FORIVERMOR LIMITED V ANZ NATIONAL BANK LIMITED HC AK CIV-2011-404-00072

FORIVERMOR LIMITED V ANZ NATIONAL BANK LIMITED HC AK CIV-2011-404-00072 [31 October 2012]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2011-404-00072[2012] NZHC 1763BETWEEN FORIVERMOR LIMITEDPlaintiffAND ANZ NATIONAL BANK LIMITEDDefendantHearing: 13 July 2012Counsel: G J Thwaite for PlaintiffC T Walker and Z A Brentnall for DefendantJudgment: 31 October 2012In accordance with r 11.5, I direct the Registrar to endorse this judgmentwith the delivery time of 11am on the 31st day of October 2012.JUDGMENT OF GODDARD JSolicitors:G J Thwaite, email: gthwaite@iproling.co.nzGilbert Walker, PO Box 1595, AucklandTable of ContentsIntroduction ................................................................................................................ [2]Background .............................................................................................................. [12]Mr and Mrs Morley discuss the possible purchase with their relationship manager at the Bank ................................................................................................................... [24]Mr Morley telephone Forivermor's accountant ....................................................... [40]Mr McLauchlan follows up on the meeting of 22 August ....................................... [41]The Morleys and Borkins enter into negotiations .................................................... [45]The agreement for sale and purchase is executed subject to finance ....................... [51]Mr Blackwood's concern which he raised with Mr McLauchlan ............................ [56]The agreement for sale and purchase becomes unconditional ................................. [63]The situation unravelled quite swiftly following the agreement becoming unconditional ............................................................................................................ [68]Negotiations and discussions with the Bank subsequently ...................................... [69]Sale of the Gordon Road farm ................................................................................. [82]Disposition of the Borkin farm ................................................................................ [88]Mr Borkin's evidence ............................................................................................... [89]First cause of action: Was there a breach of contract? ............................................ [92]Second cause of action: damages for misrepresentation under the Contractual Remedies Act 1979 .................................................................................................. [99]Third cause of action: breach of the Code of Banking Practice requiring a fair and reasonable conduct ................................................................................................. [102]Fourth cause of action: breach of contract (implied term) .................................... [106]Fifth cause of action: negligence........................................................................... [108]Sixth cause of action: breach of fiduciary duty ..................................................... [111]Seventh cause of action: Breach of s 9 of the Fair Trading Act 1986 ................... [115]Eighth cause of action: Breach of s 13(h) Fair Trading Act 1986 ......................... [117]Ninth cause of action: Breach of Consumer Guarantees Act 1993 ....................... [119]Conclusion ............................................................................................................. [121]Costs ....................................................................................................................... [122][1] This claim is premised on the view that the defendant, the ANZ National Bank Limited (ANZ), intervened in a productive farming economy for its own profit, thereby bringing about the financial ruin of the plaintiff, Forivermor Limited. The gain for ANZ was said to be the extraction of a premium from the economic disaster it had engineered.Introduction[2] The directors of the plaintiff, Mr and Mrs Morley, are hardworking and respected dairy farmers. There is no doubt they suffered a loss which can aptly be described as catastrophic. Their view of the catastrophe and its genesis was encapsulated in the following statement made in opening by Mr Thwaite on their behalf.Plaintiff company, through its farmer directors Mr & Mrs Morley, ran a modest dairy farm in the Matamata region. The business was respected for its frugality.Trusting to the urgings and advice of officials of the National Bank (Defendant), Plaintiff ended up agreeing unconditionally to buy a better and more expensive farm property. The benefit to the Defendant would be a larger loan, and thus more interest. Further, land prices might be encouraged to rise further, requiring more borrowing in the region.When Plaintiff needed the money to complete the purchase, Defendant Bank denied it funds.Ultimately Plaintiff lost its existing farm. Its equity has been about exhausted. Mr & Mrs Morley are now sharemilkers again, without any ownership interest in a farm.Defendant, for its part, was able to extract a premium from the economic disaster which it had engineered. It exercised its right to demand a break fee on the early repayment of loans when Plaintiff sold its farm.[3] Three clusters of facts are alleged to have underpinned the financial catastrophe that befell Forivermor and the Morleys: first, the existence of an"intimate business connection" between the plaintiff and ANZ giving rise to a fiduciary relationship; second, that the plaintiff was "persuaded" by ANZ to sign anagreement to buy an expensive neighbouring farm; and third, that ANZ refused to advance the plaintiff sufficient money to complete the purchase of this neighbouringfarm, thereby forcing the eventual sale of the plaintiff's existing farm.[4] The first cluster of alleged facts is based on the customer relationship which the plaintiff and Mr and Mrs Morley enjoyed with the ANZ, to which they had returned as customers in October 2005. At the time their customer relationship wasresumed in 2005, the Morleys said the Bank represented itself to them as a "Partner"in their farming business, with a desire to earn fair fees and an ability to give outsideadvice and to monitor the plaintiff's financial performance and its farmingoperations. Underpinning this, the plaintiff said, was the fact that ANZ earned about three times more per year (in interest) from the relationship than Mr and Mrs Morley earned in drawings as shareholders in the plaintiff.[5] In relation to the second cluster of facts, Mr and Mrs Morley say it was ANZ that approached them about buying the neighbouring farm, then in the ownership of Mr and Mrs Borkin. No real estate agent was involved in the sale. This was in August 2008. In the immediately following period, from 22 August to 18 September 2008, Mr and Mrs Morley say they were assured by ANZ of finance to undertake the purchase; were persuaded to sign the agreement for sale and purchase; felt justified in declaring the agreement unconditional; and received the first tranche of funds from ANZ to pay the deposit in two instalments. It is appropriate to record here thatthe plaintiff's solicitor was acting for Mr and Mrs Morley on the sale and purchase.[6] In relation to the third cluster of facts, Mr and Mrs Morley say that thereaftertheir position "unravelled". Forivermor was unable to sell part of its existing farm atthe price expected to partly fund the purchase of the Borkin property and ANZ refused to lend it more money, causing Forivermor to default under the agreement with Mr and Mrs Borkin. Eventually, Forivermor had to sell its existing farm as it could not bear the extra debt of the deposit.[7] A further unfortunate outcome is that not only have Mr and Mrs Morley lost their farm but Mr and Mrs Borkin are suing Forivermor for breach of contract in relation to the uncompleted purchase of their property, which they ultimately sold to new purchasers for a substantially lesser sum sometime after the plaintiff defaulted.[8] The crux of the plaintiff's case, as put, is that ANZ advanced enough money(for the deposit) to land the plaintiff in trouble, but not enough to retrieve its position. In this regard and in opening, Mr Thwaite submitted that litigation would not have been brought if ANZ had provided no funds and thus not enabled the agreement for sale and purchase to have been declared unconditional; or alternatively if ANZ had provided all of the funds necessary to complete the purchase of Mr and Mrs Borkin's property. The plaintiff's position is that thebridging finance (for the deposit) that was provided by ANZ simply enabled the agreement to become unconditional and unaffordable. In addition, ANZ charged penalty interest in the form of break fees on the lending when Forivermor had to sell its existing farm and repay its loans to the Bank early.