposite light. If ANZ had made the five-year commitment, it is hard tosee why there was any need to plead an implied term that ANZ would not increasemargins to minimise its own losses or to plead that increasing margins had beenoppressive conduct. Of course it would not be surprising that such pleadings mayhave been seen as fall back positions from the allegation of a five-year commitment.But the fact they were pleaded instead of such an argument seems to us to supportANZ's position that no five-year commitment was made.[100] It is also significant that in the second statement of claim, Bushline pleadedthat ANZ had made what was characterised as "the Margin Representation". Thenature of that representation was said to be that margins on swaps and the fundingprovided by ANZ would not change. It could have been expected that this would havegone on to refer to the five-year commitment if such a commitment had been made.[101] It was only in the third statement of claim that the "margin undertaking" forthe first time is characterised as a commitment to fix the 0.7 per cent margin for fiveyears.[102] In conclusion, we consider the failure of Bushline and its legal representativesto mention the alleged five-year commitment in the period between 2008 and 2016counts against the existence of a contractual commitment by ANZ to fix the margin of0.7 per cent for five years.Case not put to Mr Simcic in cross-examination[103] Mr Simcic accepted that Mr Coomey was seeking a five-year commitment.But it was not put to Mr Simcic that he had, on behalf of ANZ, agreed to match acompeting offer from ASB of a margin of 0.65 per cent fixed for five years (albeit witha margin of 0.7 per cent). Mr Hunter argued that, given that was Bushline's case, itshould have been put to him.69 We agree. The failure to do so undermines Bushline'sability to prove that the outcome of the 19 March meeting was an agreement by ANZto fix the margin for five years.Mr Harvey's evidence[104] Mr Harvey said the agreement reached at the 19 March meeting related to themargin (0.7 per cent) but not the period of time for which the margin would apply.Bushline's position that he and Mr Simcic had agreed to fix the margin for five yearswas put to him in cross-examination. He said he was "100% certain" that a period offive years had not been discussed at the 18/19 March meetings, and stated further thatthey were not talking about periods of time in relation to the margin. His evidencewas that the details of the terms on which the funding was to be provided were left tobe decided after a future discussion about swaps. However, he accepted his memoryof events was affected by the nine-year gap between the meeting and the High Courthearing.ANZ's concern about negative cashflow[105] Edwards J considered it was unlikely ANZ would have agreed to fix its marginfor a five-year term given its concerns about the Waverley farm purchase.70 She notedthat the 0.7 per cent margin meant the interest rate was already close to ANZ's cost offunds. Credit approval for the lending required to fund the Waverley farm purchasehad been granted on the condition that written advice was given to the Coomeysoutlining ANZ's concerns about the impact on the equity of the business of an entirelydebt-funded purchase and the forecast cashflow deficits. As noted earlier, this wascommunicated to the Coomeys in a letter dated 18 March 2008.71 The letter noted the69 As required by s 92(1) of the Evidence Act 2006.70 HC judgment, above n 6, at [80].71 See above at [32].potential cashflow issues and asked Bushline to confirm that any significant capitaldevelopment expenditure be made only after discussions with the rural manager atANZ. It also noted the potential reduction in Bushline's equity over time as a resultof the cashflow shortfalls.[106] The Court of Appeal did not think this was a significant element of the matrixof fact to be taken into account in applying the interpretive approach set out in theInvestors Compensation and Boat Park cases.72 This was because the statement ofconcern was preceded by a more positive statement in the same letter and, in addition,ANZ had written separately to Bushline on the same day supporting the proposedpurchase of the Waverley farm and confirming its willingness to lend the purchaseprice. ANZ had also previously cautioned Bushline in July 2007 in very similar terms,but the caution was not repeated when ANZ advanced a further $420,000 on14 December 2007.[107] Bushline argues that little weight should be given to ANZ's caution.Mr Branch pointed to evidence that handshake deals were both encouraged andhonoured by ANZ. This was confirmed by Bushline's accountant (who had workedfor the National Bank before it became ANZ) and Mr Darlow, a solicitor called as anexpert by Mr England.