Chiodo Corporation Pty Ltd v Refresh Finance Pty Ltd

[2020] NSWSC 453

Supreme Court

New South Wales

Medium Neutral Citation:

Chiodo Corporation Pty Ltd v Refresh Finance Pty Ltd [2020] NSWSC 453

Hearing dates:

27 March 2020

Date of orders:

05 May 2020

Decision date:

05 May 2020

Jurisdiction:

Common Law

Before:

Harrison J

Decision:

(1)    Allow Chiodo Corporation Pty Ltd’s appeal.
(2)    Dismiss Infin8 Finance Group Pty Ltd’s cross-appeal.
(3)    Set aside the orders made by her Honour Atkinson LCM on 29 October 2019.
(4)    In lieu thereof, order that the statement of claim filed by Refresh Finance Pty Ltd on 8 June 2018 be dismissed.
(5)    Set aside the costs orders made by her Honour Atkinson LCM on 21 November 2019.
(6)    Dismiss the cross-claim filed by Chiodo Corporation Pty Ltd on 14 February 2019.

Catchwords:

APPEAL — contracts — misleading or deceptive conduct — pre-contractual statements and representations — where one party enters into contract relying on certain representations made that presales condition would be removed

 

CIVIL PROCEDURE — cross-claims — against third party   

  CORPORATIONS — agency — type of agent — finance broker — liability of agent — for representations — where representations made by director of sub-agent of party to contract — where representations relied on — where party to contract bound by conduct of its agent

Legislation Cited:

Australian Consumer Law
Local Court Act 2007 (NSW)

Cases Cited:

Erikson v Carr (1945) 46 SR (NSW) 9
Esanda Finance Corporation Ltd v Spence Financial group Pty Ltd & Ors [2006] WASC 177
International Harvester Company of Australia Pty Ltd v Carrigan’s Hazeldene Pastoral Company (1958) 100 CLR 644; [1958] HCA 16

Category:

Principal judgment

Parties:

Chiodo Corporation Pty Ltd (First Plaintiff)
Paul Chiodo (Second Plaintiff)
Refresh Finance Pty Ltd (First Defendant)
Infin8 Finance Group Pty Ltd (Second Defendant)

Representation:

Counsel:
M Maconachie (Plaintiffs)
G Gerges (First Defendant)
M Friedgut (Second Defendant)

Solicitors:
DWF (Australia) (Plaintiffs)
Miller & Prince Lawyers (First Defendant)
Hone Legal & Conveyancing (Second Defendant)

File Number(s):

2019/365204

Publication restriction:

Nil

Judgment

1. HIS HONOUR: On 29 October 2019, Atkinson LCM published her reasons for judgment in proceedings between Refresh Finance Pty Ltd and Chiodo Corporation Pty Ltd in which Refresh claimed a facilitation fee of $95,700 for arranging finance for Chiodo Corporation from La Trobe Financial Pty Ltd. Chiodo Corporation cross-claimed against Infin8 Finance Group Pty Ltd upon the basis that it was Refresh’s agent and that Chiodo Corporation had been misled by Infin8’s representations about a presales condition that formed part of La Trobe’s written offer of finance. Chiodo Corporation claimed that it had entered into the finance contract relying upon representations made by Infin8 that the presales condition would be removed.

2. Her Honour found at [67] that on the balance of probabilities Chiodo Corporation had accepted the offer made by La Trobe “subject to the removal of the presales condition”. In forming that conclusion, her Honour found that Refresh was Chiodo Corporation’s agent and that Infin8 was Refresh’s agent. However, despite those findings, her Honour inexplicably concluded that Chiodo Corporation was liable to pay Refresh the facilitation fee it claimed but that Infin8 was somehow liable to indemnify Chiodo Corporation on its cross-claim for the same amount. Her Honour found that the misleading and deceptive conduct upon which Chiodo Corporation relied was the conduct of Mr Lecordier, Infin8’s director. Her Honour appears to have reasoned that Refresh was entitled to succeed because the representation that the presales condition would be removed that induced Chiodo Corporation to enter the agreement was made by Infin8, the sub-agent, and so was not the conduct of Refresh itself.

3. By its amended summons filed on 9 December 2019, Chiodo Corporation seeks orders setting aside her Honour’s judgment. The grounds upon which Chiodo relies are as follows:

1. The learned magistrate erred in failing to apply the correct legal principle to the facts, namely, in light of the findings made at paragraphs [46], [67] and [87] of her judgment given on 29 October 2019, she failed to hold Refresh Finance Pty Ltd bound by the conduct of its agent, Infin8 Finance Group Pty Ltd.

2. The learned magistrate erred in failing to apply the correct legal principle to the facts, namely that, in light of the finding made at paragraph [67] of her judgment, the La Trobe finance offer was non est factum as to Chiodo Corporation Pty Ltd, in circumstances where a condition precedent, being the removal of the presales condition, had not been met.

4. Her Honour’s finding at [46] was that Infin8 was an agent of Refresh and not of Chiodo Corporation and Mr Chiodo. At [87] her Honour confirmed her earlier finding that Infin8 and Mr Lecordier engaged in trade or commerce in conduct that was misleading or deceptive or likely to mislead or deceive contrary to s 18 of the Australian Consumer Law.

5. Chiodo Corporation appeals to this Court pursuant to s 39(1) of the Local Court Act 2007 which provides as follows:

39 Appeals as of right

(1) A party to proceedings before the Court sitting in its General Division who is dissatisfied with a judgment or order of the Court may appeal to the Supreme Court, but only on a question of law.

6. Infin8 has filed a cross summons in this Court seeking leave to appeal pursuant to s 40(1) of the Local Court Act. That section is in these terms:

40 Appeals requiring leave

(1) A party to proceedings before the Court sitting in its General Division who is dissatisfied with a judgment or order of the Court on a ground that involves a question of mixed law and fact may appeal to the Supreme Court but only by leave of the Supreme Court.

7. The effective protagonists in this Court are therefore Chiodo Corporation and Infin8. They understandably direct attention to different aspects of her Honour’s decision. Chiodo Corporation challenges her Honour’s finding that it is liable to pay money to Refresh if, as she found, it was misled by Infin8 acting as the agent of Refresh. That challenge is based upon the proposition that the misleading and deceptive conduct of Infin8 must also be the misleading and deceptive conduct of its principal. On that analysis, Refresh would not be entitled to enforce the terms of its agreement with Chiodo Corporation, induced by the misleading and deceptive conduct of its agent, and would not be entitled to claim its facilitation fee.

8. Infin8 on the other hand principally takes issue with her Honour’s conclusion that Mr Chiodo was in fact misled or deceived at all. It maintains, having regard to the evidence as a whole, that her Honour’s conclusion was erroneous, because it is glaringly improbable that Mr Chiodo would have been prepared to sign any document containing a presales condition that was wholly inconsistent with the representation he alleged had been made. If that contention holds good, the question of agency recedes because the misleading and deceptive conduct finding could not stand.

