Hardie v Westpac New Zealand Limited [2024] NZHC 2302 (16 August 2024)

Last Updated: 2 September 2024

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2024-404-001900 [2024] NZHC 2302

UNDER	the Credit Contracts and Consumer Finance Act 2003
IN THE MATTER OF	a claim for statutory damages, recovery of the costs of borrowing and an order prohibiting enforcement action
BETWEEN	KEVIN MICHAEL HARDIE and JENNA MARIE HARDIE Plaintiffs
AND	WESTPAC NEW ZEALAND LIMITED Defendant

Hearing:	14 August 2024
Counsel:	MD Lloyd for Plaintiffs BJ Upton and BP Marshall-Lee for Defendant
Judgment:	16 August 2024

JUDGMENT OF DOWNS J

This judgment was delivered by me on Friday, 16 August 2024 at 11.30 am pursuant to r 11.5 of the High Court Rules 2016.

Registrar/Deputy Registrar

Solicitors/Counsel:

Property Law Centre, Auckland. Simpson Grierson, Auckland.

MD Lloyd, Auckland.

HARDIE v WESTPAC NEW ZEALAND LTD [2024] NZHC 2302 [16 August 2024]

The case

• [1] On 14 August 2024, I dismissed an application for an urgent interim injunction.¹ The application sought to prevent a mortgagee sale that afternoon. Shortly thereafter, I dismissed an application for a stay of my decision pending an appeal to the Court of Appeal.² I said I would give reasons for both decisions when time permitted, hence this judgment.

Background

• [2] Kevin and Jenna Hardie have four loans with Westpac New Zealand Ltd.³ Their borrowings are secured by an all-obligations mortgage against their family home in Titirangi. The Hardies have not paid any interest or capital on their borrowings since 27 July 2022. As at 9 August 2024, their arrears were $118,586.54.

• [3] In August 2023, Westpac served notices on the couple under s 119 of the Property Law Act 2007.

• [4] A mortgagee sale, by auction, was scheduled for 2 pm, 14 August 2024.

• [5] On 12 August 2024, the Hardies filed a statement of claim against Westpac, with an application for an urgent interim injunction. As observed, that application sought to prevent the mortgagee sale.

• [6] The statement of claim contains three causes of action, all under the Credit Contracts and Consumer Finance Act 2003.⁴ All three causes of action allege Westpac has failed to meet its (statutory) disclosure obligations, with the result it owes the Hardies statutory damages. The first cause of action alleges Westpac is precluded from conducting a mortgagee sale because of its disclosure failings.

• [7] Behind this terse description lies a dispute that goes back to at least 2010. In or about December that year, Westpac informed the Hardies it needed to increase the

¹ See e-Minute of 14 August 2024 at 12.35 pm.

² See e-Minute of 14 August 2024 at 1.24 pm.

³ Westpac.

⁴ Which I call the Credit Contracts Act, or the Act.

priority amount secured by the mortgage. Westpac had overlooked doing so when the Hardies increased their borrowings in or about 2007. On 18 January 2011, Westpac wrote to the Hardies and said the priority amount needed to be increased to $710,000.

• [8] The priority amount was later increased by the bank to $710,000, plus interest. The italicised phrase captures the gist of the first cause of action. By it, the Hardies contend Westpac failed to disclose to them that the increase to the priority amount also included interest.

• [9] Materially, the Hardies do not dispute they have not paid any capital or interest since July 2022. Their position is captured by Mr Hardie’s affirmation of 12 August 2024:

Over the coming months there were ongoing communications between me and Westpac about their failure to provide information requested by me of it under the CCCFA and it claiming that we were falling into arrears under our four loans.

Eventually, in frustration, the decision I made was that until Westpac engaged with me over my concerns about it not complying with its CCCFA obligations I would not engage with it regarding its claims for payment of arrears on our loans.

My position was throughout, and still is, that in order for Westpac to be able to make demands of arrears from us under our loans it had to off set what it clearly owed us by way of statutory damages under the CCCFA and it had to properly consider whether it was even entitled to enforce our loans when it was not complying with its obligations under the CCCFA.

