BUSHLINE TRUSTEES LTD v ANZ BANK NZ LIMITED [2017] NZHC 2520

BUSHLINE TRUSTEES LTD v ANZ BANK NZ LIMITED [2017] NZHC 2520 [16 October 2017]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2014-404-001276[2017] NZHC 2520BETWEEN BUSHLINE TRUSTEES LIMITED andSTEPHEN DANIEL COOMEY asTrustees of Bushline Trust One; andBUSHLINE TRUSTEES LIMITED andSHARON LOUISE COOMEY as Trusteesof Bushline Trust TwoPlaintiffsAND ANZ BANK NEW ZEALAND LIMITEDDefendantROBERT LEWIS ENGLANDThird PartyHearing: 29 and 30 May 2017, 1-3 March 2017, 20-25 and27-28 February 2017Counsel: M D Branch and K F Shaw for the PlaintiffsS M Hunter, M C Sumpter, D T Street andW M Cheyne for the DefendantA A Challis and D P Turnbull for the Third PartyJudgment: 16 October 2017JUDGMENT OF EDWARDS JThis judgment was delivered by Justice Edwardson 16 October 2017 at 2.30 pm, pursuant tor 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:Table of ContentsPara No.Introduction ............................................................................................................. [1]Factual narrative ..................................................................................................... [7]2005 – 2006 swaps [10]The Waverley purchase [21]Post-Waverley [32]The Commerce Commission offer [42]Context ................................................................................................................... [45]Interest rate swaps [45]The contractual matrix and disclaimer clauses [52]Claims and defences .............................................................................................. [61]Cygnet Farms Ltd v ANZ Bank New Zealand Ltd [70]Key factual findings .............................................................................................. [73]The margin representation – was there agreement to hold margins at0.70 per cent for five years over all funding? [73]The fixed cost representation – was it made and was it misleading? [86]The transferability representation – was it made and was it misleading? [94]The monitoring representation – was it misleading and/or breached? [98]The good times and in bad times representation – was it misleadingand/or breached? [104]Did the Bank act fraudulently or deceitfully? [107]Negligence ............................................................................................................ [120]Did the Bank owe a duty of care? [124]Was there a breach causing loss? [143]Breach of contract [150]Contractual Remedies Act 1979 ......................................................................... [162]Fair Trading Act 1986 ......................................................................................... [167]Oppression – CCCFA.......................................................................................... [183]Summary of findings ........................................................................................... [201]Result .................................................................................................................... [202]Introduction[1] In April 2008, the plaintiff trusts (whom I shall call Bushline) purchased a run-off block known as the Waverley farm. The ANZ Bank New Zealand funded thepurchase price, and restructured Bushline's existing lending into a $19.46 million loan.As it had done on previous occasions, Bushline decided to hedge the interest ratepayable on that loan, through an interest rate swap.[2] This case is about representations made by the Bank before the $19.46 millionloan and associated swaps were agreed; and about the way the Bank treated Bushlinesubsequently. Bushline says the Bank breached a promise to hold the margincomponent of its interest rate at 0.70 per cent for five years over all its funding; mademisrepresentations about interest rate swaps; and failed to stand by Bushline "in goodtimes and in bad".[3] Bushline sues the Bank for negligence, breach of contract, misrepresentationunder the Contractual Remedies Act 1979, breach of the Fair Trading Act 1986, andoppression under the Credit Contracts and Consumer Finance Act 2003.[4] The Bank denies each of these claims. It says there was no promise to holdmargins, no misrepresentations, and that it supported Bushline over the hard times byadvancing further funds and extending overdrafts. In addition, the Bank relies on thecontractual clauses in the swap and loan agreements to defeat all but the oppressioncauses of action. It also says that most of Bushline's causes of action are out of time.[5] The Bank has joined Mr England as a third party to the claim. Mr Englandwas Bushline's solicitor and trustee at the relevant time. He gave advice on the termsand conditions governing interest rate swaps and on the $19.46 million loanagreement. On each occasion he certified to the Bank that he had explained themeaning and effect of the documents to the trustees. In the event the Bank is foundnegligent, the Bank pursues Mr England as a concurrent tortfeasor, liable in respect ofthe same loss. Mr England, for his part, denies liability.[6] The arguments are wide ranging and overlapping. But the core factual issuesturn on whether there was an agreement to hold margins at 0.70 per cent for five yearsover all of Bushline's funding, and whether the Bank acted deceitfully so as todisentitle it from relying on the disclaimer clauses in the contracts and theLimitation Act 1950 defences. Key legal issues concern the effect of Mr England'sindependent legal advice and the disclaimer clauses on the duties owed by the Bank.Factual narrative[7] Mr and Mrs Coomey are regarded as very good dairy farmers in the Taranakiregion. They purchased their first herd in 1987, which is when they became customersof the National Bank of New Zealand (now the ANZ). They purchased their first farmin 1992, and continued on a period of capital growth from then on.[8] The Bushline trusts were settled in 1998. Mrs Coomey is a trustee of BushlineTrust Two. Mr Coomey (known as Bill) is a trustee of Bushline Trust One. The trustsoperate the Bushline Trust Partnership, which is a farming partnership.[9] Mr Schurr and Mr England were Bushline's independent trustees at therelevant time. Mr Schurr is an accountant, and Mr England is a solicitor. Both trusteesretired in July 2013, and were replaced by Bushline Trustees Ltd. Mr Schurr is thesole director of Bushline Trustees Ltd. Mr England resigned as a director ofBushline Trustees Ltd in 2014.2005 – 2006 swaps[10] In July 2005, the Bank began to offer and promote an interest rate swapsproduct to its rural customers. An interest rate swap is a financial transaction whichallows a borrower to manage interest rate risk on a loan.[11] A senior dealer for the global markets team at the Bank, Mr Esquilant, madepresentations to potential customers about the Bank's swap product. Part of thepresentation included a comparison between swaps and fixed rate loans. Swaps werepromoted as being like a fixed rate loan, but with upside and flexibility.[12] Mr Esquilant made a presentation to the Coomeys, but there is a dispute aboutwhether it was in 2005 (as the Bank asserts), or in 2008 (as the Coomeys contend). Inany respect, Bushline entered into its first swap on 7 October 2005.1 This was effectedby Mr Coomey placing a telephone call to the swaps team to "lock in" the trade, withthe details of that trade subsequently confirmed in writing.[13] Mr England was instructed by the Bank to act on its behalf in relation to theswap documentation. That documentation included the Terms and Conditions ofInstitutional Financial Markets Transactions (swaps terms) and the InstitutionalFinancial Markets Authority (IFMA). The IFMA provides that all derivativetransactions, which include swaps, will be governed by the swap terms. Clause 10.1of the swap terms provides that the customer enters into the transaction in reliance on1 That swap was for a notional sum of $975,000 for five years from 20 December 2005 at a fixedswap rate of 6.85 per cent.its own independent advice, and that the Bank will not be liable for the customer's lossin any circumstances. The effect of clause 10.1 of the swap terms is in issue in thisproceeding.[14] Mr England wrote to the Coomeys on 11 October 2005, and met with them on22 December 2005. The Coomeys have not waived privilege over the advice receivedat the meeting. Nevertheless, Mr England completed a solicitor's certificate in whichhe certified that the nature and the effect of the swaps terms had been explained toBushline.[15] The IFMA was signed by all four trustees in December 2005. It was returned,together with the solicitor's certificate, and other documentation, to the Bank shortlyafterwards. For reasons which are not relevant to this dispute, amendeddocumentation, including an amended solicitor's certificate, were sent to the Bank on5 January 2006.[16] The Bank issued a swap confirmation for the first swap on 23 February 2006.Swap confirmations contain the terms and conditions of the swaps agreed over thephone. Counterparties to the swaps sign the confirmation and return it to the Bank.The confirmation includes a clause which is in capital letters and contained in a blackbox just above the signature clauses. It provides that each party agrees that it has notrelied on any advice from the other, and that it has the capacity to evaluate thetransaction. The effect of this contractual term is also in issue in this case. Theconfirmations were signed by the Coomeys and returned to the Bank on 19 May 2006.[17] Bushline entered into a second swap on 21 March 2006.2 Mr Coomey is againrecorded as confirming the details of the swap over the phone. This swap was inrelation to an underlying loan agreement for the purchase price of one of the four farmsin Kaponga, known as the "home farms". The Bank issued a swaps confirmation thesame day which was signed and returned by the Coomeys on 1 April 2006.2 That swap had a notional sum of $3.15 million for three years from 20 June 2006 at a fixed swaprate of 5.7 per cent.[18] Bushline entered into a third swap on 28 September 2006.3 The Bank issuedswap confirmations on 29 September 2006, which were signed and returned on6 October 2006.[19] There is no complaint about any of the swaps entered into between 2005 and2006. Those swaps delivered an interest rate which was below the prevailing floatingrates at the time.[20] Further loan agreements were entered into in 2007, and Bushline purchasedanother of the home farms on 1 June 2007. A bach was purchased in December 2007,which was also funded by the Bank. By the end of 2007, Bushline owned four farmsat Kaponga (bordering the Egmont National Park), two residential properties, a bachand a number of other properties. Its debt with the Bank sat at $12 million.The Waverley purchase[21] In February 2008, the Coomeys became interested in purchasing a run-offblock located in Waverley. Mrs Coomey explained in her evidence that the purposebehind buying the Waverley farm was to make the business self-sufficient. By this,she meant that the Coomeys would not have to send their stock out to graze and wouldalso not have to buy in supplements.[22] The purchase price of the Waverley farm was $7.25 million. The Bank's ruralmanager (sometimes referred to as relationship manager) for Bushline at that time wasMr Harvey. He met with Mr and Mrs Coomey to discuss the farm purchase andprepare budgets to apply for Bank financing.[23] The Bank agreed to lend the money needed to purchase the Waverley farm on28 February 2008, and an unconditional sale and purchase agreement was signed thefollowing day. The Bank provided a loan for payment of the deposit.[24] Mr Harvey and Mr Simcic, a senior rural manager at the Bank, met theCoomeys at their farm on 18 and 19 March 2008. The purpose was to discuss the3 That swap was for a notional sum of $400,000 for five years from 20 October 2006 at a fixed swapinterest rate of 7.0 per cent.Bank's offer of finance for the Waverley purchase. The Coomeys say that there wasagreement at this time to fix the margin at 0.70 per cent for five years on all of thefunding. This alleged representation (referred to as the margin representation) iscentral to Bushline's claim.[25] The Bank provided a number of letters dated 18 March 2008 at these meetings.In one of those letters, the Bank stated that it would provide "continued support andflexibility through good times and bad", and assured the Coomeys that their "exposureto interest rate risk is being managed in such a way that reduces the overall cost offinance". Bushline relies on both representations in its claims against the Bank.[26] Another of these letters was addressed to Mr and Mrs Coomey personally. Ithighlighted the Bank's assessment that the projected cashflow could be insufficient tofully meet outgoings, including interest, and that further borrowing could result in areduction of equity over time. The Waverley purchase was going to be a stretch.