9. In this last respect, Infin8 submits that leave to appeal should be granted because her Honour erred in fact and in law by failing to have any, or any sufficient, regard to highly relevant and probative evidence, by basing her decision on at best marginally relevant considerations and by misapprehending the evidence upon which she relied. Infin8 maintained that this raised an important point of law.

10. Infin8 seeks no orders or relief in its cross-summons challenging her Honour’s finding that it was the agent of Refresh.

11. Chiodo Corporation contended that her Honour should in fact have reasoned as follows.

12. Infin8 was the agent of Refresh. Her Honour’s finding to that effect is obviously not challenged by Chiodo Corporation. Agency is “an authority or capacity in one person to create legal relations between a person occupying the position of principal and third parties”: International Harvester Company of Australia Pty Ltd v Carrigan’s Hazeldene Pastoral Company (1958) 100 CLR 644; [1958] HCA 16 at 652. Put another way, an agent is “a person who has authority to act on behalf of a principal, either generally or in respect of some particular act or matter”: Erikson v Carr (1945) 46 SR (NSW) 9 at 12. It follows that Refresh as a principal was bound by the actions of its agent Infin8.

13. Chiodo Corporation contended that her Honour should then have found that Infin8, as the agent of Refresh, induced it to enter into an agreement for the provision of construction finance by La Trobe, subject to the removal of the presales condition. Chiodo Corporation accepted the offer of finance but the presales condition was never removed. Accordingly, Refresh was bound by the misleading and deceptive conduct of its agent that induced Chiodo Corporation to enter the agreement. Chiodo Corporation did not in those circumstances become liable to Refresh for payment of the facilitation fee to which Refresh would otherwise have been entitled. Her Honour’s finding that Infin8 was an agent of Refresh is dealt with later in these reasons.

14. Chiodo Corporation understandably embraces her Honour’s finding at [46]: standing alone, and accepting for the purposes of the argument that her Honour’s conclusions about Infin8’s misleading and deceptive conduct remain on foot, the finding would dispose of this appeal in favour of Chiodo Corporation. That is because the conduct complained of would be the conduct of Refresh’s agent and therefore the conduct of Refresh. Refresh in contrast contends that the finding at [46] is wrong, presumably on the basis that Infin8 was Chiodo Corporation’s agent and Refresh is therefore not affected by any misleading or deceptive conduct in which Infin8 might have engaged. However, despite making submissions that her Honour erred in finding that Infin8 was an agent of Refresh, and erred in finding that Infin8 was not an agent of Chiodo Corporation, Refresh has sought no orders by cross-summons or otherwise to set any of her Honour’s findings aside. Refresh has also not sought any orders by cross-summons or otherwise challenging her Honour’s finding at [42] that Refresh was an agent of Chiodo Corporation. Infin8 has not disputed the finding that it was Refresh’s agent, presumably upon the basis that it was only liable to Chiodo Corporation on Chiodo Corporation’s cross-claim: the finding for which Chiodo Corporation contends in this Court concerning the presales representations would mean that Refresh would not be entitled to its facilitation fee and the relevance of that cross-claim would simultaneously evaporate. Refresh has never sued Infin8 contending that if it failed to recover its facilitation fee from Chiodo Corporation, Infin8 would in some way be liable for that loss.

15. In these circumstances, it is convenient first to consider the issue that received the most attention from the parties in this Court: was Mr Chiodo induced to sign the agreement by reason of Mr Lecordier’s misleading and deceptive representations?

Background – the evidence below

16. Paul Chiodo has been a property developer for nearly 20 years. Chiodo Corporation is a corporate vehicle by which he carried out that work. Mr Chiodo agreed that he was a highly experienced property developer and that he was an expert at what he did. He has been involved with individual projects worth as much as $150M and projects overall worth up to as much as $1B. Probably ninety percent of his projects required finance. He signed loan documentation in those cases. He understood that it was important to read and to understand what he was signing. The finance that was the subject of these proceedings was for a development project at 4 Judith Court, Doncaster, Victoria.

17. Mr Lecordier and Mr Chiodo had worked together once before. They would appear to have commenced their correspondence with respect to the sourcing of finance for the Judith Court project in an email sequence between 12 and 18 May 2017. That correspondence is as follows:

“Email 1:

Hi Sean and Ricky,

As discussed yesterday with Jason, the final understanding is as follows (See attached excel spreadsheet of these two project loans:

•   4 Judith Court, Doncaster

○   Loan amount: $3,134,508 (Say $3,200,000) to be progressively drawn as per my cashflow.

○   GRV of Project: $4,500,000

○   LVR is 71%

○   Security:

▪   4 Judith Court, Doncaster 3108: $1,420,000 (As is)

▪   17C/29 Queens Road, Melbourne 3004 $3,360,000 (note that ANZ has a loan of $505,000 on this property) TRY NOT TO USE THIS. USE THE PROPERTY IF IT ONLY SEALS THE DEAL ABOVE.

•   12-14 Red Hill Terrace, East Doncaster 3109

○   Loan amount: $3,177,083 (Say $3,200,000) (inclusive of the existing $1.5M current loan)

○   GRV of Project: $6,480,000 (by Savills)

○   LVR is 49%

○   Presale: unit 1 on ground floor at 12 Red Hill Terrace for $635,000 (10% deposit paid and held by the selling agent).

○   Security:

▪   12 Red Hill Terrace, East Doncaster

▪   14 Red Hill Terrace, East Doncaster.

Can I get 2 loan offers supporting the above please.

Do you need anything else?

Regards,

Email 2:

Hi Paul,

Can you please address the below asap

RED HILL

•   What actual cash equity did the applicant place in the purchase? $1.2M for Land + $75K in Design Drawings

•   Who is the builder and are they arms length to the developer? Details please. NHS Building Pty Ltd and is arms length contract.

•   Construction seems to have commenced. This may be problematic can get some details surrounding this. All existing works have been signed off by the building surveyor (Metro Building Surveying) and NHS Building will provide full Building Warranties to cover all existing works as well. The Building Surveyor also provide a new building permit to us to all us to continue works. I have all of this information on file.

•   Who is the presale to? Peng Sum of 7 Cheviot Road, Keysborough Is this arms length Yes as its was done via Melbourne Real Estate Pty Ltd and they are holding onto the 10% deposit and not subject to FIRB? Correct

JUDITH

•   What actual cash equity did the applicant place in the purchase? $220K for Land + $65K in design costs for working drawings

•   Who is the builder and are they arms length to the developer? Details please. NHS Building Pty Ltd and is arms length contract.

•   Construction STARTED? No.

•   presale? No.

Thank you

Email 3:

Ricky,

See response in RED below.

Regards,

Paul Chiodo

Director

Email 4:

Hi Paul,

Can you please let me know once you have heard from Dale- (Private funder)? He confirmed with me this morning he would call you.

Thank you”

18. Not long after this, on 19 May 2017, Refresh wrote to Mr Chiodo in the following relevant terms:

"Dear Mr Paul Chiodo,

We refer to your recent correspondence regarding the refinance and construction of the proposed development located at 4 Judith Court, Doncaster, VIC.