[9] The plaintiff pleads nine causes of action in the following:(a) breach of contract;(b) misrepresentation under the Contractual Remedies Act;(c) breach of the Code of Banking Practice;(d) breach of Duty of Care (Negligence);(e) breach of a fiduciary duty (as a "Partner in the business");(f) misleading or deceptive conduct in breach of s 9 of the Fair Trading Act 1986;(g) misleading conduct in respect of services of a financier in breach of s 13 of the Fair Trading Act 1986; and(h) breach of the Consumer Guarantees Act 1993 (in relation to the proposed use of the house on the Borkin property for residential purposes).[10] Three heads of damages are claimed:(a) damages for the loss of bargain calculation, contractual interest and resale expenses in relation to the uncompleted agreement for sale and purchase with Mr and Mrs Borkin (this represents the amount that Mr and Mrs Borkin are suing the plaintiff for);(b) loss of equity in the plaintiff's farm property that it used to own – or –the diminution of its equity position in that property after it sold the property;(c) exemplary damages for outrageous conduct by ANZ, principally in relation to negligence and breach of fiduciary duty.[11] In terms of timeline, Mr Thwaite submitted that the focus of the claim is on a critical period of less than a fortnight, from 22 August 2008 to 10 September 2008. This critical period was preceded by a relatively long lead-in time and was followed by an unravelling over time.Background[12] Mr and Mrs Morley are experienced dairy farmers, having both come from dairy farming families and having worked in the industry for all of their married life. Prior to their marriage, Mr Morley had worked on his parents' dairy farm in theWaiuku area since leaving school in 1981.[13] The Morley family farming enterprise in Waiuku was successful. During the period Mr and Mrs Morley and the Morleys (Senior) were in partnership on the Waiuku property they expanded the size of their holding from 140 acres to about 1,000 acres through the purchase of four neighbouring farms and the sale of one farm. Mr Morley participated fully in this family expansion and acquisition process, including in helping to negotiate the purchases and in upgrading and extending the farming facilities to comply with various requirements of Fonterra.[14] In 1990 Mr and Mrs Morley, while still in the family partnership, purchased a farm property of their own at Waiuku, financed by the National Bank.[15] In 2000 Mr and Mrs Morley left the family partnership to work as 50/50 sharemilkers. This they did for two years.[16] In January 2003, Forivermor Limited was incorporated and, shortly after, the company purchased the farm property at 1268 Te Aroha, Gordon Road, Manawaru. The purchase price was $1,932,500. The farm comprised 84ha, held in three titles: two titles of 39ha and 18ha making up a block of 57ha; and a further block of 27ha. The proceeds of sale of the Waiuku farm were applied to the purchase and Mrs Morley's parents advanced a further $300,000 by way of loan. The purchasewas otherwise financed in the sum of $1,449,000 by the Southern Cross Building Society, Auckland, the National Bank having declined a request for secondary finance for the purchase.[17] Mr and Mrs Morley's solicitor, Mr Richard Blackwood, of Pukekohe, who has been the Morley family solicitor for a number of years and was also solicitor for Forivermor Limited, acted on the Gordon Road purchase.[18] Mr and Mrs Morley worked hard on the Gordon Road property, applying organic principles and maintaining a tight control of costs. It is common ground that they are frugal operators and that they and their four children maintain a modest lifestyle.[19] As noted, in November 2005, Forivermor and Mr and Mrs Morley returned to the National Bank as customers. On 1 November 2005, at an initial meeting with a bank officer from the Matamata Rural Branch (whose identity is now accepted as unknown) notes taken by the bank officer record, inter alia, that the Morleys willreceive an "Outside perspective" and "Drop in visits" from the Bank, and that the Bank will be a "Partner in the business" and will be "Keeping us informed" and will charge "Fair fees". The reference to the Bank as a "Partner in the business" assumeda degree of significance in this litigation, particularly in relation to the allegation of breach of a fiduciary duty.[20] Over the next three years the Morleys farmed the Gordon Road property successfully and it is clear the National Bank kept a close eye on Forivermor'sfinancial position and its cost structure. The Bank also made a practice of monitoring increases in the land values of properties in the area during that period, and maintained these in an internal database for its own lending security purposes.[21] In July 2007 the Bank valued the Morley's Gordon Road farm at $2,850,000,an increase of about 49 per cent over the 2003 purchase price; and on 16 April 2009 the Bank revalued the property at $3,016,500, an increase of about 56 per cent over the purchase price.[22] On or about 10 August 2008, Mrs Morley had a discussion with their neighbour, Mr Borkin, about the sale of the Borkin's next door farm property.Mr and Mrs Morley's evidence is that this was simply an informal neighbourly discussion which went no further at the time, with no expression of interest on theirpart in purchasing the Borkin's property.[23] Mr Borkin in his evidence confirmed discussing with Mrs Morley he and hiswife's interest in selling their farm and said "Mrs Morley expressed an interest in theproperty". Mr Borkin said he gave no indication of the price he and his wife were looking for.Mr and Mrs Morley discuss the possible purchase with their relationship manager at the Bank[24] Mr and Mrs Morley then say that on 20 August 2008 their rural relationship manager at the National Bank, Mr Mark McLauchlan, together with Mr Cotton of the Bank (another rural relationship manager), visited them at their farm to discuss the renewal of a loan, and that during the course of discussions Mr McLauchlan"raised the prospect of our buying the farm of Mr and Mrs Borkin". Mr Morley said he and his wife expressed doubts about their ability to purchase the Borkin property but Mr McLauchlan said something to the effect of "let's look and see".[25] Mr Morley said the Bank's officers brought a paper to the meeting containingdetails relating to production on the Borkin property, for the specific purpose ofdiscussing the possibility of the Morleys purchasing the Borkin farm. He said "thiswas an unsolicited visit, on a matter where the Bank took the initiative".[26] He said Messrs McLauchlan and Cotton outlined to him and Mrs Morley how the purchase might be funded and advised them there was no need to make anycontract conditional upon the sale of the Morley's existing farm, as farms wereselling within three months of going on to the market and there would be nine months in which to sell the 57ha block, and "that in any event Mr and Mrs Borkinwould not accept such a term".[27] Mr Morley said he inquired about a valuation but was told the Bank would arrange its own valuation of the Borkin property and Mr McLauchlan "encouragedus to hurry up and go and give Mr Tom Borkin what he wanted".[28] Mr McLauchlan's evidence was markedly different, however. He was clear that there was no meeting with the Morleys on 20 August 2008 and that he met alone with them on 22 August 2008 at their farm. This is supported by his electronic diary. He said the prospect of Forivermor buying the Borkin farm was discussed for the first time at that 22 August meeting and Mr Cotton was not present. Mr Cotton'selectronic diary was also produced and showed no entry for a meeting with theMorley's on that date but did have an entry for a meeting on a later date. I am satisfied that McLauchlan's recollection about the date of the meeting is correct, as ishis evidence that he came alone to the meeting and not with Mr Cotton.