[27] There was another meeting on 28 March 2008 between the Coomeys,Mr Harvey and Mr Esquilant. The Coomeys say that this is when the swapspresentation was first made to them. That is disputed by both Mr Esquilant andMr Harvey who say that the meeting was simply focused on swap strategies, and inparticular the term of the proposed swaps.[28] It was agreed that the Bank would consolidate all of Bushline's existing lendinginto a single loan. The interest rate on that loan was to be hedged through interest rateswaps. Mr Esquilant was proposing a three or five year term for those swaps. MrCoomey eventually settled on one, two and three year maturities for each of the swaps.[29] The swaps on the loan were a combination of new swaps and a restructure ofthe first and third swaps. As before, Mr Coomey locked in the swaps on 8 and 9 April2008 with an effective date of 21 April 2008.4 The second swap, which had a maturitydate of 20 June 2009, remained in place. As at 21 April 2008 therefore, Bushline had4 The first swap was restructured so that the notional amount was $7.905 million at a fixed interestrate of 7.64 per cent, terminating on 20 December 2010. The third swap was restructured so thatthe notional amount was $8.847 million, the fixed interest rate was 7.93 per cent, and the swapwould terminate on 20 November 2011.three swaps in place for terms of approximately one year, two years and three yearsrespectively.[30] On 21 April 2008, the Bank sent an instruction letter to Mr England asking himto act in relation to the new loan agreement. The loan agreement was for just over$19.46 million with a term of 12 months from the date of advance. The interest ratespecified in the agreement was the floating interest rate (BKBM price), plus "a marginof 0.70 [per cent] per annum (reviewable at any time)". Whether the allegedrepresentation to hold margins at 0.70 per cent for five years can sit alongside thisclause in the loan agreement is a key question in this case.[31] All four trustees signed the loan agreement on 23 April 2008. Mr Englandsubsequently returned that loan agreement, together with his signed solicitor'scertificate confirming that he had advised the trustees on the loan agreement.Post-Waverley[32] Bushline's fortunes began to take a downward turn a matter of months after theWaverley purchase. It fell behind its targeted milk production and required additionalfunding to cover the purchase of additional cows, spending on machinery, and seasonalfunding.[33] The Bank advanced further funds to cover these additional expenses. InAugust 2008, Bushline took out a new loan in the sum of $327,036.00 at BKBM plusa 1.5 per cent credit margin. From 2008 onwards, Bushline's overdraft was extendedon successive occasions, and new loans were agreed or refinanced at varying rates andmargins. There is a dispute between the parties as to whether this was enough tosupport Bushline through the bad times.[34] The global financial crisis began to have a real impact on interest rates frommid 2008. In July 2008, the Reserve Bank cut the Official Cash Rate (OCR) by0.25 per cent, its first drop since 2003. The rate was cut again in September 2008, thistime by 0.5 per cent. Further and steeper cuts followed.[35] On 20 December 2008, the margin on the $19.46 million loan was increasedfrom 0.70 per cent to 0.85 per cent. It was increased again from 0.85 per cent to0.97 per cent on 20 March 2009 and then held at that level through to the maturity ofeach swap. Those two margin increases resulted in Bushline paying approximately$76,000 more in interest than it would have if the margin had been held at0.70 per cent.[36] The Coomeys were not happy with the increases in their margins. In January2009 there was a meeting between Bank managers and the Coomeys to discussmargins and the possible transfer of their lending, including the swaps, to anotherbank. By this time, the Coomeys were taking advice from Mr Einarsson, an accountantemployed by Mr Schurr's firm who had an understanding of swaps.[37] The term of the $19.46 million loan agreement expired on 1 May 2009 and wasrolled over on the same terms. A short time later, Bushline's second swap matured.That part of the lending hedged by swaps was refinanced into a floating rate loan.[38] There was no improvement for Bushline in the 2009/2010 season. It fellfurther behind in its milk production targets. There was also a very wet spring inOctober 2009, and Bushline's herd had a high empty rate (that is, a failure to fallpregnant). The pressure to reduce debt was increasing and a number of Bushline'sproperties were put up for sale.[39] In early 2010, Bushline was transferred to rural lending services, the specialistrecovery branch of the Bank. Efforts to sell properties to reduce debt had been metwith limited success, and in 2011 the Coomeys took steps to convert the Waverleyfarm into a dairy farm. But there were cost overruns in the conversion, and the milkproduction problems that had plagued the 2008 – 2010 seasons continued into the 2011and 2012 seasons. Eventually Waverley was put on the market, and a substantial partof it sold in July 2012.[40] The first and third swaps matured in December 2010 and October 2011. Asthe underlying lending became unhedged, it was refinanced into floating rate loans.By October 2011, Bushline no longer had any swaps with the Bank.[41] The relationship between the Bank and the Coomeys had been under severestrain since the latter part of 2008, and by 2013 it had broken down completely.Bushline succeeded in refinancing its debt with another bank, and left the ANZ inJuly 2013.The Commerce Commission offer[42] In December 2012, the Commerce Commission began investigating the sellingof swaps. ANZ subsequently entered into a settlement agreement with the CommerceCommission, which was the subject of a High Court declaration. That declarationstated that the ANZ had breached s 9 of the Fair Trading Act 1986 by understatingsome of the risks and/or overstating some of the benefits of interest rate swaps to itscustomers.5[43] As part of the settlement, the Bank agreed to pay $18.5 million with that sumto be offered to all "affected customers". Bushline was offered $155,120, being theincreases that the Bank made to margins on the loans linked to the swaps, and apayment set at 0.4 per cent of the notional value of swaps as at 30 September 2008.Bushline chose to reject that offer, which left it free to pursue this claim. Proceedingswere issued in 2014.[44] To understand Bushline's complaints it is necessary to describe the interest rateswap product being sold by the Bank and the contractual terms which governed boththe loan and swap agreements. That context is provided below.ContextInterest rate swaps[45] An interest rate swap is a financial derivative which is used by borrowers tohedge the interest rate risk payable on a loan. The swap transaction is separate anddistinct from the loan transaction. But the term "swaps" is sometimes used to refer tothe swap and loan transaction combined.5 Commerce Commission v ANZ Bank New Zealand Ltd [2015] NZHC 1168, (2015) 14 TCLR 71.[46] The loan transaction involves the borrower taking out a loan with the Bank fora sum of money with interest payable at a floating interest rate. That interest ratecomprises a base rate (typically the 30 or 90 day bill rate or BKBM), plus a creditmargin. In broad terms, the credit margin reflects the borrower's creditworthiness.[47] The swap transaction involves the borrower agreeing to make payments to theBank at a fixed interest rate. In return, the Bank agrees to make payments to theborrower at the same floating base interest rate specified in the loan agreement, butwithout the credit margin. In other words, the parties agree to "swap" a floating rateinterest rate for a fixed one.[48] The transactions were represented in a diagram referred to in the evidence ofMr Derek Rankin. That diagram is reproduced (with some additions) below. The loanpart of the transaction is represented on the left hand side of the diagram, and the swaptransaction is represented on the right.[49] In the example given in the above diagram, the two floating base interest rates(at 8.64 per cent) cancel each other out. That leaves the customer paying interest atthe swap rate on the swap transaction (fixed at 8 per cent), plus the credit margin onthe loan.[50] If floating interest rates rise, the customer continues to pay the 8 per centinterest rate, plus the credit margin. If floating interest rates fall, the customer'sinterest rate remains fixed at 8 per cent plus the credit margin. In that sense, swapsoperate like a fixed rate loan.provides loan funding($1 million)pays swap rate(fixed at 8%)pays floating baseinterest rate +credit margin(8.64% + credit margin)provides floatingbase interest rate(8.64%)Borrower BankBank[51] But there are also a number of differences between swaps and fixed rate loans:(a) The key difference is that the credit margin component of the interestrate on the underlying loan can also fluctuate. Margins were relativelystable up until 2008. But the global financial crisis meant that theBank's costs of funds increased, and that was reflected in increasedmargins towards the end of 2008.(b) An interest rate swap is a tradable instrument, which means it can besold and bought, lengthened and shortened. Swaps therefore provide alevel of flexibility in the management of interest rate risk which is notavailable on a fixed rate loan. The cost of that flexibility depends onthe market value of the swap at the time, that is, whether it is "in themoney" or "out of the money". If the swap is "in the money", theborrower receives a cash benefit. If the swap is "out of the money", theborrower must pay to exit the swap.(c) Break costs are also calculated differently to the break costs for a fixedrate loan. If the swap is "out of the money" at the time of termination,the break costs can be prohibitively high.(d) Because the loan agreement and swap transactions are separate, therecan be a mismatch between the maturity of the loan, and the maturityof the swaps. That mismatch means that the borrower is exposed if theunderlying loan expires prior to the swaps, and is not rolled over on thesame terms.(e) Finally, borrowers who had swap agreements with the Bank weresubject to an internal assessment which the Bank referred to as a MarketReplacement Risk (MRR). The MRR is a tool used to assess the Bank'sexposure to a borrower with swaps. From the borrower's perspective,the MRR can limit the amount of further lending the Bank is preparedto extend. Borrowers with fixed interest rate loans were not subject toa MRR.The contractual matrix and disclaimer clauses[52] In 2008, the terms of a swap were agreed between the borrower and Bank overthe phone. Both parties became bound at that point in time, although the swap did notbecome effective until a date specified in the future. In this case, Mr Coomey agreedthe terms of the swaps on behalf of Bushline.[53] The Bank subsequently sent a swaps confirmation to the customer setting outthe agreed details of the transaction. The swaps confirmation includes a place for thecustomer to sign confirming the terms of the swap. A box just above the signatureclauses provides as follows: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.[54] The swap confirmation confirmed that the Terms and Conditions ofInstitutional Financial Markets Transactions (swap terms) governed the transaction.The front page of the swap terms warns customers of the risks associated with foreignexchange and derivative transactions as follows:Customer should note the following general risks• Foreign exchange and derivative markets can be highly volatile andthe prices of the underlying rates, currencies or commodities mayfluctuate rapidly over wide ranges, and may reflect unforeseen eventsor changes in conditions.• The customer may suffer substantial losses as a result of thosefluctuations. The Bank will not be liable for these losses in anycircumstances.It is the customer's responsibility to understand the nature of the transactionsthe customer enters into, the risks associated with those transactions, and tomonitor the transactions. The customer should not enter into transactions iftransactions or the risks are not understood.[55] Clauses 10.1, 10.2 and 14.2 of the swap terms are relevant to the issues indispute. Those clauses provide:10.1 Independent advice: The Customer has entered into and will enter intoeach Transaction and the Agreement in reliance on such independentadvice (including tax, legal and financial advice) as the Customerconsiders necessary and not on any representation or informationmade or given by the Bank. To the maximum extent permissible bylaw, the Bank will not be liable for the Customer's loss in anycircumstances.10.2 Assessment: The Customer represents and warrants on entering intoeach Transaction and the Agreement that it:(a) is capable of assessing the merits of and understanding (on itsown behalf or through independent expert advice) andunderstands, accepts and assumes the terms, conditions andrisks of that Transaction and the Agreement;(b) is satisfied that the Transaction is suitable for its objectives,financial situation and needs; and(c) understands foreign exchange and derivatives markets andhow they operate.14.2 Entire agreement: The Agreement contains all of the terms,representations and warranties made between the parties with respectto its subject matter and supersedes all prior discussions andagreements relating thereto.