BUSHLINE TRUSTEES v ANZ BANK NZ LTD [2017] NZHC 829

BUSHLINE TRUSTEES v ANZ BANK NZ LTD [2017] NZHC 829 [1 November 2017]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2014-404-001276[2017] NZHC 829BETWEEN 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 LTTDDefendantROBERT LEWIS ENGLANDThird PartyHearing: [On the Papers]Counsel: M D Branch and K F Shaw for the PlaintiffsS M Hunter, M C Sumpter and D T Street for the DefendantA A Challis and D P Turnbull for the Third PartyJudgment: 1 November 2017JUDGMENT OF EDWARDS JThis judgment was delivered by Justice Edwardson 1 November 2017 at 4.30 pm, pursuant tor 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:Counsel: S M Hunter, AucklandSolicitors: Harkness Henry, HamiltonChapman Tripp, AucklandMcElroys, AucklandIntroduction[1] By judgment dated 16 October 2017, I dismissed all five of the plaintiffs'(Bushline) causes of action.1[2] Bushline applies to recall the judgment on the grounds that I failed to consider and determine its claim for a declaration under the Contractual Remedies Act 1979 and Fair Trading Act 1986 causes of action.2[3] The defendant (the Bank) opposes the recall application on the grounds that relief is only relevant where a cause of action succeeds, and both causes of action failed in this case.The Judgment[4] Bushline's claim was pleaded in the fourth amended statement of claim. Fiveseparate causes of action were pleaded: negligence, breach of contract, misrepresentation under the Contractual Remedies Act, breach of the Fair Trading Act, and oppression under the Credit Contracts and Consumer Finance Act 2003. The pleaded claim centred on representations made about the loan and swap transactions agreed between the parties in 2008 and the Bank's treatment of Bushlineafter the transactions were concluded.[5] Both the Fair Trading Act and Contractual Remedies Act causes of action were pleaded on the basis that the Bank had made misrepresentations regarding interest rate swaps which induced Bushline to enter into the swap transactions. Bushline claimed that the misrepresentations (the misleading and deceptive conduct) had caused it to suffer loss which was separately categorised and quantified in the fourth amended statement of claim.[6] The prayer for relief for each cause of action comprised 11 and 12 subparagraphs respectively. All but one of the subparagraphs sought damages, an1 Bushline Trustees v ANZ Bank NZ Ltd [2017] NZHC 2520 [16 October 2017].2 The application was made by memorandum of counsel dated 19 October 2017. It was opposed by the defendant in a memorandum dated 20 October 2017. A further memorandum on behalf of the plaintiffs was filed on 24 October 2017. Counsel for the defendant responded by memorandum dated 25 October 2017. The application was referred to me on 25 October 2017.inquiry into damages, and costs. The first subparagraph in each prayer for relief sought declaratory relief.[7] The declaration sought in the Fair Trading Act cause of action was adeclaration that "the ANZ breached s 9 of the Fair Trading Act 1986 in the mannerset out above". The declaration sought in the Contractual Remedies Act cause ofaction was that "the ANZ made the misrepresentations set out above".[8] The trial took place over two weeks. Both Bushline and the Bank called expert evidence to address the question of loss. By the time of closing submissions, the case had narrowed in focus and part of Bushline's damages claim was abandoned or amended to reflect the evidence.[9] Bushline presented its case in closing on the basis that determination of two factual issues (whether the Bank had acted deceitfully or fraudulently, and whether the margin representation had been made) would dispose of the case. Lengthy submissions were made on the quantification of loss.[10] I made factual findings in relation to the pleaded representations. I found that most of the pleaded representations either had not been made, or if made, were not misleading or breached.3 However, in relation to the representation that interest rate swaps were like a fixed rate loan, I found that such a representation had been made to Bushline, and that the representation was misleading. That was because the Bank had failed to disclose the downsides of an interest rate swap when compared to a fixed rate loan. Specifically, it had failed to disclose that margins could move, that break costs were calculated differently, and that there could be an impact on futurelending decisions as a result of the "MRR".4[11] In relation to the Contractual Remedies Act cause of action, I found that clause 10.1 of the swap terms excluded liability