CT Money Pty Ltd v AFIG Wholesale Pty Ltd

[2008] NSWSC 1336

CITATION:	CT Money Pty Ltd v AFIG Wholesale Pty Ltd [2008] NSWSC 1336
HEARING DATE(S):	18-19 November 2008
JUDGMENT DATE :	12 December 2008
JURISDICTION:	Equity Division
JUDGMENT OF:	Young CJ in Eq
DECISION:	Plaintiff has no right to any commissions from, nor does it owe any obligations or liability to the defendants in respect of the DC loans.
CATCHWORDS:	PERSONAL PROPERTY [21]- Assignment of rights in expectancy- Plaintiff as mortgage originator/manager entered into the "CT Correspondent Deed" with the defendants as mortgage wholesalers, which entitles the plaintiff to commissions for mortgages either originated or managed by the plaintiff under the Deed- Prior to entering into the CT Correspondent Deed, two of the plaintiff's subsidiaries purchased, by entering into the "DC sale agreement", the business of a company "DC" (also previously an accredited originator/manager with the defendants) including its "loan book"- Whether the defendants owe trailing commissions to the plaintiff for the DC loans- Whether there exists an effective assignment of DC's loan book to the plaintiff- Held that the DC sale agreement was not a valid assignment at law within the meaning of s 12 Conveyancing Act 1919- DC's right to commissions under the scheme of its own correspondent deed and pricing agreements not assignable and not affected by subsequent dealings- Plaintiff was a mere delegate of DC.
LEGISLATION CITED:	Conveyancing Act 1919, s 12
CASES CITED:	Broadcast Australia Pty Ltd v Minister Assisting the Minister for Natural Resources (Lands) (2004) 221 CLR 178 Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85 Minister for Land and Water Conservation v NTL Australia Pty Ltd (2002) 122 LGERA 53 Westgold Resources NL v St George Bank Ltd (1998) 29 ACSR 396
PARTIES:	CT Money Pty Ltd (Plaintiff/First Cross-Defendant) AFIG Wholesale Pty Ltd (First Defendant/First Cross-Claimant) Australian Mortgage Securities Pty Ltd (Second Defendant/Second Cross-Claimant) DC Corporation Australia Pty Ltd (In liq) (Second Cross-Defendant)
FILE NUMBER(S):	SC 5957/07
COUNSEL:	A J Sullivan QC and A P Cheshire (Plaintiff/First Cross-Defendant) J T Svehla and R M Higgins (First and Second Defendants/First and Second Cross-Claimants) Z Ramsay (S) (Second Cross-Defendant)
SOLICITORS:	McLachlan Thorpe (Plaintiff/First Cross-Defendant) Hicksons Lawyers (First and Second Defendants/First and Second Cross-Claimants) Uther Webster & Evans (Second Cross-Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

YOUNG CJ in EQ

Friday 12 December 2008

5957/07 – CT MONEY PTY LTD v AFIG WHOLESALE PTY LTD

JUDGMENT

1 HIS HONOUR: This is a dispute between CT Money Pty Ltd (“CT Money”) (the plaintiff), a mortgage originator and manager, and a mortgage wholesaler as to whether any, and if so, how much commission is owing by AFIG Wholesale Pty Ltd (the first defendant) and Australian Mortgage Securities Pty Ltd (“AMS”) (the second defendant) (to which I will collectively refer as “AFIG”) to the plaintiff.

2 The case has proceeded by way of separate questions being stated for the court to answer. The questions, as finally amended, are MI 1009 and these are set out in the schedule to these reasons.

3 The plaintiff says that the basal question I must address is whether the plaintiff is legally responsible for any breaches in respect of loans in the loan book which occurred prior to the plaintiff acquiring that loan book on 1 November 2005.

4 I need to give some background facts, most of which are non controversial before I address the basal question, consequential matters and then address myself to answering the questions in the schedule.

5 Prior to 1 November 2005, a company DC Corporation Australia Pty Ltd (“DC”) now in liquidation, the second cross-defendant in these proceedings, was an accredited mortgage originator and manager with AFIG. As from 1 November 2005, the plaintiff or two of its subsidiaries acquired DC’s mortgage business. This was effected by an agreement which is at pp 142 and following of the tender bundle. This was referred to as the “DC sale agreement”.