Unfortunately Westpac basically refused to properly consider the points I was making about its CCCFA obligations and certainly never acknowledged that it was in breach of them giving rise to damages.

In August 2023 Westpac served us with notice under s 119 of the PLA ...

• [10] The Hardies have complained about Westpac to the Banking Ombudsman. Those complaints have been dismissed, treated as stale, or both.

Principle

• [11] A plaintiff in this context must identify a serious issue to be tried. If such an issue exists, the Court must consider the balance of convenience and wider interests of justice in determining whether an interim injunction should be granted.⁵

A précis of the case for an interim injunction

• [12] On behalf of the Hardies, Mr Lloyd argued a serious trial issue arose in relation to the first and second causes of action.⁶

• [13] In relation to the first, Mr Lloyd said s 22(1)(a) of the Credit Contracts Act required Westpac to provide “full particulars of the change” concerning the priority amount, and “full particulars” included reference to interest. Mr Lloyd said Westpac was, therefore, precluded by s 99 of the Act from enforcing the contract or taking other action governed by that section. Mr Lloyd emphasised s 99(1A) and (1B), which provide:

(1A) Neither the debtor nor any other person is liable for the costs of borrowing in relation to any period during which the creditor has failed to comply with section 17 or 22.

(1B) The period referred to in subsection (1A)—

(a) Starts on the date of the failure; and

(b) Ends only at the close of the day on which the disclosure under section 17 or 22 is made.

• [14] Mr Lloyd said these provisions meant the Hardies “were not and are not liable for the costs of borrowing ... in relation to the period in which Westpac has failed to make disclosure, that period being January 2011 to the present date”. Mr Lloyd emphasised the consumer protection rationale of the Act.

• [15] The second cause of action concerns s 23 of the Act. Among other things, s 23 requires disclosure of a change in the interest rate in relation to a consumer credit contract. The Hardies changed address and told Westpac they had done so. However,

⁵ American Cyanamid Co v Ethicon Ltd [1975] UKHL 1; [1975] AC 396 (HL), [1975] 1 All ER 504; and

Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] NZCA 70; [1985] 2 NZLR 129 (CA).

⁶ Mr Lloyd offered no concession in relation to the third; see [16].

Westpac continued to send correspondence to the Hardies’ old address, at least for a time. The Hardies had floating interest rates on all their borrowings, and these changed throughout this period. So, the Hardies allege Westpac contravened s 23 and are liable for damages under the Act. Mr Lloyd said these damages would erode their arrears.

• [16] Mr Lloyd said little about the third cause of action, presumably because it duplicates or largely duplicates the first; the apparent concern is the change to the priority amount discussed earlier.

Balance of convenience and the broader interests of justice

• [17] Mr Lloyd acknowledged the Hardies had sought injunctive relief at the 11^th hour. However, he said they had been without a lawyer until he was engaged, and that occurred only last week.

• [18] Mr Lloyd said the Hardies stood to lose their family home whereas Westpac would suffer nothing. Mr Lloyd stressed that for it, the case concerned “just money”. Mr Lloyd said there was no risk of Westpac not getting its money as there remained “good equity” in the home and the Hardies owned another property. Mr Lloyd also emphasised the Hardies’ personal circumstances.

Analysis

• [19] I was unpersuaded a serious issue arose in relation to any cause of action.

• [20] The Act draws a distinction between a consumer credit contract (or credit contract) and a security interest. The distinction is apparent in a number of places, including the initial disclosure required by s 17 and Schedule 1. Section 17(1) requires disclosure of “as much of the key information set out in Schedule 1 as is applicable to the contract”, and Schedule 1 includes the nature of the security interest, the property subject to the security interest, and the extent to which the borrower’s obligations are secured by that interest.
• [21] Section 22 of the Act regulates disclosure of changes to a consumer credit contract. Section 22(3)(c) contemplates these changes could include those that changed or affected the security interest, but the evident focus is upon a change or changes to the consumer credit contract itself.

• [22] These observations introduce the important point in relation to the first cause of action. A change to the priority amount in connection with a security interest is just that, a change to the security interest only. Such a change does not change or affect the consumer credit contract. So, s 22 could not be engaged by a change to the priority amount alone. That being so, no breach of s 22 could occur.