[108] Mr Branch also relied on the evidence of an expert called by Bushline,Hayden Dillon, who said that ANZ's request that no significant capital developmentexpenditure be made until discussed with the rural manager was itself an indicationthat ANZ was relying on a side deal. We disagree. It was a request, not a legallybinding obligation.[109] We accept the Court of Appeal's view that the cautionary wording appeared tobe something of an exercise of "going through the motions", and did not detract fromthe clear enthusiasm of ANZ to compete for the business of providing funding toBushline for the purchase of the Waverley farm. Mr Hunter did not press this argumentand we consider he was right not to do so.72 CA judgment, above n 7, at [214].Position of Mr Schurr and Mr England[110] ANZ draws support for its case from the evidence of Mr Schurr andMr England, both of whom were trustees of both the Bushline trusts, that they had noknowledge of any agreement to fix the 0.7 per cent margin for five years. Neither hadany knowledge of any commitment made by ANZ other than that evidenced by theloan agreement entered into on 21 April 2008.[111] Mr England also advised on that agreement and certified to ANZ that he hadexplained it to the trustees, including Mr and Mrs Coomey. Edwards J considered thiswas a significant factor.73 She said it was reasonable to assume that Mr andMrs Coomey would have mentioned such an important promise to their fellow trusteesand, at the very least, would have been expected to say something to Mr England whenhe was advising them on the terms of the loan agreement, given that agreementspecifically provided that the margin was reviewable at any time. She considered thefact that neither Mr Schurr nor Mr England was made aware of the commitment tohold the margin for five years suggested that no promise to that effect had been made.[112] The Court of Appeal did not engage with this point in its judgment. But in ourview it is significant for the reason given by the High Court Judge.[113] Because there has been no waiver of privilege in relation to Mr England'sadvice to the trustees at the time of the execution of the loan agreement, we do notknow exactly what occurred. We do not draw any adverse inference from Bushline'srefusal to waive privilege. That is something it was entitled to do, and it should notbe criticised for doing so.74[114] However, there was no suggestion that Mr England was not competent to givethis advice. In the absence of any evidence to the contrary, we assume the advice wasgiven competently. The evidence was that Mr England would, normally, go throughthe important aspects of a loan agreement when explaining it to a client. It is hard toimagine that would not have included explaining how the interest rate was calculated,73 HC judgment, above n 6, at [82].74 Sayers v Clarke Walker [2002] EWCA Civ 910 at [16]; and Edwards-Tubb v JD Wetherspoon plc[2011] EWCA Civ 136, [2011] 1 WLR 1373 at [9].the fact that the margin was reviewable and the fact that the term of the loan was forone year only, with no commitment to roll over the loan at the end of that period.[115] The fact that Mr Schurr and Mr England did not know of the agreement wasalso significant because as trustees of both of the Bushline trusts, they were bindingthe trusts to the loan agreement of 21 April 2008. ANZ's loan was to Bushline, not tothe Coomeys. Although the Coomeys were clearly acting on Bushline's behalf at the18/19 March meetings, it is surprising that they would not have informed their fellowtrustees of what was said to have been agreed on 19 March, namely the margin beingfixed for five years. It seems unlikely that Mr England would have signed the loanagreement (and advised his fellow trustees to sign it) without seeking alignmentbetween the written terms and the verbal agreement if such an agreement had beenmade and he had been informed of it.Swap context[116] Edwards J considered that the discussion about margins was in the context ofan interest rate that was to be hedged by swaps. She acknowledged that the formaldiscussion about swaps did not occur until 28 March 2008 (nine days after the18/19 March meetings) but considered that it must have been contemplated by allparties that Bushline would continue to use swaps to hedge its lending, given thatswaps had worked well for Bushline in the previous three years. She considered thatcertainty in relation to interest costs was more important for Bushline than ever beforegiven that the Waverley purchase increased Bushline's overall debt considerably.These factors led her to conclude that the reference