The High Court put on hold attempts by Co-Operative Bank to enforce a $375,000 personal loan, first requiring evidence that the Bank had acted responsibly in dropping a co-borrower from the loan when refinancing.
Melissa Jean Opai claims Co-Operative Bank was in breach of the Credit Contracts and Consumer Finance Act in its consolidation of three loans into one, when two of the consolidated loans were joint loans to both Ms Opai and her now deceased mother. She is now being held solely responsible for not only her own debts but also her mother’s debts, she says.
The High Court was told the first loan was taken out in 2016, with both Ms Opai and her mother as co-borrowers. Ms Opai said she signed to provide financial assistance for her mother who had been widowed three years previously. The Bank took mortgage security over her mother’s home in Papakura, south Auckland.
In early 2017, this loan was refinanced under what the Bank styled a ‘home loan’ facility. Ms Opai’s mother died five months later. As co-borrower, Ms Opai initially kept up the mortgage payments until losing her job in 2019. Bank threats to call up the mortgage led to discussions about refinancing.
It was circumstances of a 2021 consolidation of existing debt which led to a subsequent High Court hearing. The previous debts, including debts now owed by Ms Opai’s mother’s estate, were consolidated into what became a personal loan to Ms Opai alone. Bank staff, sighting online records showing Ms Opai as owner of her late mother’s Papakura home, were blissfully unaware that she held title as trustee of her late mother’s estate; it was not her property.
Associate judge Sussock put on hold attempts by Co-Operative Bank to recover a total of $375,000. The Bank said it had been more than accommodating to Ms Opai; giving detailed evidence of steps taken to accommodate her previous financial difficulties with loan extensions and periods of interest only payment.
Judge Sussock said there is little doubt Ms Opai is liable as borrower to pay the principal sum still outstanding, but she recommended the Bank reconsider both the legal costs it now seeks to recover and the amount sought as unpaid interest given its conduct at time of the 2021 debt consolidation. This debt consolidation saw the Bank lose its rights as secured creditor over the Papakura property.
The court was told Ms Opai’s mother died without leaving a will. Intestacy rules will see her estate divided between her three children. How much each inherits depends upon whether Ms Opai bears repayment costs alone or her mother’s estate makes an equitable contribution towards repayment of the now consolidated debt.
Co-Operative Bank Ltd v. Opai – High Court (15.12.23)
24.032