The BNZ became concerned that it made a loan to two migrants who run a bakery business based on false information presented to it. Photo / 123RF
The BNZ became concerned that it made a loan to two migrants who run a bakery business based on false information presented to it. Photo / 123RF
Two immigrants from Cambodia have failed to stop the BNZ from selling their Auckland home after applying to the court for an injunction.
Kimteav Lay and Bau Hoang sought an interim injunction against the bank from exercising its power to sell their Flat Bush home.
They went to the HighCourt at Auckland, pending trial of their claims that the bank was in breach of its contract with them and had engaged in unconscionable, or misleading and deceptive conduct.
But Justice Pheroze Jagose rejected their application.
The Cambodian nationals had limited or non-existent English language skills.
They had operated their own bakery business for over 20 years in East Tāmaki, living at their Flat Bush home with their two children, aged 8 and 9 years.
“Their commitment to and self-denial in improving their family’s position in New Zealand is marked by their extraordinary hours devoted to family and work under very trying personal circumstances,” the decision said.
But afterwards, the bank was told by an as-yet unidentified third party that the loan was improperly obtained.
The BNZ became concerned that it made that loan based on false information about the couple’s capacity to service the debt.
That had been based on past income derived from their bakery business.
Justice Pheroze Jagose ruled in the case. Photo / Doug Sherring
So the bank investigated and considered there was a marked disparity between the couple’s reported and represented income, “the latter overstating the former by degrees of magnitude”.
The bank took the view such constituted a “default” for the purposes of the mortgage, entitling it to exercise a power to sell the Flat Bush property if complying with Property Law Act 2007 requirements.
The couple raised four causes of action against the bank, alleging:
That the bank has breached its contract with them by not dealing with them “reasonably and fairly” and asserting them to be in default and taking enforcement action accordingly;
The bank was in breach of the Fair Trading Act by engaging in unconscionable conduct in the investigation and enforcement of their contended default;
That the same conduct grounds the bank’s liability for unconscionable conduct “in equity and in law”;
The bank’s issue of its Property Law Act notice and deduction of enforcement expenses from their account are misleading and deceptive conduct in breach of the Fair Trading Act.
However, the BNZ argued via counsel Sarah Armstrong there could be no genuine dispute that it was provided with false financial information in support of their loan application.
That loan application presented a materially inaccurate picture, she argued.
Evidence was presented about the bakery’s financial statements which recorded sales, surpluses and tax amounts payable.
The judge cited an accountant saying it appeared that the tax records at Inland Revenue were purposely amended “to furnish higher income in the summary of earnings to the bank” in the 2021 and 2022 years.
The couple complained they had no direct contact with the bank until it started its investigation. All dealings were through the mortgage broker, they said.
The issue of potential fraud then arose in the decision, the judge noted.
The couple’s lawyer, Angela Parlane, argued they had not acted fraudulently. Rather, the couple were innocent victims of an accountant’s fraud, she said.
The judge sought more information.
“In response to my query if the plaintiffs nonetheless argued that information may be ‘true, complete and accurate in all material respects’,” Ms Parlane responded “it might be; [the plaintiffs] just don’t know” without information from the contended fraudulent accountant, on whose professional expertise they relied,” the judge said in the decision.
He ruled on August 14 that the couple’s application for the injunction be declined.
Anne Gibson has been the Herald’s property editor for 24 years, written books and covered property extensively here and overseas.
