Taranaki farmers miss out on compo

A Taranaki dairy farming couple have lost their compensation claim against ANZ over the loss of homes and farms.

At the High Court in Auckland in October, Stephen and Sharon Coomey claimed National Bank, which ANZ took over in 2003, had failed in its duty of care towards them when it sold them controversial interest rate swap loans, but failed to warn them about how risky they really were.

When the global financial crisis struck in 2008 the costs of the swap loans rose dramatically, the court heard.

The couple argued the bank failed to ‘‘stand by’’ them ‘‘in good times and bad’’, but Justice Rebecca Edwards ruled the bank owed them no duty of care over the swaps.

She ruled that the couple, who were the trustees of the Bushline trusts, which owned their five farms, had signed loan contracts stating they were not relying on the bank’s advice.

The banker-customer relationship did not automatically give rise to a duty of care, Justice Edwards ruled.

The judge also dismissed the Coomeys’ claims that the bank had acted oppressively, and that bank staff ‘‘made various threats, forced the sale of property, and acted in a way designed to force the financial collapse of Bushline’s business activities’’.

The Coomeys had a reputation as good dairy farmers, having bought their first farm in 1992, and set up the Bushline trusts to own their growing farming empire in 1998.

They built their enterprise to four farms, before buying the ‘‘Waverley’’ run-off block in 2008 which they converted to dairy.

The deal left them with $19.46 million of debt, all of it funded through complex interest rate swaps which National Bank had marketed as a tool farmers could use to manage interest rate risk.

The swap loans, traditionally used by businesses with expert finance staff, were sold between 2005 and 2009 by some banks to farmers as insurance against interest rates rising. But when the opposite happened, the farmers who bought them were left locked in to high interest rates with hefty break fees.

ANZ lawyers told the court that Bushline needed fair winds for Waverley to work out. Instead, ‘‘it hit heavy weather in every sense of the word’’.

Missed milk production targets resulted in Bushline having to borrow more from the bank. In late 2008 and early 2009, ANZ lifted the margin it charged on the swap loans, resulting in $76,000 extra interest costs for Bushline.

The Coomeys claimed the bank had promised the margin would not rise during the lifetime of the loans. But while Justice Edwards accepted the bank failed to disclose the ‘‘downsides’’ of swap loans, she found there was no such promise, even though internal ANZ emails from 2008 showed some rural lending staff did not understand that.

After media reports of rural swap sales, the Commerce Commission began an investigation in 2012. ANZ agreed to pay $18.5m to affected customers.

Bushline was offered $155,120, but rejected the offer.