[29] Mr McLauchlan said he was aware before going to the meeting that the Borkin farm was for sale and had been intending to ask the Morleys if they were alsoaware of this, because it was an adjoining farm. He said this "was a normal type of thing for a relationship manager to do". He said, however, that it was the Morleyswho first raised the subject of purchasing the Borkin farm: "[t]hey knew that theBorkin farm was for sale and had already been looking at how they might purchaseit." Mr McLauchlan said the discussion at the meeting was as follows:The Gordon Road farm was held in three titles. The Morleys proposed selling two of the titles on which the house and cow-shed were located (approximately 57 hectares). They planned to retain the third title which adjoined the Borkin farm (approximately 27 hectares). This would allow them to exploit the synergies between the two farms. The Borkin farm was 81 hectares, meaning, that the combined farm would be 108 hectares. This farm would have access to irrigation, whereas the Gordon Road farm had no irrigation.The Morleys' proposal included putting in $1m from family members. At that meeting, they described this as a gift.This proposal had been conceived by the Morleys, not by me. While I knew the total area of their farm, I did not know how it was split into separate titles in a way which would allow the sort of plan which they had in mind. I certainly did not go to the meeting with this plan in mind. I also had no idea about the possibility of a family contribution.[30] Mr McLauchlan said that during the meeting he used his laptop to prepare a spreadsheet, based on these discussions with Mr and Mrs Morley. The spreadsheetdepicted two possible scenarios for Forivermor's purchase of the Borkin property,showing snapshots of equity and debt levels on completion of a transaction. He said:In the scenarios, there is a figure of $4 million as the value of the 57 hectares ($70,175 per hectare) and a figure of $1.9m as the value of the 27 hectares ($70,370 per hectare), excluding livestock, plant and 63,000 Fonterra shares. I do not recall the precise discussion that produced these figures. Typically, I would have asked the Morleys what value they thought the land had. I would have discussed what I knew of comparable sales in the area. The ultimate figures used in the spreadsheet would have been the result of a mutual discussion.[31] Both scenarios were predicated on the purchase of the Borkin's property for$7.2m. The first scenario proposed funding of the purchase by sale of the 57hablock of the Morley's farm together with 45,000 dairy shares at $5.60 per share for $4.25m, and input of $1m as a family gift. The second scenario was predicated on not selling the 57ha block and related dairy shares, but on receiving the $1m family gift.[32] In both scenarios a figure of $6.6m ($81,481 per hectare) was used as a possible purchase price for the Borkin farm, excluding livestock, plant and associated Fonterra shares. Adding 107,000 Fonterra shares at $5.60 per share brought the price to $7,199,200, and adding amounts for livestock, plant, machinery and development brought the total to $7,619,200.[33] The first scenario, involving sale of the 57ha and the 45,000 Fonterra shares at $5.60 per share, would necessitate total new term borrowing of $2,367,200. The second scenario, based on not selling the 57ha and associated Fonterra shares, would necessitate total new term borrowing of $6,919,200.[34] Mr McLauchlan said he also prepared two budgets with minor differences, based on the assumption that the Morleys would sell the 57ha. In addition, heprepared a third budget which assumed the Morleys kept all of their existing farm and employed a manager. Of that third budget, he said:Based on a conservative long-term estimate of the Fonterra pay-out at $5.70, Forivermor would suffer a trading loss of $289,920 in one year. That would have been an unsustainable loss. This budget showed quite clearly that it was not feasible for the Morleys to carry both farms for any significant period of time.[35] Mr McLauchlan said he did not bring any prepared sheet to the meeting showing any production figures for the Borkin farm. He said that while he would have known basic facts about production on the Borkin farm as the result of an earlier but entirely unrelated meeting he and Mr Cotton had with Mr Borkin sometime in mid-2008 (to discuss the Bank's equity partnership scheme), that earlier meeting with Mr Borkin had no connection with the 20 August meeting with Mr and Mrs Morley.1[36] Nor would he have told the Morleys there was no need to make a purchase of the Borkin farm conditional on the sale of the 57ha of the Gordon Road farm and he is sure he never gave any such advice. He said that neither he or Mr Cotton would ever tell a customer what conditions they should or should not put into an agreement with another party. In any event it would have made no sense for him to say this, given the budgets he worked out on his laptop during the meeting demonstrated that the proposal could not work unless the 57ha were sold.[37] Mr McLauchlan was also clear that he would not have told the Morleys that Mr and Mrs Borkin would not accept a conditional sale. He had not had any discussions with the Borkins about the sale and had no idea what conditions theymight or might not accept. Nor did he tell the Morleys to "hurry up and go and giveMr Tom Borkin what he wanted". That was simply not something he would have said.[38] Nor would he have conveyed to the Morleys that the Bank would "stand by them" irrespective of whether or not the 57ha sold for the assumed price. Any1 A note by the Bank during the discovery process records "Borkin had given Mark a farm factsheet. No record held and we are not sure what it contained." This presumably relates to theunrelated earlier meeting at which the Bank's equity partnership scheme was outlined toMr Borkin.application for necessary credit would have to be processed and approved by the appropriate section of the Bank. Nor would he have made any commitment to provide bridging finance. That would have made no sense given the budgeting exercise just completed.[39] In relation to valuations, Mr McLauchlan said that the Bank would not have required the Morleys to provide it with registered valuations in order to obtainfinance because the Bank's practice was to rely on its internal valuation system. This internal system was about satisfying the Bank's own need to determine the value of any properties as lending security. It was not an undertaking to providevaluations to the Morleys or other clients for their benefit and the Bank's internalvaluations would not be disclosed in any event.Mr Morley telephone Forivermor's accountant[40] That same afternoon, following the meeting with Mr McLauchlan, Mr Morley telephoned Forivermor's accountant, Mr Baker. Mr Baker's handwrittenfile note of Mr Morley's call is as follows:Telephone call from Stuart MorleyDate: Friday 22/8/08 Time: 3.15pmThey have been approached by neighbour to buy his farm. 80 ha @ $90,000 per ha.Total(?) $7.2mBut Stuart thinks $7.2m should include herd. Would sell some of their existing farm.Milk 360 cows – but would go away from organic, grow & feed maize.Do approx 126000 kgms.Bank may ring for copies of financial a/cs.Mr McLauchlan follows up on the meeting of 22 August[41] Mr McLauchlan followed up on the meeting of 22 August 2008 by writing to the Morleys on 25 August, summarising the two scenarios discussed at the meetingand enclosing copies of both and (probably) also the first of the two trading budgets for the first scenario involving the sale of the 57ha. His letter included a warning that on the second scenario there was too much debt to support, assuming a long- term Fonterra payout of $5.70. The second scenario could only break even on a long-term payout of $7.50.[42] The specifics of Mr McLauchlan's follow-up letter of 25 August 2008 were as below:Dear Stu & Jo Morley,Following my visit on Friday 22nd August. Attached are 2 scenario's regarding purchase of Borkin's property next door.Proposal #1Required;Purchase Borkin Farm &Shares $7,200,000Purchase 150 MA Cows $300,000Purchase assorted plant & machinery $100,000Build/extend races $200,000Total required $7,619,000Funded;Proceeds from sale of 57Ha $4,000,000Proceeds from sale of 45,000 shares $252,000Family Money $1,000,000Total new borrowing from the bank $2,367,200Budget #1, key points & parameters used;Milking 360 cows, aiming to do 130,000kgMS. That's 361kgMS/cow.Stock income $40,000.Farm Working Expenses set at $2.30/kgMS produced.Costs include 230T of maize silage.Total debt $4,031,000. (existing $1.66mil plus $2.36mil new)Drawings $80,000Refer sensitivity table. Break even budget of $5.70 payout. At $6.20 payout $41,000 surplus. At $7.20 payout $132,000 surplus.Proposal #2Have worked through scenario of not selling 57Ha & Shares.Therefore require $6.9mil of new lending. Total debt $8.5mil (existing plus new).Worked on Borkin ppty targeting 105,000kgMS & Home block doing 70,000kgMS.Total 175,000kgMS from 520 MA Cows.Employing a farm Manager $65,000Farm working expense $2.28/kgMS excluding labour.To summarise, to (sic) much debt for this unit to support at a $5.70 payout. Causing budget result to be deficit. Breakeven point $7.50 payout.As discussed on the phone, worst case scenario really. Farm in top location, with 9mths of season remaining, plenty of time for a sale.If you would like to make any changes or have any questions please don'thesitate to call.RegardsMark McLauchlan[43] It should be noted that the figure of $200,000 for build/extend races in Proposal #1 above should be $20,000. The figure of $4m from proceeds from sale of 57ha subsequently became a figure of $4.3m. I will refer to this again shortly. One explanation is that the increase might have been based on the need to add in GST, subsequently calculated as $837,000.