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Tears of sympathy unlikely for banks that screw up
t’s not often the banks get it wrong and lose out. But when they do they can usually expect scant sympathy from customers fed up with paying ever-increasing bank fees and charges for what many consider is diminishing service.
In New Zealand this week Hui “Leo” Gao, the man who ran away with NZ$10 million the bank mistakenly put in their account instead of NZ $100,000 pleaded guilty to theft. His partner in the escapade, Kara Hurring, was earlier found guilty of money laundering, attempted fraud and theft. While a bank stuff up on such a scale is highly unlikely who hasn’t sometimes had a quiet little wish that the ATM would spit out an extra vt 5000? Or that the bank would err our way even a teensy bit and not notice? So although the NZ bank still can’t find a few of its millions most people are probably feeling less than sorry for it.
People in Vanuatu may feel even less sorry for the local ANZ bank following a more legitimate win for a couple of its customers. In its Judgment dated May 4, 2012 the Vanuatu Appeal Court dismissed ANZ Bank (Vanuatu) Limited’s appeal against a 2012 Supreme Court judgment that disallowed the bank’s claim that Markson Heihei and Rasa Louis owed it Vt15 million. The alleged debt stemmed from two loans Heihei had taken out in 1996 (Vt1m) and 1997 (Vt1.7m).
This was the second time the matter and the circumstances in which a mortgage had been arranged by ANZ Bank as security had been brought before the Appeals Court. In 2004 the Court described it as: “a mess which must be sorted out in a disciplined and professional manner which has not yet occurred” and “a matter which seems to have developed a life of its own”
Background to the case is that in 1997 when the second of Heihei’s loans had been taken out ANZ claimed Heihei had paid back Vt 500,000 of the first loan thus leaving the total debt at Vt 2.2million. Heihei however stated that he had repaid the whole of the first loan by 1997 when he obtained the second.
When it agreed to the second loan ANZ required security and Heihei agreed to give them a mortgage over leasehold title 03/OJ74/004 that he owned with Louis Rasa. Although the loan was made no mortgage was then entered into. By 1999 the loan repayments were in arrears. In July of that year ANZ issued proceedings and obtained judgment in the Supreme Court for Vt 2,486,761 against Heihei. Under the same civil case (No17 of 1999) ANZ issued an originating summons for an order permitting it to sell the leasehold property as mortgagee.
Concerning this summons and the execution warrant that followed, the 2004 Appeal Court hearing an application by Heihei for leave to appeal out of time found that so ingrained were the errors throughout the matter that even on the warrant the parties were reversed making it appear as if it was the Bank that was the debtor and Heihei the creditor.
Peter Jones had been the ANZ manager. Although he had left Vanuatu his file notes were available at trial in 2012. They showed that by October 1999 the Bank realized it did not have any mortgage security and that the Court order was therefore unenforceable.
The Supreme Court judgment being appealed by ANZ in 2012 began “with a recitation of what can only be described as the tortuous progress of this case from institution in 1999 to trial in 2012 some 13 years later.”
The first issue addressed by the Supreme Court Judge was whether Rasa had, in fact, signed the mortgage. Rasa said that he had not, that he had never seen the documentation relating to Heihei’s loans with ANZ and that the signature on the mortgage document was not his.
The ANZ’s case was that first Rasa did not challenge the terms of the mortgage and second that shortly after the mortgage was signed Rasa knew about the mortgage over his (and Heihei’s) land and yet he did not protest to the bank about the mortgage. This claim was primarily based on a letter of October 25, 1999. The letter is addressed to ANZ and signed by both men. In it Heihei and Rasa agree to give ANZ a mortgage over their land if the bank agreed not to enforce a judgment debt awarded in Civil Case No 17 of 1999 against Heihei.
ANZ submitted this letter illustrates Rasa agreed to sign the mortgage. Counsel for ANZ accepted that ANZ had drafted the letter of October 25 and had Heihei and Rasa sign it. This letter, however said the 2012 Appeal Court, must be seen in context.
By October 25, 1999 ANZ realized that it did not have a mortgage security for its advance to Heihei. It had a judgment against Heihei only. There was no reason for Rasa to agree to sign any mortgage in ANZ’s favour in those circumstances. ANZ could not enforce its Judgment against him. Jones’ file note of October 22 and the letter of October 25 should be seen in light of the bank’s concern that it had no security. Further ANZ pointed to Rasa’s signature on the mortgage itself. As we [the Appeal Court] have said, the [Supreme Court] Judge was not satisfied Rasa had signed the mortgage.
“Rasa’s evidence was that he had not signed the mortgage and was therefore never a party to the mortgage. The fact that he did not ‘challenge’ the terms of the mortgage is therefore hardly relevant.”
Counsel accepted a certificate which stated that the certifier (who had to be a Commissioner of Oaths) knew the person signing the mortgage, that the person had freely signed and that the person had appeared to understand the mortgage was part of the approved mortgage form.
In this case Jones, ANZ manager, had certified the certificate. There was no evidence that he was a Commissioner for Oaths. Nor, in the circumstances, was he an independent person given the bank was anxious to improve the security for its loan by obtaining the mortgage. This was a situation that required Rasa to have independent advice. He did not receive it.
The 2012 Appeal Court considered therefore ANZ had not shown the Judge was wrong to accept Rasa’s evidence that he did not sign the mortgage. This conclusion by itself was sufficient to dispose of the appeal however the Court did consider the question of whether the loans to Heihei were repaid by the sale of his two trucks by ANZ.
The Supreme Court Judge had concluded that ANZ could not prove Heihei was indebted to them when he claimed the ANZ’s sale of the two vehicles had repaid the loan.
The evidence called by ANZ at trial in 2012 regarding Heihei’s debt to the ANZ the Appeal Court said was confused. ANZ retained ownership of the leased Mitsubishi truck by virtue of the lease. That vehicle was sold by the ANZ in 2000. Heihei might have been entitled to the net proceeds of sale if the sale price exceeded any arrears of lease payments and the residual value. ANZ took the view at trial (wrongly) that its sale of the two vehicles was irrelevant to the questions of whether the mortgage loan had been repaid. As a result, ANZ provided no direct evidence as to the sale of this vehicle or an accounting under the lease.
The other vehicle was an Isuzu truck. It was not clear whether Heihei owned this truck or whether it was leased, how much the truck was sold for by ANZ or how it accounted for the proceeds.
All that can be confidently said is that with respect to at least one of the trucks ANZ credited the sum of Vt350,000 to Heihei’s account.
The 2012 Appeal Court said that the Judge at trial did his best to sort through this confused and confusing evidence. Regrettably, the parties took no notice of the earlier Court’s observation that the mess must be sorted out in a disciplined and professional manner and the evidence at trial remained a mess. It was primarily the responsibility of the Claimant, ANZ, to ensure the evidence was properly assembled to prove their case.
It did not do so. The appeal was dismissed with standard costs awarded to Heihei and Rasa.
>>The ideas and opinions expressed in this article are those of the writer and are not necessarily those of the Vanuatu Daily Post.