ANZ BANK NEW ZEALAND LIMITED v BELL [2015] NZHC 391

ANZ BANK NEW ZEALAND LIMITED v BELL [2015] NZHC 391 [9 March 2016]IN THE HIGH COURT OF NEW ZEALANDHAMILTON REGISTRYCIV-2015-419-275[2016] NZHC 391BETWEEN ANZ BANK NEW ZEALAND LIMITEDPlaintiffAND BRENDAN CHARLES BELL andCORRINA MAREE BELLDefendantsHearing: 18 February 2016Appearances: Ms M Brugeyroux for PlaintiffMrs C Bell Defendant in personJudgment: 9 March 2016JUDGMENT OF ASSOCIATE JUDGE J P DOOGUEThis judgment was delivered by me on09.03.16 at 4 pm, pursuant toRule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDateIntroduction[1] The plaintiff seeks summary judgment against the two defendants as trustees of the BLF Trust in regard to advances that were made to them by the plaintiff when it refinanced borrowings that the trust had obtained from a finance company called Origin Mortgage Management Services. As part of the arrangements on 12September 2008 the defendants executed a "consent to transfer and assignment" tothe ANZ of the debts owed to Origin. The transfer and assignment document agreed that by the document the defendants were consenting to "the transfer and assignment to ANZ of all the rights and obligations (as the case may be) " of the transferor,Origin.[2] On 23 September 2008 the defendants signed a loan agreement recording that the plaintiff agreed with the defendants to advance to them the sum of $664,229 with the terms of the loan being 22 years and nine months from the drawdown. The loan agreement made provision for interest to be paid and for there to be an interest rate of 10.45% which the bank had the power to vary. The loan agreement made the following provision as to security:All and any security held by the ANZ now or in the future is to secure all your liabilities to ANZ (whether it is principal or guarantor) including this loan.[3] One of the securities provided was a mortgage of the defendants' residence.[4] The loan agreement further provided:Unless agreed to by the bank any new securities listed in this loan agreement will also secure any other advances, banking accommodation or other financial assistance given by the bank to the customer....[5] The refinancing agreement provided for ANZ to advance $664,229 for a period of 22 years approximately. There can be little dispute that that was the purpose for the advance of the $664,229. That figure in its turn represents the combined amounts owing to Origin under two accounts that the defendants had with that company.The further borrowing from Origin[6] Even though the purpose of the advances was to refinance the Origin loans, Origin did not close the defendants' two accounts which were the Cash Power Express Loan and the Prime Express Loan. The plaintiff's position is that after therefinancing had occurred which had the effect of reducing the Origin liabilities to zero, the defendants withdrew more money from the Origin accounts. By 4 June 2008, further indebtedness of $107,449.89 had been incurred under the Origin Cash Power account.[7] The plaintiff has produced copies of statements apparently drawn by Originwhich are addressed to the defendants as "The Trustee, BFL Trust" at the defendants'postal address.[8] The plaintiff says that on or about 4 June 2009 the defendants entered into a written loan agreement with the bank in respect of the further Origin debt which I have just been discussing. This, the plaintiff alleges, resulted in the plaintiff refinancing the Cash Power deficit in the sum of $107,043.02. The bank says that this particular liability was identified in its accounts as the 92/1002 account which was later to become known as the ANZ 1002 account. However, the plaintiff says that it is unable to locate a copy of this loan agreement.[9] The defendants defaulted under their loan obligations. Notices were served pursuant to the Property Law Act 2007 and a mortgagee sale took place. The security for the ANZ loans having been realised with a deficit still remaining to be paid, the bank has brought the present summary judgment proceeding against Mr and Mrs Bell for its recovery.[10] It is correct that the bank has proved that it apparently took over an additional liability that Origin claimed to be owed by the defendants. The defendants however point to the fact that no documentation of this loan has been provided to them which proves that they agreed to this course.The case for the plaintiff[11] Ms Brugeyroux for the plaintiff in her submission contended that it was open to the bank to recover the 92/1002 loan (the -92 loan) even though it is unable to locate the original agreement which it claims that the defendants signed. She submitted:24 In R v Thompson [2001] 1 NZLR 129, the Court of Appeal had to consider whether a search warrant was valid in circumstances where the original affidavit filed in respect of a search warrant had been lost but the search warrant was available. The Court