JENKINS-DAVIES v ANZ BANK NEW ZEALAND LTD [2014] NZHC 114

JENKINS-DAVIES v ANZ BANK NEW ZEALAND LTD [2014] NZHC 114 [11 February 2014]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2012-404-7625[2014] NZHC 114BETWEEN RHYS JENKINS-DAVIESPlaintiffAND ANZ BANK NEW ZEALAND LIMITEDDefendantHearing: 10 February 2014Appearances: P R Cogswell for PlaintiffR L Pinny for DefendantJudgment: 11 February 2014JUDGMENT OF PETERS JThis judgment was delivered by Justice Peters on 11 February 2014 at 12 pmpursuant to r 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate: ...................................Solicitors: Cogswell Law, AucklandBell Gully, Wellington[1] The Plaintiff seeks an interim injunction preventing the Defendant ("Bank") from exercising its power of sale pursuant to a memorandum of mortgage.[2] The Bank opposes the application and, in addition, seeks an order striking out the statement of claim, alternatively seeks summary judgment on its defence.[3] I propose to decline the application for interim injunction and grant the Bank's application to strike out.[4] These proceedings were commenced by the Plaintiff and his wife. The Bank and the Plaintiff's wife have since resolved all matters between them.Background[5] In July 2004 the Bank advanced $352,000 to the Plaintiff and his wife to assist with the acquisition of a residential property in Auckland. The advance was secured by a first mortgage registered against the title.[6] At the request of the Plaintiff and his wife, between August 2005 and November 2007 the Bank made four further loans, pursuant to which it advanced additional funding of, by my calculation and in round terms, $120,000. These advances were made to allow the Plaintiff and his wife to meet various costs, and to repay credit card and hire purchase debt.[7] By December 2008 the loans were in arrears.[8] Various events occurred between December 2008 and March 2010. The Plaintiff's wife's employment position was made redundant, although she subsequently gained other employment. The Plaintiff ceased to be employed. During this period, the Bank agreed to three "repayment holidays" in respect of one or more of the loans, thereby giving the Plaintiff and his wife some relief from their financial commitments. The Bank also honoured a direct debit to maintain insurance cover on the home, despite there being insufficient funds in the borrowers' account.[9] In March 2010, the Plaintiff suffered a serious and debilitating head injury in an accident on his mountain bike. There is a difference between the parties as to when the Plaintiff informed the Bank of his accident. The Plaintiff's evidence is that he informed the Bank in March 2010. The evidence for the Bank is that it learned of the injury in or about July 2010.[10] The Plaintiff has made some recovery from this accident, but to date it is not a complete recovery. Counsel for the Plaintiff informed me that the Plaintiff accepts he does not have a clear recollection of some of the events in dispute. That said, the present applications do not turn on evidence that is in dispute.[11] By June 2010 the loans were again in arrears and the Bank was required to meet a rates demand. The Plaintiff and his wife sought, and the Bank refused, a further repayment holiday.Restructuring[12] The Plaintiff contacted the Bank in July 2010 regarding the various loans and his wish to refinance the borrowings, whether with the Bank or a third party. That contact led to the involvement of staff in the Bank's recoveries section, and a series of proposals to the Plaintiff and his wife.[13] The proposals and the Plaintiff's response to them are relevant because, at least from the Bank's perspective, they evidenced that the Plaintiff was capable of making decisions about his financial affairs.[14] The Bank's first proposal was to consolidate two of the loans and the arrears into a new loan. The evidence for the Bank is that the Plaintiff rejected this proposal and advised that he wished to have all five loans, all early repayment fees and all arrears consolidated into one loan, or "super loan" as the Plaintiff describes it.[15] The Bank then offered to consolidate the various loans/sums as requested. The Plaintiff declined this proposal and requested the Bank to advance funds to repay debts that he and his wife owed to third parties, with the loan for that purposeto be included in the (consolidated) loan. The Plaintiff also asked the Bank to omit a three month "trial period" it had proposed.[16] The Bank subsequently offered to reduce the trial period to two months. After a period of time to consider the offer, the Plaintiff and his wife accepted.[17] The Plaintiff and his wife made all payments required during the trial period, following which the Bank made, and the Plaintiff and his wife accepted, a written loan offer dated 23 December 2010. The effect of the offer was to consolidate all loans, third party debt, arrears and early repayment fees of approximately $2,500 into one super loan. Also, the interest rates on the Bank's loans had ranged from 6.24 to 8.70 per cent per annum. The super loan was advanced at the Bank's floating rate, then 6.24 per cent per annum. This reduction had the effect of reducing the amount of each repayment.September 2011[18] The Plaintiff and his wife met their obligations from January 2011 until September 2011, bar the occasional late payment. The Bank was also required to pay a rates demand made by the Council in or about August 2011.[19] Between September and December 2011 the Plaintiff and his wife defaulted on all but two of their fortnightly loan payments. The Bank's records show that the Plaintiff was withdrawing large amounts in cash a day or two before the interest payment was due to be debited, leaving insufficient funds in the account to make the required payments.