[44] The interpretation of the penultimate paragraph in the letter of 25 August 2008 is an important aspect of the case. The plaintiff contends it was a commitment to lend on the second scenario in Proposal #2, notwithstanding the size of debtrequired. However, the defendant's firm contention is that the second scenario wasnever considered a viable option by the Bank as something that the Bank was likelyto fund. Nor does the defendant accept that the words "worse case" equate to anoption for lending. The Bank says the scenario would never have been seen as viable and would not have been approved for finance by the Bank. This is evidenced by the fact it was never pursued as an option thereafter. Certainly, there is no record of any reference to it in notes taken at the next meeting between the Morleys and Mr McLauchlan on 2 September 2008.The Morleys and Borkins enter into negotiations[45] Prior to the meeting with Mr McLauchlan on 2 September 2008, the Morleys met again with Mr and Mrs Borkin (sometime between 22 and 29 August 2008) and agreed on a sale price of over $7m but excluding the Borkin's herd.Mr and Mrs Borkin drew up the agreement for sale and purchase and wrote in the agreed price of $7,298,928. The Borkins did not have a real estate agent acting forthem. The Morleys sent the agreement to Forivermor's solicitor, Mr Blackwood, for his review.[46] Mr Blackwood proposed the insertion of a finance clause, which Mr Morley said he understood meant Forivermor had to have its bank loan approved before becoming legally committed to completing the purchase. Following his discussion with Mr Blackwood, Mr Morley handwrote a finance clause into the agreement in the following terms. This was initialled by the parties:Lender: Any suitable to purchaser.Amount required: Sufficient finance to complete the contract on terms required by purchaser.Finance date: 7 working days after contract is signed by all parties.[47] On 2 September, Mr McLauchlan again met with Mr and Mrs Morley, this time accompanied time by Mr Cotton of the Bank. Mr McLauchlan recorded two pages of notes at the meeting. Inter alia, his notes record in three separate places that funding would be by sale of the 57ha block, in addition to borrowing from the Bank and a family contribution.[48] In the notes, the sum of $4m required for funding becomes $4.3m (as earlier noted in para [43]). The suggestion in para [43] that this change was to account for GST does not actually accord with the amount of GST that would be owing on a $4m transaction. Both parties asserted that the other set the figure of $4.3m but the plaintiff did not pursue the point in evidence. Mr McLauchlan's evidence was thatthe figure in fact came from Mr and Mrs Morley. It was their view that they could get $4.3m for the 57ha and he was satisfied that estimate was sound by reference tocomparable sales data. Mr McLauchlan was not challenged on this in cross- examination. I am not in any event persuaded that anything turns on this discrepancy.[49] At the conclusion of Mr McLauchlan's notes, under the heading "Action Points", appears the notation "Approval of finance by Friday"; and the furthernotation that the application fee for lending approval will be $1,500.00.[50] As a consequence of the increased estimate of $4.3m, the new Bank term lending decreased from the $2,367,200 assumed on 22 August to around $2,167,000. Mr McLauchlan prepared revised spreadsheets on that basis.The agreement for sale and purchase is executed subject to finance[51] The following day, 3 September 2008, Forivermor and Mr and Mrs Borkin executed the agreement for sale and purchase, conditional on the plaintiff obtaining finance within seven working days. The deposit was payable on the contract becoming unconditional and settlement was to take place on 29 May 2009.[52] It was anticipated that Forivermor would use an advance from the Bank drawn on the term loan to pay the deposit and then use the GST credit to repay that portion of the loan. The other monies would be payable on settlement.[53] On 4 September 2008, Mr McLauchlan prepared and submitted a credit application for approval by the Bank. The following extracts from the proposal are particularly relevant:04/09/2008PROPOSALTo Purchase 81Ha adjoining existing Dairy unit. Fits in well with 27Ha block Morleys. Give milk platform of 108Ha & Morleys can lift cow numbers to 360. Purchase Price $7,299,000 (including shares).Morley's will partially fund purchase by:Selling Southern part of their adjoining farm 57ha (in separate title) plus 45,000kgMS Fonterra shares. ($4,552,000).Morleys parents will put $1,000,000 towards proposal.Require $2.067mil of new long term debt from NBNZ.Selling Plan is to sell 57Ha of [existing] property (on separate title), this area includes Cowshed, House & all most support buildings.Keeping The Morleys will retain 27Ha of the original unit. As this directly adjoins the proposed Borkin property. A large fenced drain separates this unit from the 57Ha above. About 70m of new race would be all it would take to join this piece with the new block.SUMMARY (including SWOT analysis)StrengthsHistoric low cost operatorNew property has irrigation, control pasture productionUndoubted personal factorHave family assistanceWeaknessesHigh debt levelRelient(sp) on sale of 57ha (however given current market should sell quickly)Couple have history of operating a low cost, highly indebted business. They understand their current position. Land market in area currently booming see matrix. RM confident will be able to sell 57Ha quickly.[54] Finance as sought was approved by the Bank on 5 September 2008 and Mr McLauchlan advised the plaintiff on same date of the approval and its terms. Hisletter advising the loan and its basis clearly states that the Bank's lending isdependent on the customer contribution as set out.[55] This letter is clearly critical in determining the outcome of this case and thus is reproduced in full below:5th September 2008Dear Stuart & JoanneI am please to confirm that The National Bank has approved finance to purchase a 81.0992Ha located 140 Shaftsbury Rd, Te Aroha.Finance has been based on the following proposal as discussed with you both:Required For Funded ByProperty Purchase & Shares $7,299,000National Bank, Term Loan $2,167,000MA Cows 150 @ $2,000/Hd $300,000GST Bridging Loan $874,000Assorted Machinery $100,000 Proceeds from 57Ha Sale $4,300,000Development, races $20,000 Proceeds, Dairy Shares 45,000 sale $252,000GST on Land & Stock $874,000Family Contribution $1,000,000Total $8,593,000 Total $8,593,000The new lending is on the basis:- Customer Contribution from:a) Sale of 57Ha of $4,300,000b) Sale of 45,000 Fonterra Dairy Co shares, from 57Ha Dairy unit being sold.c) Contribution from Family of $1,000,000.- New 1st mortgage over the 81Ha Borkin block.Yours sincerelyMark McLauchlanRural ManagerMatamata BeachMr Blackwood's concern which he raised with Mr McLauchlan[56] The next event is also influential in determining the issues between the parties. On 5 September the Morleys sent Mr Blackwood a signed copy of the agreement for his perusal.[57] Mr Blackwood clearly had some concern about the Bank's offer of financerequiring a sale of the 57ha block for $4.3m. On 8 September he rang Mr McLauchlan to discuss the situation and made a file note of the discussion, which is reproduced below:8/9/08I rang Mark McLauchlan at NBNZ Matamata and asked if they would confirm their offer of finance even though the 57ha property does not sell in time – or sell for enough. Will the Bank still cover them for finance to complete the deal? The best he can say is that this offer is based on aprojected sale or even if it didn't happen they would probably still coverthem at least for the short term. They have done budgets on a conservativebasis. The bank won't walk away from them he says – but he can't/won'tput it in writing.