(emphasis added)[56] Clause 10.1 comprises both a no-reliance clause, and a limitation of liabilityclause. I have italicised the latter part of the clause for emphasis.[57] The advance of $19.46 million was governed by the Bank's standard loanagreement. Clause 5 of that agreement specified the interest rate on the loan asfollows: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 BKBMrate as at the Date of Advance (which at the date of this agreementwould be 8.88% per annum) plus a margin of 0.70% per annum(reviewable at any time), then from 20 May 2008 the 1 month BKBMrate as at that date (which will be reviewed every 1 month) plus amargin of 0.70% per annum (reviewable at any time).[58] Clause 22 of the $19.46 million loan agreement is also relevant. It provides:The Customer acknowledges that:(c) No representation, warranty or undertaking has been made by or onbehalf of the Bank in relation to the Loan which is not expressly set out in thisagreement;(d) In deciding to obtain the Loan and/or to proceed with any transactionor project for which the Customer has sought the loan, the Customer has notreceived or relied upon any advice given by or on behalf of the Bank.[59] Each of the loan agreements between Bushline and the Bank contained clausessimilar to clause 22 above.[60] The clauses in the swap terms, swap confirmation and loan agreement are allexamples of basis clauses, no reliance clauses, limitation of liability clauses, or entireagreement clauses. I shall refer to them collectively as disclaimer clauses in thisjudgment.Claims and defences[61] Bushline commenced this proceeding by statement of claim filed on 27 May2014. Amended statements of claim were filed on 19 November 2015 and23 September 2016. The latter amendment included the claim relating to the allegedpromise to hold margins at 0.70 per cent for five years over all of Bushline's funding.These dates are relevant to Bushline's defences under the Limitation Act 1950.[62] The fourth amended statement of claim was filed on 10 March 2017, and is thepleading referred to in this judgment unless stated otherwise.[63] Bushline's fourth amended statement of claim pleads five causes of action:negligence, breach of contract, misrepresentation under the Contractual Remedies Act1979, breach of the Fair Trading Act and oppression under the CCCFA.[64] Bushline claims that if the Bank had not breached its legal duties, then it wouldnot have entered into the swaps. Several alternative measures of loss are presented.The primary loss claimed is calculated on the basis that Bushline would not haveentered into a bill rate loan hedged with swaps and would instead have structured theirdebt on a one-third fixed and two-thirds floating basis for the period of the swaps.[65] There are five representations which underpin Bushline's claims. Those are:(a) The margin representation: The promise to hold margins at 0.70per cent for five years on all of Bushline's funding.(b) The fixed cost representation: That swaps operated like a fixed rate loanexcept with greater flexibility and benefits.(c) The transferability representation: That swaps were transferable andthe Bank would not prevent Bushline from refinancing if they desiredto do so.(d) The monitoring representation: That the Bank could and would monitorand/or manage Bushline's swaps on an ongoing basis to ensureBushline was able to take advantage of the flexibility and benefits, andmanage their exposure to interest rate risk.(e) The good times and in bad times representation: That the Bank wouldbe there for Bushline in "good times and in bad".[66] The Bank denies each of the allegations against it. In addition, it pleads sixaffirmative defences: voluntary assumption of risk, contributory negligence, theexclusion clause in clause 10.1 of the swap terms, and limitation defences under theLimitation Act 1950 and the Fair Trading Act 1986.[67] Bushline attempts to meet the Bank's reliance on the disclaimer clauses andlimitation periods by claiming that the Bank acted fraudulently and deceitfully. It saysthe Bank knew that it had made misrepresentations about swaps prior to Bushlinesigning the $19.46 million loan agreement, and it failed to correct thosemisrepresentations.[68] Finally, in the event it is found negligent, the Bank claims against Mr Englandas a joint tortfeasor. Mr England defends that claim on the basis that the Bank cannotdischarge its onus in the absence of a waiver of privilege, the scope of his duty waslimited, there was no breach, and even if there was, there is no causal connectionbetween the loss and any alleged breach.[69] My key factual findings in relation to the representations and fraud allegationsfollow. But first, I make brief mention of the decision in Cygnet Farms Ltd v ANZBank New Zealand Ltd.6Cygnet Farms Ltd v ANZ Bank New Zealand Ltd[70] The claim in Cygnet was the first contested case about the ANZ's promotionof interest rate swaps in New Zealand. Like this case, Cygnet also involved thepromotion of interest rate swaps by the Bank to rural farmers in the Taranaki region.[71] Palmer J found that the Bank's relationship with Cygnet was sufficientlyproximate to establish a duty of care in tort for negligence. His Honour found that thecapitalised and bold words in the box on the swap confirmation were sufficient tonegative a duty of care to provide reasonable advice, but they were not effective topreclude a duty to provide an accurate explanation and honest replies. That duty wasfound to have been breached, but the effect of s 6(1)(b) of the Contractual RemediesAct 1979 precluded Cygnet from recovering damages in tort.7 The remaining causesof action were dismissed.[72] This case has similarities to Cygnet, but also has some important differences:(a) The alleged fixed cost and monitoring representations are the same,although the content of the alleged representations is not identical.(b) Mr Esquilant, the Bank's senior market dealer, promoted the swaps inboth cases. However, the circumstances in which he did so differ tothose in Cygnet.6 Cygnet Farms Ltd v ANZ Bank New Zealand Ltd [2016] NZHC 2838, [2017] 2 NZLR 538.7 At [17], [188]–[189].(c) Bushline's claims are broader than the claims in Cygnet. The mainfocus of Bushline's claim is on the alleged promise to hold margins at0.70 per cent for five years over all of its funding. The claim is notlimited to representations about interest rate swaps. Bushline's claimsalso include allegations that the Bank treated it oppressively whentimes got tough. There was no oppression claim in Cygnet.(d) Finally, the involvement of Mr Schurr and Mr England as Bushline'strustees and independent advisors is a significant distinguishing featureof this case. As explained further, the involvement of bothprofessionals, and Mr England's advice on the swap terms and the loanagreement in particular, provides the point of departure from Cygnet interms of the proximity necessary to establish a duty of care.Key factual findingsThe margin representation – was there agreement to hold margins at 0.70 per cent forfive years over all funding?[73] Bushline claims that agreement to hold margins at 0.70 per cent for five yearsover all funding was reached between the Bank and the Coomeys at the meetings on18 and 19 March 2008. Both Mr Harvey and Mr Simcic attended those meetings onbehalf of the Bank.[74] Those meetings were to discuss the Bank's offer of finance for the Waverleypurchase. Mr Coomey had received finance offers from the ASB and the BNZ. Hewas prepared to take Bushline's business to another bank if the ANZ did not matchthese offers. Mr Harvey's internal notes from 19 March 2008 record "Coomeys nearlyout the door".[75] After getting proof of the competing offers, Mr Simcic received approval on19 March 2008 to agree a 0.70 per cent margin. This was communicated to theCoomeys the same day, and was recorded in Mr Harvey's notes from the meeting on19 March 2008 as follows:"Agreed – 70 pts ongoing".[76] The 0.70 per cent margin was expressly provided for in the $19.46 million loanagreement. There is no dispute that this was the margin agreed. The issue is whetherthere was agreement to fix that margin for five years, and whether it covered all ofBushline's lending, or just the lending hedged by swaps.[77] I do not consider there was any representation made, or agreement reached, tohold the margin for five years or to apply it to all of Bushline's lending. The agreementwas to set the margin at 0.70 per cent, and that was for lending which would be subjectto swaps. My reasons for those findings are as follows.[78] First, the Bank's agreement to set the margin at 0.70 per cent was made inresponse to competing offers received from BNZ and ASB. Mr Simcic and Mr Harveyhad no authority to agree to the 0.70 per cent margin unless they had proof of thosecompeting offers. Those offers did not include a set margin for a five year term. TheASB offer refers to 65 points, but makes no reference to a five year term. Mr Robinsonwas the rural manager for the ASB in the Taranaki region in 2008. His evidence wasthat the margin of 0.65 per cent above BKBM was offered to Mr and Mrs Coomey.But, he specifically denies that the margin was to be fixed for five years. Hisunchallenged evidence is that it was not part of the proposal, and not something offeredby the ASB at the time.[79] Similarly, there is no evidence of a comparable offer being made by the BNZin 2008. Mr Purvis was the former BNZ head of rural banking at this time and wascalled to give evidence for the Bank. He confirmed that BNZ would not have offeredto fix a margin for five years.[80] Second, I consider it unlikely that the Bank would have agreed to fix the marginat that level for a five year term. The context of the discussions on 18 and 19 March2008 was lending for the Waverley farm purchase. Credit approval for that newlending was granted on the condition that written advice was given to the Coomeysoutlining the Bank's concerns about the impact on equity given the forecasted cash-flow deficits. That written advice was set out in a letter delivered to the Coomeys on18 March 2008. The Bank is unlikely to have agreed to fix its margin for a five yearterm in those circumstances – particularly when the 0.70 per cent margin agreed wasalready close to the Bank's cost of funds.[81] Third, there is no written record of such an important and far reaching term.Although I accept that the commercial landscape was very different in 2008, andbusiness deals may well have been done on a handshake, this was a significant dealfor both parties. Mr Harvey made notes of the discussions on both 18 and 19 March2008. His notes from 19 March 2008 simply record agreement to the 70 point marginon an "ongoing" basis. If there had been agreement to fix the margin for five years,across all of Bushline's lending, then Mr Harvey is likely to have recorded it in hisnotes.[82] Fourth, Mr Schurr and Mr England were not made aware of the allegedagreement. It is reasonable to assume that the Coomeys would have mentioned suchan important promise to their fellow trustees. At the very least, the Coomeys couldhave been expected to say something to Mr England when he was advising them onthe terms of the $19.46 million loan agreement. The interest rate term in thatagreement expressly provided for the margin to be reviewed at any time. That was atodds with an agreement to hold the margin for five years. The fact that neitherMr Schurr, nor Mr England, were made aware of the promise to hold margins for fiveyears suggests that the promise was not made in the first place.[83] Fifth, Bushline made the claim for the first time in the amended pleading filedin September 2016. Yet, Bushline's margins on its $19.46 million loan were increasedin December 2008, and then again in March 2009. It took out a number of loans overthe 2008 to 2012 period which were not priced at a 0.70 per cent margin. Bushline'scomplaint about those increases was not in relation to an agreement to hold marginsat 0.70 per cent for five years across all its funding. Rather, the complaint was aboutmargins being increased generally, when the expectation was that swaps relatedlending would operate like a fixed rate loan.