of Appeal laid out the principles governing lost or deficient trial records then said at [45]:At common law, too, secondary evidence is admissible to prove the contents of a document which has been lost or destroyed and where in the case of a lost document a reasonable effort has been made to find it (May, Criminal Evidence, 4th ed, paras 3-08 and 3-13 to 3-14; Andrews & Hirst on Criminal Evidence, 2nd ed, para 11.19). What is needed is proof by or on behalf of the person who should have had possession of the original that it has been duly searched for without success (16 Laws of Australia, para 16.5.33).25. Mr Desai deposes that ANZ has been unable to locate a copy of the ANZ 92/1002 loan agreement but that the loan would have been inthe same general format and same general terms as the Trust's ANZ91/1001 loan.1 He has also deposed that he has reviewed ANZ'selectronic files, physical files, and system notes relating to the defendants.226. While ANZ has been unable to locate a copy of the ANZ 92/1002 loan agreement, bank statements confirm that the ANZ 92/1002 loan was drawn down on 4 June 2009.3 It is submitted that ANZ'scontemporaneous documents confirm that there was a written loan agreement entered into between the parties in respect of the ANZ 92/1002 lending and should be accepted as secondary evidence confirming the existence of the ANZ 92/1002 loan agreement.[12] Ms Brugeyroux then reviewed the evidence which in her submission would entitle the court to conclude that the loan had been agreed to, notwithstanding the inability of the bank to produce the signed Original or indeed a copy of it. She submitted that the following items in the evidence supported the plaintiff's position:1 Affidavit of Kaushal Jayantilal Desai dated 14 August 2015 at [12]–[14].2 Affidavit of Kaushal Jayantilal Desai dated 22 December 2015 at [4].3 Affidavit of Kaushal Jayantilal Desai dated 14 August 2015, exhibit J.In particular:(a) ANZ's letter dated 10 June 2009 addressed to the Trust, says "TheBank notes that when your conversion from Origin to ANZ took place your Line of Credit facility limit was not cancelled & further debt was incurred; as an interim solution this debt has been movedto ANZ (as per the recent loan documents you signed".4(b) Mr Kurta's email to Ms Bell sent 2 December 2009 says "Also of note is that the [ANZ 92/1002] home loan was originally structured over a 6 month interest only loan term while the Bank awaited your proposal to repay the amount incurred under your remaining Originrevolving credit facilitythis loan is due to mature 04/12/2009".5(c) Mr Kurta's email to Ms Bell sent 8 February 2010 says "The -92 home loan has actually matured as it was only ever put over a 6-month term"6(d) Mr Brosnahan's file copy of his email to Ms Bell says "The -92 loanhowever doesn't appear to have had a payment since 1st February. This loan was only documented for 6 mths when it came over from Origin and I see from earlier e-mails with Vincent [Kurta], that he advised you that this loan has actually matured and technically needs redocumenting."7[13] I accept that as a matter of evidence the plaintiff has proved that the documents and emails etc in the preceding paragraph were in fact sent or exchanged.[14] Counsel submitted further:27. Documents created by ANZ in the course of its dealings with the defendants clearly refer to the ANZ 92/1002 loan and show that the defendants knew that the ANZ 92/1002 loan existed and that they were obliged to repay the monies owing pursuant to this loan.8 Loan account statements for the ANZ 92/1002 loan addressed to the Trust were generated in the ordinary course. All statements for the period starting 30 June 2011 were posted to the security property.9 In addition to the documents outlined above, further examples include:(a) The three PLAs issued to the defendants all refer to the ANZ 92/1002 loan arrears;104 Affidavit of Kaushal Jayantilal Desai dated 22 December 2015, exhibit M.5 Affidavit of Kaushal Jayantilal Desai dated 22 December 2015, exhibit R.6 Affidavit of Kaushal Jayantilal Desai dated 22 December 2015, exhibit S.7 Affidavit of Kaushal Jayantilal Desai dated 22 December 2015, exhibit U.8 A summary of the relevant correspondence from ANZ's file is set out in the affidavits of Kaushal Jayantilal Desai dated 14 August 2015 at [9] and dated 22 December 2015, exhibits M to HH.9 Statements from 4 June 2009 to 30 June 2011 were posted to the Trust's post office box.10 Affidavit of Kaushal Jayantilal Desai dated 22 December 2015, exhibits II and JJ.