Westpac sued for $6.5m
Westpac Bank is being sued for $6.5 million in relation to losses connected to the sale of interest rate swaps.
It is understood there could be as many as a dozen other High Court cases filed relating to losses from interest rate swaps sold by big-name banks which have not yet been made public.
Silver Oaks Group, which operates motels in Auckland and Rotorua, would not comment, but has filed documents in the High Court in Auckland claiming damages against the bank.
Westpac said only: "As the matter is before the courts, it would not be appropriate for us to make any comment."
Following an investigation into claims of mis-selling, which parallel a scandal on the same issue in the United Kingdom, the Commerce Commission said late last year that it planned to take legal action against banks, including Westpac, ANZ, and ASB, which sold the swaps to farmers between 2005 and 2008. They covered loans said to run into the hundreds of millions, if not billions of dollars.
Borrowers say they were told the swaps would protect them from rising interest rates, but instead interest rates crashed, and, to their horror, they found their borrowing costs rising.
The Silver Oaks Group, which is a family-owned business with Greg Wilson as its major shareholder and sole director, came close to destruction as a result of its indebtedness to Westpac. It was tipped into receivership owing Westpac $17.9m on August 23, 2012.
After the sale of two properties, and the debt to Westpac being paid out by refinancing from ANZ, Silver Oaks Group re-emerged from receivership in November the same year. It appears to have taken an entire year to prepare its legal challenge to the bank.
When the Silver Oaks Group case gets to trial, it is expected to shed light on the way Westpac sold interest rate swaps, which
will be the first time such claims against a mainstream bank have been laid out in detail in the public domain.
Much has been said of the way interest-rate swaps were sold but, as yet, the only detailed analysis of an interest-rate swap sale that has been made public was that by the now-defunct ABN Amro New Zealand to the Kaipara District Council.
That deal was investigated by the Office of the Auditor General, which found explanations to the council on how the swap worked were inadequate, that the swap had not matched the council's borrowing circumstances, and that it had needed to borrow an extra $840,000 to break the contract, adding to its spiralling debts.
To date, the Commerce Commission has not revealed what its investigations have found that led it to threaten action against the banks. The banks have said they will defend themselves.
The Sunday Star-Times has applied to the High Court to view the statement of claims and defence in the Westpac case.
- Sunday Star Times