to "ongoing" in Mr Harvey's notesreferred to the duration of the associated swaps, rather than the five-year term allegedby Bushline. She noted that this interpretation was also favoured by Mr Simcic. Sheconsidered it was the most plausible in the circumstances.75[117] The Court of Appeal considered that Mr Simcic's recollection that "ongoing"referred to the term of the swaps was difficult to reconcile with the sequence of eventsthat followed. The Court noted that it was not until April that it was agreed that all ofBushline's financing, both existing and new debt, would be provided under one75 HC judgment, above n 6, at [84].12-month BKBM loan with three associated swaps. This arrangement was confirmedin a fresh approval dated 15 April 2008.76[118] Mr Simcic accepted that ANZ's loan offer was not conditional on swaps beingentered into. However, that does not mean that there was not an underlyingassumption that swaps would, in fact, be entered into. Bushline had entered into swaptransactions from 2005 onwards, and these had been advantageous to it whencompared to fixed rate lending. Mr and Mrs Coomey denied receiving a briefing onswaps in September 2005 and said they did not understand that they had entered intoswaps before 2008.[119] Mr Simcic said that ANZ would not have disclosed, let alone negotiated, amargin on anything other than a BKBM loan that was to be hedged by swaps. ANZ'svariable or fixed rate loans would involve "all up" rates, which would incorporate amargin that was not disclosed to the customer. The Court of Appeal noted, however,that it was not clear that the parties were thinking of a 12-month BKBM loan duringthe 18/19 March meetings because ANZ's policy of 12-month lending was new andalmost certainly unknown to Mr Coomey at the time.77[120] It is hard to accept that Mr and Mrs Coomey had not realised that Bushline wasentering into the swap transactions that occurred between 2005 and 2008. They hadsigned a confirmation letter after each swap transaction was entered into in the periodbetween October 2005 and April 2008.78 They had been advised by Mr England onthe terms of the swaps signed in 2005. If the swaps briefing took place in 2005 asMr Esquilant and Mr Lawn said, that would make it even harder to accept.[121] It also seems unlikely there would have been discussion of a loan of severalmillion dollars involving a floating rate adjusted monthly (even if the loan for theWaverley purchase is considered separately from the existing funding that was rolled76 CA judgment, above n 7, at [206].77 At [209].78 The word "swap" was not used in the confirmation letter for the first swap, which was transactedon 7 October 2005. The confirmation letters for the second and third swaps, which were transactedon 21 March and 28 September 2006, are both headed "RE: INTEREST RATE SWAPTRANSACTION".into the $19.466 million loan) without some assurance as to the ongoing affordabilityof the interest rate, which could be achieved by a swap transaction.[122] We consider that the swap context provides some support for ANZ's argumentthat if any commitment to maintain the margin was made, it would have been for theperiod of the swaps, rather than for five years.Conclusion[123] We conclude that the evidence does not establish on the balance of probabilitiesthat there was an agreement reached between ANZ and Bushline on 19 March 2008that ANZ would fix the 0.7 per cent margin for five years. Nor does the evidenceestablish that ANZ made a representation to that effect.[124] We see the high point of Bushline's case as being the concession by Mr Simcicthat he was told that ANZ needed to fix the margin for five years to match thecompeting ASB offer. But Mr Simcic's evidence-in-chief was that the "ongoing"commitment was for the term of the swaps and it was not put to him that he had,contrary to that evidence, agreed or represented on ANZ's behalf that the marginwould be fixed for five years.[125] There are many indications that both parties engaged with each other over aperiod of years on the basis that no such five-year commitment had been made. Theprofessional trustees of Bushline were unaware of any such commitment and Bushlinedid not assert that there was any agreement by ANZ to fix the margin for five years atany time until its third statement of claim. The evidence on behalf of ASB and BNZwas that they were not offering such terms at that time (and the ASB representativewas not cross examined). At the very least, these factors lead us to conclude thatBushline did not prove this aspect of its claim on the balance of probabilities. Weconclude that the High Court Judge was correct about this aspect of the case and theCourt of Appeal should not have overturned her finding.Outcome[126] Edwards J considered the most plausible construction of what was agreed atthe 18/19 March meetings was that ANZ had agreed to fix the 0.7 per cent margin forthe term of the swaps.79 She noted that was Mr Simcic's view. But Mr Simcic alsosaid in cross-examination that the loan offer was not conditional on swaps beingentered into. If that was so, it is hard to see the logic in agreeing to fix the margin forthe period of the swaps.