(b) The letter sent to the defendants at the security property dated 16 November 2009 refers to the loan arrears for the ANZ 91/1001 and ANZ 92/1002 loans.11(c) Mr Brosnahan's email to Ms Bell sent 27 April 2010confirms that payments to the ANZ 92/1002 loan could be made directly to the loan account.12(d) Ms Watene's email to Ms Bell sent 9 February 2012 sets out details for both the ANZ 91/1001 and ANZ 92/1002 home loans and confirms that the regular loan payments have notbeen met because Brendan [Bell]'s income was not sufficientto make the required loan repayments.1328. In light of ANZ's documents, it is submitted that the defendants'assertions that they lacked knowledge of the existence of and reasons for 92/1002 loan are inherently improbable and cannotamount to a defence to ANZ's claim. In particular, the External Note Detail created by Mr Kurta records that Ms Bell made contact on 23 July 2009 and that she was aware of the further withdrawalsmade from the Trust's revolving credit facility. Mr Kurta's notesays:Customer questioned regarding Origin credit facility & she confirmed that due to their circumstances they were using this to pay the ANZ lending.1429. Loan account statements for the ANZ 92/1002 loan were also created and sent out in the ordinary course of business.1530. The documents confirm that the defendants had knowledge of the ANZ 92/1002 loan from its establishment in June 2009 to February2012. Ms Bell's letter to ANZ dated 9 August 2013 confirms that:A few years back we were told that new loan documents would be drawn up and the loans would be consolidatedinto one but that didn't happen eitherand later:I think the best idea forward is to consolidate outstanding loans into one or two accounts.16[15] Reference to the loan is also to be found in an email exchange between Mrs Bell and the bank which took place in April 2014 when the bank was close to exercising enforcement action against the defendants. Mrs Bell put forward the view11 Affidavit of Kaushal Jayantilal Desai dated 22 December 2015, exhibit Q.12 Affidavit of Kaushal Jayantilal Desai dated 22 December 2015, exhibit T.13 Affidavit of Kaushal Jayantilal Desai dated 22 December 2015, exhibit Z.14 Affidavit of Kaushal Jayantilal Desai dated 22 December 2015, exhibit N.15 Affidavit of Kaushal Jayantilal Desai dated 22 December 2015 at [28] and exhibits K and L.16 Affidavit of Kaushal Jayantilal Desai dated 22 December 2015, exhibit DD.that the bank ought to reduce the amount it was claiming because of its alleged negligence in dealing with the Bells concerning the loan. She said in her email dated 7 April 2014:We had discussed some time ago the loan 1002 has received about $30,000 in penalties and interest due to a bank error. Will be bank be looking to reduce the penalties and interest as this has accrued because of bank negligence? We trusted in good faith that the bank would do all that was necessary to structure the payments to ensure this loan was paid however this was never picked up by the bank and therefore we are now being penalised quite considerably. I am sure you agree that $30,000 is quite a considerable amount to have added to our already large mortgage and as it is through no fault of ours, I thought the bank would consider reversing these charges without the review process to make things easier on us.[16] It would appear that the substance of the complaint was that the bank did not take steps to set up an auto payment arrangement so that repayments of the second loan would commence from the outset. If the defendants were minded to find reasons why the bank should reduce the amount that it was claiming from them on grounds such as this, it is unlikely that they would have failed to mention the even more significant point, namely, that they had never incurred liability with the bank for the second loan in the first place.[17] It would also seem to be relevant to the question of whether the defendants signed the second loan document that in the letter dated 10 June 2009 which thebank sent to the defendants the writer made reference to the "recent loan documents you signed". The date when that letter was sent is close to the date when the Originaccount was closed after receiving a direct loan payment and it is also close to the date shown in the records of the bank for the opening of the second loan account, 4 June 2009.The case for the defendants[18] The defendants do not of course need to prove affirmatively that they did not sign the loan documents. They need only show that it is reasonably arguable that thebank's allegations, namely that they signed the loan documents, are untrue.[19] In their joint affidavit the defendants do not disagree that the plaintiff refinanced advances that had been made to them by Origin and in particular thePrime Express loan pursuant to which the sum of $664,226 was borrowed in September 2008.