Refresh Finance Pty Ltd would be pleased to consider this proposal subject to the following terms and conditions and you providing the items listed below.

Details of Proposed Facility:

Borrower: Chiodo Corporation.

Loan Purpose: Refinance and construction of three townhouses.

Loan Amount: $2,900,000 or not exceeding 65% of the GRV value of the security property as assessed by our panel valuer.

…

RF Facilitation Fee: 3.00% plus GST in accordance with the attached Mandate to Act.

…

Security: Registered First Mortgage…Directors Personal Guarantees

Indicative Approval Conditions: …As required by lender.

…

The proposed loan arrangements will be based on the products available from our panel lenders and the information provided by you. Before entering any loan, you should consider its appropriateness having regard to your relevant personal circumstances. If necessary, you should seek independent financial advice. We do not provide legal or financial advice. It is important that you understand your legal obligations under a loan, and the financial consequences. If you do not understand or have any doubts, you should obtain independent legal and financial advice.

We do not determine or recommend the conditions of a credit contract. These are determined by our panel lenders.

…

In order to accept this Indicative Funding Proposal:

1. Please initial all pages.

2. Sign the attached RF Mandate to Act.

3. Please deposit the fees noted above …

ACCEPTANCE

The terms of this conditional indicative funding proposal are accepted.

…

Applicant's name: Paul Chiodo Applicant's Signature…"

19. The Mandate to Act was signed by Mr Chiodo on the same day. It was made between Refresh and Chiodo Corporation as the borrower in the following relevant terms:

"The borrower acknowledges that the finance facility terms contained in the Schedule and Indicative Funding Proposal merely summarise what the borrower has requested and is not necessarily what is commercially available in the marketplace. RF makes no representation, guarantee or warranty that the finance facility offer procured will match the borrower's requested terms.

…

The Borrower acknowledges that:

(a) The intentions of the parties are confined to this document and the attached Indicative Funding proposal.

…

(f) The RF Facilitation Fee is deemed due and payable upon the Lender issuing a Formal Letter of Offer."

20. Mr Lecordier then sent an email to Mr Chiodo on 22 May 2017 at 5.16 pm as follows:

“Dear Paul,

Please find the following attached:

Indicative Funding Proposal

…

If you are happy with the terms please review the Indicative Funding Proposal and if you wish to proceed, sign where indicated on the Indicative Funding Proposal and the Mandate to Act and return. This will enable us to commence our due diligence activities and seek formal credit approval.

If you have any questions regarding the attached indicative funding proposal please contact me.”

21. Shortly thereafter, on 14 June 2017, La Trobe Financial issued an Indicative Offer. It provided relevantly as follows:

“FINANCE APPLICATION – INDICATIVE OFFER

We are pleased to advise that La Trobe Financial is prepared to proceed generally with your application for finance, subject to our formal loan approval process being completed. Various conditions will need to be confirmed in any formal subsequent Letter of Offer should you proceed with your application.

…

Your application will also be subject to obtaining the following:

…

Presales required to provide 50% debt coverage.”

22. Mr Chiodo appears nowhere to have referred in writing or otherwise to the presales requirement mentioned in this document until 24 July 2017. This is referred to below.

23. Some five weeks later than the sending of the Indicative Offer on 14 June 2017, La Trobe Financial sent Mr Chiodo a document on 21 July 2017 headed “Application for Finance - Letter of Offer”. It contained the following paragraphs:

“We are pleased to advise that your Application for Mortgage Finance has been approved and is now offered to you by La Trobe Financial (Lender’s representative) on the terms set out below.

Before you sign, read this Letter of Offer, so that you know exactly what contract you are entering into and what you will have to do under the contract. Once you have signed this Letter of Offer you are bound by it. You must not give false or misleading information to obtain credit.”

24. The General Terms and Conditions that were incorporated into the Letter of Offer included the following:

“The Introducer, loan referral source or third party is not authorised to make any representations or warranties to you regarding the terms of the loan or any of La Trobe Financials [sic] obligations.

…

[43] No variation of this letter of offer and general terms and conditions will be binding on the Credit Provider unless advised or confirmed in writing by the Credit provider.

…

[46] Borrower’s, Mortgagor’s and Guarantor’s Declarations

By accepting this offer, each of you…makes the following declarations:

…

3. Other than what is set out in the letter of offer, La Trobe Financials general terms and conditions and Financial Table of pre-contractual Disclosure Statement and the Information Statement, you have not relied on any promise or representation by any person when deciding to accept this offer.

…

This letter of offer is made subject to the General Terms and Conditions detailed in this letter and Special Conditions and terms that are specific to your loan need to be satisfied prior to the loan being made.

…

Special Conditions to be satisfied before the loan can proceed to settlement. Satisfaction of these conditions should be directed to La Trobe Financial.

…

(l) La Trobe Financial requires evidence of unconditional pre sales of 50% of the loan amount prior to settlement. These pre sales are to be (1) with parties not related to the borrower group; (2) have evidence that a minimum 10% deposit has been paid and; (3) provide for a sunset date not earlier than 6 months after the proposed expiry date of the facility.”

25. Mr Chiodo signed this document on 25 July 2017, acknowledging that “the information contained in the application form [was] true and correct in every particular”.

26. Mr Chiodo’s evidence in chief in the Local Court was contained in his affidavit sworn 7 December 2018. Part of what he said is as follows:

“11.   When I first obtained the facility with Gippsreal, I was dealing with a sub-consultant, Ricky Lecordier (“Ricky”) who was working for Infin8 Finance Group Pty Ltd (“Infin8”). Infin8 acts as a broker for financiers who lend money for a wide variety of purposes. Ricky had previously helped me procure loans for Chiodo Corporation. Therefore, in or around May 2017, I contacted Ricky and asked him to assist in obtaining finance for the Proposed Developments. During that conversations, words were said to the following effect:

Paul: I need a finance facility with no presale requirements for my development at 4 Judith Court, Doncaster.

Ricky: Yes, Paul I will do that.

12.   Based on my conversation with Ricky, I believed that he would find a lender through his network with no presale requirements. It is my experience that this was commonly accepted by market lenders as the usual course of business in the construction and development industry.

13.   Ricky started to procure lenders and notified me in or around mid May 2017 that the plaintiff, Refresh Finance would be willing to provide a facility.

14.   On 22 May 2017, I received an email from Ricky which attached a letter from Refresh Finance outlining the proposed facility to be granted to Chiodo Corporation (‘Indicative Funding Proposal’).

15.   In addition, the email included a Guarantee and Mandate to Act (‘Guarantee and Mandate’) from Refresh Finance which was also to be signed and returned back to them within 10 days.

16.   Behind tab 2 of PC1, is a true copy of this email dated 22 May 2017.

17.   The Indicative Funding Proposal offered to provide Chiodo Corporation with the amount of $2,900,000 for the refinance and construction of the Proposed Developments (“Proposed Facility”). In addition, this proposal did not include any pre-sale conditions or requirements on Chiodo Corporation.

18.   Accordingly, on 23 May 2018, I accepted the Indicative Funding Proposal and the Guarantee and Mandate to Act (‘Guarantee and Mandate’).