6 One of the assets of the business being transferred was described as “the loan book”. This was defined as meaning “the rights to receive Commissions and margins accruing from the Business which have been earned by the Seller as a result of loan applications having been submitted by it and Franchisees to various Lenders and includes details of all such Lenders, loans and relevant borrowers as listed in Item 8”. Item 8 included AFIG. Of course, the words which occur with initial capital letters in the definition are words which are defined in the agreement.

7 Although the document is called “an agreement” and recital B recites that the seller (namely DC) is desirous of selling to the purchaser (two subsidiaries of CT Money) who were desirous of purchasing the business, clause 2.1 actually reads:

“The Seller hereby sells to the Purchaser who hereby purchases unencumbered and with clear title the Business … “.

Accordingly, the so called agreement appears to purport to be a conveyance and not just an executory agreement. It does not appear to be stamped but no one has raised any point as to this.

8 On 22 December 2005, AFIG wrote to the plaintiff, the salient points of the letter being as follows:

“Mr Peter Frampton
CT Money Pty Limited …
Dear Peter
AFIG Wholesale Pty Ltd (AFIG Wholesale) has approved your accreditation to its Programme. This letter outlines the administrative matters required to complete your accreditation.
Please return the following information to AFIG Wholesale:

· Correspondent Deed – Enclosed is your Correspondent Deed. The Deed is the agreement that governs the relationship between us. Please note that if the Deed is to be entered into by a company, we require the guarantees from the directors of that company. The guarantee is incorporated into the Deed. This Deed needs to be executed by you and witnessed. The witness should not be a party to the Deed.

…

· RCTI – Signed and completed RCTI Agreement.

· PI Insurance – please forward a copy of your full PI Insurance, including the general wording as well as the schedule and certificate of currency, the policy should note the following …

….

· AFIG Wholesale Operations Manual

We have also enclosed a CD-Rom, which contains the AFIG Wholesale Operations Manual. Please be aware the AFIG Wholesale Operations Manual forms part of the Correspondent Deed … .
…

· Remuneration

Up-fronts – These are paid directly to your nominated bank account every week on a Monday.
Margins – These are paid directly to your nominated bank account every month on the seventh working day of the month.”

9 Although the RCTI (Recipient Created Tax Invoice Agreement) was returned, none of the other documents were returned by the plaintiff to AFIG.

10 There were then a large number of discussions principally focused on the subject of the directors’ personal guarantees.

11 As at 22 December 2005, there was in existence what I will call the “Mark 1 pricing agreement”. There was a second pricing agreement bearing date 20 March 2006 (“Mark 2 pricing agreement”) and a third pricing agreement of 4 May 2006 (“Mark 3 pricing agreement”).

12 What appears to be the situation is that the rates of interest and commission varied from time to time. What seems to occur is that an application for loan would be made by a borrower either directly to the mortgage originator or alternatively to one of its brokers or franchisees. The proposal would then be put to the wholesaler. The wholesaler would fix a rate by working out what rate of interest it required on its money and would add to that a further percentage to cover the commissions of the originator and other commissions.

13 Accordingly, if at the relevant time the lender was wanting 7% on its money and the commission under the pricing agreement at the time required an additional 0.14%, then the borrower would be offered a mortgage at 7.14%.

14 The 7.14% would eventually find its way into the mortgage wholesaler’s hands. However, the originator was responsible for “managing” the mortgage and as there was a recourse agreement whereby the originator virtually guaranteed the wholesaler against loss, it behoved it to ensure that the borrower paid what was due when it was due. The wholesaler paid an initial commission from which doubtless the originator paid its franchisee and then paid trailing commissions as the mortgage progressed.

15 Accordingly, when DC purported to assign its loan book to the plaintiff, the situation was that DC was obliged to manage the mortgages to guarantee payment to the lender and in return was entitled to monthly trailing commissions. Those commissions were fixed as at the date the mortgage was taken out according to the pricing agreement that was then current.

16 It will be necessary to examine the details of the transactions in greater depth in due course, but for the moment I will pursue the general narrative.

