WILSON V ANZ NATIONAL BANK LTD HC AK CIV-2010-404-50025

WILSON V ANZ NATIONAL BANK LTD HC AK CIV-2010-404-50025 10 May 2011IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2010-404-50025BETWEEN WARREN WILSONPlaintiffAND ANZ NATIONAL BANK LIMITEDDefendantHearing: 6 May 2011Appearances: Plaintiff in personMs J Stevens for defendantJudgment: 10 May 2011 at 3:00 PMJUDGMENT OF ASSOCIATE JUDGE MATTHEWSThis judgment was delivered by me on 17 May 2011 at 3 pm, pursuant to Rule 11.5of the High Court Rules.Registrar/Deputy RegistrarDate[1] The defendant (the bank) has applied for leave to file a counterclaim againstthe plaintiff in this proceeding, leave to file an application for summary judgment onthe first cause of action in the proposed counterclaim, and for summary judgment onthat cause of action. Both the claim and the proposed counterclaim arise out of twoadvances made to the plaintiff (Mr Wilson) by the bank in respect of which therehave been partial repayments by Mr Wilson, but remain outstanding balances.[2] In his amended statement of claim Mr Wilson seeks orders prohibiting thebank from enforcing any security interest taken in connection with the loanagreements on which the advances were based, an order for statutory damages to beawarded under the Credit Contracts and Consumer Finance Act 2003 (CCCFA), anorder for exemplary damages under that Act, and costs. In the proposed first causeof action in the proposed counterclaim, which is the basis of the proposedapplication for summary judgment, the bank seeks judgment against Mr Wilson inthe sum of $833,909.71 being the principal initially advanced less repayments madeto date, plus interest from the date of judgment, and costs. Notably, interest to thedate of judgment is not sought in this cause of action; claims for both principal andinterest are made in the second and third causes of action in the proposedcounterclaim but form no part of the proposed application for summary judgment.The debt claimed in this application has been calculated by applying all instalmentsof principal and interest paid by Mr Wilson to the initial advances as principalreductions.Application for leave to file counterclaim out of time[3] Under r 5.55 of the High Court Rules a counterclaim may be filed and servedwithin the time stated in the notice of proceeding for the filing of a statement ofdefence, in this case 25 working days after service, a period which expired inSeptember 2010. The bank filed a statement of defence on 7 September 2010together with a request for further and better particulars. The latter resulted in MrWilson filing an amended statement of claim on 6 November 2010. The bank'sposition is that it was not until that document was served that it was sufficientlyaware of the plaintiff's claim to be in a position to formulate its counterclaim, andtime should therefore be extended for a counterclaim to be filed. A statement ofdefence to the amended statement of claim, together with the bank's counterclaim,were filed on 17 February 2011. Thus the extension of time sought by the bank isapproximately five months.[4] The Court has a general discretion to extent time – see r 1.19. The discretionis unfettered: Caltex Oil (NZ) Ltd v Hughes1. A proper foundation justifying theexercise of the discretion sought must be laid by the party seeking it – Spicers Paper(NZ) Ltd v BPK & GA Buckley Ltd2.[5] The bank submitted that it was not in a position to file a counterclaim until itreceived the plaintiff's amended statement of claim. In its memorandum dated 21October 2010 for the first case management conference the bank referred to itsrequest for further particulars, with which Mr Wilson had not complied, andforeshadowed that once those particulars had been provided (and subject toconsidering them), it intended to file an application for leave to file an applicationfor summary judgment for the bank on Mr Wilson's claim, and a counterclaim forenforcement of the consumer credit contracts between Mr Wilson and the bank. Italso foreshadowed that it would consider filing an application for summary judgmenton the counterclaim.[6] In a case management minute dated 27 October 2010 the Court recorded thatthe plaintiff's claim did not comply with the High Court Rules in a number ofrespects, which were then set out. This is recorded in paragraph [7] whichinadvertently refers to the ―defendant's claim instead of the plaintiff's claim, but itis clear that this paragraph was a reference to the statement of claim – see paragraph[8]. Mr Wilson was directed to file an amended statement of claim complying withthe High Court Rules by 6 December 2010. An amended statement of claim wasfiled. At a conference on 8 December 2010 the bank's counsel expresseddissatisfaction with the amended statement of claim and was directed to file anyapplication in respect of it by 19 February 2011. A further case managementconference was set for 26 January 2011.1 [1986] 1 PRNZ 2352 [1993] 6 PRNZ 16[7] At that conference the bank indicated it would not pursue an applicationeither to strike out the proceeding or for further particulars of the amended statementof claim. It indicated that instead it would file a counterclaim and an application forsummary judgment on its counterclaim. That was opposed by Mr Wilson. The bankwas given until 18 February 2011 to file its application, and it did so. This is theapplication now before the Court.