[20] The defendants are critical of the poor standard of communication which existed between themselves and the plaintiff. They say that they understood from communications with the bank which was trying to elicit from them a payment program that the: main reason of concern was based around the facility for $107,043.02[21] The defendants depose that:43 We raised questions about this facility along with the interest and penalties that had been added to the account. At no point was [the bank officer Mr Walmsley with whom they were dealing] able to provide us with loan documents or information as to why this debt existed or a resolution around it.44 The bank has failed to communicate with us particulars pertainingtoa. Borrowed amount of $107,043.02b. Funding account: 01-0321-0116864-00..47 Up to the present time the bank has never been able to provide any information to us in regards to loan 'ANZ 92/1002'.48 We were told by Matt Walmsley via a phone conversation that themuck up with the facility 'ANZ 92/1002' was the reason why theysold our house via Mortgagee Sale.49 We never received loan documentation for this loan.50 The loan never showed up on any account information from the bank.51 We never received any bank statements regarding this loan.52 We did not know why this loan existed or given [sic] any account information regarding it.56 In point 12 of the Affidavit of [Mr Desai] it states: According to the banks records, on or about 4 June 2009, BLF Trust refinanced the Cashpower Express Loan pursuant to which the BLF Trust borrowed $107,043.02 from the bank (ANZ 92/10002 loan agreement).Despite extensive searching, the Bank has been unable to locate a copy of the ANZ 92/1002 loan agreement.a. No loan agreement was ever signed by the trustees of the BLF trust or ourselves.57. In point 14 of the Affidavit of [Mr Desai], it states: The ANZ 92/1002 loan agreement would have been signed by the trustees of the BLF Trust before the ANZ 92/1002 loan was drawn down on 4 June 2004[.]a. Brendan and Corrina did not purchase the land at 395 Grove Road until 2006.b. We believe that the statement "would have been signed" isdeemed to be an assumption not fact.Discussion[22] The bank however has put its claim on the basis of a signed bank agreement. It does not attempt to attribute liability to the defendants on any indirect basis such as a restitutionary claim arising out of the circumstance that it discharged a liabilitythat the defendants owed to Origin. No doubt the bank's position reflects the factthat it would be the usual conclusion in cases of this kind where banks are suing to recover the advances to start from the position that no liability was intended unless the parties entered into a standard form bank agreement. That is why the existence of a signed loan agreement is a matter that the bank has gone to some pains to prove by secondary evidence.[23] There is no dispute on the part of the defendants that they had incurred further deficits with Origin after the date of the refinancing occurred in 2008. The plaintiff points to a file note which an employee made of a conversation with the female defendant on or about 23 July 2009 in which she confirmed that the defendants had in fact continued to use the Origin account after the date when the refinancing had occurred. The bank says that it was for the purpose of taking out that deficit that the second loan was arranged.[24] Mrs Bell did not dispute that the defendants continued to use the Origin account after it had been brought back to zero.[25] That being so, having regard to the fact that the Origin account was for a second time brought back to zero, there is no dispute that it was the plaintiff or the National Bank which took that step on behalf of the defendants.[26] This repayment occurred on 4 June 2009. The timing closely coincides with the contemporaneous document, the letter from the bank dated 10 June 2009, in which the bank made reference to the fact that the defendants had recently executed documents for the -92 loan. This temporal connection between the two events tendsto suggest that the plaintiff's account of matters is correct.[27] As well, there are difficulties in accepting the claim on the part of the defendants that no further loan document was signed. If the account that the defendants give is correct, it means that the bank paid out a total amount of $107,449.89 to meet a liability which the defendants owed to Origin in circumstances where they did not obtain a corresponding binding obligation from the defendants that they were indebted to the bank for this amount.[28] The defendants' claim is also inconsistent with the position that they took in the course of communications with the bank to the effect that they accepted that they had a liability to the bank. During the period from January to February 2010, there were discussions between Mrs Bell and Mr Kurta for the bank. In one of the emails, which Mr Kurta sent to Mrs Bell on 21 February 2010, he said:Once management has viewed these [details of personal position that the Bells had supplied] and are satisfied that you will be able to service your debt moving forward then we may be able to get a more concrete arrangement in place and look at addressing what to do with your -92 HML.