19.   A copy of the executed Indicative Funding Proposal is annexed to Mr Harrison’s affidavit and marked ‘DH3’.

20.   A copy of the executed Guarantee and Mandate is annexed to Mr Harrison’s affidavit marked ‘DH4’.

Facility with La Trobe

21.   On 14 June 2017, I received an indicative finance application from La Trobe Finance Services Pty Limited (‘Indicative Letter of Offer’).

22.   The Indicative Letter of Offer stated that La Trobe Finance Services Pty Limited (‘La Trobe’) was willing to proceed with the first defendant’s application for finance that was received from Refresh Finance. The Indicative Letter of Offer outlined the details of the proposed loan (‘Facility’).

23.   A copy of the Indicative Letter of Offer is annexed to Mr Harrison’s affidavit marked ‘DH5’.

24.   I reviewed the Indicative Letter of Offer and noticed that a presale condition was listed on page two of the document being ‘Presales required to provide 50% debt coverage’. For the reasons set out above, including the terms of the Indicative Funding Proposal, I believed that Ricky had sought a Facility that did not involve presale conditions and considered that there was an error in the Indicative Letter of Offer. At the time I considered that this error would be corrected in the Formal Letter of Offer and so I did not raise it at the time with Ricky.

25.   Then on 24 July 2017, Ricky provided Chiodo Corporation with a formal letter offering finance for the Proposed Developments (‘Formal Letter of Offer’).

26.   A copy of the Formal Letter of Offer is annexed to Mr Harrison’s affidavit marked ‘DH6’.

27.   Behind tab 3 of PC1 is a true copy of an email from Ricky to myself dated 24 July 2017 attaching the Formal Letter of Offer.

28.   The Formal Letter of Offer stated that there were a number of special conditions that needed to be fulfilled by Chiodo Corporation before the Facility could proceed to settlement. The conditions were listed on page 11 of the Formal Letter of Offer (‘Special Conditions’).

29.   Chiodo Corporation had fourteen days to return the Formal Letter of Offer to La Trobe and accept the Facility.

30.   I reviewed the Formal Letter of Offer and found that it included a presale condition at (l) of the Special Conditions which was as follows:

La Trobe Financial requires evidence of unconditional pre sales for 50% of the loan amount prior to settlement. These pre sales are to be (1) with parties not related to the borrower group; (2) have evidence that a minimum 10% of deposit has been paid and; (3) provide for a sunset date not earlier than 5 months after the proposed expiry date of the facility.

31.   Behind tab 4 of PC1 is a true copy of an email from myself to Ricky dated 24 July 2017 where I stating [sic] that the offer included presales.

32.   This Formal Letter of Offer did not meet the requirements that I discussed with Ricky as set out above. Accordingly, I organised a meeting with Ricky as he had been dealing with La Trobe directly.

33.   A few days after receiving the Indicative Letter of Offer, I met with Ricky at Chadstone Shopping Centre. We exchanged words to the effect of:

Paul: As I have told you before we cannot have any presale conditions in the loan.

Ricky: Leave it to me Paul. I know it’s a mistake and it will be taken out.

34.   I had a further conversation with Ricky at our meeting and we exchanged words to the effect of:

Ricky: I need you to execute the La Trobe letter of offer in order for La Trobe to commission the Valuer and Quality Surveyor. I am worried that your loan with Gippsreal is about to expire and if you don’t obtain the loan with La Trobe you will fall into default.

Paul: Ok, I will sign the letter of offer if you can guarantee that the presale error will be fixed.

Ricky:     I will make sure the presale condition is taken out.

35.   Based on my conversations with Ricky I continued to satisfy the other preconditions set out in the Formal Letter of Offer.

36.   Over the next few days, I checked with Ricky multiple times to discuss what Special Conditions were outstanding.

37.   As a result of my previous dealings with Ricky, he already held a sufficient amount of information about Chiodo Corporation which he used to satisfy most of the Special Conditions in the Formal Letter of Offer.

38.   On 25 July 2018, Ricky notified me by email that there were only a small number of the Special Conditions still outstanding. Behind tab 5 of Exhibit PC1 is a true copy of the email from Ricky Lecordier to myself cc Sean Locren dated 25 July 2018.

39.   In this email, Ricky informed me that the only Special Conditions still outstanding by Chiodo Corporation were:

i. (f) – La Trobe Financial requires written confirmation from the administrators of 80 Alfred Road Melton South Pty Ltd and 2 Nails Pty Ltd that Paul Anthony Chiodo has no real or contingent liability in relation to the administrations;

ii. (g) – La Trobe Financial; requires a letter from both Gippsreal Ltd and Metrofin Partners Pty Ltd confirming satisfactory conduct of the borrowing being refinanced;

iii. (h) – Receipt of written confirmation that Chiodo Corporation Pty Ltd do not act in capacity of a superannuation company of superannuation trust;

iv. (i) – Receipt of written confirmation that Chiodo Corporation Pty Ltd is not attached to any trust; and

v. (m) – La Trobe Financial are to receive an initial Quantity Surveyors report from Mitchell Brandtman at a cost of $3080.00 payable by the borrower prior to instruction.

40.   Also, on 25 July 2018, I had a conversation with Ricky where he assured me that the La Trobe presale requirements had been negotiated out of the Facility and said words to the following effect:

Ricky: Paul, you need to sign the Formal Letter of Offer to get the Surveyors report done in order to get the finance approved. The four conditions in my email are the only conditions that you are going to need to worry about.

Paul: What about the presale issue? I don’t want to sign the letter while that condition is in there.

Ricky: Paul, you need to sign it to get the finance approved and I will fix it with La Trobe. The presale condition will not be in the final documents. It was a mistake in the letter.

41.   Based on my conversations and correspondence with Ricky, I believed that the presale condition would not be removed by La Trobe. My loan with Gippsreal was about to expire and I believed that the presale condition would not be included in any final documentation.

42.    [Not read]

43.   I sent the executed Formal Letter of Offer to Ricky to send3 onto La Trobe. Behind tab 6 of Exhibit PC1 is a true copy of the email from myself to Ricky Lecordier dated 25 July 2018.

44.   A copy of the executed Formal Letter of Offer is annexed to Mr Harrison’s affidavit marked ‘DH6’.

Defendants unable to perform

45.   In or around mid August 2017, I received the following documents from La Trobe:

i.   Security;

ii.   Loan;

iii.   Guarantee;

iv.   Accountant advice letters; and

v.   Solicitor certificates

collectively referred to as the (‘Loan Documents’).

46.   At the time, I was surprised that the Loan Documents were ordered as I had not yet fulfilled all of the Special Conditions in the Formal Letter of Offer. I am still unsure of who ordered the Loan Documents.

47.   After I reviewed these documents, I found that La Trobe had failed to remove the presale condition which was in the Formal Letter of Offer.

48.   Based on the above, I contacted Ricky and exchanged words to the following effect:

Paul: I have received loan documents from La Trobe. Did you organise these documents?