[8] From this chronology it is clear that Mr Wilson has been on notice that the bank had been considering filing a counterclaim since October 2010 and that thedelay in taking this step was principally as a result of the unsatisfactory state of theinitial statement of claim.[9] In its counterclaim the bank seeks to recover funds advanced to Mr Wilson,which have not been repaid. The claim is not time-barred and could be the subject ofa new proceeding, instead of a counterclaim. The bank has indicated that if leave isnot granted to file a counterclaim it will file a new claim. This would causeduplication of proceedings in the Court and increased costs to both parties. Thebank's claims are properly the subject of a counterclaim and I see no impediment toleave being granted to file a counterclaim out of time, in the circumstances outlined.Leave is granted accordingly.Application for leave to file an application for summary judgment[10] Rule 12.4(2) requires that an application for summary judgment by a plaintiffmay be made either at the time the statement of claim is served on the defendant orlater with the leave of the Court. In my view, where summary judgment is sought ona counterclaim this rule is to be read as relating to the time at which the statement ofcounterclaim is served on the plaintiff.[11] Generally, a counterclaim is dealt with as an independent proceeding insertedinto a plaintiff's claim as a procedural convenience. Rule 58(3), for example,provides that after service a counterclaim must proceed in the same manner as if thedefendant had commenced an independent proceeding against the plaintiff. Acounterclaim continues even if the claim ends – r 5.59. It follows that, as theapplication for summary judgment was filed and served at the same time as thecounterclaim, no further leave is required once leave has been granted to file thecounterclaim out of time. Rule 12.4(3), which relates to an application for summaryjudgment by a defendant, applies, in my view, to an application made by a defendantfor judgment in the defendant's favour on the plaintiff's claim, and not to judgmentin a defendant's favour on its own claim. To interpret this rule otherwise would beinconsistent with the interpretation I place on r 12.4(2).[12] The bank has filed an application for leave to file its application for summaryjudgment out of time. If my interpretation of r 12.4(2) and (3) is correct, leave is notrequired. If it is incorrect, and an extension of time is required, plainly it should begranted. The application accompanied the counterclaim in respect of part of whichsummary judgment is sought. With leave granted to file a counterclaim out of timeit follows that leave to file the application for summary judgment should follow.Leave is granted accordingly.Principles of summary judgment[13] Rule 12.2 of the High Court Rules provides that the Court may give judgment against a defendant if the plaintiff satisfies the Court that the defendant has no defence to a cause of action in the statement of claim, or to a particular part of any such cause of action.[14] Where an application for summary judgment is made by a defendant theterms ―plaintiff and ―defendant are inverted, and a reference to the statement ofclaim is taken as a reference to the counterclaim.[15] There is an onus on the bank as counterclaimant to satisfy the Court that there is an absence of any real question to be tried (Pemberton v Chappell3) or put another way, whether the bank's case is unanswerable (Powers v R & W Hellaby Ltd)4. At the same time, where a defendant raises a defence it is for the defendant to lay an3 [1987] 1 NZLR 14 [1987] 3 NZCLC 100,064 (Forbes J)evidential foundation for the defence (Australian Guarantee Corporation NZ Ltd v McBeth5). In this case the Court said:Although the onus is upon the plaintiff (here, read defendant) there is upon the defendant (plaintiff) a need to provide some evidential foundation for thedefences which are raised. If not the plaintiff's (defendant's) verificationstands unchallenged and ought to be accepted unless it is patently wrong.[16] It will be noted that r 12.2 refers to judgment being given to a cause of actionin the statement of claim, ―or to a particular part of any such cause of action.Judgment may be given on part of a claim, where the amount is indisputable. InAustralian Guarantee Corporation v McBeth (above) the Court of Appeal said thereis ―no reason to prevent judgment being given for an amount which is indisputablydue and owing but which is only part of the claim and therefore not the whole of the relief sought under the particular cause of action.[17] In Burberry Mortgage Finance & Savings Ltd v Henderson6 the Court gave judgment for a principal sum advanced by the company, less payments received, with the balance of the plaintiff's claim left to continue as an ordinary proceeding.