Farming couple's $1.24m damages case fails but ANZ breached duty of care
Taranaki dairy farmers Craig and Lisa Swan have lost a claim for $1.24 million from the ANZ Bank over controversial interest-rate swaps, although the bank has been judged by the High Court to have breached its duty of care to the couple.
Trading as Cygnet Farms, the Swans borrowed about $6m from the National Bank (later ANZ) in 2007 to buy a dairy farm.
In January 2008 Cygnet agreed with the bank to structure a loan of nearly $4m in the form of two interest-rate swaps.
Banks sold interest rate swap contracts to farmers between 2005 and 2009, to help them manage their interest rate risk, but farmers found they were locked into higher costs instead.
Justice Matthew Palmer said the swaps were disadvantageous for Cygnet when the global financial crisis hit in mid-2008 because it could not take advantage of a precipitous fall in floating rates.
On one of the loans the Swans had, the floating rate underlying a swap dropped from 7.57 per cent in November 2008 to 4.92 per cent in February 2009. and did not rise above 5 per cent for the rest of its term to maturity.
Cygnet also suffered from the swaps because the bank imposed an additional credit limit which it would not have done for a fixed rate loan, and which later affected the margin it charged; the break fees were calculated differently, and were higher, than for fixed rate loans; and the bank increased the margin it charged on the underlying loan which it could not do on fixed rate loans.
Cygnet sought damages for the bank's alleged negligence, negligent misstatement, pre-contractual misrepresentation, breach of contract and breach of the Fair Trading Act.
Justice Palmer said the Contractual Remedies Act did not allow for damages because it removed the ability of plaintiffs to recover meaningful relief for a wrong even when liability was established. Furthermore, the Fair Trading Act claim was out of time.
"I make a declaration that the bank breached its duty of care to Cygnet. Effectively Cygnet fails to achieve anything other than a moral victory and an award of costs. Whether the law should be reformed is a matter for Parliament."
In 2014 ANZ settled for $18.5m with customers who complained to the Commerce Commission about the crippling swaps.