Northland truckie suing Westpac over interest swap arrangement

Northland truckie Renie Gibson is suing Westpac for allegedly misleading her into financing a farm's purchase. Photo / John Stone

A Northland truckie is suing Westpac for allegedly deceiving her during lending arrangements that resulted in her losing her farm during the global financial crisis.

Renie Gibson filed a statement of claim in September 2015 and an amended statement of claim in December 2016 against Westpac Banking Corporation and Westpac New Zealand Limited.

The case concerns the bank's marking, promotion and sale of interest rate swaps to rural customers between 2005 and 2012 that prompted a Commerce Commission investigation.

Gibson is alleging Westpac misled her into financing the purchase of a farm near Dargaville with an interest rate swap agreement. She says she was led to believe she was entering into a fixed rate arrangement.

The banks reject the allegations they misled Gibson, saying they gave her a product disclosure statement that urged her to read all documents carefully and to seek independent advice before committing herself.

The swap transaction involves the borrower agreeing to make payments to the bank at a fixed interest rate. In return, the bank agrees to pay the borrower at the same floating base interest rate.

Westpac applied to the High Court in Whangārei for summary judgment— a ruling made without a trial— and to strike out Gibson's claim as they were allegedly made out of time.

Associate Judge Roger Bell ruled against Westpac. The bank lent a wholesale term loan with fixed and float alternatives of $2.8m and an additional $300,000 to Renie Gibson Trustees in 2007.

Westpac New Zealand Limited terminated the lending arrangements in August 2011, made demands and appointed receivers. It sold the farm in February 2012 but the receivership and sale did not earn enough to clear the bank's debts.

But Associate Judge Bell said at no time did the banks alert her to the wisdom of terminating the swap agreement in the face of falling interest rates, increasing margins and increased costs of funding passed on to customers.

Swap agreements were sophisticated financial transactions, he said, that required specialist knowledge to understand and manage.

"Having drawn the plaintiffs into a complex financing arrangement which they could not be expected to understand or operate under representations that the banks could give them real practical know-how, it is offensive for the banks to say that all advice was off once the agreements were signed," the judge said.

A trial date is yet to be set.