[58] In evidence Mr Blackwood said that, although he did not record it in his file note above, he recalls Mr McLauchlan saying that the Bank would not "leave theMorleys to be hung out to dry".[59] Mr McLauchlan's evidence was that Mr Blackwood actually telephoned him on more than one occasion seeking an undertaking that the Bank would provide bridging finance if the Morleys were unable to sell the 57ha for a sufficient price. These calls were before the agreement for sale and purchase was declared unconditional. Although Mr McLauchlan did not make a file note of either the 8 September phone call with Mr Blackwood or of the other call in which Mr Blackwood raised the same query, he agrees with the tenor of Mr Blackwood'sfile note of the 8 September 2008 call. However, Mr McLauchlan doubted that hewould have used the words "the Bank won't walk away from them". Rather,Mr McLauchlan's evidence was that he could clearly remember explaining toMr Blackwood in both calls that the Bank could not commit to providing urgent finance. He conceded that he may well have said that the Bank would probably cover the Morleys in the unlikely event that they could not sell their farm. However, he said that the Bank could not give an undertaking to do so and explained why. He remembers discussing the variables involved in the budgets, which meant that there was no certainty as to what the position would be.[60] Mr McLauchlan also said:I distinctly recall that, in one of the conversations, Mr Blackwood raised that he was concerned about the Morleys being exposed because the agreement with the Borkins was not conditional on the sale of the 57 hectares. I recall him saying that he was worried about them being sued and about them losing their deposit. I distinctly recall this because the idea that the Morleys could be sued had not occurred to me before Mr Blackwood raised it. I distinctly recall telling him that he needed to tell the Morleys about those risks.I remember discussing both conversations with Dave Johnson, the credit manager. During one of the two calls, I asked Mr Blackwood to hold the line while I had a brief discussion with Mr Johnson about it. Mr Johnson agreed that we could not give a commitment.[61] Mr Blackwood reported his discussions with Mr McLauchlan to Mr Morley, who said in evidence that he recalls Mr Blackwood saying that Mr McLauchlan "hadnot given Mr Blackwood much to go on".[62] The Morleys elected to proceed with the contract.The agreement for sale and purchase becomes unconditional[63] On 9 September 2008, the deposit of $808,129.25 was paid into Mr Blackwood's trust account by the Bank; and on 10 September 2008Mr Blackwood wrote to the Borkin's solicitor advising that the finance condition hadbeen satisfied and declaring the agreement unconditional.[64] There was some disputed evidence given by Mr and Mrs Morley as to whether on 9 September Mr McLauchlan and Mr Cotton, during a visit to theMorley's farm to congratulate them on achieving the sale, told Mrs Morley that there was no need to sell the 57ha as the Bank would have sufficient security without such a sale.[65] It is understandable that Mrs Morley may have made such an inquiry during the 9 September visit, given Mr Blackwood had discussed that very issue with Mr McLauchlan only the day before and reported on it to Mr and Mrs Morley. However, Mr Cotton and Mr McLauchlan were emphatic in their evidence that they would not have given such advice and neither has any recollection of Mrs Morley asking such a question.[66] As the express terms of the Bank's loan offer of only four days earlier were based on the sale of the 57ha for $4.3m, it would be extraordinary if either Mr Cotton or Mr McLauchlan would have given the advice contended for by Mrs Morley. I am satisfied that no such assurance was or could be given by either Bank officer and their evidence on this point is to be preferred.[67] However, I can accept that, given the buoyant state of the rural property market in the area at that time, the Bank officers may have appeared reassuringly confident that the property would sell for its estimated price within a reasonable time. But any such assurance would not abrogate the written terms of the loan offer, as Mr Blackwood was very aware. He may well have advised the Morleys to seek insertion of a clause making the contract conditional on the sale of the 57ha block at a minimum price. Against this, the clear inference is that Mr and Mrs Borkin would not have accepted such a condition, given the bullish state of the rural propertymarket at that time and everyone's confidence in it. Indeed, Mr Borkin said so, in both his evidence in chief and under cross-examination.The situation unravelled quite swiftly following the agreement becoming unconditional[68] Shortly after the agreement to purchase the Borkin farm became unconditional, the rural property market began a substantial decline. The Morleys had listed the 57ha block with seven real estate agents but the market rapidly grew cold. This property recession was also unfortunately coupled with a declining Fonterra milk payout projection, further contributing to lack of any real purchaser interest in the block.Negotiations and discussions with the Bank subsequently[69] On 17 November 2008, Mr McLauchlan met with Mr and Mrs Morley and discussed three possible scenarios. These were recorded in notes made by Mr McLauchlan during the discussions and in spreadsheets he created.[70] The first scenario was predicated on Forivermor selling the 57ha block for $4.3m, as initially envisaged. The second scenario assumed a sale of 57ha at a lower price of $3.7m with a consequential rise in bank lending from the approved $2,167,000 to $3,019,200. This would leave an equity of 44.6 per cent. There is no suggestion in the evidence that the Bank would have rejected this scenario, had there been an offer in the region of $3.7m. The third scenario assumed that the 57ha block was not sold. Mr McLauchlan's handwritten notes at the foot of this scenario state"Basically deficit result due to there being too much debt (46.93/kgms) for the farmto service."[71] It is to be assumed that a sale price of $3.7m for the 57ha, as envisaged in the second scenario, must have still been feasible at the time of the 17 November meeting. The property had only been on the market for two months by then, listed with seven real estate agents. Although the market was in decline it would still not have been over-optimistic to assume that a sale was achievable and that the Bank would lend on the basis of that scenario.[72] A further meeting took place between Mr McLauchlan and the Morleys on 16 December 2008. By that time, the projected Fonterra payout had dropped to $6, the 57ha had still not sold, and there was no sign of a serious buyer. A marketing strategy was discussed during the meeting and options explored. These were recorded in handwritten notes made by Mr McLauchlan at the meeting and heprepared spreadsheets on the basis of them. The Morley's suggestion was to now tryand sell the 30ha run-off area, which formed part of the 57ha block and continue to farm the remaining 138ha but with an increase in stock. On this basis there would be an estimated operating surplus of $16,460 and a requirement of new Bank term debt of $4,991,200, leaving equity of $2,868,800.[73] However, no offer was received for the 30ha run-off area or for the 57ha block and thus no opportunity to further assess the viability of this further scenario.[74] In January 2009, Mr and Mrs Morley engaged a consultant to provide them with business advice. The consultant, Mr Fraser of Fraser Farm Finance, conducted an analysis of the viability of the Morleys retaining both farms on an estimated (and much higher) production. It is accepted that this was an ambitious target and in reality it was an unlikely scenario.[75] In his report, Mr Fraser made the following observations. Of the Borkin'sfarm he said:The new farm is top shelf, it has irrigation, plus there are two houses on the property. One is beautiful and the other is really good. It has a goodcowshed, excellent pastures and everything about this property looks to be perfect for you.