· 2022-12-09T03:44:27+0000 · 15 posts

Australia and New Zealand Banking Group Limited v Ngo [2022] VSC 713 (22 November 2022)

Australia and New Zealand Banking Group Limited v Ngo [2022] VSC 713 (22 November 2022)

Intro: This is a case where the plaintiff, Australia and New Zealand Banking Group Limited (‘ANZ’), agreed to provide, Chuc Hong Ngo (‘Ms. Ngo’), with different loans. Ms. Ngo went on default. Hence, ANZ made claims for it.

Facts:

On 20 January 2015, the plaintiff, Australia and New Zealand Banking Group Limited (‘ANZ’), agreed to provide the first defendant, Chuc Hong Ngo (‘Ms. Ngo’), with a business loan facility (the ‘Business Loan’) in the amount of $220,000. On 8 September 2015, ANZ agreed to provide Ms. Ngo with a residential loan facility (the ‘Residential Loan’) in the amount of $591,431.94.

Earlier, on 7 January 2015, ANZ provided Ms. Ngo’s company, Jessica’s Public Pty Ltd (the ‘Company’), with an overdraft facility (the ‘Overdraft Facility’) which had an initial facility limit of $24,500.

The Business Loan, Residential Loan, and Overdraft Facility are collectively referred to as the ’Facilities’ for these reasons.

The funds advanced under the Business Loan were used by Ms. Ngo to purchase a commercial office suite at Unit 15, 471-475 Sydney Road, Coburg (the ‘Coburg Property’) of which Ms. Ngo is currently the registered proprietor. The Business Loan is secured by a registered mortgage over the Coburg property (the ‘Coburg Mortgage’).

The funds advanced under the Residential Loan were used by Ms. Ngo to purchase a residential property at 37 Sheila Street, Preston (the ‘Preston Property’) of which Ms. Ngo is currently the registered proprietor. The Residential Loan is secured by a mortgage over the Preston Property (the ‘Preston Mortgage’).

On 7 November 2018, ANZ notified Ms. Ngo that she was in default of the Business Loan and the Coburg Mortgage (‘First Default Notice’), and in default of the Residential Loan and the Preston Mortgage (‘Second Default Notice’).[1] Each default notice gave Ms. Ngo 61 days from the date of the notice to remedy the default.

Ms. Ngo has not remedied the defaults. In this proceeding, ANZ seeks to recover debts owing from Ms Ngo, comprising:

(a) $300,509.08 under the Business Loan, together with interest of that sum at the rate of $54.57 per day from 19 July 2022 to the date of judgment;

(b) various bank fees, charges, and legal costs in relation to the Business Loan; and

(i) the principal sum advanced to Ms. Ngo of $591,431.94;

(ii) less repayments made by Ms. Ngo totalling $52,237.92; and

(iii) less the $5,000 inconvenience compensation in Ms. Ngo’s favour from ANZ, which circumstances are explored further below.[2]

In addition, ANZ seeks possession of the Coburg Property and the Preston Property.

ANZ does not seek interest on the Residential Loan or repayment of the Overdraft Facility.

Ms. Ngo admits that she received advances under the Facilities and defaulted under the Facilities.

Ms. Ngo nevertheless contends that she should be relieved from all liability under the Business Loan and the Residential Loan because, among other things, ANZ acted improperly and unconscionably in:

(a) approving the Business Loan and the Residential Loan;

(b) applying two credit limit increases to the Overdraft Facility; and

Ms. Ngo and the Company have made counterclaims based upon such alleged conduct.

Ms. Ngo’s Defence:

Ms. Ngo alleges that when ANZ approved the First Increase and Second Increase, the Company did not have the means to service the Overdraft Facility and ANZ knew or ought to have known this. Additionally, Ms Ngo contends that the Second Increase was without the Company’s consent.

Ms. Ngo contends that before she entered into the agreement for the Business Loan, on 20 January 2015 ANZ orally offered her the ability to apply for an additional two-year interest-only period beyond the initial two-year interest-only period.[20] Around the time the first two-year interest-only period was about to expire, Ms. Ngo communicated to ANZ her desire to take up an offer for an additional two-year interest-only period, which ANZ did not apply to the Business Loan.