Rickey: I am not sure who organised the documents.

Paul: I cannot sign these documents as they have a presale condition. I cannot proceed with this loan.

Ricky: La Trobe said they were going to fix the presale condition.

Paul: I need another lender as my current loan has expired.

Ricky: Ok I will go find another lender for you. I will go back into the market and get you another lender.

Paul: Ok.

49.   On the same date, I contacted Naomi Scholten (‘Naomi’) Mortgage Broker at Refresh Finance about the Loan Documents. During the same period, I held another facility with Refresh Finance. I had corresponded with Naomi about the other finance facility but not this loan.

50.   I contacted Naomi and we exchanged words to the following effect:

Paul: I have received loan documents from La Trobe, I cannot sign these documents as they have a presale condition and this was a no presale deal.

Naomi: I need to talk to Ricky.

51.   Based on the above, I decided that I could no longer proceed with the Facility offered by La Trobe as Refresh Finance had failed to perform in accordance with their Indicative Funding Proposal.

52.   My loan with Gippsreal had expired and I needed to procure finance for the Proposed Development.

53.   As a result of the plaintiff’s failure to provide finance in accordance with my instructions, I sought finance from another lender.

54.   On or around 31 August 2017, I secured a facility with Balanced Securities and Optima Funding (‘Balanced Securities’) with there being no presales required as a condition. However, this loan had a higher interest rate than that offered by Refresh Finance. In addition, Chiodo Corporation incurred a 3% loan setup fees.

55.   Chiodo Corporation obtained finance from Balanced Securities on the basis that Balanced Securities were able to provide a no presale loan. However, the failure of Refresh Finance to provide Chiodo Corporation with a no presale loan meant that I had to procure a more expensive loan.

Infin8 acting as a sub-consultant of Refresh Finance

56.   I understood that Infin8 was acting as a sub-consultant of Refresh Finance in this matter.

57.   Behind tab 7 of PC1 is a true copy of a letter from Matisse Mitelman solicitor for Chiodo Corporation at the time, to Miller and Prince, solicitors for the Plaintiff, dated 22 January 2018 requesting on who was acting as the sub-consultant of Refresh Finance in this matter.

58.   Behind tab 8 of PC1 is a true copy of a letter of reply from Miller and Prince to Matisse Mitelman dated 22 January 2018 in response.”

27. Mr Chiodo exhibited some documents to this affidavit. For example, Mr Lecordier sent an email to Mr Chiodo on 24 July 2017 at 5.49 pm simply in these terms:

“Please see attached for your perusal.

Calling to discuss shortly.”

28. Mr Chiodo’s response was by return email at 6.32 pm that day in these terms:

“All good with the exception of the 1 presale.

Know anyone that can buy a property? I’ll fear that I will now lose the 2nd if I can get this deal?

Talk tomorrow.”

29. On 25 July 2017 at 11.44 am, Mr Lecordier sent an email to Mr Chiodo in the following terms:

“Subject: Chiodo Corp – La Trobe Conditions

Paul,

Further to our earlier conversation regarding outstanding conditions: from La Trobe

•   (f) Letter needs to be obtained from the administrator confirming Paul has no liability

•   (g) Just an email confirming acceptable conduct from Gippsreal and Metrofin would be fine

•   (h) & (i) This is covered off on the last page of the LOO – Paul to sign

•   (m) I am told these guys work very quickly – and we have to use those on lender panel. Paul to either BPay or provide Credit Card for payment (form attached)

•   Also, can you please send a copy of the trust Deed for The Family trust

Please get this form completed ASAP so that I can push the QS from my end.”

30. In a subsequent affidavit sworn on 7 August 2019, Mr Chiodo responded to what had been said by Mr Lecordier in his 1 July 2019 affidavit. Part of that response was in these terms:

“7.   I refer to paragraph 6.5 of Ricky’s affidavit, which states that I did not specify that I required a loan with no presale condition.

8.   On 12 May 2017, I contacted Ricky by email and clearly set out the requirements for the Proposed Development at 4 Judith Street, Doncaster Victoria 3018. In this email, I addressed the requirements for the Proposed Developments including the loan amount, security and the total value of the project.

9.   In this email to Ricky, I identified another project which I was looking for a loan for and also the requirements for that loan including the loan amount, security, presale and the total value of the project.

10.   On the same date, I received a response from Ricky where he made comments on the requirements for the Proposed Developments. In these comments, Ricky questioned the requirement for a presale.

11.   Also on the same date, I replied to Ricky and confirmed in red that I needed a loan with no presale requirements for the Proposed Development.

12.   Annexed hereto and marked “A” is a true copy of the email chain between Ricky Lecordier and myself from 12 May 2017 to 18 May 2017.

13.   I refer to paragraph 6.6 of Ricky’s Affidavit, which states that I did not specify that I wanted a no presale finance deal and that I was open to working with either option. This is incorrect. As can be seen from the email at Annexure A to this affidavit and my evidence in my Earlier Affidavit I was only prepared to enter into the Facility if there were no presale requirements. I believe that I made this abundantly clear to Ricky on a number of occasions.”

31. Mr Chiodo’s evidence was that the email chain exhibited to this affidavit, reproduced earlier in these reasons, makes it clear that Mr Chiodo was only prepared to enter into the facility if there were no presales requirements. On one view, that does not appear unequivocally from the terms of that correspondence. The emails were exchanged in May. Mr Lecordier sent the Indicative Funding Proposal to Mr Chiodo on 22 May 2017. There is no further correspondence between Mr Chiodo and Mr Lecordier until late July. That includes what Mr Chiodo maintains was his apparently flippant or sarcastic reference to finding a purchaser in his email on 24 July 2017. In any event, Mr Chiodo signed the relevant documents containing the presales condition the very next day.

32. Mr Chiodo and Mr Lecordier were both cross-examined at considerable length about these matters. Some of that evidence is referred to later in these reasons.

Infin8’s submissions

33. Infin8’s principal contention is that her Honour failed to take account of important evidence, or failed to do so adequately, in reaching her decision that the presales representations were made. The particular representations are to be found in Chiodo Corporation’s amended defence filed in the Local Court on 8 February 2018. They are there variously expressed as follows:

• In early May 2017, and prior to Chiodo Corporation receiving the Mandate, Refresh represented to Chiodo Corporation, through Mr Lecordier of Infin8, and at Chiodo Corporation’s request, that Refresh would obtain a finance facility that contained no presales requirements as a condition of providing such finance.

• The Indicative Funding Proposal contained a list of indicative approval conditions but did not particularise any presales requirements as a condition of obtaining finance. The Indicative Funding Proposal was therefore a representation by Refresh to Chiodo Corporation that Refresh expected to be able to procure finance for Chiodo Corporation that did not contain any presales requirements as a condition of the finance.

• As at 24 July 2017, the presales condition contained in the Offer Letter was included by mistake.

• As at 24 July 2017, the presales condition contained in the Offer Letter would not be included in any further documentation.

• As at 25 July 2017, the presales condition contained in the Offer Letter was no longer a requirement of Refresh [sic, La Trobe?]