[20] The Bank put a "stop" on the Plaintiff and his wife's accounts in December 2011, the effect of which was to require the Bank to approve any withdrawal or transfer. The Plaintiff and his wife then ceased making deposits into their account with the Bank and made no further loan repayments until May 2013 or thereabouts.[21] In January 2012 the Bank wrote requesting payment of the arrears of more than $10,000 by 7 February 2012. The Plaintiff and his wife did not pay the arrears.[22] In about February 2012 the Plaintiff made complaints regarding the Bank to the Human Rights Commission and the Banking Ombudsman. It was agreed that the Banking Ombudsman would address the complaint. In August 2012 the Ombudsman advised the Bank that they were treating the complaint as abandoned.[23] On 29 August 2012 the Bank served notices pursuant to s 119 Property Law Act 2007 ("PLA notice"). In October 2012, solicitors acting for the Plaintiff's wife asked that the Bank to defer taking steps while they asked the Plaintiff to agree to sell privately. The Bank sought further information but it was not provided. Time for remedying the default specified in the PLA notice expired in October 2012. The Bank sought to proceed with a mortgagee sale from November 2012 onwards.[24] The Plaintiff and his wife commenced proceedings in December 2012.[25] By January 2013 the couple's indebtedness exceeded $530,000 and the Bank was concerned that sum would not be recouped in full by a sale of the mortgaged property.[26] The various applications before me were to be heard in May 2013. The parties agreed, however, that they would be adjourned on terms. The Plaintiff complied with those terms until August 2013, then defaulted, and then resumed payments until 18 October 2013. No payments have been made since. The Bank has also met insurance costs and rates demands.[27] The evidence for the Bank is that, as at 24 January 2014, the Plaintiff and his wife have missed 50 fortnightly loan repayments and that the sum now due is not less than $545,795.11. On any mortgagee sale, the Bank will be required to pay marketing and other costs, and the fee of the real estate agent.[28] Very recently the Plaintiff has made another proposal to the Bank which, if accepted, would require the Bank to delay a mortgagee sale. The Bank has declined the proposal.[29] The parties have not provided a current market valuation of the property. Counsel for the Plaintiff submits that it is clear the property will have increased in value and should now fetch a price in the vicinity of, say, $650,000. I am not able to take judicial notice of an increase in the market value of the property. That is a matter on which expert evidence is required.Discussion[30] The issues on the Plaintiff's application are whether there is a serious question to be tried and, if so, where the balance of convenience lies.[31] The Plaintiff prepared his own statement of claim, although more recently he has been represented by counsel, to whom I am grateful. The statement of claim is discursive and does not comply with the High Court Rules. Essentially the Plaintiff relies on the following causes of action, all brought pursuant to provisions of the Credit Contracts and Consumer Finance Act 2003 ("CCCFA"):(a) a failure to make disclosure;(b) an application for relief pursuant to s 58 of the Act; and(c) an application for relief on the grounds of oppression.Disclosure[32] The Plaintiff contends that the Bank failed to make initial disclosure of the terms of the (restructured) loan as required by s 17 CCCFA. In summary, s 17(1) requires a creditor under a consumer credit contract to ensure disclosure of as much of the information set out in schedule 1 to the Act as is applicable, whether before the contract is made or within five working days thereafter.[33] Counsel for the Plaintiff did not pursue the alleged issue under s 17(1). The evidence for the Bank includes a copy of the loan agreement executed by the Plaintiff and his wife on 23 December 2010. 1 Clause 22 of the loan agreement1 Affidavit of A Athea dated 24 January 2014, Exhibit "A" at 140.contained an acknowledgement by the Plaintiff and his wife that, amongst other things, they had received a copy of the loan agreement. The Plaintiff has not identified the information he contends has been omitted and on its face the loan offer appears to record as much of the information set out in schedule 1 as is applicable to the contract.[34] In the Plaintiff's notice of interlocutory application it appears to be suggested that the Bank withheld information including, essentially, that certain terms of the loan might be negotiable including matters such as the frequency of repayments. With respect, that is not information required to be disclosed by s 17(1).[35] It is also alleged that the Bank failed to make "request disclosure" pursuant to s 24 CCCFA. This allegation is not pleaded in the statement of claim, nor is it referred to in the Plaintiff's notice of interlocutory application. It is, however, referred to in the notice of opposition filed to the Bank's application for strike out/summary judgment.[36] The Plaintiff has not provided particulars of the information he requested nor when he did so. The Bank has no record of any such request being made. Certainly no request was made in writing. I also accept the Bank's submission that a failure to comply with request disclosure would not generally lead to the granting of an interim injunction.Application for relief pursuant to s 55 CCCFA[37] The Plaintiff alleges that he made an application for relief pursuant to s 55 CCCFA and that this was declined. He seeks relief from the Court pursuant to s 58.