[84] Sixth, and finally, I consider the discussion around margins was in the contextof an interest rate to be hedged by swaps. Although the formal discussion about swapsdid not occur until 28 March 2008, it must have been contemplated by all the partiesthat Bushline would continue to use swaps to hedge its lending. There was no reasonfor Bushline to change a strategy which had worked well for it the previous three years.In fact, certainty in relation to interest costs was more important for Bushline than everbefore given that the Waverley purchase was going to increase its overall debt to nearly$20 million. In that light, I consider the reference to "ongoing" in Mr Harvey's notesreferred to the duration of the associated swaps. That is the interpretation favoured byMr Simcic, and the one which I consider is most plausible in the circumstances.[85] I therefore find that there was no agreement to hold margins at 0.70 per centfor five years over all the funding.The fixed cost representation – was it made and was it misleading?[86] Bushline claims the Bank made misleading representations about interest rateswaps being like a fixed rate loan at the meeting on 28 March 2008. Therepresentations were said to be made orally and in writing.[87] There is a conflict in the evidence about whether the swaps presentation wasgiven in 2005, or at the meeting on 28 March 2008. I find that it was given in 2005.The Bank's internal diary suggests that there was a meeting between Mr Esquilant, theCoomeys, and Mr Lawn (the rural manager at the time) on 28 September 2005. Iconsider it unlikely that the Bank would have allowed swaps to be transacted withoutthe Coomeys having first received the presentation.[88] A version of the presentation which Mr Esquilant was likely to have given in2005 was produced in evidence. That presentation included the followingrepresentations about interest rate swaps:(a) "Provide a known "fixed" interest rate for the term chosen-(like thefixed loan product)"(b) "Benefits are paid out on advantageous movements - (unlike the fixedloan product)"(c) "Are tradable instruments and provide quick entry and exit from themarket"[89] Further representations were made in a table comparing fixed rate loans tointerest rate swaps. Those representations from the table which are relevant in thiscontext are:Attribute Fixed Rate Loan Interest Rate SwapBreak costs Clients pay break costs but donot receive break profitsClients pay break costs butdo receive break profitsAbility to extend term totake advantage of fall ininterest ratesFixed rate term can't bechanged unless client breaksloan and pays costCan extend out to term offacilityAbility to shorten term totake advantage of higherinterest ratesNo ability to do this Can shorten[90] Although there was some variation between the different versions of thepresentations, the substance of the above representations remained the same. Inparticular the same representations were made in the presentation which Mrs Coomeysaid they received, and which was passed to Mr Nitschke, at the meeting between theparties in January 2009.[91] Bushline's claim also relied on representations made in a brochure. But theevidence about the brochure was equivocal. Mrs Coomey was not certain that thebrochure passed to Mr Nitschke was the same one which she thought had been left atthe meeting in 2008. Mr Esquilant said his invariable practice towards the end of 2005was to leave a brochure, but he could not recall whether one had been left when hemet with the Coomeys in September 2005. There was no definitive evidence that theCoomeys had read a brochure, or that the representations in the brochure had beendrawn to their attention. In light of that uncertainty in the evidence, I am not persuadedthat other written representations set out in a brochure were made to Bushline.Therefore, I find that the written representations made about interest rate swaps werethose set out above.[92] The next issue is whether those written representations were misleading. I findthat they were. That is because they failed to disclose the downsides of a swapcompared to a fixed rate loan. Specifically:(a) There was no disclosure that the credit margin could increase on anunderlying loan, unlike a fixed rate loan. Although the credit marginwas identified as a separate component in the graphs in the presentationmaterial, there was no disclosure of the fact that they could move. Thatwas a critical difference to the fixed rate loan.(b) There was no disclosure that break costs were calculated differently tobreak costs for a fixed rate loan. Break costs were referred to in thepresentation. The table comparing interest rate swaps and fixed rateloans made specific reference to break costs being payable for bothtransactions. But the key point of difference to fixed rate loans was thatthe costs payable depended on the current market value of the swap atthe point of termination. That needed to be highlighted in thecomparison of swaps to fixed rate loans.(c) There was also no disclosure that entering into swaps could impact onfuture lending decisions due to the MRR. Some versions of thebrochure disclosed that a credit limit would need to be agreed betweenthe Bank and the customer. But the key point about the MRR beingpotentially more restrictive than the credit limit that would apply for afixed rate loan was not made explicit in the Bank's material.Mr Esquilant says he would have discussed the MRR with the Coomeyswhen he met at their place on 28 March 2008. I reject that evidence.None of the other participants at the meeting, including Mr Harvey,recall him discussing the MRR, and it is not recorded in any of the notestaken at this time.[93] I therefore find that the fixed cost representation was made, and it wasmisleading for failing to properly disclose the downsides of swap transactions whencompared to a fixed rate loan.The transferability representation – was it made and was it misleading?[94] Bushline claims that the Bank also made misrepresentations about thetransferability of swaps at the meetings on 28 March 2009 and January 2009.8[95] As to the 2008 representations, Mrs Coomey said in her evidence in chief thatMr Esquilant had told them that that swaps could be transferred to another bank.Mr Esquilant denied saying this. On this point, I prefer Mr Esquilant's evidence. Thediscussion on 28 March 2008 was about swap strategies and the terms of the swaps.The Coomeys had already agreed to remain with the ANZ. It is unlikely that thetransferability of swaps was discussed at this time.[96] As to the 2009 representations, the Coomeys say that another bank manager,Mr Nitschke, told them at a meeting in January 2009 that swaps could not be novated.Mr Nitschke does not recall making the comment. I consider it likely that he did so.He understood that this was Bank policy at the time. However, subsequent to thatmeeting, the Bank indicated that it would be prepared to entertain a novation requestto certain banks. That was passed on to Bushline's accountant, Mr Einarsson, whoresponded by saying that Bushline did not intend to migrate swaps at the time. To theextent that Bushline maintains a claim that the Bank refused to allow it to transfer itsswaps, then such a claim must be dismissed in the face of this evidence.[97] I find that there were no representations made about transferability in 2008.Any representations made in 2009 were not misleading, and there is no evidence ofbreach.8 This claim was not pursued in respect of the contract cause of action, but was nevertheless referredto in the oppression claimThe monitoring representation – was it misleading and/or breached?[98] There is no real dispute that the Bank represented that it would provide ongoingadvice and management to those customers who had swaps. The Bank's presentationincluded a slide entitled "what we do" which included the following representation:Advise and recommend to RMs/Clients interest rate risk strategies, includingappropriate fixed rate exposure and optimal product mix to achieve financialobjectivesProvide on-going interest rate risk advice and strategies[99] Similarly, one of the letters dated 18 March 2008 contained the followingstatement:Our interest rate risk management package leads the market for flexibility andtransparency. You can be assured that your exposure to interest rate risk isbeing managed in such a way that reduces the overall cost of finance to you.[100] The issue in dispute is whether the Bank lived up to that promise. I consider itdid. The evidence shows that Mr Harvey met with the Coomeys on a monthly basisto discuss swap strategies. He passed on swap strategies received from Mr Esquilantprior to these meetings. On other occasions, Mr Esquilant discussed matters directlywith Mr Coomey.[101] Bushline says that the Bank should have advised it to break its swaps any timeup to October 2008, when its swaps were "in the money". Mr Esquilant providedsome strategies for Bushline in August and October 2008 for lengthening its swaps totry and lower the proposed rates. I am not persuaded that this advice, as opposed tobreaking the swaps, was flawed when assessed in the circumstances as they existed atthe time.[102] The Reserve Bank stated in its monetary policy statement issued on 5 June2008 that the "outlook for economic activity is now weaker than in our previousstatement" and that "provided the economy evolves in line with our projection, we arenow likely to be in a position to lower the OCR later this year, which is sooner thanpreviously envisaged". But the rate at which interest rates fell after this date wasunprecedented and, as Mr Rankin confirmed, could not have been predicted inadvance. It is only with the benefit of hindsight that the prospect of breaking the swapsappears to have been a prudent course.[103] In summary, I find that the ongoing management representation was made, butit was neither misleading, nor breached, in Bushline's case.The good times and in bad times representation – was it misleading and/or breached?[104] There is no dispute that this representation was made. It was set out in one ofthe letters given to the Coomeys on 18 March 2008.[105] The Bank did not raise any issue with the nature of such a representation.Rather, it contended that it did, in fact, stand by Bushline in good times and in badtimes.[106] Bushline's claims relating to this representation form the basis of its oppressionclaim. Whether the representation was misleading and/or breached is thereforeaddressed in that context.Did the Bank act fraudulently or deceitfully?[107] The Bank relies on the disclaimer clauses and limitation periods under theLimitation Act 1950 to defeat Bushline's contract and negligence claims.[108] Bushline responds by submitting that in April 2008, the Bank knew that it hadmisrepresented swaps to its rural customers. It says the Bank was under a duty tocorrect its misrepresentations, and the failure to do so was fraudulent or deceitful.9 Itsays that this is sufficient to obviate the effect of the disclaimer clauses,10 and extendthe statutory limitation periods.119 Bushline relies on Jones v Dumbrell [1981] VR 199 (SC); Cramaso LLP v Ogilvie-Grant [2014]UKSC 9, [2014] AC 1093at [31]; and Amaltal Corporation Ltd v Maruha Corporation [2007] 1NZLR 608 (CA) at [47] to establish this duty.10 For the purpose of preventing the Bank from relying on the disclaimer clauses: see HIH Casualtyand General Insurances Ltd v Chase Manhattan Bank [2003] UKHL 6, [2003] 1 All ER (Comm)349 at [16].11 Limitation Act 1950, s 28(b).[109] Bushline relies on a series of internal emails from mid April 2008 as evidenceof the fraud and deceit. Because this forms a central plank of Bushline's case, and theemails need to be considered in context, I have set out the text of those emails in full.[110] In an internal email dated 16 April 2008, Mr Young, senior manager formarkets at the Bank, wrote:My concerns are particularly around the loss of reputation and integrity wehave with our clients if we adjust rates.The IRRM have told clients that they can treat their budget rate same as afixed rate loan. Are we effectively now to say that there is no such thing as afixed rate and the only thing we are guaranteeing is the base rate?If you are planning on lifting margins across the board on bill rate loans areyou also adjusting fixed rate term loans as well? It would appear we arepenalising clients for using the right products, and I believe this would causesignificant client flight risk in future years, and also the RMs may struggle onthis and simply move towards FRTLs to avoid the threat of losing face withtheir clients.(emphasis added)[111] In another email sent on 21 April 2008, Mr Young wrote:This morning I've fielded calls that I feel you should be made aware of inrespect to concerns being raised from some RMs across some of the regions,in particular raised in Canterbury/Central/BOP.Its in respect of the 12 month bill facilities. They are worried that we "thebank" will move credit margins adversely against their clients after 12 monthsand hence RMs are suggesting to just deal fixed rate loans to give their clientsa "guaranteed fixed rate". This is of obvious concern to my team as well.Impacting on behaviours with RMs and potentially disadvantage cleints [sic]longer term who opt to fix without the added flexibility and our on goingadvice not to mention our rates business going forward.Is this just an education issue with lack of communication hitting the RMs atthis stage? How do you want my team to respond given they are dealing withthe front line and are much more aware of the issues facing the bank in termsof raising capital?