• As at 25 July 2017, the only conditions precedent to La Trobe approving finance were those in special conditions (f), (g), (h), (i) and (m) contained in the Offer Letter.

• As at 25 July 2017, Chiodo Corporation must accept the Offer Letter for La Trobe to approve finance.

• As at 25 July 2017, the only conditions precedent to La Trobe approving finance were those set out in Mr Lecordier’s 25 July 2017 email to Mr Chiodo.

• As at 25 July 2017, the presales condition contained in the Offer Letter was included by mistake.

• As at 25 July 2017, the presales condition contained in the Offer Letter would not be included in the final loan documentation.

• As at 25 July 2017, if Chiodo Corporation did not sign the Offer Letter, finance would not be approved.

34. Infin8 submitted that her Honour did not have regard to the following matters:

1. Mr Chiodo was an experienced and expert property developer, as already described, and was a person who understood the importance of reading contractual documents. He agreed that he would not just sign contracts without reading and understanding them.

2. Mr Chiodo’s evidence was that he well understood the frequency of presales conditions and that a construction facility generally has such a condition.

3. Mr Chiodo was not able to produce an email, letter, file note or any other document prepared or signed by him that in any way asserted that an essential requirement for the loan he was seeking for the project was that it should not be subject to a presales condition.

1. All of the documents in evidence prepared or signed by Mr Chiodo over the relevant period were either expressly and categorically inconsistent with the proposition that he ever in any way asserted, or that Mr Lecordier ever in any way agreed or represented, that an essential requirement for the loan was that it should not be subject to a presales condition (for example, the Indicative Offer and the Formal Offer) or were implicitly inconsistent with such a proposition (for example, the Mandate letter) and were in either case inconsistent with the alleged representations.

2. Mr Chiodo sent an email to Infin8 in December 2016 indicating, in effect, that he was, at least at about that time, willing to consider a presales condition for the project if that were required to secure the necessary funding. The transcript of Mr Chiodo’s cross-examination on this point included the following:

“Q. It changed, but at this time, you were willing to accept a loan that had a pre-sale condition?

A. Sure – a pre-sale condition – yeah, okay.

Q. You were willing to accept a loan with that condition in December 2016?

A. Subject to a whole bunch of other items being met.

Q. But you were willing to accept a loan that had a pre-sale condition in December 2016

A. Yeah, sure.”

6. Mr Chiodo had only met Mr Lecordier the previous year on one prior transaction. It was therefore improbable that Mr Chiodo would not have made a note or otherwise confirmed in writing, if the May 2017 discussion was “absolutely” vital, to the effect that, unlike the position in July and December 2016, it was now an essential requirement for the loan that it should not be subject to a presales condition.

7. It was glaringly improbable that Mr Chiodo would have been prepared to sign documents wholly inconsistent with the alleged representations.

8. The 12 May 2017 email in which Mr Chiodo confirmed, when asked by Mr Lecordier, that there was at that stage no presales condition in the (then current) finance arrangement, was inconsistent with Mr Chiodo’s assertion that it had been expressly discussed that day as an essential requirement. Had the discussion occurred, it would not have made sense for Mr Lecordier to inquire again whether there was an existing presales condition on the project. Moreover, if it had been “absolutely” significant that the loan not contain a presales condition, it is improbable that Mr Chiodo would not have recorded it in his 12 May 2017 email.

9. Mr Chiodo signed and accepted the 19 May 2017 Indicative Funding Proposal that contained a clear statement that the indicative approval conditions would be those “as required by the Lender” and which expressly stated “We do not determine or recommend the conditions of a credit contract”.

10. The Indicative Funding Proposal was inconsistent with Mr Chiodo’s asserted position in the 12 May 2017 email.

11. The Mandate to Act expressly stated that Refresh made no representation, guarantee or warranty that the finance facility offer procured would match the borrower’s terms.

12. The 14 June 2017 Indicative Offer expressly said that the offer “will also be subject to obtaining…Presales required to produce 50% debt coverage”.

13. The formal Letter of Offer dated 21 July 2017 contained express written terms in unambiguous and unequivocal language that was wholly inconsistent with the alleged presales representations. In particular, special condition (l) specifically referred to the requirement for evidence of unconditional presales for 50% of the loan amount prior to settlement. Mr Chiodo signed this letter twice in two capacities as a director and guarantor.

14. Mr Chiodo conceded in cross-examination that he read the formal Letter of Offer before he signed it and that he would have to pay 50% of Refresh’s facilitation fee even if he did not proceed with the loan.

15. Mr Chiodo did not send an email or make any file note of the alleged representation made to him on 25 July 2017.

16. Mr Chiodo never sent an email or other written communication to Infin8 or Refresh or to anyone else complaining that he had been misled as alleged.

35. Infin8 made further detailed submissions along similar lines. The consistent and reoccurring, not to say repetitive, theme of those submissions is that it is incredible that Mr Chiodo, with his background and experience, would have committed himself to a contract that contained a condition he did not want and could not fulfil. One paragraph from those submissions will serve as an example:

“24. Remarkabl[y], the learned Magistrate seeks to draw an inference in favour of the Presales Representation being made on the basis that Mr Chiodo was a very experienced property developer who had taken out many loans and was aware of the need to comply with their conditions and therefore - and this …is a profound non sequitur – he decided to sign the La Trobe offer having been assured that the presales condition would be removed. But the absolute opposite inference is to be drawn: a highly experienced property developer who had taken out many loans and was aware of the need to comply with their conditions would not sign a loan that contained a presales clause (as well as a no representations clause, and a no variation other than in writing clause etc) unless he was satisfied that the contract reflected his agreement with the lender.”

Chiodo Corporations submissions

36. It will be immediately apparent that the predicate of Infin8’s incredulity and astonishment at her Honour’s conclusion is Chiodo Corporation’s response: the only reasonable or rational explanation for Mr Chiodo’s signature on the loan documents containing a presales condition, taking into account the very expertise and experience that Infin8 emphasises, is that the representations he alleges were actually made by Mr Lecordier and that Mr Chiodo relied upon them. Rhetorically, why else would he have signed them? Chiodo Corporation contends that these are competing inferences between which her Honour was entitled to choose. In doing so her Honour had the advantage of seeing and hearing both Mr Chiodo and Mr Lecordier give evidence, an advantage that should not lightly be discounted. Chiodo Corporation submits that Infin8’s invocations of glaring improbability do not necessarily provide only a single possible outcome.

Consideration

37. Her Honour’s decision that the representations were in fact made appears at [64]-[66] of her judgment. That paragraph is as follows:

“Did Chiodo Corporation accept the offer made by La Trobe Financial Pty Ltd subject to the removal of the presales condition?

[64]   Infin8 says that Chiodo Corporation’s acceptance of the offer by La Trobe was not subject to removal of the pre sales condition. Mr Lecordier denies telling Mr Chiodo that he should sign the La Trobe letter and that he would arrange to have the pre sales condition removed.

[65]   Mr Chiodo says that he only signed the documents upon the assurance by Mr Lecordier that the pre sales condition would be removed.

