Otago farmer Tony Haines was ordered to pay Heartland Bank $754,200 after a bank loan was called up because Mr Haines failed to pay stock sale proceeds into the farm’s Heartland account. His claim that Heartland failed to properly handle its forced sale of farm stock was dismissed.
Hillend Station Ltd ran dry stock on farmland near Milton. Tony Haines was majority shareholder, with a sixty per cent stake. Heartland Bank provided working capital. Mr Haines guaranteed Hillend’s borrowing. Its loan agreement contained a common banking provision that proceeds of all stock sales were to be banked with Heartland. When Heartland learnt in December 2017 that sales of $85,740 were diverted by Mr Haines to a BNZ account, it moved swiftly. The balance of the Heartland loan was called up. Several weeks later, Heartland took control of all cattle and sheep on Hillend’s two farm properties.
It was to come out in High Court evidence that Heartland did not maintain an accurate count when mustering into Hillend’s stock yards. Heartland said it was intended that Mr Haines’ father would assume control of Hillend’s debt and resume farming at Hillend. There was no commercial urgency to get an accurate count. As it turned out, Tony Haines’ father lost interest in the proposal. Heartland cleared the farm, selling some stock at auction, sending others to the freezing works and selling some cattle diseased with ‘pink eye’ to a neighbouring farmer.
Hartland sued Tony Haines, claiming its shortfall on sale of farm stock plus legal expenses.
Mr Haines complained Heartland Bank had not accounted for all stock on the property. In return, Heartland alleged Mr Haines had been using his own transport company to rustle Hillend stock, selling it privately. Justice Osborne ruled the tally figures provided by Heartland may have understated stock levels on the property, but it was for Mr Haines to provide evidence as to any shortfall. He did not do so. Justice Osborne also ruled Heartland did not have adequate arrangements in place to care and manage the stock after taking possession. Just leaving animal husbandry in the hands of Mr Haines’ father was not sufficient. Mr Haines failed to provide evidence of stock values dropping because of poor management.
Even if Mr Haines could substantiate his claims that Heartland did not get a reasonable price for stock covered by its mortgage, Heartland was protected by provisions in its loan documents exempting it from liability for acting carelessly or negligently, Justice Osborne said.
Heartland Bank Ltd v. Haines – High Court (10.07.20)
20.121