[76] In relation to the declining rural property market Mr Fraser expressed the following opinion:You entered this contract when times were still good, the market has stopped and now you are caught owning two farms.There are a number of options, and the farm is listed with several real estate agents, and everything is being done to sell the property. There is no point in putting more money into advertising at this stage when there are no purchasers looking.[77] This was the grim reality.[78] On 5 February 2009, Mr McLauchlan and Mr Fuller, the senior branch manager, of the Bank met with the Morleys, Mr Fraser and the Morleys' farmmanagement adviser, to discuss what options were available for enabling the Morleys to complete the purchase of the Borkin farm and preserve their business. Ultimately four scenarios were discussed, the first of which investigated the effect of not selling and consequentially lifting borrowing from the Bank to $8,700,000, plus $1m from the family. The Bank pronounced this option as unsustainable. Anotherscenario investigated "pulling out of sale and purchase agreement" and taking onadditional debt for loss of the $800,000 deposit. The Bank recommended that Forivermor take legal advice as to the ramifications of this scenario.[79] The outcome of the meeting was recorded in a letter from the Bank to Mr and Mrs Morley and Mr Fuller personally took them through the detail of the letter ten days later. The essence of the letter is as follows:Thank you for your time last Thursday. Attached are [copies] of budgets & [scenarios] we worked through, together with Don Fraser (Fraser Farm Finance), Peter Kane (Waikato Farm Management Ltd) & David Fuller (National Bank).The Original National Bank Finance Approval, dated 5th of September 2008, was based on a Total Cash Contribution of $5,522,000. This was to be achieved via:Sale of 57HaSale of Dairy Company sharesCash contribution from family $1,000,000.The unforeseen changes in the global commodity markets has caused Fonterra Payouts to be significantly revised. This in turn has cooled the land market, with few sales occurring throughout the district. The main purpose and intent of our meeting was to discuss options which will enable you to complete the purchase of the neighbouring property and maintain your[business's] profitability.Final Meeting Outcomes:It is strongly advised you seek urgent legal advice regarding the inability to settle the 81ha under present conditions.Discuss further options with Real estate agents to Market not just the 57Ha but the whole lot. Including the new 81Ha. May appeal to more buyers, generate quicker sale and protect your equity.As [offers] come in on the farm or farms put up for sale, contact the bank to work through your end scenario as any change to our 5th September approval will need to be re-approved.[80] On 25 February 2009 Mr and Mrs Morley met again with Mr Fuller and Mr McLauchlan. Mr Fraser and Mr and Mrs Borkin also attended the meeting. It is clear on the evidence that the meeting was a difficult one for the parties and particuarly so for Mr and Mrs Morley. Mr and Mrs Morley's view was that the Bankhad committed to provide finance even if the 57ha did not sell and felt that this was Mr Blackwood's perception also. An internal e-mail report by Mr Fuller to the Bank, made the same date, described certain events at the meeting as follows:Subject: Possible legal & reputational ramifications?Importance: HighMeeting [25] February 2009Attendees: S & J Morley, Don Fraser, Tom & Maureen Borkin (vendor on 81ha) Mark McLauchlan & Dave Fuller.Borkin sought to understand how this situation arose. Morley agreed for NBNZ to discuss their financial situation.All parties provided with copy of approval letter dated 5 September 2008.Morley explained their perception was NBNZ would still support them if property did not sell. Stated they had verbal indication of support from Mark [McLauchlan]. Mark clarified that no approval had been provided.Morley stated their solicitor (Richard Blackwood, 46 Edinburgh St, Pukekohe), perceived we would support if unable to sell land. Refuted by Mark [McLauchlan] given he had a number of discussions with their solicitor when the deal was approved & had stated bridging finance was not approved.Meeting deteriorated, [Morleys] very upset. [Morleys] left meeting. Discussion held with Don Fraser & Borkins around options.[Morleys] are understandably very stressed & emotional. They feel they had an indication of ongoing support by the Bank & we have now withdrawn that support.Mark McLauchlan is concerned he did indicate deal would be revisited if property did not sell but he could not confirm to the client that bridging would be available at that time. It would [be] dependant on the market situation at that time. Mark feels he did explain that they ran the risk of no approval being gained to bridge the deal.[81] On the same date, 25 February 2009, Mr Fuller wrote to Forivermor and Mr and Mrs Morley confirming the Bank's positions as follows:Our loan offer dated 5 September 2008 was on the basis of your cash contributions from the sale of your existing 57 ha farm ($4.3m), your dairy company shares ($252k), and a family loan ($1.0m) for you to complete the purchase of your new 81 ha dairy farm.We enclose a copy of our letter to you dated 5 September 2009 for your reference.Following our meeting on Wednesday 25 February 2009 we confirm our verbal [advice] that we are unable to approve any bridging finance for you to complete the purchase of the 18 ha.Sale of the Gordon Road farm[82] On 4 March 2009, Forivermor received an offer for the entire Gordon Road farm of $3.2m. Mr Blackwood telephoned Mr McLauchlan that day to inquire aboutthe Bank's position. Mr Blackwood made a file note of the call which, inter alia, records:I rang NBNZ Matamata, Mark McLauchlan about the Morleys & [said] I am not pointing the finger at the Bank for refusing funding as the Morleys had not complied with their lending requirements.Stuart & Joanne are trying to sell the farm and have conditional offer @ $3.2 million + GST. They will keep the herd.What is the Bank's attitude if they don't sell the farm & simply stay put.Will NBNZ force them to sell up? Mark is to consult with higher authority & let me know but he does not sound hopeful. I [said] we need decision in 24 hrs as the [purchaser] won't hang around for long.[83] Mr McLauchlan made a similar file note as follows:He [Richard Blackwood] acknowledged the bank [were] within their rights to not proceed with the Borkin settlement as Morleys have or can not meet the terms & conditions of the bank approval.Said the Morleys have a $3.2mil offer for their 87ha + shares.His question, would the bank allow Morleys to take up the offer in an attempt to settle with Borkins. By taking up more debt from NBNZ.My response, I can not comment will need to do some work and talk to the right people before I can give an answer.[84] Mr McLauchlan prepared spreadsheets to ascertain whether lending on the basis proposed was viable from the Bank's point of view and sustainable from the Morley's point of view. The spreadsheet analyses showed that the proposal wouldrequire Bank term debt of $3,429,000 and would leave Forivermor with equity of only $481,590.[85] On 6 March 2009 Mr McLauchlan met with the Morleys and took them through the analysis. The Morleys advised him that they had been told that day by Mr Borkin that the Borkins would be suing Forivermor.[86] On 11 March 2009 Mr McLauchlan wrote to the Morleys advising that the Bank was unable to provide bridging finance to purchase the Borkin farm on the proposed basis of a sale of the Gordon Road farm at $3.2m. Expressly he said:We have reviewed the proposal regarding your latest offer above. We are unable to approve any bridging finance for you to purchase the 81ha. Key issues the bank has are:Significant projected budget deficits. Year 2009/10 estimated -$172,000. And then Long term budget result -$136,700. Main factor driving the budget deficit, level of bank debt on completion alone at $48.69/kgMSproduced. In the [Bank's] view this is unsustainable.Your level of Equity after settlement $481,000. This was based on Don Fraser's assessment of the current land market, valuing 81HAproperty at $6 million.