[66]   The two positions are diametrically opposed. However I am satisfied on the balance of probabilities that Mr Chiodo’s evidence should be preferred for the following reasons:

•   Mr Lecordier had apparently been involved in the Judith Court financing proposals from the start – he helped facilitate the Gippsreal loan proposal.

•   Mr Lecordier was on notice that there were no presales for the Judith Court property. In fact, he specifically asked for information about presales in relation to the two loans that Mr Chiodo was seeking and was told that there were no presales for Judith Court. Why clarify this issue if it were unimportant?

•   Mr Chiodo was a very experienced property developer. He had taken out many business loans and he was aware of the need to comply with the conditions of any offer. He was acutely aware that his current loan facility was due to expire and that he needed to refinance in order to proceed with the construction of the units. The La Trobe offer required certain things to be carried out before the money could be drawn down including obtaining an independent valuation and the preparation of mortgage documents. He did not have the time to waste pursuing the La Trobe offer in circumstances where he could not satisfy its requirements. The most logical inference is that he decided to sign the La Trobe offer having been assured by Mr Lecordier that the condition would be removed.

•   Mr Chiodo was aware of the effect of borrowing money with or without pre sales:

Q.   You are saying it’s implied by the fact that you hadn’t yet got a presale, that you would be unwilling to accept a presale condition?

A.   For that particular development because it’s a small development, it was – it was common in the market place at that point in time in a private lending market with paying the private interest rate to have no presales. (T28/8/19, p 27 lines 37-41)

…

Q.   Yes. And where in that email does it say that you confirmed – well, sorry, you say that you confirmed in red that, ‘I’ll need a loan with no presale requirements for proposed development’?

A.   No, but that had, like – that was the status, but – but the – the discussions that we’ve had in between, including this email, is that there is no presales, we’re not getting presales, is zero. It’s a status and a position.

Q.   Let’s put the discussions that you had to one side for the moment. We’re going to go through all of the discussions. But you’ve said here that you replied in red that you needed a loan with no presale requirements. Now I’m looking at this email and all that I see is the word ‘no’, and that word is said in answer to the question, ‘Have you got any presales yet?’ So from my part, I’m struggling to see where you say that, ‘I needed a loan with no presale requirements’.

OBJECTION (MACONACHIE). FORM. QUESTION ALLOWED

Q.   Where do you say that?

A.   But the – at a position of ‘no’ in context with all the discussions, which I’m sure you’ll come to, is that that ‘no’ is – is the ultimate position of the status and the implied would – because nowhere in – in any form of – of documents I’m saying I need a presale. This – because a presale will allow me to secure loans at a bank (T 28/8/19, page 32 line 39 to page 33 line 11).

•   Mr Chiodo knew that he would have to make alternative arrangements (which he did in fact do) should the La Trobe loan offer prove to be unsuitable.

•   As at 24 to 25 July 2017 when he was exchanging emails and discussing with Mr Lecordier the terms of the loan offered by La Trobe, he acknowledged, in a somewhat sarcastic manner, the impossible task of finding someone to whom he could presell a unit in the short time available before the Gippsreal loan expired.”

38. As earlier recorded, her Honour considered that the accounts of Mr Chiodo and Mr Lecordier were diametrically opposed. Mr Chiodo was taken to the 12 May 2017 email and gave the following evidence under cross-examination:

“Q. This is the only one I’m asking you about right now. You’re telling me that this email implies that you were not willing to accept a presale condition?

A. That wasn’t on the offering. That wasn’t my point of view at this point in time, no.

Q. What do you mean when you say that wasn’t my offering?

A. Because I can’t offer something that I don’t have –I – I don’t have a presale.

Q. You don’t have a presale?

A. So how – I can’t procure a loan with a presale if I don’t have it.”

39. Mr Chiodo also said in cross-examination that he “had no ability to satisfy” a presales condition. Mr Chiodo said, and her Honour accepted, that his reference in the email sent at 6.32 pm on 24 July 2017 saying “Know anyone that can buy a property?” was a sarcastic reference contemporaneously reaffirming his inability to satisfy a presales condition. Chiodo Corporation submitted that her Honour was entitled to accept that evidence and Mr Chiodo’s explanation of what it meant. Chiodo Corporation contended that it was glaringly improbable that it would have committed itself to an agreement that rendered it liable to the payment of a considerable sum that included the obligation to comply with a 50% presales condition or requirement that it could not fulfil. Her Honour accepted that analysis and Chiodo Corporation maintained that she was entitled to do so.

40. Chiodo Corporation also maintained that Infin8’s submissions fail to come to terms with an important piece of uncontested evidence from Mr Chiodo concerning his conversation with Naomi Scholten from Refresh. As already recorded, Mr Chiodo said, at paragraphs 49 and 50 of his 7 December 2018 affidavit, that when he received the Refresh loan documents, he phoned Ms Scholten and told her “I cannot sign these documents as they have a presale condition and this was a no presale deal”. Ms Scholten said that she needed to speak to Mr Lecordier. However, neither Refresh nor Infin8 called Ms Scholten to give evidence. Chiodo Corporation submitted that, in the absence of an explanation for her non-attendance, an inference should be drawn that her evidence would not have assisted either of them. Moreover, it is striking that Mr Chiodo would have given evidence of a conversation with Ms Scholten at Refresh that might have been capable of easy contradiction if it were not in fact true, and tends to support the proposition that Mr Chiodo was asserting that the loan was not conditional upon a presale, that he had told Mr Lecordier that in clear terms, and that he had been assured that no such condition would be enforced.

41. In my opinion, it was entirely open to her Honour to have concluded that Mr Chiodo relied upon representations that the finance approval that Refresh was attempting to procure would not be subject to a presales condition. He had not sold any unit in the development. He had made no effort to do so. He had no ability in the available refinancing timeframe to satisfy such a condition. It made no commercial sense for Mr Chiodo to continue with attempts to obtain finance that was subject at the threshold to a condition he could not satisfy.

42. Moreover, Infin8’s patent indignation at the apparent tension between Mr Chiodo’s acceptance of the proposition that he read and understood the loan documents and the fact that he went ahead and signed them containing the offending condition does not withstand scrutiny. It is highly improbable that Mr Chiodo, having read and understood the literal terms of the documents, would have blithely proceeded to sign them if it were not for the fact that he relied upon the representations alleged. Even if the construction of the documents and the fact that Mr Chiodo read and signed them objectively support equally glaring improbabilities, her Honour preferred the evidence of Mr Chiodo. It cannot in my view be contended that she was not entitled to do so. Her Honour’s preference for the evidence of Mr Chiodo has not in any event been directly attacked.

43. It follows that Infin8’s challenge to her Honour’s finding that the representations were misleading and deceptive and relied upon by Chiodo Corporation must fail.

