DLA Phillips Fox recently acted for ANZ National Bank in
defending an interim injunction sought by a mortgagor who alleged
that the Bank was liable for the failure of a property development
it had funded. In the case, Piper v ANZ National Bank
Limited  NZHC 872, it was alleged that the Bank was
liable for the costs to complete the unfinished development and the
costs to repair defects in the construction work. Lenders may
breathe a sigh of relief at the decision of Justice Winkelmann that
the claim against the Bank could not succeed.
The Bank had agreed to advance the mortgagor up to NZ$600,000
under a development loan facility. As part of the funding
arrangements, the Bank appointed an independent Quantity Surveyor.
The Quantity Surveyor was required to provide the Bank with monthly
drawdown certificates for the development facility on a cost to
complete basis. The Bank relied on the drawdown certificates to
make advances to the mortgagor under the development loan
Before the development was completed, a dispute arose between
the mortgagor and the builder. The mortgagor alleged there were
significant defects in the builder's work. The builder denied
the allegations and stopped work. The mortgagor claimed that over
NZ$350,000 was required to complete the development and remedy the
defects in the work.
The Bank became involved in the dispute when the mortgagor
stopped paying her mortgage and the Bank took steps to sell the
property at mortgagee sale. The mortgagor alleged, amongst other
things, that the Bank's appointment of the Quantity Surveyor
meant the Bank owed the mortgagor duties which it had breached. It
was alleged that the Bank was liable for the costs to successfully
complete the development and the costs to repair defects in the
The Bank successfully defended the application for interim
injunction. Justice Winkelmann found that there was not a serious
question to be tried as:
There was no express contractual term in the loan documents
imposing any duties on the Bank.
There was no implied term in the loan documents. The purpose
behind the transaction was for the mortgagor to obtain funding for
the development and for the Bank to obtain adequate security to
protect its interests. To introduce the notion that the Bank
assumed responsibility to the mortgagor to ensure that the property
was developed under all appropriate regulatory requirements and
with appropriate standards of workmanship, was to 'introduce
entirely alien concepts into the contract'.
The Bank was not responsible for any alleged negligent
misstatement made by the Quantity Surveyor.
The relationship between the Bank and the mortgagor was not a
fiduciary relationship. The Bank did not assume the responsibility
of safeguarding the mortgagor's interests before its own. The
stipulation in the loan documents for a Quantity Surveyor and for
reports and certificates from the Quantity Surveyor, were intended
for the benefit of the Bank. The Bank did not exercise control over
the mortgagor's interests.
Phillips Fox has changed its name to DLA Phillips Fox
because the firm entered into an exclusive alliance with DLA Piper,
one of the largest legal services organisations in the world. We
will retain our offices in every major commercial centre in
Australia and New Zealand, with no operational change to your
relationship with the firm. DLA Phillips Fox can now take your
business one step further − by connecting you to a global
network of legal experience, talent and knowledge.
This publication is intended as a first point of reference
and should not be relied on as a substitute for professional
advice. Specialist legal advice should always be sought in relation
to any particular circumstances and no liability will be accepted
for any losses incurred by those relying solely on this
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