[29] Had the defendants genuinely not understood that there was any such account, it would have been expected that they would promptly ask what the -92 account was. They did not.[30] Further, bank statements showing the existence of the -92 account were sent to the defendants. The defendants say that they did not receive those bank statements. The bank statements were sent to two different addresses. The second of those addresses was the property which the Bells had acquired. But thedefendants say that they did not become aware of bank statements at either address. The position then is not that the bank statements failed to come to the notice of the defendants because the bank was sending them to the wrong address. The case for the defendants must be that bank statements were not sent out at all. The defendants implicitly accept that had documents been sent to either of the two addresses they would have been received. It is of course correct that the court does not take theview that the bank's processes are infallible. It could be that the automatedoperation, which I understand it to be, that results in bank statements being sent out failed on this occasion. The dispatch of bank statements though, is consistent with the existence of the -92 loan.[31] Further, it is a curious feature of the operation of the -92 account that the defendants made repayments to it. A repayment of $1000, for example, occurred on 30 October 2009. The defendants do not say that such repayments were made without their knowledge. Such a contention would in any event be difficult because the funding would have come from them.[32] At some point in 2010 a Mr Brosnahan from the bank who was thenresponsible for the Bells' accounts, wrote to the defendants making reference to the - 91 account (a mortgage account which was not in dispute) but also making reference to the disputed -92 account.17 He referred to the fact that the loan had matured and technically speaking required re-documenting. He said that in the meantime payments needed to be made on the account. He stated that the balance was $110,939.65 and that at current floating rates of 5.69% the interest cost the loan per month was $536.13.[33] On 26 April 2010 Mrs Bell replied to that communication. After making reference to the fact that her family had tragically lost their son, she went on to deal with the matters that Mr Brosnahan had raised. She said:I can make payments to the loan as requested. I'll make them about $545per month to ensure we get the amount right.17 Affidavit of Kaushal Jayantilal Desai dated 22 December 2015, exhibit U.[34] Ms Brugeyroux submitted that this could only have been a reference to the - 92 account. The figures mentioned simply made no sense so far as the larger -91 account was concerned. I agree that Mrs Bell would simply not have made this proposal if she had not understood that a further liability of approximately the amount that Mr Brosnahan had stated was still outstanding. This, too, is confirmation that the defendants knew that they were liable under the -92 advance.[35] On 9 August 2013 Mrs Bell after explaining in a letter how shocked she was to find the extent of the arrears that were owed under the mortgage went on to say:I think the best idea forward is to consolidate outstanding loans into one or two accounts.[36] Based upon the uncontradicted evidence of the bank, the reference to"outstanding loans" can only have been a reference to the -91 and -92 loans. The only other liability that the defendants owed to the bank was in respect of a further account which had been established for the purposes of debiting unpaid rates payments that the plaintiff was required to make on the property, presumably to clear the way for the mortgagee sale to settle. That account had a debit balance of between $2000 and $3000. Given the context of the discussions between Mrs Bell and the bank, the reference to consolidation implicitly acknowledges that the -92 loan was owing.[37] The -92 loan was further mentioned in notices that were served on the defendants under the Property Law Act 2007 in about September or October 2009. This did not lead to any querying of the liability. The defendants did not actually dispute the loan for the first time until after the proceedings were issued in 2015.18[38] Further implicit recognition of the existence of the -92 loan is to be found in a communication that Mrs Bell sent by email to the bank on 4 April 2014.19 By this time the defendants were beginning to take the position that they might not be liable to the bank for the entire amounts claimed. Mrs Bell said:18 Affidavit of Kaushal Jayantilal Desai dated 22 December 2015, exhibit II.19 Affidavit of Kaushal Jayantilal Desai dated 22 December 2015, exhibit GG.We [the defendants] discussed that there is penalties and interest that has been added to the loan despite no official repayment having been set up for this loan.