(emphasis added)[112] On 21 April 2008, Mr Haden, customer strategy manager, responded in anemail of the same date:I have sent you a paper to the Rural I have sent to branches to help understandthe issues.In regard to your comments below:• Staff are correct that we may move client margins - but this can occurat any time, and not just in twelve months or at expiry. It is criticalthat Rural staff and Dealers understand this. It appears that thishasn't been the case in the past so we need this to change as soon aspossible.• One year Bill in conjunction with a swap should be cheaper thanlonger fixed, but there is a risk clients in this that will have to manage.This needs to be considered part of their risk management strategy.Clients can take longer bill, but at a cost. We still can't commit on CM• What we need from Dealers is to engage with Rural staff to get themessage out that Bill loan CMs can move up as well as down. Practicein this has not been appropriate, so there is some catch-up to do.• Strategy includes some upward movement of existing Bill Rates. Weneed to get Dealers and branch staff working together on this.• In regard to customer and product selection, what we have to do isgive clients accurate information to base their decisions on. There isa risk that CMs will move, and customers need to balance this againstother factors.• Outcomes for business for both Rural and Markets will change, butthe risks to revenue, and reputation are the primary issueWe can go through this in some detail on Wednesday.(emphasis added)[113] The above email refers to a strategy paper which was then distributed to ruralbranches. That strategy paper refers to the risk of client demands changing and theimportance that clients understand that they run that risk. Under a heading "Bill andSwap Understanding", the strategy paper includes the following:Bill and Swap UnderstandingSeparate, independent productsIt appears there is still confusion about this. It is critical to realise that:• Swaps are derivative products• Bill loans are quite separate funding lines with a base rate set on theBKBM rate• The two operate quite independently, but dealers are required toensure a Bill loan exists, for an amount equal to or greater than theswap• Swaps do not have a client margin• Bill loans do have a client margin• When swap client margins are discussed, this is incorrect. You canadd the client margin to a swap to compare price to that of a a [sic]fixed loan, but you need to be very clear to the client, that this is nota "swap margin". Swaps and bills, together, do not equal a fixed loan.• Swap pricing is the responsibility of Markets Dealers• Bill pricing is the responsibility of Rural Banking• Bills are able to be repriced at their billing intervals (R201 30-90D,R202 - monthly)Whatever occurs with individual BKBM loan Client Margin repricing, anyclient interaction needs to leave the client under no doubt about theindependence of the two products, and that the Client Margin can move withthe market. Dealers will be requested to ensure this is the case.(emphasis added)[114] It is clear from these emails that some within the Bank were aware that swapshad been aligned to fixed rate loans, and that not enough had been done to make itclear that margins could rise at any time on the underlying loan agreement. Theconcern was that increasing margins could lead to customer flight. And, it could alsolead to rural managers recommending fixed term loans rather than swaps which wouldhave implications for the sale of swaps in the future.[115] However, the emails fall short of evidencing a realisation thatmisrepresentations about swaps had been made to Bushline. The concerns expressedabout the promotion of swaps are general in nature and across the board. There is noexplicit recognition in these emails of misrepresentations being made to Bushline.That is important because exactly what was said about swaps, and the circumstancesin which they were promoted, varied from customer to customer, as the differencesbetween this case and Cygnet demonstrates.[116] In my view, something more than a general awareness would be required totrigger a duty to correct a misrepresentation (assuming such a duty arose in the firstplace). Something more would also be required to constitute fraud within the meaningof s 28(b) of the Limitation Act. Knowledge of the essential facts constituting a causeof action is a necessary ingredient of the fraud referred to in that section.12[117] Furthermore, this email correspondence does not show any attempt by theBank to conceal the fact that it had made misrepresentations about swaps. The Bank'sresponse to the concerns expressed in the emails was to circulate a strategy paper torural managers clarifying the position. That is not the behaviour of an institution tryingto cover things up. And, there is no suggestion in any of these emails that Bank staffwere deliberately keeping Bushline in the dark so as to induce it to enter into a $19.46million loan agreement hedged by swaps.[118] Bushline's claim is also difficult to sustain in the face of the express terms ofthe $19.46 million loan agreement. The fact that the margin on a swap related loancould be increased was apparent from the interest rate clause in that agreement. Clause5 stipulated that the margin was "reviewable at any time". Bushline's trustees receivedlegal advice on that clause. To the extent that they were operating under a falseimpression that margins could not move in swaps related lending, then such animpression must have been dispelled on receipt of this loan agreement.[119] Therefore, I find that the Bank did not engage in any deceit or fraudulentconcealment of the kind that would defeat its entitlement to rely on the disclaimerclauses or the statutory limitation periods.Negligence[120] Bushline's fourth amended statement of claim pleads the following duty ofcare:12 Inca Ltd v Autoscript (New Zealand) Ltd [1979] 2 NZLR 700 (SC) at 711; Matai Industries Ltd vJensen [1989] 1 NZLR 525 (HC) at 536.The ANZ had a duty to competently and fully advise the Trusts (on an ongoingbasis) as to the suitability of SWAPs, and in particular, the risks of SWAPsand to advise on other financing options and not to mislead the Trusts (theDuty of Care)[121] In closing arguments, Bushline submitted that this duty comprised two distinctduties of care:(a) A duty to explain the downsides of swaps; and(b) A duty to provide ongoing competent advice.[122] All counsel referred to the former as a duty not to mislead (that is, the dutyimposed in Hedley Byrne),13 and the latter as a duty to advise. They are the same twoduties considered in Cygnet.[123] Ten separate breaches of the duty of care are pleaded in the fourth amendedstatement of claim. However, by the time of closing arguments, those had beenwhittled down to just two:(a) The duty not to mislead had been breached by failing to informBushline of the downsides of swaps. Those downsides included:(i) that a margin could increase;(ii) an MRR could affect security values;(iii) break fees were calculated differently; and(iv) that there could be a mismatch between the term of the loan andthe term of the swap.(b) The duty to advise had been breached by the failure to advise Bushlineto exit the swaps when they were "in the money" and would thereforehave avoided break fees.13 Hedley Byrne & Co Ltd v Heller [1964] AC 465 (HL).Did the Bank owe a duty of care?[124] In opening Bushline's case, Mr Branch sought to characterise this cause ofaction as being one of "pure negligence" as opposed to negligent misstatement. Theapparent purpose in drawing that distinction was to circumvent the effect of s 6(1)(b)of the Contractual Remedies Act 1979 which, Mr Branch submitted, only applied tothe latter and not to the former.14[125] The description of the ongoing management aspect of the claim varied, butoverall I consider Bushline's claim to most closely resemble a claim of negligentmisstatement. It is essentially a claim that the Bank was careless in what it said aboutcredit margins, interest rate swaps, and ongoing management, and that carelessnesshas caused it to suffer economic loss. But, in any event, any difference between thetwo causes of action does not impact on the duty of care analysis. And, as will becomeapparent from what follows, I have not found it necessary to address s 6 (1)(b) in thisjudgment.[126] In Invercargill City Council v Southland Indoor Leisure Centre CharitableTrust, the Court of Appeal framed the elements of negligent misstatement as follows:15(a) Proximity: the parties must be in a relationship of proximity, or a"special relationship". This requires that the adviser knew for whatpurpose the advice was wanted, knew the advice would go to theplaintiff or an ascertainable class that included the plaintiff, and knewthe advice would likely be acted on without independent inquiry.Knowledge may be imputed, the court having found that the adviserought in the circumstances to have known or foreseen what wouldlikely happen.(b) Policy: wider policy reasons must not exclude a duty of care in thecircumstances. For example, a court may exclude a duty for risk ofindeterminacy, or for conflict with some other duty or the publicinterest.14 Section 6(1)(b) of the Contractual Remedies Act 1979 provided that if a party to a contract hasbeen induced to enter into it by a misrepresentation, "he shall not, in the case of a fraudulentmisrepresentation, or of an innocent misrepresentation made negligently, be entitled to damagesfrom that other party for deceit or negligence in respect of that misrepresentation."15 Invercargill City Council v Southland Indoor Leisure Centre Charitable Trust [2017] NZCA 68,[2017] 2 NZLR 650 at [85].(c) The ultimate question: whether, having regard to (a) and (b), a duty isfair, just and reasonable.(d) Specific reliance and loss: the plaintiff actually relied on the adviceand suffered loss in consequence.(footnotes omitted)[127] The principles summarised by Miller J were derived from recentSupreme Court cases, and the House of Lords decision in Caparo Industries plc vDickman.16 As Miller J observed, reliance is relevant to whether there is a duty of care(the defendant's expectation of reliance), and to the causation question (whether thereis actual reliance).[128] Applying these principles to the case at hand, the first question concernsproximity. The fact that losses could be sustained as a result of interest rate swaptransactions is not seriously disputed. (However, there is a dispute about whether allthe losses claimed by Bushline were reasonably foreseeable. I consider that dispute isbest dealt with as part of any causation and damages assessment rather than as part ofthe duty of care analysis).[129] The banker – customer relationship does not automatically give rise to a dutyof care. But the interposition of the rural manager, "the trusted advisor", does bringthe parties closer together in this case. The rural managers knew Bushline's businessand were involved in the funding decisions which Bushline made as a part of it. Inthis case, Mr Harvey sat down with the Coomeys around their kitchen table to preparea budget for the Waverley purchase, and he walked over the farm with them prior tothe purchase being finalised.[130] In terms of the relative positions between the parties, the Bank was clearly ina dominant position. It knew and understood the product it was marketing to ruralfarmers, and the terms of the contracts were in standard form and non-negotiable.However, the degree of Bushline's vulnerability was not the same as in Cygnet. Inthis case, Bushline had two professionals as trustees – an accountant and a lawyer.16 Carter Holt Harvey Ltd v Minister of Education [2016] NZSC 95, [2017] 1 NZLR 78; North ShoreCity Council v Attorney-General [The Grange] [2012] NZSC 49, [2012] 3 NZLR 341 at [147]–[161]; Caparo Industries plc v Dickman [1990] 2 AC 605 (HL).The very purpose in appointing those trustees was to have professional expertiseavailable to the Coomeys in running their significant business enterprise.[131] That is not to say that Mr England and Mr Schurr's involvement completelyredressed the knowledge imbalance between the parties regarding interest rate swaps.Mr England did not possess any particular expertise or knowledge about swaps, andMr Schurr candidly admitted that he did not understand swaps and he told the Bank asmuch.[132] But there was a source of swap expertise available to Mr Schurr, and thereforeto the other Bushline trustees. Mr Einarsson was employed at Mr Schurr'saccountancy firm from 2006, and was at the firm in 2008. Mr Einarsson was a self-proclaimed "swaps man", who had previously worked in the banking industry and hadsome insight into the derivatives markets. Mr Einarsson would have been well placedto evaluate the risks associated with swaps – at least in respect of margins and breakcosts. I accept, however, that he may not have known about the MRR. That was aninternal Bank assessment which was not directly connected with the operation ofswaps. Therefore, to that extent, there remained a knowledge imbalance.