for misrepresentation.5 I also found that the disclaimer clauses meant that the reliance and inducement ingredients of the3 Bushline Trustees v ANZ Bank NZ Ltd [2017] NZHC 2520 at [85], [97] and [103].4 At [92]–[93].5 At [163].cause of action could not be established.6 Finally, I found that the claim was time- barred.7[12] In relation to the Fair Trading Act cause of action, I found that the fixed cost representation was misleading and deceptive in breach of s 9 of the Fair Trading Act.8 However, the claims that it was misleading and deceptive because of the failure to disclose that margins could move, and that break costs were calculated differently, were time-barred pursuant to s 43A of the Fair Trading Act.9 The surviving claim was that the fixed cost representation was misleading and deceptive for failure to disclose the MRR. The pleading also included an allegation that the non-disclosure of the MRR was itself misleading and deceptive. I declined to determine that claim in the absence of legal argument on the issue.10[13] Having found a breach of s 9 of the Fair Trading Act, I then considered whether to grant relief under s 43 in accordance with the principles set out by the Supreme Court in Red Eagle v Ellis.11 Ultimately, I declined to grant relief under s 43 because I was not persuaded that the non-disclosure of the MRR was causative of any loss.12[14] All causes of action were dismissed.Relevant legal principles[15] Rule 11.9 of the High Court Rules allows a judge to recall a judgment any time before a formal record of it is drawn up and sealed.[16] The grounds upon which a judgment may be recalled are strictly limited.13The defined categories of cases in which recall may be appropriate were set out by Wild CJ in Horowhenua County v Nash (No 2).14 Bushline's application is pursued6 Bushline Trustees v ANZ Bank NZ Ltd [2017] NZHC 2520 at [164].7 At [165].8 At [175].9 At [172]–[173].10 At [176].11 Red Eagle v Ellis [2010] NZSC 20, [2010] 2 NZLR 492.12 Bushline Trustees v ANZ Bank NZ Ltd [2017] NZHC 2520 at [182].13 Erwood v Maxted (2010) 20 PRNZ 466 at [3].14 Horowhenua County v Nash (No 2) [1968] NZLR 632 (SC) at 633.on the basis of the third category, that is, "where for some very special reason justicerequires that the judgment be recalled".[17] The scope of this third category was considered by the Court of Appeal inUnison Networks Ltd v Commerce Commission.15 The Court of Appeal considered the case of Brake v Boote in which recall had been given for the failure to consider and determine an interest claim which was properly before the Court.16 As the Court of Appeal observed, the Judge in that case was influenced by the fact that there was not a persuasive argument as to why interest would not have been awarded as sought if the matter had been considered. The Court of Appeal said that the basis for recall in Brake v Boote was intended to be a narrow one, and the category of cases where recall would be appropriate was considered to be rare.17[18] One of the grounds for recall in Unison was that the Court of Appeal had failed to consider the application for declaratory relief. In the substantive appeal, the Court had found that an initial threshold set by the Commerce Commission was not lawful as it was inconsistent with the Commerce Act, but that the reviewed threshold was lawful. As to the claim that the Court had failed to consider the application for declaratory relief, despite the breach in relation to the initial threshold, the Court of Appeal said:[41] Putting to one side for these purposes the question of whether or not this aspect was disregarded, we consider that a substantive reason for making a declaration would be necessary to trigger a recall. In terms of that, the Court has made clear findings about the lawful purpose of the thresholds and the Commission accepts it is bound by those findings. The argument now advanced for making a declaration is one of convenience. That is not a sufficient basis for recall especially where the matter can be corrected on appeal.Should the judgment be recalled?[19] The Contractual Remedies Act cause of action was dismissed on liability grounds. The question of relief did not arise.15 Unison Networks Ltd v Commerce Commission [2007] NZCA 49.16 Brake v Boote (1991) 4 PRNZ 86.17 Unison Networks Ltd v Commerce Commission [2007] NZCA 49 at [23] and [34].[20] Similarly, the issue of relief did not arise in relation to those Fair Trading Act claims which were time-barred, or which I specifically declined to determine. Those findings made it unnecessary to address either the damages or declaratory relief sought by Bushline.