[18] In its counterclaim the bank has pleaded in its first cause of action a claim for the principal advanced to Mr Wilson. If the tests for the entry of summary judgment are met, judgment can as a matter of law be given for the balance of the principal advanced, with the claims for interest (and, here, outgoings paid on the property bythe bank due to Mr Wilson's default in meeting those payments) remaining part of the substantive proceeding to go to trial.The bank's claim[19] The bank's claim for summary judgment is relatively straightforward. On 23 April 2007 Mr Wilson, through the agency of Investor Finance, applied for an advance of $815,000 with a fixed rate of interest for 60 months, repayable over a 30 year term, and for an advance $162,500 on a variable rate of interest for a period of five years, repayable over a 30 year term also. The loans were approved and two5 [1992] 3 NZLR 546 HC Christchurch CP67/87, 14 May 1987letters of loan offer were issued by the bank. The first, for an advance of $815,000, was at a fixed interest rate of 8.7 per cent for a period of 48 months, with repayment to be made by 780 consecutive fortnightly payments of $2,952.42 each, and a final payment at the end of the loan term in May 2037. The loan agreement which is signed by Mr Wilson is dated 2nd May 2007.[20] Additionally, the bank agreed to advance $162,500.00, also at a fixed rate of interest of 8.7 per cent for a period of 48 months, repayable over 780 fortnightly payments of $588.67 each with a final payment in May 2007. Again, Mr Wilson signed the loan agreement. Both of these loan agreements are dated 2 May. I willrefer to these as the term loans.[21] The two advances were made, and loan repayments, as required by thecontracts, were debited to Mr Wilson's account and credited respectively to the two term loans. Mr Wilson was represented by his own solicitors on execution of the documents and in their solicitor's certificate they certified that the nature, effect andimplications of the provisions of the securities, deeds and agreements relating to the loan had been explained to Mr Wilson and he appeared to have understood the explanation.[22] Fortnightly payments were made on each loan until January 2008. FromFebruary 2008 Mr Wilson's repayments were debited monthly, but during that year Mr Wilson was in arrears from time to time. Arrears were cleared in December 2008 but early in 2009 Mr Wilson fell into arrears again; the last payments that have been made were received on 15 January 2009. Repayments totalling $143,590.29 have been made, comprising $120,702.02 in relation to the larger advance and $22,888.27 on the smaller advance. These payments comprised instalments of principal and interest in accordance with the term loan agreements.[23] On 30 April 2009, the bank issued formal demands for payments of all outstanding sums. Indebtedness to the bank was also secured by way of mortgage and on 8 June 2010 the bank issued to Mr Wilson a notice under the Property Law Act 2007 specifying the defaults by Mr Wilson of the term loans and advising that apower of re-entry and sale would be exercised if all amounts secured by the mortgage were not paid by a specified date.[24] The demands issued by the bank, and the Property Law Act 2007 notice issued, sought payment of principal and interest, as well as expenses. In its counterclaim, the bank seeks judgment for all sums owing under the loan contracts. In its first cause of action it has confined itself to a claim for principal only as it maintains that the issues which Mr Wilson has raised with the bank, as reasons for not paying the sums owed, relate solely to claims for interest. I will outline thebank's argument on this issue when dealing with the defence raised by Mr Wilson.Mr Wilson's defence[25] As context for Mr Wilson's defence I refer first to the Credit Contracts and Consumer Finance Act 2003 (CCCFA), on which it is based. Section 3 provides:3 PurposesThe purposes of this Act are—(a) to protect the interests of consumers in connection with credit contracts, consumer leases, and buy-back transactions of land; and(b) to provide for the disclosure of adequate information to consumers under consumer credit contracts and consumer leases—(i) to enable consumers to distinguish between competing credit arrangements or competing lease arrangements; and(ii) to enable consumers to become informed of the terms of consumer credit contracts or consumer leases before they become irrevocably committed to them; and(iii) to enable consumers to monitor the performance of consumer credit contracts or consumer leases; and(c) to provide rules about interest charges, fees, and payments in relation to consumer credit contracts; and(d) to enable consumers to seek reasonable changes to consumer credit contracts on the grounds of unforeseen hardship; and(e) to provide for the disclosure of adequate information to consumers under buy-back transactions of land and for the provision- of independent legal advice to those consumers—(i) to inform consumers of the terms, the effects, and the implications of those transactions before they become irrevocably committed to them; and(ii) to enable consumers to monitor the performance of those transactions; and(f) to provide rules about fees in relation to buy-back transactions of land; and(g) to prevent—(i) oppressive credit contracts, consumer leases, and buy- back transactions of land; and(ii) oppressive conduct by creditors under credit contracts, lessors under consumer leases, and transferees under buy- back transactions of land.