[127] Mr and Mrs Coomey's evidence was that they were not even aware, at the timeof the 18/19 March meetings, that Bushline was involved in swap transactions. Theysaid they did not know what swaps were. If that is correct, it is hard to see why theywould have agreed on Bushline's behalf to a transaction referable to the term of theswaps.[128] The case before us was confined to the question of whether ANZ undertook orrepresented to Bushline that the 0.7 per cent margin would be fixed for a five-yearperiod and, if so, whether ANZ was bound not to raise the margin during that five-yearperiod. Having found that Bushline did not prove that ANZ made the five-yearcommitment, we allow ANZ's appeal on the only issue now before us. It is notnecessary for us to go on to decide whether or not ANZ agreed to fix the margin forthe period of the swaps.Section 50 of the Contract and Commercial Law Act 2017[129] Having found that there was no representation, undertaking or agreement byANZ to fix the 0.7 per cent margin for five years, it is not necessary for us to addresss 50 of the CCLA. The issue under s 50 would be whether the entire agreement clausewould prevent the Court from inquiring into and determining whether an oralundertaking was given or representation was made that the 0.7 per cent margin wouldbe fixed for five years and whether it was a term of the contract between ANZ andBushline.79 HC judgment, above n 6, at [84]. See above at [116].[130] We do, however, make the following observation. The Court of Appeal in thiscase quoted the following passage from that Court's earlier decision, PAE (NewZealand) Ltd v Brosnahan:80[Section 50's] apparent purpose is to protect one party's relative vulnerabilityfrom another party's power to impose an exemption from liability which iscontrary to the factual reality or an existing legal obligation and is thusunreasonable and unfair.[131] The Court of Appeal then, however, went on to characterise the purpose of s 50as "better enabling a court to determine the true bargain between contracting parties".It saw the reasonableness of giving effect to an entire agreement clause as beingaffected by "the significance of the difference, the distance as it were, between [thewritten agreement] and what the court finds was actually agreed".81[132] We would characterise the position differently. Section 50 does not mandate ageneral empowerment to determine the "true bargain" between the parties. Instead thetask of the court is to assess whether in all the circumstances,82 it is fair and reasonablefor an entire agreement clause83 to be conclusive between the parties.Limitation[133] Our conclusion that there was no agreement or undertaking to fix the0.7 per cent margin makes it unnecessary to address ANZ's limitation defence.Result[134] We allow the appeal and restore the decision of the High Court.80 CA judgment, above n 7, at [244], citing PAE (New Zealand) Ltd v Brosnahan [2009] NZCA 611,(2009) 12 TCLR 626 at [15]. See also Brownlie v Shotover Mining Ltd CA181/87, 21 February1992 at 31–32.81 CA judgment, above n 7, at [246].82 All the circumstances include the matters set out at s 50(3)(a)–(c) of the CCLA. This includes therelative bargaining strength of the parties and whether any party was represented by a lawyer.83 Or any other provision purporting to prevent a court from inquiring into or determining an issueset out in s 50(1).Costs[135] Counsel for ANZ advised the Court that ANZ and Bushline have agreed thatneither will seek an award of costs against the other in this Court. Given Mr England'slimited role in the appeal, we see no basis for making an award of costs in his favouror against him. Accordingly, we make no award of costs in relation to the proceedingin this Court.[136] We are not clear as to the status of the costs awards in the Courts below afterthe settlement between ANZ and Bushline. In these circumstances, we make no orderin relation to costs in the Courts below but reserve leave to any party to apply for suchan order. Any such application should be made within 20 working days of the date ofthis judgment.Solicitors:Chapman Tripp, Auckland for AppellantHarkness Henry, Hamilton for First RespondentsMcElroys, Auckland for Second Respondent