Banks to be sued over loans policy

Press, 1 February 1988, Page 1

Banks to be sued over loans policy

PA Wellington A Tauranga barrister, Ms Fiona Bolwell, says six of her clients, farmers and orchardists, are pursuing legal action against several of New Zealand’s biggest financial institutions over overseas loans they took out. Many other similar cases of legal claims being prepared against financiers by borrowers in overseas loans have been reported in Auckland. Provincial law firms have already consulted experts from Auckland and Wellington to lead the legal battle against financial institutions such as the BNZ, the National Australia Bank and the Development Finance Corporation. Lawyers will argue that some bankers acted irresponsibly by

advising financially unsophisticated farmers and orchardists to get involved in complex overseas borrowing at a time of peaking land value. Land values have in many instances halved since then and the courts will hear cases alleging financiers acted incompetently by persuading rural industries to borrow overseas and by making a hash of managing those loans, the “Dominion Sunday Times” reported. Some financers had up to a billion dollars tied • up in overseas, loans to the rural sector alone and feared that if they lose one case a precedent could be set with a snowball effect on the number of litigants joining the queue. Claims could then blow out to billions

of dollars, the newspaper reported. Many of the loans were in Swiss francs — a strong currency. Currency movements against New Zealand’s floating dollar, coupled with plummeting land values, have left many farmers and orchardists virtually wiped out. While the value of their properties crashed, their loans went through the roof when the New Zealand dollar dropped in value. One lawyer said he was acting for a client who a few years ago had a kiwifruit empire.

His' client’s orchard was valued at $2.6 million when he took out an overseas loan of $1.3 million. In just six months the loan leapt nearly $400,000 through currency changes.