[26] Section 17 provides:17 Initial disclosure(1) Every creditor under a consumer credit contract must ensure that disclosure of as much of the key information set out in Schedule 1 as is applicable to the contract is made to every debtor under the contract—(a) before the contract is made; or(b) within 5 working days of the day on which the contract is made.(2) Every creditor under a consumer credit contract must ensure that a copy of all of the terms of the contract not disclosed under subsection(1) (other than terms implied by law) is given or sent to every debtor under the contract—(a) before the contract is made; or(b) within 5 working days of the day on which the contract is made.(3) For the purposes of subsection (2), the copy of the terms of the contract must be given or sent in the same manner that disclosure is made under section 35.[27] Section 99 provides:99 Enforcement of consumer credit contract prohibited(1) If disclosure is required under section 17 or section 22, no person (other than a debtor under the consumer credit contract) may, before that disclosure is made,—(a) enforce the contract; or(b) enforce any right to recover property to which the contract relates; or(c) enforce any security interest taken in connection with the contract.(2) This section does not limit any rights that a person has in connection with a bill of exchange.[28] Mr Wilson's case is that disclosure has not ever been made in terms of s 17 and accordingly the bank cannot either enforce the contract by seeking to recover the principal sums advanced, or for that matter enforce its security (though the latter point plays no part in this application for summary judgment).[29] The facts that are required to be disclosed are set out in Schedule 1 of the CCCFA. The required facts are recorded in the body of each of the loan agreements to which I have referred and Mr Wilson did not argue otherwise. Rather, his argument that s 99 prohibits the bank from enforcing its rights is based on an allegation that in addition to the two term loan contracts dated 2 May, there are two further loan contracts between Mr Wilson and the bank for the same sums of money but in different terms, and that any disclosure given of any of these loan terms failed to adequately disclose the precise terms under which the advances were being made, because the terms differed materially. Thus, it is said that there has been a breach of s 17 when interpreted in light of the principles set out in s 3, and that s 99 is therefore a defence to this application for summary judgment. As Mr Wilson put it, the intention of the CCCFA is that there is clarity of disclosure; it must be clear cut what the terms and conditions were.[30] Although Mr Wilson had told the bank some time ago that he believed that there were two further and different loan agreements in existence, and provided to the bank the first and last pages of these documents, it was not until he swore and served his affidavit dated 3 May 2011 that the documents which he said were executed on 4 May 2007 were finally made available to the bank. Unlike the termloan agreements dated 2 May 2007, the agreements dated 4 May 2007 are headedFlexible Home Loan Facility Agreements. They provide for the two advances to bear interest at 9.2 per cent per annum and for the lending to form, in each case, a facility available to be drawn down or repaid until such time as full repayment is demanded by the bank. Thus, these documents record advances for the same sums of money as those recorded in the term loan agreements executed two days earlier, but at different interest rates and on entirely differently structured terms. Again, in the body of each of these documents the information required by the First Schedule to the CCCFA is set out. Each agreement was signed by Mr Wilson, and each contained an acknowledgement by him that he had received disclosure of information as required by the Act. I will call these the flexible agreements.The bank's position on the flexible agreements[31] Evidence for the bank was given by Mr C D Cummings, a legal executivewith the bank in Wellington. He advised that the bank is ―currently unable toprovide an explanation for why Mr Wilson may be in possession of the alleged flexi- agreements, as he described them. Based on seeing excerpts from the documentsonly, as he did not have full copies when he swore his affidavit, he accepted thatthey looked like documents on the bank's standard forms and noted that the bank hassome records suggesting that it may have approved a restructure of one of theadvances to become a variable rate flexible home loan facility. However, the bankhas no record of approving a change in relation to the other advance nor of receivingany signed agreements from Mr Wilson in the terms now produced.