[21] However, I accept that the decision not to grant relief under s 43 of the Fair Trading Act did not directly address Bushline's prayer for declaratory relief.The jurisdiction to grant a declaration does not arise under s 43. And, the causation inquiry undertaken in accordance with the principles in Red Eagle v Ellis, was directed at loss or damage caused by the misleading or deceptive conduct. In that very narrow respect the question of declaratory relief was not addressed.[22] However, that is not enough, in and of itself, to justify recall of the judgment. As the Court of Appeal said in Unison, there must be a substantive reason to justify recall for declaratory relief.[23] Bushline submits that my factual findings mean that it is "entitled" to a declaration. I do not agree. Declaratory relief is a discretionary remedy. It does not automatically follow a finding of breach. Factors such as whether the issue is moot, and the utility of granting a declaration, are weighed in the balance.18[24] I am not satisfied that the grant of a declaration would serve any useful purpose in this case. The Bank is bound by my factual findings that the fixed cost representation was misleading for failure to disclose the MRR. Those findings are a matter of public record.[25] To the extent that there is a public interest in declaring a breach of s 9 of the Fair Trading Act, that interest has already been met by the declaration made by Venning J in Commerce Commission v ANZ Bank New Zealand Ltd.19 The Chief High Court Judge considered whether he had jurisdiction to declare a breach of s 9, and considered whether or not the making of the declaration would have practical utility. His Honour concluded that it would have utility in that case as the18 See e.g. Kung v Country Section NZ Indian Association Inc [1996] 1 NZLR 663 (HC) at 666.19 Commerce Commission v ANZ Bank New Zealand Ltd [2015] NZHC 1168.marketing of swaps was a matter of public interest, a declaration would be a public record of a breach of the Act, and it would deter the Bank and others from engaging in similar conduct in the future. The declaration was also considered to have utility because it confirmed to the public and to the commercial community generally that the Commission was willing and would act to enforce the Act where appropriate.20The following declaration was made:Between on or about July 2005, and 31 March 2009, ANZ Bank New Zealand Limited breached s 9 of the Fair Trading Act 1986, in that, being in trade, it engaged in conduct that was misleading in relation to some of the customers listed in Schedule 1 to the Statement of Claim, in that it understated some of the risks and/or overstated some of the benefits of interest rate swap arrangements to those customers.[26] Contrary to Bushline's submissions, I do not consider a refinement of thisdeclaration would serve any real purpose; particularly when the question of declaratory relief only arises in relation to a very narrow aspect of the fixed cost representation.[27] Finally, my factual findings distinguish this case from the declaration made inCygnet Ltd v ANZ Bank New Zealand Ltd.21 In that case Palmer J found that the Bank owed Cygnet a duty of care which had been breached, causing loss. However, the damages claim was precluded by s 6(1)(b) of the Contractual Remedies Act.Palmer J made a declaration that "in promoting and entering into interest rate swaps with Cygnet, [the Bank] breached the duties arising from its relationship to take reasonable care that explanations it proffered were accurate and that its replies toinquiries were correct".22 In addition to granting relief for a breach which caused loss, the declaration highlighted a matter of wider public interest, which Palmer Jtermed a "gap in the law". None of those issues arise in this case.[28] In summary, I am not persuaded that this is one of those very special or rare cases where the interests of justice require the recall of the judgment. In the words of Wild CJ, the judgment stands for better or worse subject to appeal.2320 At [18].21 Cygnet Ltd v ANZ Bank New Zealand Ltd [2016] NZHC 2838.22 At [193].23 Horowhenua County v Nash (No 2) [1968] NZLR 632 (SC) at 633.Result[29] The application for recall is declined.[30] The timetable for the exchange of memoranda regarding costs on the substantive decision was suspended pending determination of the recall application. Therefore, I direct that any memoranda in support of costs be filed on or beforeWednesday, 21 November 2017. Any memoranda in opposition are to be filed on or before Wednesday, 5 December 2017.___________________Edwards J