[39] The stance that Mrs Bell was taking when she sent this email was not to complain that the loan did not exist but to criticise the bank implicitly for not having made arrangements for repayments, presumably in the form of an automatic payment, to be set up. It is further implicit in her position that the bank had caused unnecessary expense to the defendants by not doing so.[40] Mrs Bell says that at one point she went to the bank and asked to be told about the loan. However, her own evidence establishes that the date when she did this was after the mortgagee sale had taken place. The evidence of the bank is that the -92 loan had been repaid from the proceeds of sale. It is therefore unsurprising that the teller was not able to find reference to the loan.[41] It is also correct that the defendants did not expressly dissent from the existence of responsibility for such a loan. The existence of such a loan alsodovetails with the end of the defendants' association with Origin. That could notoccur unless the defendants paid off what they owed to Origin. They apparently did not have the financial resources to pay down the debt owed to Origin and therefore they were dependent upon a third-party financier paying out what they owed.[42] The evidence just quoted in my assessment, gives rise to a strong inference that the defendants had recently signed the 92/1002 loan agreement. It has to bebalanced against the defendants' explicit denial on oath that they signed the loanagreement.[43] The court will disregard sworn evidence of this kind in the circumstances stated in the well-known case of Eng Mee Yong v Letchumanan20 which is cited with approval from the following passage in Krukziener v Hanover Finance Ltd:21[26] The principles are well settled. The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell20 Eng Mee Yong v Letchumanan [1980] AC 331 (PC).21 Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26].[1987] 1 NZLR 1; (1986) 1 PRNZ 183 (CA) at p 3; p 185. The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11 PRNZ 66 (CA). The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331; [1979] 3 WLR 373 (PC), at p 341; p 381. In the end the Court's assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).[44] Adopting the approach set out in Krukzeiner it cannot be said that the defendants have an arguable defence to the effect that they did not sign the -92 loan agreement.[45] The defendants make other criticisms of the bank including the frequent changes of personnel who dealt with their account and poor communication. There may well be some substance to these complaints but they could not justify the court declining to give judgment to the bank.[46] One additional aspect of the case which merits brief comment is the apparent contention that it was the fault of the bank that the Bells did not make the payments that they were required to make because they did not set up the appropriate payment mechanisms. In my view there is considerable merit to the position which the bank takes on this point which is that the reason why the Bells defaulted was that they were over-indebted. They could not meet their obligations and that would not have changed even had there been an appropriate payment authority set up to service the - 92 loan.[47] The result is that the application for summary judgment will be granted. Theposition that the Bell's take is that they never signed the loan agreement containing the terms and conditions which ANZ has said that the agreement contained. TheBell's in their notice of opposition did not put forward any grounds of oppositionthat related to the quantum of the plaintiff's claim.[48] The plaintiff's claim set out the position in 2015 when the proceedings werefiled and stated amounts that were owing at that point. The statement of claim was in the usual way verified on oath.[49] I have permitted the plaintiff to file a further memorandum essentially updating the quantum taking as its starting point the figures in the statement of claim. In response, the plaintiffs have filed a memorandum dated 29 February 2016 which seeks additional interest from 2 July 2015 in the sum of $14,164.47. When that is added to the judgment sum claimed in the statement of claim the resulting total is $439,646.15 and there will be judgment for the plaintiff in that amount. There will be judgment for the plaintiff accordingly.[50] I also direct that 2B costs are to be payable by the defendants. The plaintiff has submitted a calculation of those costs which are all legitimate items to be claimed under a 2B award and accordingly there will be judgment that the defendants pay costs on a 2B basis in the sum of $15,164.[51] Likewise I am satisfied that the disbursements sought are those to which the plaintiff is entitled and there will be an order that the defendants pay the disbursements of $1,642.08._____________J.P. DoogueAssociate Judge