Further, Ms. Ngo makes mention of the fact that she intended to open a ‘personal investment property loan’ for a personal investment rather than a Business Loan, but pleads no material facts to this.

Ms. Ngo admits that ANZ provided her with the Residential Loan on or about 8 September 2015. Ms. Ngo requested a discount to the interest rate on 31 March 2016, which she contends ANZ agreed to provide by email dated 1 April 2016 but did not in fact implement. Ms. Ngo further argues that ANZ failed to comply with its responsible lending obligations in assessing the suitability of the loan for her and that ANZ changed the loan to an ‘investment residential loan’ without her consent. Further, Ms. Ngo claims that she may not have received the Second Default Notice which, much like the First Default Notice, was addressed to an incorrect address.

ANZ’s reply and defence to Ms Ngo’s defence and counterclaim :

ANZ variously does not admit and/or denies the allegations made by Ms Ngo against it in relation to the Overdraft Facility. It does not address Ms. Ngo’s claim that the Second Increase was provided without her consent, but states that given it does not pursue recovery of the Overdraft Facility, Ms. Ngo’s pleadings in relation to that facility should be ignored.

ANZ denies that the Business Loan was for personal investment purposes but accepts that the Business Loan is detailed as a ‘Business Loan for Personal Investment Facility’. ANZ says that insofar as Ms Ngo makes reference to the further two-year interest-only period offer, the allegation is that ANZ offered Ms. Ngo the ability to apply for an additional interest-only period of two years, but does not admit that this occurred.

In relation to Ms. Ngo’s claim pursuant to s 74 of the NCC, ANZ states that it is unaware of any application made by Ms. Ngo to change the terms to the Business Loan. It accepts that the 2 November 2017 Letter was a hardship notice. ANZ further states that it has engaged in voluminous correspondence with Ms. Ngo in an attempt to assist her to overcome her financial hardship, including varying the terms of the Business Loan.

In relation to the Residential Loan, ANZ does not admit that it represented to Ms. Ngo that it would offer a discount to the interest rate on the loan. ANZ further does not admit that it failed to adequately assess the suitability of the Residential Loan for Ms. Ngo. ANZ otherwise denies all allegations of breaches of law as pleaded by Ms. Ngo.

Issues:

1.) Whether or not they constitute a breach of the 2013 Banking Code.

2.) Whether or not the plaintiff engaged in misleading, deceptive or unconscionable conduct.

Ruling:

No.

The counterclaim brought on behalf of Ms Ngo and the Company in respect of the Overdraft Unconscionable Conduct by reason of the increase in the amount of the facility from $24,500 to $74,500 on or around 19 May 2015 and then to $124,500 on or around 23 September 2015 is built upon the conclusion of the Customer Advocate to the effect that the two increases ought not to have been approved and were not in compliance with responsible lending practices. Implicitly, the Customer Advocate concluded that ANZ had not acted in compliance with the 2013 Banking Code by failing to act with the care and skill of a diligent and prudent banker.

Although the Customer Advocate concluded that the First Increase and Second Increase were not consistent with the conduct of a prudent and responsible lender, the basis for that conclusion is not obvious.

On the basis of the evidence before me, I am not satisfied that ANZ’s conduct fell short of the requisite care and skill of a diligent and prudent banker as contained in the 2013 Banking Code.

Further, I do not accept that the Second Increase occurred without Ms Ngo’s consent. Ms Ngo received a letter of offer for the increase, which she signed and dated on behalf of the Company. In circumstances where Ms Ngo had applied for the Overdraft Facility and had requested, and consented to, the First Increase, I accept that she knew, or ought to have known, the implications of signing the offer for the Second Increase on 23 September 2015.

In addition to the NCCP Act and the NCC, I also note that, although not expressly pleaded by Ms Ngo, the terms and conditions of the Overdraft Facility and the Business Loan both provide that ANZ would comply with the 2013 Banking Code.