[38] Sections 55(1) and 56(1) provide:55 Changes on grounds of unforeseen hardship(1) A debtor who is unable reasonably, because of illness, injury, loss of employment, the end of a relationship, or other reasonable cause, to meet the debtor's obligations under a consumer credit contract and who reasonably expects to be able to discharge the debtor's obligations if the terms of the contract were changed in a manner set out in section 56 may apply to the creditor to agree to that change.56 Changes that can be made(1) An application by a debtor under section 55 must seek to change the terms of the consumer credit contract in 1 of the following ways:(a) extending the term of the contract and reducing the amount of each payment due under the contract accordingly (without a consequential change being made to the annual interest rate or annual interest rates):(b) postponing, during a specified period, the dates on which payments are due under the contract (without a consequential change being made to the annual interest rate or annual interest rates):(c) extending the term of the contract and postponing, during a specified period, the dates on which payments are due under the contract (without a consequential change being made to the annual interest rate or annual interest rates).[39] Sections 58(1) and (2) provide:58 Changes by Court(1) If the creditor does not agree to change the consumer credit contract in accordance with the application, the debtor may apply to the Court to change the terms of the contract.(2) The Court may, after allowing the applicant, the creditor, and any guarantor a reasonable opportunity to be heard,—(a) by order, change the consumer credit contract in a manner set out in section 56; and(b) make any other orders it thinks fit.[40] The Plaintiff alleges that he applied to the Bank to agree to changes on two separate occasions, namely on or about 21 June 2010 and in mid-2011 when he requested further advances.[41] The Bank submits that s 57 is a complete answer to this cause of action. Section 57 provides that a debtor may not make an application under s 55 if the debtor has defaulted in a payment and the default has not been remedied. 22 Credit Contracts and Consumer Finance Act 2003, ss 57(1)(a) and 57(2)(a).[42] The Plaintiff was in default at the time he made the applications (assuming for the sake of argument that they were applications for the purposes of s 55(1)), and those defaults had not been remedied.[43] Counsel for the Plaintiff submitted that the fact that a party is in default should not preclude an application. He also acknowledged, quite rightly, that is beside the point. The fact is that is the effect of the legislation.[44] I add that any relief granted pursuant to s 58(1) is in the discretion of the Court. The matters to which I refer below, when considering the balance of convenience, would count against the Plaintiff even if s 57 did not apply.Oppression[45] The Plaintiff alleges that the Bank has acted oppressively by insisting on fortnightly repayments on the super loan and in pursuing a mortgagee sale.[46] Section 120 CCCFA permits a Court to re-open a credit contract if it considers the contract is oppressive or that a party has exercised or intends to exercise a right or power conferred by the contract in an oppressive manner. Section 118 CCCFA defines oppression as follows:118 Meaning of oppressiveIn this Act, oppressive means oppressive, harsh, unjustly burdensome, unconscionable, or in breach of reasonable standards of commercial practice.[47] The Plaintiff has not called any expert evidence to establish that the terms of the loan are oppressive or that the Bank's conduct is oppressive.[48] With respect, no such evidence could be produced. The loan appears to have been made on reasonable terms and there is no suggestion that the Bank's floating rate is or has been higher than prevailing market rates.[49] Contrary to the Plaintiff's view of it, I consider the Bank has done its best to accommodate the Plaintiff and his wife in what have no doubt been very difficult circumstances for them. As counsel for the Bank submitted, however, the Plaintiff isindebted to the Bank in excess of $500,000, he has not serviced the debt and it must be repaid.Balance of convenience[50] It follows that I do not consider there is any serious question to be tried. Given that, it is not essential that I deal with the balance of convenience. I am satisfied, however, that the balance of convenience lies with the Bank.[51] There can be no certainty that on a mortgagee sale the Bank will recoup its indebtedness in full. If it does, then there will be a surplus for the Plaintiff and his wife. I am not satisfied that any useful purpose is to be served by giving the Plaintiff further time. I accept the Bank's submission that the Plaintiff has had opportunities and that further time would simply delay the inevitable. This is not an instance of temporary hardship. It is a case where there is an ongoing inability to comply with the terms of the loan.[52] I decline the application for injunction.Application to strike out[53] I turn now to the Bank's application to strike out the Plaintiff's statement of claim. For the reasons given, I am satisfied that the statement of claim does not disclose a reasonably arguable cause of action, and I do not consider the deficiencies are able to be remedied by amendment. 3 I grant the Bank's application to strike out accordingly.[54] The Bank having succeeded, it is entitled to costs and disbursements on the Plaintiff's application and on its own. It may be that the Bank had a contractual entitlement to some or all of its costs. To the extent it does not, it is to have costs on a 2B basis...................................................................M Peters J3 High Court Rules, r 15.1(a).