Neil Sands
A High Court judge who rejected ANZ’s bid to dismiss a high-profile class action found that Parliament had outlined its intent clearly in the relevant statute, obliging the court to follow the letter of the law, despite the bank’s argument that the amounts involved were too trivial for the case to proceed.
Justice Geoff Venning
ANZ is considering appealing Justice Geoffrey Venning’s decision, which New Zealand’s largest bank estimates could cost it up to $125 million in payouts to disgruntled customers.
The judgment, released this week, centred on disclosure obligations under the Credit Contracts and Consumer Finance Act (CCCFA), raising issues about the need for creditors to provide accurate information to maintain confidence in financial markets.
The case ultimately rested on whether the legislation allowed enough judicial discretion to throw out the case.
Venning ruled that it did not, saying legislators had been specific about what they wanted when drafting the Act.
“As a general proposition, if the purpose of the Act is clear, its text should, if possible, be interpreted so as to give effect to that purpose. Legislation should work as Parliament intended it to work… Where, as here, the relevant enactment expressly sets out its purpose, the court must have regard to that section,” he found.
Strict compliance required
ANZ customers Andrew Beaven and Mei Lim jointly took out a loan with ANZ in August 2015, with the interest rate part fixed and part floating. The couple were representative plaintiffs in the class action against ANZ, which involves a total of 17,000 customers.
A parallel case against ASB, involving representive plaintiff Anthony Simons, was discontinued after the bank agreed to settle for $135.6 million in October last year.
Beaven and Lim changed the terms of the floating part of their loan in November 2015, but ANZ’s loan calculator was faulty, resulting in an error on the couple’s fortnightly repayments of $2.34, or $1,812.23 over the life of the loan.
The mistake put ANZ in breach of s 22 of the CCCFA, which states that when an agreement to amend the terms of a loan is reached, the lender must accurately disclose all changes to the debtors.
In September 2021, ANZ publicly acknowledged that there was a mistake with its loan calculator, reported the issue to the Commerce Commission and paid $35m in remediation to affected customers.
However, under a provision introduced into the CCCFA in 2015, debtors cannot be held liable for the cost of borrowing – interest payments and fees – if their creditor has failed to make proper disclosures.
While the provision was amended in 2019 to give judges discretion to apply “just and equitable” remedy for breaches, the change was not retrospective. The errors made by ANZ dated from 2015-2016, allowing the class action to proceed.
Lawyers pursuing the case, led by Auckland firm Russell van Hout with funding from the LPF group, argued the law as it stood at the time was clear and required strict compliance, meaning borrowers were entitled to a full refund of interest payments and fees, along with penalty interest and statutory damages.
De minimis dismissed
ANZ’s lawyers told the High Court that the mistakes were small, inadvertent and caused no harm to borrowers, with most actually benefitting because their fortnightly repayments were on average $2 less than they should have been, an amount the bank wrote off.
They argued that it was a case where the de minimis principal should apply – that the law does not need to concern itself with trifling matters.
Venning said that under the CCCFA lenders such as ANZ must exercise due diligence before entering a credit agreement so that borrowers can make informed decisions. He also said information given to borrowers must be clear, concise “and not be likely to deceive or mislead a reasonable person”.
“When those various provisions are read with the purposes of the CCCFA, it becomes difficult to apply the de minimis principle to this case. Strict accuracy is required… The plaintiffs were entirely dependent on ANZ to calculate the amounts correctly,” he said.
Venning also rejected the suggestion that the value of the amounts under discussion did not warrant the court’s consideration, saying: “The repayment amount of $2.34, while small, cannot be regarded as de minimis in the circumstances of ongoing regular repayments. They are not rounding errors.”
Trust eroded
In his 58-page judgment, Venning quoted evidence from economist Shamubeel Eaqub about why accurate disclosure is needed for credit markets to operate properly.
“Mr Eaqub considered the errors were economically significant by virtue of ANZ failing to meet its statutory compliance requirements. The errors were large, taken overall, and were not altered by later remedial payments,” the judgment said.
“A lender’s failure in this respect erodes trust in the market. It diminishes the ease of comparing products, which reduces competition between lenders and results in inefficiencies. In his opinion, the plaintiffs suffered economic loss or harm by receiving a lesser quality product. A rational consumer would prefer a credit product with compliant disclosure.”
Venning dismissed the claims for damages and penalty interest, but found ANZ had breached s 22 of the Act between November 2015 and November 2018, meaning Beaven and Lim and were not liable for the cost of borrowing over that period. He ordered ANZ to refund them $32,728.42.
ANZ is yet to decide on an appeal. The bank released a statement after the judgement was released saying, “We maintain that the potential consequences under the current law are disproportionate and not aligned with any actual harm caused.”
A bill that retrospectively allows the courts discretion to apply the “just and equitable” threshold to CCCFA disclosure breaches from 2015-2019 is currently before Parliament. The bill would have initially snuffed out the class action, but the government relented after an outcry about applying backward-looking legislation to ongoing court cases.
The judgment is available here.
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