[87] On 16 March 2009 Forivermor entered into an agreement for sale and purchase of its farm for $3,300,000, with settlement on 29 May 2009.Disposition of the Borkin farm[88] On 1 July 2009 Mr and Mrs Borkin cancelled their agreement with Forivermor and entered into an agreement to sell their property to a third party for $4.5m plus GST, including shares, with settlement in March 2010.Mr Borkin's evidence[89] Mr Borkin was called to give evidence for the plaintiff and in some material respects his evidence contradicted that given by Mr McLauchlan. Specifically Mr Borkin alleged that Mr McLauchlan initiated contact with him about the possible sale of his farm to the Morleys while acting for the Morleys as their banker. He said Mr McLauchlan suggested the price per hectare and this accorded with the price Mr Borkin had already decided he wanted. He said he thought it unusual for a bank to approach people who were not customers about selling the farm but in the 2008 period that sort of approach was not unheard of. Mr Borkin also said in evidence that, at the meeting on 25 February 2009, Mr Fuller and Mr McLauchlan did not deny the Bank had said that it would stand by the Morleys if they were not able to sell their own farm.[90] I did not find Mr Borkin's evidence convincing in either respect. He was quite vague about dates and about whether he had provided materially inconsistent information contained in an earlier unsworn version of his brief of his evidence.[91] Mr and Mrs Borkin are not disinterested in the outcome of this case, given their own pending suit against Forivermor, calculated on a loss to them of $2,925,180.90.First cause of action: Was there a breach of contract?[92] The plaintiff contends that the Bank's offer of finance, as made in the letterdated 5 September 2008, contains "an absolute promise to finance the purchase ofthe Borkin farm". Further, that the Bank's offer did not contain any explicitcondition that required the prior sale of the 57ha; set no timeframe for the sale of the 57ha; provided for a bridging loan; and did not require a first mortgage over the Borkin property as a condition precedent to the advance of money.[93] In addition the plaintiff contends that assurances were given to Mr and Mrs Morley and to Mr Blackwood that the Bank would not require the prior sale of the 57ha before advancing funds, or not require a sale at $4.3m.[94] The essential question is whether the risk that materialised as events unfolded was assumed by the Bank or by Forivermor?[95] The start and end point is the offer of finance made in the letter of 5 September 2008 and accepted by Mr and Mrs Morley on behalf of Forivermor. The Bank agreed to provide the necessary funding to complete settlement of the Borkin property on the basis as set out in that letter. The offer contained in it was based on a viable proposal of cash contributions from the Morleys, sourced from the sale of the 57ha block; the associated dairy company shares; and a cash contribution from the family. The debt to the Bank for the new borrowing would be secured by a first mortgage over the Borkin farm on settlement of its purchase. It is clear that at the time the loan offer was made and accepted by the Morleys, both parties were confident that the 57ha block would sell within the settlement period and their confidence was justified at the time. Mr and Mrs Morley were taking advice from Mr Blackwood and from Forivermor's accountant. The Bank was doingits own homework for its internal lending security purposes. It was not for the Bank to require the Morleys to make their purchase of the Borkin farm conditional on theprior sale of the 57ha block. The risk of proceeding with an unconditional purchase was Forivermors.[96] In the result the conditions on which the Bank had agreed to advance the money and which had been accepted by Forivermor could not be met and the Bank was not obliged to provide finance on a different and unapproved basis. The borrowing that would now be required to complete settlement in May 2009 was unsustainable and the security for the Bank loan was no longer adequate. In reality, had the Bank advanced the loan it would have been calling up the loan when inevitably Forivermor was unable to service it.[97] The express terms of the loan offer and the absence of any ambiguity or obvious lacuna preclude importation of an oral term. In any event, the evidence doesnot support the plaintiff's contention that a variation was agreed to byMr McLauchlan or his superiors at the Bank. What the evidence does point to is the fact that the Bank made an effort to assist the Morleys with advice as to how the debt they were seeking to incur might be sustained, despite the steadily deteriorating situation.[98] Mr Blackwood rightly had misgivings about the potential for risk and conveyed those to his clients and to the Bank. But the Bank gave no commitment to Mr Blackwood or to the Morleys, at any stage, to the effect that the Bank would provide finance in the event that the 57ha did not sell in time or sell for enough.Second cause of action: damages for misrepresentation under the Contractual Remedies Act 1979[99] Under this head, which closely tracks the first cause of action, the plaintiff alleges that certain statements were made as to finances that constitute a misrepresentation which induced Forivermor to enter into the finance contract. The plaintiff says that in reliance on that contract, Forivermor declared the purchase of the Borkin farm unconditional and thus became inevitably committed to financial destruction. The representations the plaintiff relies upon are those allegedly made by Mr McLauchlan to the effect that the Bank would not "leave the Morleys to be hungout to dry" and that "the Bank won't walk away from them". Also the statementsattributed by Mrs Morley to Messrs MacLauchlan and Cotton at the 9 September meeting, to the effect that there was no need for the Morleys to sell the 57ha as the Bank would have sufficient security without such a sale.[100] This cause of action must also fail because it contends for oral variations of the written loan offer that were never imported into it and never approved by appropriate authorities within the Bank. In any event, I am not persuaded that Messrs McLauchlan and Cotton would have given such an assurance to Mrs Morley on 9 September. As earlier noted, I accept the Bank officers may well have been reassuringly positive about the prospects of the 57ha block selling. But achieving a sale was not their responsibility. Further, it is not credible that Mr McLauchlan would have told Mrs Morley there was no need to sell the 57ha, given his equivocal and cautious response to Mr Blackwood of only the day before. I accept Mr Walker's submission that the Bank's conduct in the month that followed wasentirely consistent with Mr McLauchlan's statement that the Bank would "probably"advance necessary funds, evidenced by the fact that the Bank continued to explorefunding options right through until March 2009, as per the Bank's letter of11 March 2009, referred to in para [86] above.[101] Forivermor, the Morleys and Mr Blackwood knew from the time of the 8 September 2008 telephone call between Mr Blackwood and Mr McLauchlan that the Bank had not committed to provide bridging finance. As Mr Walker submitted, Forivermor took a calculated risk in proceeding to declare the agreement unconditional on 10 September 2008, in light of that knowledge.Third cause of action: breach of the Code of Banking Practice requiring a fair and reasonable conduct[102] Under this head the plaintiff pleads that the finance contract included a term from the Code of Banking Practice 2007; viz that the Bank would act fairly and reasonably towards the plaintiff in a consistent and ethical way.[103] The letterhead on which the loan offer of 5 September 2008 was made bore astandard reference to the Bank's website. The website acknowledges and refers to the Code. The plaintiff seeks to extrapolate this by arguing that the Code is therefore an express term of the finance contract, incorporated by reference. Alternatively, the plaintiff argues that the Code is implied by custom or by the course of dealing through the banking relationship.[104] The narrative of events as set out in this judgment preclude any finding that the Bank acted other than fairly and reasonably towards the plaintiff and thus in accordance with the Code. In finding this, I leave aside the Bank's decision tocharge break fees for early repayment which, while perhaps not unfair orunreasonable, might have been charitably and reasonably waived in the Morley'scase. However, I can take the matter no further than that.[105] In terms of implication by custom, it is to be expected that business dealings with a reputable bank will be fairly and reasonably conducted and I have alreadyfound that in Forivermor's case they were.Fourth cause of action: breach of contract (implied term)[106] This cause of action concerns another clause of the Code of Banking Practice: that the Bank will only provide credit or increase a credit limit when the information available to the Bank leads it to believe the customer will be able to meet the terms of the credit facility.