[133] Another ingredient of the proximity analysis concerns the expectation ofindependent inquiry. That ingredient arises out of Lord Oliver's dictum inCaparo Industries PLC v Dickman.17 It has been adopted by the Supreme Court inNorth City Council v Attorney-General [The Grange],18 and Carter Holt Harvey Ltdv Ministry of Education.19 In the passage from Invercargill City Council v SouthlandIndoor Leisure Centre Charitable Trust set out above, Miller J framed this aspect ofthe test as whether the adviser "knew the advice would likely be acted on withoutindependent inquiry".[134] In Williams v Hacking, Associate Judge Bell observed that there weredifficulties with Lord Oliver's dictum and no guidance as to the specific content of the17 Caparo Industries PLC v Dickman [1990] 2 AC 605 (HL) at 638.18 North City Council v Attorney-General [The Grange] [2012] NZSC 49, [2012] 3 NZLR 341 at109.19 Carter Holt Harvey Ltd v Ministry of Education [2016] NZSC 95, [2017] 1 NZLR 78 at [80].independent inquiry requirement.20 I do not consider those difficulties arise here. Thisis not a case where there is any real doubt about whether the Bank could havereasonably expected Bushline to make its own inquiries, and relied on its ownindependent advice. The Bank had a very clear and real expectation that Bushlinewould do so which was made explicit in the swap and loan agreements.[135] In Cygnet, Palmer J found that the clause in the swaps confirmation wasenough to attenuate the Bank's duty of care in relation to the duty to advise.21 Thatfinding applies equally in this case. The capitalised and bold words contained in thebox just above the signature clause state that each party agrees that it has not relied onany advice from the other party.22[136] But, the concerns which led Palmer J to finding that clause 10.1 of the swapterms found in the "22 closely typed pages of legalese" was not sufficient to obviate aduty of care do not apply in this case.23 That is because the Bank ensured that Bushlinereceived legal advice on the swap terms, including clause 10.1, by instructing MrEngland to provide that advice. It may be inferred from the execution of a solicitor'scertificate, that Mr England did in fact do just that. That legal advice means clause10.1 is also effective in this case.[137] Clause 10.1 provides that the customer enters into the transaction "in relianceon such independent advice (including tax, legal and financial advice) as the Customerconsiders necessary and not on any representation or information made or given bythe Bank". It also makes clear that the Bank would not be liable for Bushline's loss.Clause 22 (d) of the $19.46 million loan agreement is to the same effect. That clauseexpressly provides that the Customer has not received or relied on any advice givenby or on behalf of the Bank. Bushline received legal advice on that agreementincluding that clause also. The Bank's expectations regarding reliance on statementsmade prior to the swaps and loan agreements could not have been made clearer.20 Williams v Hacking [2017] NZHC 799 at [54]–[57].21 Cygnet Farms Ltd v ANZ Bank New Zealand Ltd [2016] NZHC 2838, [2017] 2 NZLR 538 at[144]-[146].22 Carter Holt Harvey Ltd v Ministry of Education [2016] NZSC 95, [2017] 1 NZLR 78 at [25]–[28].23 At [143].[138] The entire agreement clauses in both the loan and swap agreements add weightto that assessment. Clause 14.2 of the swap terms provides that the agreement containsall the terms and representations made by the parties. Clause 22 of the loan agreementprovides that no representation, warranty or undertaking has been made by the Bankin relation to the loan "which is not expressly set out in this agreement". The partiestherefore agreed that their liability would be determined in accordance with the termsof the respective agreements. Those terms allocated the risk of the transaction betweenthe parties and the disclaimer clauses made it clear that the Bank did not assumeresponsibility for any other risk beyond that set out in the agreements.[139] In my view, the disclaimer clauses, and the fact that Bushline received legaladvice on them, disentangled any last vestiges of proximity between the parties.Bushline proceeded with the transaction at its own risk and in the knowledge that theBank did not accept liability for representations or statements which were not recordedin the agreements. It follows that I do not consider there to be sufficient proximitybetween the parties to establish a prima facie duty of care.[140] My findings regarding proximity mean that the second question concerningpolicy considerations does not need to be considered in any detail. In any event,neither party made submissions directed to policy factors. Palmer J canvassed themin Cygnet.24 I would add the effect of the Contractual Remedies Act 1979 (nowreplaced by the Contract and Commercial Law Act 2017) and the Fair Trading Act1986 to that enquiry. Whether there was any reason why the duties in tort and theduties in contract should not be co-extensive in this case would also be relevant to thepolicy enquiry. Ultimately, however, there is nothing in the policy assessment whichwould lead me to find a duty of care being found in this case.[141] Finally, in terms of the third and final question, I consider it is fair, just andreasonable to find that the Bank did not owe a duty of care to Bushline in this case.The parties agreed the basis upon which they were to conduct their business. Bushlinereceived legal advice on those agreements which made it clear that they entered intothe loan and swaps transactions in reliance on their own independent inquiries. There24 At [152]-[154].is no reason to find that the Bank assumed any greater duty than that prescribed bycontract in this case.[142] I therefore find that the Bank did not owe a duty of care to Bushline.Was there a breach causing loss?[143] That finding is sufficient to dispose of the negligence cause of action.However, for completeness, I record my factual findings on the other elements of thiscause of action, albeit in very brief terms.[144] If I had found that the Bank owed a duty of care, I would have found it breachedthat duty by failing to disclose that margins could increase; by failing to disclose theMMR; and by failing to disclose the different basis on which break costs werecalculated.[145] Despite the breaches, I would have found that Bushline could not satisfy thereliance and causation ingredients of the causes of action. I would have found thatBushline's independent legal advice prior to entering into the swaps and loanagreement broke the causative effect of any reliance Bushline placed on the Bank'smisrepresentations. In particular, Mr England's advice on the $19.46 million loanagreement, which specifically referred to the margin being "reviewable at any time"meant that the reliance element of the claim in relation to this representation could notbe established.[146] Similarly, I would have found that it would have been obvious to Bushline thatthere was a mismatch between the term of the loan and the term of the swaps. Theswap maturities were one, two, and three years, as against a loan term of 12 months.Those swap maturities were specifically selected by Mr Coomey. Bushline could nottherefore claim that it had relied on the failure to advise it of the mismatch in enteringinto the swaps.[147] In addition, I would have made adverse causation findings in relation toBushline's damages claim. In particular, I would not have accepted Bushline'scounterfactual that it would have fixed one-third of their lending, and floated theremaining two-thirds. Given its debt position of $19.46 million, and the forecastedcashflow shortfalls, Bushline needed certainty in terms of the interest rates payable onits loan. In addition, the predominant form of lending to the rural sector at this timewas on a fixed rate basis. I do not consider Bushline would have opted for a floatingrate loan in the circumstances.[148] Finally, these findings mean it is unnecessary for me to consider the Bank'sdefences under the Limitation Act 1950. However my provisional view is that thiscase is not on all fours with Davys Burton v Thom.25 I would have been hesitant tofind the claims statute barred in those circumstances.[149] In summary, I have found that the Bank did not owe a duty of care. But evenif I had found that there was a duty, the claim would have faltered on other grounds.The negligence cause of action is dismissed.Breach of contract[150] Bushline claims that there was a partly written and partly oral contract, oralternatively a collateral contract with the Bank. Five separate terms of the allegedcontract are pleaded in the fourth statement of claim which were distilled into threemain terms during closing submissions:(a) That the margin would be fixed at 0.70 per cent for five years on all ofBushline's funding.(b) That the Bank would provide ongoing management and full advice.(c) That the Bank would stand by Bushline in good times and bad.[151] A collateral contract was pleaded in Cygnet also. The law regarding collateralcontracts is not controversial and was summarised by Palmer J as follows:[115] In some circumstances, courts can find there to be a collateral contract- a contract consideration for which is the making of another contract. The twocontracts are independent of, but related to, each other. The leading text on25 Davys Burton v Thom [2008] NZSC 65, [2009] 1 NZLR 437.contract law characterises collateral contracts in these terms: "the device maybe used to enforce a promise given prior to the main contract and but for whichthis main contract would not have been made". The attraction to a plaintiff ofa collateral contract being found to exist is potential escape from clauses thatexclude or limit liability in the main contract.(footnote omitted)[152] I do not consider the representations constituted terms of a collateral contractin this case. They are inconsistent with the primary written terms of the swaps andloan agreements. In particular, the alleged promise that margins would be held at 0.70per cent is inconsistent with clause 5 of the loan agreement which specifically providesthat margins are reviewable at any time. Mr England certified that he had given adviceon this agreement. It is inconceivable that advice was not given on clause 5, which,in the circumstances of a $19.46 million loan was of central importance to both parties.[153] In the same vein, I consider it implausible to suggest that the Bank would haveagreed an oral side deal on a loan agreement for $19.46 million. The terms andconditions upon which that loan was advanced were set out in a carefully drawn andcomprehensive agreement. The Bank required Bushline's trustees to receive legaladvice on that agreement. That conduct is inconsistent with an oral agreement to fixthe interest rate on a different basis.[154] The other alleged terms of the collateral contract are also inconsistent with theentire agreement clauses of both the swaps terms and the loan agreement. Bushlinesubmits that these clauses should not preclude the Court from inquiring into whetherthe representations constituted a term of the contract because it is not "fair andreasonable" that they have that effect within the meaning of s 4 of the ContractualRemedies Act 1979.26[155] I have already found that that there was no fraud or deceit which would preventthe Bank from relying on these clauses. I deal (briefly) with Bushline's otherarguments as to whether the terms should be conclusive.26 See PAE (New Zealand) Ltd v Brosnahan (2009) 10 TCLR 626 (CA) at [15] for the principlesrelevant to s 4 Contractual Remedies Act 1979.[156] Bushline claims that the fact that the swap confirmations were not signed byall four trustees means that the disclaimer clause in the bold box cannot apply. I donot agree. The IFMA was signed by all four trustees. The word "severally" has beenwritten in beside the signatures. That is sufficient evidence that the signatures of allfour trustees were not required on the swap confirmations.[157] The fact that Bushline's trustees did not receive legal advice on the swap termsuntil after the first swap was placed does not advance Bushline's case. The first swapis not in issue in this proceeding. It is the 2008 swaps which are at the heart of theclaim. By the time the 2008 swaps were agreed, Mr England had given his advice onthe swap terms.[158] The fact that the swap confirmation was not signed until after the swap wasplaced on 8 April 2008 does not provide a reason not to enforce the bold andcapitalised words in the box. The swap terms signed earlier made it plain that theywould govern all future swap transactions. And, by the time of the 2008 swaps,Mr Coomey had signed a swap confirmation including the bold box on at least threeseparate occasions.