[32] On an application for summary judgment the Court is not required to accept uncritically evidence of a defendant (here, plaintiff) that is inherently lacking in credibility, as, for example, where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable – Krukziener v Hanover Finance Ltd7. In my view, Mr Wilson'sevidence that these documents were executed cannot be rejected under this mandate, nor did the bank argue that it should be. Although it seems unlikely that two differing sets of loan agreements would be drawn up and signed within two days7 [2008] 19 PRNZ 162providing for the advances to be made on materially different terms, on the evidence before me that possibility cannot be discounted. For present purposes I proceed on the basis that this did occur. It forms the foundation for Mr Wilson's submissionthat it resulted in a situation in which his obligations as borrower were unclear, leading to the submission that there had not been proper disclosure under s 17, and s 99 is therefore applicable.[33] Mr Wilson's said that the bank made deductions from his account, and he didnot physically make any payments, from which an intention to proceed only with thefixed rate contracts might have been inferred. He also said that if disclosure has notbeen made, s 99 bans any enforcement, not just a claim for interest.The bank's position on disclosure[34] First, the bank argued that Mr Wilson had disclosure of the terms required by the First Schedule of the CCCFA in relation to each of the loans, and on each of the bases upon which they may have been advanced. Each of the four loan agreement contains acknowledgement of disclosure. So far as the flexible agreements are concerned, this is contained in clause 21(b) of each agreement. Mr Wilson himself produced those documents so they were clearly in his possession. So far as the term loan agreements are concerned, not only did the bank rely on the signed acknowledgements in the documents themselves (clause 22(e) of each), but also on a letter dated 21 January 2011 in which it gave detailed disclosure and copies of documents, to ensure that there could be no argument that s 99 applied to any claim to enforce these documents.[35] Secondly, the bank submitted that under all four agreements the principalsum is repayable on demand, demand has been made, and the bank is entitled tojudgment for the principal. It said that even if the Court were to find, as Mr Wilsonmaintains it should, that interest should not be payable for certain periods of the loanterm because of a lack of required disclosure, that cannot be relevant to a claim forprincipal only, which is all that is at stake in this application for summary judgment.[36] Thirdly, the bank's evidence showed that from the time each of the advanceswas made payments were debited to Mr Wilson's account in accordance with theterm loan contract terms and at no point was either account operated in accordancewith the flexible agreements, with, for example, debits and credits of various sums asa revolving credit facility, or debiting of interest at the higher rates specified in theflexible rate agreements. The bank's position is that from the draw-down of theadvances Mr Wilson has been well aware of the basis on which they were to berepaid, having made significant inroads into repayment precisely in accordance withthe terms of the term loan agreements over the first 18 months or so of the loanperiods. Thus even if there were two agreed bases for the advances, only one wasacted upon and there had been full required disclosure of the loan terms. That beingthe case the bank maintained that it had complied in every respect with itsobligations under the CCCFA and was entitled to judgment for the principal sum.Discussion[37] Section 3 of the CCCFA makes it clear, in a series of specific propositions, that the Act is directed at consumer protection. The Act prescribes those requirements in terms which give precise directions to creditors and impose clear obligations on them. Broadly, the Act imposes a series of duties on creditors, intended to achieve each of the objectives in s 3, and to penalise creditors who do not comply with those duties. Consumers are entitled to expect compliance, and at the same time creditors are entitled to carry on their businesses within the certain terms laid down in the Act. The consumer protection objectives of the Act are not a mandate to the Court to interpret the Act in any way which imposes on credit providers obligations which are not spelled out. Except where there has been oppressive conduct, as defined, the Act does not give the Court power to make a broad assessment of the merits of a commercial relationship between a creditor and adebtor. A creditor's actions are to be tested against the specific duties imposed by the various relevant sections of the Act. If allegations are made that oppressiveconduct has