Ms Ngo also advances another head of loss and damage in addition to, or in the alternative to, the loss of earnings and income claim occasioned by the collapse of the Company’s business. She argues that she lost the opportunity of setting up a business providing NDIS management services. This claim too suffers from the same causation problem. Additionally, there is insufficient evidence to establish on the balance of probabilities that Ms Ngo and/or the Company lost an opportunity of some not insignificant value, or to enable the assessment of the value of that opportunity. The only evidence relied upon by Ms Ngo is a recent letter (April 2022) from a representative of the NDIS, which sets out the nature of the services that could be provided and the charges that may be rendered for such services. There is no evidence as to the likelihood that Ms Ngo would have been appointed as a provider, much less the number of clients that she could have obtained or their likely needs.

Yes.

Indeed, ANZ’s conduct in adopting the recommendations of the Customer Advocate, writing off the Company’s overdraft debt of $124,500 and only seeking to recover the net principal advanced under the Residential Loan used by Ms Ngo to acquire the Preston Property in September 2015 went beyond that which the law requires and is the antithesis of unconscionable conduct. That conclusion is not altered by the fact that ANZ seeks to recover principal and interest (but not default interest) owing under the Business Loan.

Overdraft Facility

Ms. Ngo’s complaints in relation to the Overdraft Facility, the Business Loan, and the Residential Loan are based on alleged breaches of the Customer Owned Banking Code of Practice,[28] the unconscionable conduct provisions contained in ss 20 and 21 of the ACL, the misleading and deceptive conduct provision contained in s 18 of the ACL and the statutory guarantees that services would be provided with due care and skill and be fit for their particular purpose in ss 60 and 61 of the ACL.Ms Ngo further claims that ANZ made a misleading representation with respect to a future matter for the purposes of s 4 of the ACL in respect of the Residential Loan.

First, ANZ is not a subscriber to the Customer Owned Banking Code of Practice, and accordingly, it has no application.

Secondly, the ACL has no application to Ms. Ngo’s complaints in connection with any of the Overdraft Facility, the Business Loan, or the Residential Loan. The Overdraft Facility was provided to the Company and the Business Loan was provided to Ms. Ngo for investment purposes. Neither the Company that received the benefit of the overdraft or Ms. Ngo was a ‘consumer’ for the purposes of the ACL. Further, the Overdraft Facility, the Business Loan, and the Residential Loan are financial services, which are largely provided for under the ASIC Act.

Thirdly, as stated above, the NCCP Act includes the NCC as sch 1. The NCC applies to credit contracts entered into on or after 1 July 2010 where:

(a) the lender is in the business of providing credit;

(b) a charge is made for providing the credit;

(d) the credit is provided wholly or predominantly:

(i) for personal, domestic or household purposes; or

(ii) to purchase, renovate or improve residential property for investment purposes or to refinance credit previously provided for this purpose.

In light of the above, the NCC therefore does not apply to the Overdraft Facility, which was provided to the Company. Further, I do not accept that the Business Loan was a personal investment loan provided to Ms Ngo, because the Business Loan was used to acquire a commercial property (the Coburg Property), not a residential property. Accordingly, the NCC does not apply to the Business Loan. Ms Ngo’s claims in relation to the Business Loan that ANZ breached s 74 of the NCC, or alternatively s 72, as I have inferred she may have meant to refer to, are not made out.

Conclusion:

Indeed, ANZ’s conduct in adopting the recommendations of the Customer Advocate, writing off the Company’s overdraft debt of $124,500 and only seeking to recover the net principal advanced under the Residential Loan used by Ms Ngo to acquire the Preston Property in September 2015 went beyond that which the law requires and is the antithesis of unconscionable conduct. That conclusion is not altered by the fact that ANZ seeks to recover principal and interest (but not default interest) owing under the Business Loan.

There will be orders on the claim for possession of the Coburg Property and the Preston Property and Ms Ngo is ordered to pay ANZ the sum of $834,703.10 together with interest on the Business Loan at the rate of $54.57 from 19 July 2022 to the date of judgment.[50] The counterclaim is dismissed.

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