[159] Bushline also argued that the disclaimer clauses in the swap terms do not apply,because this claim is not about the swaps component of the transaction, but onlyconcerns the loan component. That argument is strained. Although the marginrepresentation only concerns the loan, the fixed cost, transferability, and ongoingmanagement, representations are squarely about swaps. In any respect, both the loanagreement and the swaps agreement include entire agreement clauses which are atodds with a representation forming a separate term of a collateral contract.[160] Finally, for the reasons set out in relation to the negligence claim, I considerMr Schurr and Mr England's involvement in this case also makes it fair and reasonablethat the clauses are treated as conclusive. Their role as independent trustees andadvisers to Bushline, coupled with Mr England's legal advice on both the loan andswap agreements, redresses any imbalance between the parties. That includes anyimbalance in negotiating power, and knowledge and expertise about swaps.[161] The parties agreed on how the risk associated with a $19.46 million loan, andthe associated swaps, was to be allocated. There is no reason in this case not to respectthat agreement. The breach of contract cause of action is dismissed.Contractual Remedies Act 1979[162] Bushline claims it was induced it to enter into the April 2008 swaps by the fivepleaded representations. It claims relief under s 6 of the Contractual Remedies Act1979.[163] I consider the exclusion of liability in clause 10.1 operates to defeat Bushline'sclaim in this case. As Palmer J held in Cygnet, that clause excludes contractual liabilityfor misrepresentations.27 It is effective irrespective of whether it is "fair andreasonable" to uphold the clause under s 4 of the Contractual Remedies Act 1979.[164] In addition, I consider Bushline is unable to establish an essential ingredient ofthe cause of action, being reliance and inducement. Not only did Bushline have theopportunity to seek separate legal advice on the transactions, it actually received thatlegal advice on both the swap terms and the loan agreement. The terms of bothagreements made it clear that the Bank understood that Bushline was capable ofunderstanding the transaction, and was relying on its own independent enquiry inproceeding with both transactions. If, contrary to these clauses, Bushline went aheadwith the transaction still placing reliance on the Bank's representations, then it did soat its own risk.[165] In any respect, as Bushline accepts, its claims are time barred by s 4 of theLimitation Act 1950. Bushline entered the swaps and loan agreement in April 2008which is more than six years before the claim was filed in May 2014. For the reasonsset out earlier, the time period is not postponed by the Bank's alleged deceit.[166] The Contractual Remedies Act 1979 cause of action is dismissed.27 Cygnet Farms Ltd v ANZ Bank New Zealand Ltd [2016] NZHC 2838, [2017] 2 NZLR 538 at [112].Fair Trading Act 1986[167] Bushline claims that the representations were misleading and deceptive inbreach of s 9 of the Fair Trading Act 1986. In addition it pleads that the Bank failedto disclose the following:(a) By entering into the swaps the Trusts would be subject to a MRRwhich could affect the Trusts' risk profile and margins charged byANZ;(b) The break costs under a swap were not calculated on the same basisas the early repayment fee under a fixed rate loan.[168] The Bank claims that this cause of action is time barred by s 43A of theFair Trading Act 1986. That section provides that a person may apply for an orderunder s 43 at any time within three years after the date on which the loss or damagehad already occurred or was likely to occur. The principles relevant to s 43A set outin the Supreme Court's judgment in Commerce Commission v Carter Holt Harvey,28were summarised in Cygnet as follows:29(a) "time starts running when the applicant discovers or ought to havediscovered that loss or damage has already occurred, or is likely tooccur in the future".(b) discovering loss means being aware of it;(c) being likely to occur means loss is more probable than not; and(d) the loss that must be discovered is more than minimal loss.[169] Bushline argues that time did not start to run until it discovered that the Bank'sconduct amounted to a contravention of the Fair Trading Act, which was not until theCommerce Commission began investigating the Bank's conduct. It also argues that itcould not have reasonably discovered the contravention of the Act, because it did notknow of the Bank's deceptive conduct, being the failure to correct misrepresentationsprior to the swaps and loans being agreed.[170] I have already found that the Bank did not act deceitfully or fraudulently, whichdisposes of the second of Bushline's submissions. The first submission was28 Commerce Commission v Carter Holt Harvey Ltd [2009] NZSC 120, [2010] 1 NZLR 379.29 At [176].considered and dismissed in Cygnet.30 The clock started ticking when Bushline hadknowledge that the statements made were incorrect, rather than when they knew thatthose false statements amounted to a contravention of the Act.31[171] Bushline's Fair Trading Act 1986 cause of action was pleaded in the originalstatement of claim filed on 27 May 2014. If there was knowledge or awareness thatdamage had already occurred or was likely to occur in the future arising out of themisrepresentations or non-disclosure conduct prior to 27 May 2011, then the claimswill be statute barred.[172] The only representation which I have found was either made or was misleadingin this case is the fixed cost representation.32 In relation to that representation,Bushline knew by at least 26 May 2011:(a) That its margin was not fixed, whether at 0.70 per cent or at all. TheCoomeys had been told that their margins would go up in August andOctober 2008. Bushline's margin on its swap related lending wasincreased in December 2008, and then again in March 2009.(b) That break fees were calculated differently. By January 2009, theCoomeys were receiving advice from their accountant, Mr Einarsson.There was a meeting on 29 January 2009 where the issues around thecalculation of break fees were discussed. There were a number ofemails between Mr Einarsson and the Bank in February 2009 regardingthe transferability of the swaps, and the cost of breaking the swaps atthis time.[173] The claims in respect of these representations, and the non-disclosure conductconcerning the break costs set out in (b), are therefore statute barred.30 At [179] and [180].31 Houghton v Saunders [Lifting Stay] (2011) 20 PRNZ 509 (HC).32 For the reasons set out in the oppression section which follows, I have not found the "good timesand in bad times" representation to be misleading and/or breached in this case.[174] The only fact which Bushline did not know about was the Bank's MRR.Mrs Coomey's evidence is that they did not find out about the MRR until afterproceedings were issued. I accept that evidence. That claim is not statute barred.[175] I have already found that non-disclosure of the MRR made the statement thatswaps were like a fixed rate loan misleading and deceptive in breach of s 9. ButBushline's pleaded claim under the Fair Trading Act 1986 does not just rely on thefixed rate representation. Non-disclosure of the MRR is pleaded as a separate andstand-alone category of misleading and deceptive conduct unconnected to therepresentations comparing swaps with fixed rate loans.[176] Neither party addressed whether general non-disclosure, unconnected to thefixed costs representation, was misleading and deceptive in breach of s 9. Given myfindings as to causation below, it is unnecessary to determine the issue to dispose ofBushline's case. Because it may have significance for other cases, I decline to do soin the absence of legal argument. The rest of the analysis of this cause of actionproceeds on the assumption that the stand alone non-disclosure of the MRR constituteda breach of s 9.[177] In Red Eagle v Ellis,33 the Supreme Court said that if the Court decides therehas been misleading and deceptive conduct, it must then go on to consider whether theclaimant was actually misled or deceived by the conduct, and if so, whether the breachwas an effective cause of the claimant's loss or damage.34[178] The disclaimer clauses are relevant to the causation enquiry under s 43. Therelevant principles arising out of PAE (New Zealand) Ltd v Brosnahan35 were recentlysummarised by the Court of Appeal in Fonterra v McIntyre as follows:36[178] In PAE (New Zealand) Ltd v Brosnahan this Court accepted as settledlaw the proposition that a party cannot contract out of the s 9 prohibition onmisleading or deceptive conduct. The policy justification is that the FTA isdesigned to protect the consuming public. However, this Court found that33 Red Eagle v Ellis [2010] NZSC 20, [2010] 2 NZLR 492.34 See Poplawski v Pryde [2013] NZHC 2042 at [47]; Poplawski v Pryde [2013] NZCA 229, (2013)14 NZCPR 528 at [44]–[45].35 PAE (New Zealand) Ltd v Brosnahan (2009) 10 TCLR 626 (CA).36 Fonterra Co-operative Group Ltd v McIntyre and Williamson Partnership [2016] NZCA 538,(2016) 14 TCLR 435.while the policy factors were a starting point, the consumer protection purposewas not necessarily an absolute or decisive consideration. Supporting thispoint, the following passages from this Court's earlier decision in David vTFAC Ltd were cited:"[63] While such mechanisms are not determinative, it hasbeen accepted that they are relevant to the s 9 analysis. Forexample, in Kewside Pty Ltd v Warman InternationalLtd (1990) ATPR (Digest) 46-059, French J said (at 53,222):'A disclaimer or exclusion clause will affectliability for misleading or deceptive conductonly if it deprives the conduct of that quality orbreaks the causal connection between conductand loss. Whether it has that effect in a givencase is a question of evidence and not aquestion of law."See also Butcher v Lachlan Elder Realty Pty Ltd (2004) 218CLR 592 (HCA) at [50]—[51]. But a disclaimer or similarclause may be overwhelmed by oral assurances or otherconduct (see Phyllis Gale Ltd v Ellicott (1997) 8 TCLR 57(HC) at 65—66 and Cornfields [Ltd v Gourmet Burger CoLtd (2000) 9 TCLR 698 (HC)] at [41])."[179] As the above passages show, the question of the effect of the disclaimer clauseson relief is a matter of fact. It was not necessary for the Court of Appeal to considerthe issue in that case as the trial judge had left the effect of the entire agreement clausesto be determined as part of any later enquiry into reliance and damages.[180] For the reasons I have already canvassed under the negligence andmisrepresentation causes of action, I consider the disclaimer clauses, andMr England's advice on them, break the chain of causation insofar as reliance on therepresentations. The terms of the agreements made it clear that Bushline was notrelying on anything the Bank said about swaps being like a fixed rate loan, and that itagreed to the transaction in reliance on its own independent enquiries.[181] But that assessment does not sit easily with the non-disclosure of the MRR asa stand-alone category of misleading and deceptive conduct. It is one thing to agreethat you have not relied on anything the Bank has said ("swaps are like fixed rateloans"); but quite another to agree that you have not relied on anything the Bank hasnot said. In my view, the disclaimer clauses would not deprive the non-disclosure ofthe MRR of its misleading and deceptive conduct (assuming that it is proved to bemisleading), or break the chain of causation, in those circumstances.[182] Ultimately, however, the causation claim in this case fails on the evidence. Tothe extent there was a dispute between the expert evidence of Mr Dillon (for Bushline)and Mr Glubb (for the Bank) on the effect of the MRR, then I prefer the evidence ofMr Glubb. His opinion was based on an analysis of what would have happened hadthe MRR been excluded from any assessment of the Bank's exposure to Bushline. Inhis expert opinion, Bushline would still have been in serious financial difficulty hadthe MRR not been in place. And, the Bank would have taken the same action to protectits position in light of the rapid deterioration in Bushline's business after 2009. MrGlubb's evidence was not challenged in cross-examination. In the face of thatevidence, I am not prepared to find that the non-disclosure of the MRR was causativeof any loss, and I decline to grant relief under s 43 of the Fair Trading Act 1986.Oppression – CCCFA[183] Bushline claims that the Bank exercised its rights and powers in an oppressivemanner contrary to s 120(b) of the CCCFA. It seeks an award of damages under s 127of that Act.