• [23] Three interrelated points support this view. First, Westpac has not changed the nature or extent of the Hardies’ obligations in relation to their borrowings. These were secured, and remain secured, by an all-obligations mortgage against the home. Second, the priority amount exists to protect the bank, not the Hardies. The priority amount typically exceeds the amount of any borrowings. It ensures advances the bank makes to the level of the priority amount rank ahead of any subsequent mortgage. Third, no subsequent mortgage exists. Indeed, the Hardies required Westpac’s permission to have a subsequent mortgage.

• [24] A piece of correspondence in evidence suggests Mr Hardie believes or believed the priority amount is the amount he and his wife owe the bank. The priority amount does not identify what the borrower owes. Again, it exists to protect the bank, not borrower, in relation to any subsequent mortgage.

• [25] The second cause of action is similarly porous. Regulation 5 of the Credit Contracts and Consumer Finance Regulations 2004 creates alternative means by which interest rate changes may be communicated to borrowers:

Alternative publication requirements

For the purposes of sections 23(4) and 26(4) of the Act, a creditor may make disclosure in relation to a change to the amount of an interest rate, or to the amount of any fee or charge payable, by—

(a) Displaying the information at all of the creditor’s places of business that are accessed by the public so that the information is reasonably

visible (at all reasonable times) to persons entering those places of business; and

(b) Advertising the information at least once in the daily newspapers published in all of the following areas in which the creditor carries on business: Whangarei, Auckland, Hamilton, Rotorua, Hawkes Bay, New Plymouth, Palmerston North, Wellington, Nelson, Christchurch,

Dunedin, and Invercargill; and

(c) If the creditor has a website, posting the information on the creditor’s website in a form that is publicly accessible (at all reasonable times).

• [26] The evidence offered by Westpac—which I did not understand the Hardies to contest—implies the interest rate changes were communicated by these alternative means. Furthermore, as Mr Upton observed on behalf of Westpac, the Hardies had access to the applicable interest rates by online banking.

• [27] Nothing need be said about the third cause of action for the reason at [16], or Mr Upton’s other submissions in relation to the first and second causes of action.

• [28] I was also unpersuaded the balance of convenience or broader interests of justice favoured an interim injunction.

• [29] First, equity in the property is being eroded. As observed, the arrears are not less than $118,586.54. Second, Westpac has engaged with the Hardies in an attempt to address their concerns. For example, on 10 November 2023, it sent them a 24-page, 102-paragraph letter. The letter identifies the apprehended complaints, and Westpac’s response. The Hardies did not reply until 6 May 2024. By then, the Hardies had been informed Westpac was pursuing a mortgagee sale. Third, urgency arises because of the lateness of the application—and for no other reason. Fourth, the Hardies have chosen not to pay anything to Westpac since July 2022; see [9]. The significance of this point cannot be overstated, particularly as the Hardies could have met their obligations to the bank and brought a claim under the Act (in relation to the matters complained of). These courses are not mutually exclusive. Fifth, the contention animating the application—that a borrower may use the Act as a fulcrum to disregard their obligations—is, frankly, unattractive.

• [30] In short, this situation did not need to arise. That it has does not provide a basis for, nor support, an interim injunction.

A stay pending appeal?

• [31] I declined the application (by e-Minute) at 12.35 pm. At 12.47 pm, Mr Lloyd filed a memorandum of counsel seeking a stay of my decision pending an appeal to the Court of Appeal. I immediately convened a telephone conference, at which Mr Lloyd said an appeal would be nugatory without a stay.

• [32] I declined the application at the end of the (brief) conference. I did so as I considered an appeal had no realistic prospect of success, and by then, the auction was less than an hour from commencing.

Costs

• [33] I know of no reason why Westpac should not have 2B scale costs. If costs cannot be agreed, counsel may file memoranda of not more than seven pages each:

(a) Mr Lloyd on behalf of the Hardies, on or before 27 September 2024.

(b) Mr Upton on behalf of Westpac, on or before 11 October 2024.

...................................

Downs J