Farmers miss out on swaps 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 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.

National Bank was taken over by ANZ in 2003.

When the global financial crisis struck in 2008 the costs of the 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 swap loans.

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 staff ‘‘made various threats, forced the sale of property, and acted in a way designed to force the financial collapse’’ of Bushline’s activities.

The Coomeys set up the Bushline trusts in 1998 to own their growing farming empire.

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 debt of

$19.46 million, 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 sophisticated businesses with expert finance staff, were sold between 2005 and 2009 by some banks to farmers as insurance against interest rates rising.

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.