[184] The particulars of the alleged oppressive conduct overlap to a substantial extentwith the representations and non-disclosure conduct the subject of the other causes ofaction. My earlier findings in relation to the margin representation, the transferabilityrepresentation, the fraud and deceit claims, and the non-disclosure of the MRRrespond to those specific claims of oppression and are not considered further in thispart of the judgment.[185] Bushline also claims that Bank staff made various threats, forced the sale ofproperty, and acted in a way designed to force the financial collapse of Bushline'sbusiness activities. The substance of the oppression claim is that the Bank breached apromise to be there in good times and in bad times.[186] Section 120(1)(b) of the CCCFA permits a Court to reopen a credit contract ifa party has exercised its rights or powers in an oppressive manner.37 Oppressive isdefined in s 118 of the CCCFA as follows:118 Meaning of oppressiveIn this Act, oppressive means oppressive, harsh, unjustly burdensome,unconscionable, or in breach of reasonable standards of commercialpractice.[187] In GE Custodians v Bartle, the Supreme Court considered the meaning ofoppressive and said:38 That follows from the fact that the definition of "oppressive" is wider thanunconscionable conduct and includes a "breach of reasonable standards ofcommercial practice. The Court of Appeal has correctly said in GreenbankNew Zealand Ltd v Haas that the various words which together form thedefinition of the term "oppressive" all contain different shades of meaning butthey all contain the underlying idea that the transaction or some term of it isin contravention of reasonable standards of commercial practice. That sets anobjective standard. A contract or course of conduct may therefore, as ArnoldJ also said, be treated as oppressive even though the party whose conduct issaid to be oppressive may be (subjectively) blameless because the party issimply following industry practice. Where that practice is in breach ofreasonable standards, compliance with it will not immunise a lender. It is forthe courts rather than the industry to set the standard.[188] Section 124 sets out guidelines for deciding whether to reopen a credit contract,or an arrangement. Those guidelines include the circumstances relating to the makingof the arrangement or the exercise of any right or power conferred by the arrangement.As Mr Branch submits, oppression needs to be assessed in context.[189] Relevant context in this case is the fact that the Waverley purchase was a realrisk for Bushline. The purchase price was 100 per cent financed on budgets whichforecasted a three year deficit. The lending for this purchase increased its overall debtto nearly $19.5 million. Both the Bank and the Coomeys were well aware of this risk.The Bank made sure of it by pointing it out in one of the letters which accompaniedthe loan offer:37 Section 7 of the CCCFA defines a credit contract to mean a contract under which credit is or maybe provided, and a transaction that is in substance a credit contract, even if the contracts orarrangements do not themselves constitute a credit contract.38 GE Custodians v Bartle [2010] NZSC 146, [2011] 2 NZLR 31 at [46].We would however like to highlight that in the Bank's assessment yourprojected cashflow may be insufficient to fully meet all your outgoingsincluding interest. Given that the projected cashflow excludes any capitaldevelopment expenditure, we would expressly ask you to confirm that anysignificant capital development expenditure be made only after discussionswith your Rural Manager. The new lending is effectively borrowed againstthe equity in your business and supported by the security held by the Bank.This further borrowing may result in a reduction of your equity over time as aresult of cashflow shortfalls.[190] As Mr Hunter submitted in closing: "Bushline needed fair winds for Waverleyto work out, but that did not happen; it hit heavy weather in every sense of the word".That heavy weather included the global financial crisis, high empty rates forBushline's herd, a drop in the Fonterra pay out through the first season, and a wetspring in the 2009/2010 season. Those external factors clearly had an impact onBushline's financial condition and are part of the background circumstances in whichthe Bank's conduct is to be considered.[191] A number of "internal" factors also had an impact. These were every daydecisions made by the Coomeys in the management of their farming business. Forexample, the decision to amalgamate two of the Kaponga farms resulted in cowsgetting sore feet; and the decision to spend more on extra feed came with nodiscernible return.[192] In addition, the budgets prepared to obtain funding were overly optimistic, andBushline failed to meet its predicted milking targets. Although Mr Harvey assisted inpreparing those budgets, Mr and Mrs Coomey must take responsibility for the inputs.It was, after all, their business.[193] With that context in mind, I turn to the specific allegations which found theoppression claim. The overarching allegation is that the Bank did not stick byBushline through the good times and bad times. That representation was made in oneof the letters dated 18 March 2008. In the highly competitive environment that existedat the time, it was undoubtedly a promise designed to ensure Bushline remained withthe Bank, and did not transfer its business to a competitor.[194] To the extent that this promise is relied on to say that the Bank should havecontinued to fund Bushline no matter what the circumstances, then it is rejected. Thespecific obligations being accepted by the Bank were set out in the loan and swapterms on which Bushline received legal advice. Those specific obligations must takeprecedence over statements in a covering letter which, if not actual puffery, certainlycome close to it.[195] In any event, the Bank did offer additional financial support in an effort to seeBushline through the hard times. It extended the overdraft on numerous occasions. InMarch 2008, the overdraft sat at $600,000, but successive extensions saw it increasedto $2.1 million by August 2009. This was to accommodate Bushline's over-expenditure, and to assist with cashflow. The Bank also advanced new funds andrefinanced existing loans from 2008 onwards.[196] Increased margins undoubtedly placed further pressure on Bushline'sotherwise precarious financial position. But those margins were increased across theboard in response to an unprecedented global situation. And, the $19.46 million loanagreement which Bushline signed after receiving legal advice, allowed the Bank to dothe very thing that it did. Some of Bushline's interest rates were priced above theapplicable guide. However, the lending associated with swaps was priced belowguide, and other loans were priced at guide. Mr Glubb's uncontested expert opinionwas that the Bank's margins were as one would expect for a customer in Bushline'sposition.[197] Bushline complains that the Bank forced it to sell property in order to reducedebt levels. That property included the Waverley farm in 2012, an 11 hectare run-offsection in 2010, and residential houses in 2009. But the evidence shows thatBushline's trustees had come to an independent view that assets would have to be soldto reduce debt and proposals were made to the Bank on that basis.[198] In any respect, in the circumstances which Bushline faced at the time, requiringa sale of assets to reduce debt was not unreasonable. I accept Mr Glubb's expertevidence that the Bank acted reasonably in requiring Bushline to reduce its debt.[199] Bushline made a number of specific allegations of oppression which I addressbriefly below:(a) Increasing margins beyond 1.8 per cent: Bushline complains that theBank increased interest rate margins after Mr Nitschke guaranteed thatthe margin on the funding would not go above 1.8 per cent on29 January 2009. But even if such a promise was made — and onbalance, I consider it likely that it was — it would have related to thelending hedged by swaps. The margin on Bushline's lending hedgedby swaps did not increase above 1.8 per cent, so no issue with thatalleged representation arises.(b) Increasing margins as a penalty: Bushline says the Bank increasedmargins as a penalty for Bushline refusing to extend or enter newswaps. This allegation is unsubstantiated. I accept Mr Langwell'sevidence that as the swaps matured, the lending had to be re-structuredand re-priced. Mr Nolan's evidence was that it was priced according toguide. There was no penalty applied for failure to take up swaps.(c) Ensuring other creditors took action against Bushline: I reject theallegation that the Bank conducted itself in a way designed to ensureother creditors of Bushline took action which would result in the saleof its assets. Those actions included reversing IRD cheques anddictating which creditors could be paid. There would simply be nointerest or advantage to the Bank in conducting itself this way. Ifanother creditor undertook liquidation proceedings, the Bank itselfcould lose control of the process and prejudice its own securityposition.(d) Acting 'threateningly': Bushline claims that Mr Nolan orally threatenedto exercise ANZ's securities by appointing a receiver with an associatedstatement that the Coomeys could lose everything, and he drew adiagram showing what would occur. It is also alleged that he threatenedto put Bushline's margin up by a further 2.0 per cent unless Bushlinesold the Waverley farm.It is likely that Mr Nolan told Bushline that they risked liquidation andreceivership if they did not take immediate action to sell assets andreduce debt. Mrs Coomey's evidence was compelling. It was a verystressful situation for her and the thought of losing everything after allof their hard work left her distraught. Mr Nolan is also likely to havementioned the prospect of increased margins in the event property wasnot sold to reduce debt. But there is insufficient evidence of Mr Nolan"threatening" the Coomeys as alleged, rather than outlining possibleconsequences of continued default.[200] Stepping back, and considering the Bank's conduct as a whole, I do notconsider that the Bank's actions amounted to oppression. I have no doubt that theCoomeys suffered significantly throughout 2008 to 2013. Many others suffered thesame fate. Increased margins on Bushline's lending did not help that situation, andthe pressure to reduce debt or face total collapse added enormously to the strain. Butthe Bank's conduct cannot be regarded as harsh, unjustly burdensome, orunconscionable in the circumstances. It did not breach reasonable standards ofcommercial practice. There is no basis upon which to reopen the loan contracts unders 120 of the CCCFA and no grounds to grant relief. The oppression cause of action isdismissed.Summary of findings[201] My findings in relation to each of Bushline's causes of action are summarisedbelow:(a) Negligence: There was not a proximate relationship between Bushlineand the Bank sufficient to establish a duty of care. That is largely dueto the effect of the disclaimer clauses, upon which Mr England advised.Even if such a duty had been found, the breach did not cause loss.(b) Breach of contract: The representations did not constitute terms of acollateral contract as they were inconsistent with the terms of the loanand swap agreements, including the entire agreement clauses. It wasfair and reasonable that the entire agreement clauses and otherdisclaimer clauses were conclusive.(c) Contractual Remedies Act 1979: Clause 10.1 of the swap terms appliesso as to exclude liability for misrepresentations. The disclaimerclauses, and the legal advice on them, meant the reliance andinducement ingredients of the cause of action could not be established.The claims were time barred by the Limitation Act 1950, and thelimitation period is not postponed by fraudulent concealment.(d) Fair Trading Act 1986: The claims are statute barred, except for claimsrelating to the non-disclosure of the MRR. The disclaimer clausesbreak the chain of causation insofar as the positive representations areconcerned, but were not conclusive in relation to the stand aloneallegation of non-disclosure of the MRR. If that non-disclosure wasfound to be in breach of s 9 (which is not conclusively determined), theMRR did not cause Bushline to suffer any loss and there is no basisupon which to grant relief under s 43 of the Fair Trading Act 1986.(e) Oppression: The Bank did not act oppressively and accordingly thereis no basis upon which to reopen the credit contracts under s 120 of theCCFA.Result[202] Bushline's claims are dismissed. This makes it unnecessary to determine thethird party claim by the Bank against Mr England and that claim is also dismissed.[203] The parties shall endeavour to agree on costs. If agreement cannot be reached,then memoranda in support of a claim for costs shall be filed and served by Friday, 10November 2017, with memoranda in response filed on or before Friday, 24 November2017.Edwards JCounsel: S M Hunter, AucklandSolicitors: Harkness Henry, HamiltonChapman Tripp, AucklandMcElroys, Auckland