The Court of Appeal has overturned a ruling that ANZ Bank New Zealand doesn't have to compensate a Taranaki farming family for the way it had represented the risk attached to interest rate swaps.
The High Court turned down a bid by Sharon and Stephen Coomey and their family trust - Bushline Trustees - for compensation over the way ANZ sold the swaps in 2008. Although the court found the bank had misrepresented the effect of combining floating rate loans with fixed rate swaps, no legal liability followed.
The Coomey's had claimed, on a variety of calculations, damages ranging between $76,000 and $6.3 million. The judge increased the costs awarded to the bank because they turned down two settlement offers.
But the Court of Appeal has sent the dispute back to the High Court to determine the damages payable by ANZ.
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The appeal court found ANZ misrepresented the nature and effect of the swaps and failed to comply with its obligations in its margin and monitoring undertakings. It also differed from the High Court's in its view on whether it was fair and reasonable for the bank to rely on its disclaimer accuses.
"We do not think it is fair and reasonable — given the circumstances just outlined — that ANZ should be able in effect to say to the Coomeys: 'Notwithstanding what we promised we would do and what we represented to be true, you have no claim against us even though we did not do what we said we would and what we represented to you was false'," the judgment said.
The swaps had been used to help finance a $7.3 million farm as well as refinance almost $12 million of existing debt. The Coomeys had been long-standing customers of ANZ and its predecessor, National Bank.
The High Court ruled on the case in 2017. The appeal by the Coomeys and Bushline was heard by Justices Forrest Miller, Raynor Asher, and Denis Clifford in October last year.
The judges also said the High Court erred in increasing the costs payable based on the settlement offers, saying the complexity of the law and facts involved showed that the Coomeys hadn't acted unreasonably.
ANZ had offered the Coomeys and Bushline $155,120 in compensation. That was part of an $18.5 million fund set up to settle potential claims over the bank's sale of interest rate swaps to farmers.