[107] At the time the loan was sought, in August 2008, the Bank's internal lending security checks established to the Bank's satisfaction that Forivermor should be ableto meet its credit obligations on the basis as proposed. Whilst it may be impossible to eliminate every element of risk in a financial transaction, the risk at that time appeared minimal or nonexistent. Nobody foresaw that the market would collapse as it did and that the whole financial situation would consequentially unravel. I accept that it was the market collapse which undid the transaction in this case. The Bank would have been in breach of the Code of Banking Practice, had it provided further credit in March 2009, at a time when the Bank's calculations showed thatForivermor's resulting equity would now only be 7.3 per cent and that this would soon be consumed by operating deficits.Fifth cause of action: negligence[108] Under this head the plaintiff pleads a duty of care, in relation to the assessment of the value of the Borkin and Gordon Road farms, to advise Forivermor both specifically and generally on the agreement for sale and purchase with the Borkins. The plaintiff says the Bank took the initiative in approaching Mr and Mrs Borkin and obtaining a fact sheet; actively encouraged the Morleys to enter into the purchase of the Borkin farm; advanced the deposit, thereby enablingthe Morleys to declare the purchase of the Borkin's farm unconditional; and madesundry further similar allegations.[109] The facts have however found themselves in relation to all of these matters. The Bank was under no duty to provide the Morleys with legal or accounting advice.Forivermor had its own professional advisers on those matters. The Bank's role inits customer relationship with the Morleys was to ensure that any lending by the Bank was secured on a proper basis. This it was obliged to do in the interests of both the Morleys as customers of the Bank and in discharge of its wider banking responsibilities. That was the precise purpose of the spreadsheets which Mr McLauchlan routinely created on each occasion when he and the Morleys discussed the viability of their borrowing from the Bank. That did not make the Bank a farming adviser to the Morleys. Nor did the Bank act as a de facto real estate agent for the Borkins and I disregard Mr Borkin's evidence on that issue. The Bankmade no representations about the value of either farm; rather it made its own internal estimations about the two farms for the purpose of assessing the package as a lending proposition. The Bank did not carry out its internal valuations for the purpose of advising about or representing values.[110] The discussions that did take place between the parties were, on their face, at all times entirely responsible. Any discussions as to estimated value of the respective properties could not be classified as negligent but rather for the purpose of assessing whether the financial basis for the proposed borrowing appeared sound.Sixth cause of action: breach of fiduciary duty[111] The essential basis of this claim is reliance by the plaintiff on the concept of a'partnership' between Forivermor and the Bank, both written and oral, as well asreliance on the Code of Banking Practice. The plaintiff has pleaded a number of factors which it contends gave the Bank superior bargaining power and thus rendered the plaintiff vulnerable. The plaintiff says the Bank breached its fiduciary duty,arising from the 'partnership', to act in the plaintiff's interest, by putting its own interest as lender ahead of Forivermor as borrower, and in particular aroundassessment of the "proper value" of the Borkin and Gordon Road farms. The Bankfurther breached its fiduciary duty by not advising a structure for the purchase and financing arrangements which would ensure that Forivermor was not exposed to any liability if the Gordon Road farm were not sold; further, by advancing the deposit when Forivermor had no certainty that it would sell the Gordon Road farm; and further, by the Bank encouraging Mr and Mrs Morley to believe that it would provide additional funds if required and irrespective of the terms of the loan offer in the letter of 5 September 2008.[112] The above issues have all been canvassed during the course of this judgment.Any 'partnership' arising from the banking relationship did not override the fact thatForivermor had its own financial and legal advisers and the fact that it was Mr and Mrs Morley who made a decision to proceed with an unconditional contract for sale and purchase of the Gordon Road farm, not the Bank.[113] The description of the Bank as a 'partner' in the business at a meeting on1 November 2005 between the Morleys and their (then) relationship manager did not create a relationship that transcended the usual banker-customer relationship so as to become fiduciary in nature. Case law has established that " the relationship ofbanker and customer is not one where there will be any presumption of a fiduciaryrelationship".2 In Shotter v Westpac Banking Corporation3 a friendly working relationship between the plaintiff and his local branch manager during which there were frequent discussions on the progress of Mr Shotter's business ventures were2 Goddard v DFC New Zealand Ltd [1991] 3 NZLR 580 at 587.3 Shotter v Westpac Banking Corporation [1988] 2 NZLR 316.alleged to show "a relationship of trust and confidence giving rise to a fiduciaryrelationship, leading in turn to a presumption of undue influence".4[114] Referring to the test applied by Lord Scarman in National Westminster Bank Plc v Morgan5 "that the determination of whether such a relationship as is allegedhere exists is to be arrived by "a meticulous examination of the facts"", Wylie J found on the facts that no fiduciary relationship existed in Mr Shotter's case.63. A fiduciary relationship does not automatically arise from the relationship of banker and customer. Each case requires a meticulous examination of the facts. In this case there was nothing to indicate that the bank had crossed the line between a normal business relationship of banker and customer and a relationship of dominating influence.Seventh cause of action: Breach of s 9 of the Fair Trading Act 1986[115] The plaintiff claims that the Bank engaged in misleading and deceptive conduct in advising Forivermor that if the Gordon Road farm did not sell for $4.3m, the Bank would still advance sufficient funds to enable Forivermor to acquire the Borkin farm.[116] For the various reasons I have already found, this cause of action is not established on the facts and must fail.Eighth cause of action: Breach of s 13(h) Fair Trading Act 1986[117] This cause of action concerns alleged false representation for the supply of services, including financial services.[118] Essentially the plaintiff says that the Bank set up the transaction with Forivermor on the basis that the 57ha block was worth $4.3m and the proceeds could be used to finance the purchase of the Borkin farm. Mr Thwaite submitted that, in fact, the maximum that could be expected would have been $4,050,000. He said Forivermor should not have been encouraged or allowed to enter into the agreement4 At 333.5 National Westminster Bank Plc v Morgan [1985] 1 All ER 821 at 831.6 Shotter v Westpac Banking Corporation, above n 3, at 317 (headnote) and 333.for sale and purchase of the Borkin farm, or to declare it unconditional, because Forivermor was most unlikely to be able to complete. Once again the argument advanced under this head is untenable on the facts, for the various reasons already given in this judgment.Ninth cause of action: Breach of Consumer Guarantees Act 1993[119] This cause of action is based on the fact that the Borkin farm had a house on it which would be occupied by Mr and Mrs Morley and their family. Mr Thwaite argued that the Consumer Guarantees Act 1993 applied to the situation becauseForivermor was a "consumer" in terms of the Act, as it was intending to acquire aresidential house on the Borkin farm.[120] Apart from the obvious point that the primary purpose of the proposed lending was rural farm lending, as opposed to ordinary personal or domestic use or consumption, the lending was fit for purpose.Conclusion[121] Forivermor's claim must fail on every head. Judgment will be entered for thedefendant.Costs[122] The defendant, having been successful, is entitled to costs. In the circumstances my initial inclination is to suggest that costs might lie where they fall. However, counsel are at liberty to submit memoranda as to costs, if they wish."Goddard J"