Citigroup Pty Limited v Middling (No. 4) - [2015] NSWSC 221

Supreme Court

New South Wales

Medium Neutral Citation: Citigroup Pty Limited v Middling (No. 4) [2015] NSWSC 221
Hearing dates: 2 - 3 March 2015
Decision date: 17 March 2015
Jurisdiction: Common Law
Before: Adamson J
Decision:
(1) Judgment for the first cross-defendant on the cross-claim.
(2) Unless either party makes an application for a different order for costs, order the cross-claimant to pay the first cross-defendant’s costs of the proceedings, other than the costs of the adjournment and amendment ordered on 1 May 2014, which are the subject of a separate application.

Catchwords: CONTRACT – agency – no relationship of agency between lender or manager and mortgage originator – originator acting on its own behalf when filling out loan application for borrower and including false statements of borrower’s income and employment – borrower authorised lender to pay funds to originator’s sole director – lender not liable for alleged misappropriation
CONTRACT – Contracts Review Act 1980 (NSW) – no basis for relief made out in pleading – importance of pleadings and particulars to inform lender of case it has to meet – cross-claim statute-barred in any event – relief under Act intended to be used as a shield not a sword – subs 16(c) of the Contracts Review Act
UNCONSCIONABLE CONDUCT – requirement of moral obloquy not present – lender unaware of dishonest conduct by mortgage originator
Legislation Cited: Civil Procedure Act 2005 (NSW), ss 56, 57, 58
Contracts Review Act 1980 (NSW), ss 4, 7, 9, 16(c)
Evidence Act 1995 (NSW), s 91
Interpretation Act 1987 (NSW), ss 34(1), 34(2)
Real Property Act 1900 (NSW), s 57(2)(b)
Trade Practices Act 1974 (Cth), s 51AC
Cases Cited: Aon Risk Services Australia v Australian National University [2009] HCA 27; 239 CLR 175
Baltic Shipping Co. v Merchant “Mikhail Lermontov” (1994) 36 NSWLR 361
Citigroup Pty Limited v Middling [2014] NSWSC 474
Davis v Williams [2003] NSWCA 371
Heperu Pty Ltd v Morgan Brooks Pty Ltd (No. 2) [2007] NSWSC 1438
Kirkpatrick v Kotis [2004] NSWSC 1265; 62 NSWLR 567
Landa v Perpetual Trustees Victoria Ltd [2014] NSWCA 393
Lloyd v Grace Smith & Co. [1912] AC 716
Michalopoulos v Perpetual Trustees Victoria Limited [2010] NSWSC 1450
Murphy v Overton Investments Pty Ltd [2002] FCAFC 129
Peddie v Stein (Unreported, Young J, 26 March 1987)
Perpetual Trustees Victoria Limited v Schmidt [2010] VSC 67
Provident Capital Ltd v Papa [2013] NSWCA 36
Tonto Home Loans Australia Pty Limited v Tavares [2011] NSWCA 389
Tran v Perpetual Trustees Victoria Limited [2012] NSWSC 1560
Uxbridge Permanent Benefit Building Society v Pickard [1939] 2 KB 248
Texts Cited: John R Peden, Harsh and Unconscionable Contracts: Report to the Minister for Consumer Affairs and Co-operative Societies and the Attorney-General for New South Wales, (1976).
John R Peden, The Law of Unjust Contracts, (1982, Butterworths).
Category: Principal judgment
Parties: Citigroup Pty Limited (Plaintiff/First Cross-Defendant)
Dennis James Middling (Defendant/Cross-Claimant)
Perpetual Trustees Victoria Limited (Second Cross-Defendant)
Representation:
Counsel:
DW Elliott (Defendant/Cross-Claimant)
M Ashhurst SC/P Newton (Second Cross-Defendant)

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2015] NSWSC 221
Decision Date: 17 March 2015

CaseChat Overview and Summary

The case before the court involved Citigroup Pty Limited, acting as a lender, and Middling, the borrower, with the dispute centering on the lender's liability for alleged misappropriation of funds by the mortgage originator. The court was tasked with determining whether there was an agency relationship between the lender and the mortgage originator and, if so, whether the lender was liable for the originator's actions. Additionally, the court needed to consider the lender's entitlement to relief under the Contracts Review Act 1980 (NSW).

The central legal issues were whether there was an agency relationship between the lender and the mortgage originator, and if the lender could be held liable for the originator's actions. The court had to assess the nature of the relationship between the parties and whether the lender could be held accountable for the false statements made by the mortgage originator during the loan application process. Furthermore, the court examined the lender's potential liability under the Contracts Review Act, specifically whether the lender could seek relief from the mortgage originator's alleged misconduct.

The court found that there was no relationship of agency between the lender and the mortgage originator. The mortgage originator was acting on its own behalf when it filled out the loan application and included false statements about the borrower's income and employment. Since the borrower had authorised the lender to pay the funds to the originator's sole director, the lender was not liable for the alleged misappropriation. The court also ruled that there was no basis for relief under the Contracts Review Act, as the lender had failed to make out a case for relief in its pleadings. The lender's cross-claim against the mortgage originator was dismissed as it was found to be statute-barred. The court emphasised the importance of pleadings and particulars in providing the lender with adequate notice of the case it had to meet. The court concluded that relief under the Act was intended to be used as a shield rather than a sword, and that the lender had not met the requirements for relief.

The final orders of the court were that the lender was not liable for the mortgage originator's actions, and that the lender's cross-claim against the mortgage originator was dismissed. The court also noted that the lender's failure to meet the requirements for relief under the Contracts Review Act meant that it was not entitled to any relief from the mortgage originator's alleged misconduct.

Orders