occurred, it is necessary to examine the creditor's conduct, including its knowledge, as in GE Custodians v Bartle8. In this case no such allegation was made.8 [2010] NZSC 146[38] Here, I have assumed for the purposes of this summary judgment application that the bank and Mr Wilson entered two sets of agreements in relation to the same advances. The loans were made and repayments debited in accordance with the terms of only one set of those documents. Both the bank and Mr Wilson conducted their affairs in accordance with that set of terms, the bank by debiting the payments provided for in those terms and accepting interest at the agreed term loan rate, and Mr Wilson by accepting the debits to his account at the sums agreed in those documents and at the interest rate specified in the term loan agreements. The other set of documents providing for a flexi facility at a higher rate of interest were never, in fact, implemented.[39] I am satisfied on the evidence that there is no arguable case that Mr Wilson has not had disclosure, as required, in respect of each advance and in respect of both bases upon which the loans were documented. The documents upon which the parties proceeded with their commercial relationship were fully disclosed as required by s 17 of the Act (subject only to a minor issue in relation to a variation of the regularity of instalment payments, which I will refer to below).[40] The view expressed by Mr Wilson that the existence of two sets of documents for each of the two advances led to an overall general lack of clarity in the commercial relationship between him and the bank has some foundation, but neither the purpose nor express provisions of the CCCFA are directed at the clarity of commercial relationships in any sense broader than the precise requirements of the Act, including s 17, require. In any event, for at least 18 months Mr Wilson was fully aware of the basis upon which the advances had been made and were being repaid, so any lack of clarity was minor.[41] Further, on the evidence of Mr Cummings, the issue of whether the loans might in fact have been the subject of the flexible agreements was not raised until March 2009 by which time Mr Wilson was in arrears with his payments and the advances were under scrutiny from the enforcement sections of the bank. Mr Wilson maintained that by a letter dated 17 August 2007 he sought request disclosure underthe CCCFA ―to help clarify the conflicting agreements anomaly and had no response to that request; the bank has no record of receiving the letter. The letter, inany event, whilst referring to ―different loan documents does not refer to there being two conflicting sets of loan terms. It must be remembered that there were―different loan documents from the outset, even under the term loan agreements,because there were loan agreements for two different sums. In the context of theongoing adherence by Mr Wilson to the payment arrangements under the term loanagreements it cannot be inferred that this letter (assuming it was sent, as I do forpresent purposes) was raising any serious issue about the terms of the loan and, as Ihave recorded, Mr Wilson continued to pay instalments as required by the term loanagreements until January 2009. All other communications produced by him asannexures to his affidavit are dated in 2009 by which point he was well in arrearswith payments under the loans.[42] As recorded above, the term loans were to be repaid by fortnightly instalments. In 2008 this was changed to monthly instalments, and monthly instalments were paid thereafter. Mr Wilson argued that he had not had the required variation disclosure in respect of this change of terms (s 22). If variation disclosure was not given when this was first implemented, which is in contention on this application, it was certainly provided by letters dated 3 April 2009 and 4 September 2009 from the bank to Mr Wilson, produced in evidence by Mr Cummings. Copies of these letters were sent to Mr Wilson, again under cover of the letter dated 21 January 2011 referred to earlier, from the bank's solicitors to Mr Wilson.[43] Disclosure of the variation of the frequency of instalments was not required by s 22 if the loan terms were those in the flexible agreements, as they did not amount to changes in the contracts. Under those agreements payments can be made to the bank at any time, and advances, up to the credit limit, similarly withdrawn. Therefore all variation disclosure required by s 22 has been given.[44] There is no arguable case that disclosure required by the Act has not been given.Outcome[45] The plaintiff does not have an arguable defence to the plaintiff's applicationfor summary judgment. There will be judgment for the bank for the principal sum owing to it by Mr Wilson, $833,909.71 together with costs on a 2B basis. I further declare that the bank is entitled to interest at 8.7 per cent, the contractual rate applying to the loan, on the sum of $833,909.71 from the date of judgment to the date of payment.J G MatthewsAssociate JudgeSolicitors:Bell Gully, AucklandCopy to:Mr W Wilson, Auckland