44. As already observed, her Honour’s finding at [42] that Refresh was an agent of Chiodo Corporation is uncontroversial and is not challenged. However, her Honour found at [44] that Infin8 was an agent of Refresh. Her Honour should in those circumstances have concluded that Refresh was not entitled to its facilitation fee: her Honour’s finding that Refresh is entitled to its fee cannot stand with a finding that the misleading and deceptive representations were made by its agent. Her Honour’s conclusion that Refresh was entitled to its facilitation fee can only be understood if she had found, or had intended to find, that the representations that induced the contract were made by Infin8 acting as Chiodo Corporation’s agent.

45. Her Honour's reasoning to her finding that Infin8 was the agent of Refresh is to be found at [44]-[46] as follows:

"[43] Infin8 has been described in the evidence as a sub-broker.

[44] I am satisfied on the balance of probabilities that Infin8 was in fact an agent of Refresh as:

•   It did not have an Australian credit licence. As such, it could not engage in credit activities on its own behalf.

•   Instead it had a referral agreement in place with Refresh which did have the requisite Australian credit licence. Under this agreement, it would be paid a fee when it referred matters to Refresh.

•   Refresh knew that Infin8 was in the market for looking for prospective clients for it given that it would remunerate Infin8 for such introductions.

•   Mr Lecordier was clearly acting as the intermediary between Refresh and Mr Chiodo and Chiodo Corporation as:

○   Chiodo Corporation's application for finance was made through Infin8 and not direct to Refresh.

○   Refresh directed its correspondence to Chiodo care of Ricky Lecordier or Infin8.

○   Mr Lecordier was the person who was following up the outstanding La Trobe requirements with Mr Chiodo…

○   When Mr Chiodo rang Naomi Scholten, a mortgage broker at Refresh about the loan documents and told her that he could not sign them as they had a presale condition and it was a no presale deal, she said that she would talk to Ricky.

[45] I am satisfied on the balance of probabilities that Infin8 was not an agent of Mr Chiodo and Chiodo Corporation as:

•   The task to be carried out was to provide credit services by procuring suitable finance for the Judith Court project.

•   Infin8 could never have, by itself, provided the credit services that Chiodo Corporation required without the requisite Australian credit licence.

•   There was no written agreement between Infin8 and Chiodo Corporation similar to that which existed between refresh and Chiodo Corporation.

•   Although Mr Lecordier continued to be involved in the discussions about the loan and was transmitting information between Mr Chiodo and Refresh, he was not the person who was carrying out the work necessary to obtain a loan for Chiodo Corporation.

[46] Accordingly I find that Infin8 was an agent of Refresh and not of Chiodo Corporation and Mr Chiodo."

46. Only Refresh argued for a different finding.

47. First, Refresh submitted that it was immaterial that Infin8 did not have an Australian credit licence, as Infin8 is not a lender. Infin8 was engaged by Chiodo Corporation on two occasions. The first was to source the loan facility with Gippsreal in 2016, Chiodo Corporation’s original credit provider of the loan that was due to be discharged. The second was the loan in question for the construction of the Judith Court project.

48. Secondly, Refresh contended that her Honour did not allow the referral agreement into evidence and yet she speculated about what it might have said. Her Honour incorrectly assumed that under the referral agreement Infin8 would be paid a fee when it referred matters to Refresh, when in fact Infin8 would not be entitled to payment by Refresh unless the end borrower (in this case Chiodo Corporation) settled the loan. Mr Lecordier’s evidence was that “if a deal isn’t settled, no one gets paid”.

49. Thirdly, her Honour considered the fact that Mr Lecordier was acting as the intermediary between Refresh and Chiodo Corporation supported her finding that Infin8 was Refresh’s agent. Refresh argued that if Infin8 were Refresh’s agent “then by receiving information, or instructions from Infin8, or by providing updates and documents to Infin8, Refresh was in effect dealing with itself and not the end borrower”. Refresh submitted that it was “an untenable position that Refresh would need its own agent to play middle man between itself and the end borrower” and that “such action would only delay the transfer of information, and the finalisation of the matter”.

50. Refresh also contended that her Honour failed to give proper consideration to the authorities. No particular content is given to that somewhat doughty submission. For example, with the exception of the reference to Esanda Finance Corporation Ltd v Spence Financial group Pty Ltd & Ors [2006] WASC 177 at [65], and the proposition that “whether in any case a finance broker is the agent of the financier is a question which must be determined on the facts of the particular case, there is a strong body of authority which supports the view that such an agency will not readily be inferred”, no specific criticism of her Honour’s approach is explained.

46. In my opinion, her Honour has properly concluded, “on the facts of the particular case” that Refresh was the financier’s agent and dealt with Chiodo Corporation through its sub-agent Infin8. David Harrison is the sole director of Refresh and affirmed an affidavit on 29 October 2018 that was relied upon in the court below. In my opinion, a fair reading of Mr Harrison’s affidavit gives a convincing impression that Chiodo Corporation was dealing directly with Refresh in order to source the required finance. Mr Harrison does not refer at all to Infin8 or Mr Lecordier although it is clear from Mr Chiodo’s affidavit that many of the documents that were coming to Chiodo Corporation from La Trobe or Refresh came via the intermediation of Mr Lecordier. For example, Mr Chiodo says at paragraph 14 of his 7 December 2018 affidavit that he “received an email from Ricky [Lecordier] which attached a letter from Refresh Finance outlining the proposed facility to be granted to Chiodo Corporation”.

47. Mr Chiodo also said at paragraph 11 of that affidavit that “Infin8 acts as a broker for financiers who lend money for a wide variety of purposes”. That was not objected to by Refresh. Her Honour was entitled to take it into account as an uncontradicted statement of fact.

48. I consider that, having regard to the particular facts of the case she had to decide, her Honour was entitled to conclude that Infin8 was the agent of Refresh.

Conclusion

54. It follows from what I have said that, in accordance with her Honour’s finding at [67], Chiodo Corporation accepted the offer made by La Trobe Financial Pty Ltd subject to the removal of the presales condition, having been induced to do so by the misleading and deceptive conduct of Infin8 acting as the agent of Refresh. That conduct of Infin8 as the agent of Refresh means that Refresh did not become entitled to its facilitation fee. Moreover, Infin8 obviously did not become liable to indemnify Chiodo Corporation for any amount that Chiodo Corporation was liable to pay Refresh.

55. In these circumstances, I consider that the following orders should be made:

1. Allow Chiodo Corporation Pty Ltd’s appeal.

2. Dismiss Infin8 Finance Group Pty Ltd’s cross-appeal.

3. Set aside the orders made by her Honour Atkinson LCM on 29 October 2019.

4. In lieu thereof, order that the statement of claim filed by Refresh Finance Pty Ltd on 8 June 2018 be dismissed.

5. Set aside the costs orders made by her Honour Atkinson LCM on 21 November 2019.

6. Dismiss the cross-claim filed by Chiodo Corporation Pty Ltd on 14 February 2019.

56. As I have not so far had the advantage of any submissions on costs, I have made no orders either with respect to costs of the proceedings in the Local Court or in this Court. I therefore direct the parties within 14 days, if so advised, to provide my Associate with written submissions not exceeding three pages dealing with the costs orders for which any party wishes to contend having regard to my conclusions in the matter.

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Decision last updated: 05 May 2020