17 On 4 May 2006, AFIG again wrote to the plaintiff a letter, more or less identical to that of 22 December 2005. This time the documents were returned.

18 The principal document is known as the AFIG Wholesale Correspondent Deed (“the CT correspondent deed”). In the present case it bears date 15 May 2006 though it may not have been executed by AFIG until 24 July 2006.

19 The CT correspondent deed contains a number of definitions. These are introduced with the phrase “The following words and expressions have the following meanings when used in this Deed”. It was pointed out during argument that these are not the common words which usually include the phrase “unless the context otherwise requires”.

20 “Loan Agreement” was said to mean “the contract evidencing the terms of a Loan”. “Mortgage” was said to mean:

“a registered (or pending registration, registrable) mortgage over land situated in any Australian jurisdiction which is:
(a) originated and settled (or proposed to be originated and settled) by the Correspondent or by AFIG Wholesale as a result of a Loan Application processed by the Correspondent under this Deed; and/or
(b) managed by the Correspondent under this Deed.”

21 Clause 1.3 was as follows:

“ Retrospective Effect of this Deed
The parties acknowledge and agree that, with effect from the date of this Deed:
(a) this Deed replaces all existing agreements and arrangements between them with respect to the origination and management of mortgages …;
(b) …
(c) the obligations and liabilities of the Correspondent to AFIG Wholesale or AMS under any agreement or arrangement referred to in paragraph (a) with respect to any act, omission, circumstance or event occurring prior to the date of this Deed are replaced by the obligations and liabilities referred to in paragraph (b).”

22 Clause 2.4 required the correspondent to comply and act in accordance with the operations manual in all respects.

23 Clause 12 contained various representations and warranties.

24 Clause 15.1 reads as follows:

“ Origination and Servicing Fee
AFIG Wholesale must pay to the Correspondent such servicing and origination and other fees as are from time to time agreed between them in relation to the performance by the Correspondent of its obligations under this Deed. In the absence of agreement, the Correspondent is not entitled to any such fees under this Deed.”

25 The plaintiff says that up until 8 October 2007, AFIG paid all commissions due to it. The commissions are trailing commissions.

26 However, on 23 August 2007, AFIG sent the plaintiff a notice to indemnify. This alleged that the plaintiff was obliged to indemnify AFIG for its loss in respect of a mortgage taken out by one Nguy where the loss was said to be $190,382.92. On 8 October 2007, AFIG issued a notice of set-off indicating that AFIG would be setting off future trail commissions against the amounts it claimed under the Nguy transaction.

27 For completeness I should add that on 31 January 2008, AFIG’s solicitors wrote to the plaintiff’s solicitor that as the trailing commissions due to the plaintiff now exceeded $190,382.92, a cheque for the balance due at that date, namely $3,829.09 was enclosed with the letter. A further amount was paid to the plaintiff in February 2008. However, subsequently there were further alleged defaults over mortgages originated by DC and AFIG again withheld trailing commissions to indemnify it against those losses.

28 The plaintiff commenced these proceedings by summons filed on 12 December 2007 seeking basically a declaration as to the meaning and effect of cl 1.3 of the correspondent deed and an order that AFIG repay the amounts withheld. Pleadings were ordered and the final version to date of the statement of claim is the further amended statement of claim filed on 19 November 2008. AFIG has filed a cross-claim on 24 October 2008 seeking a series of declarations as to the obligations of the plaintiff and DC to it.

29 Palmer J, when Expedition Judge, ordered that separate and preliminary questions be determined and his Honour expedited the hearing of those questions. In their amended form, these questions are marked MI 1009. These are set out in the schedule to these reasons. However, for the purpose, hopefully, of making these reasons more intelligible, I will summarise them as follows, then deal with each of them in order, and end with the result of this hearing:

1. Did CT Money for the whole of the period from 1 November 2005 to date, have an obligation and/or liability to AFIG with respect to any conduct occurring on or prior to 31 October 2005 in relation to the DC Corporation loans?

2. If the answer to 1 is “No”, did CT Money have such an obligation for any part of the period 1 November 2005 to date, and if so, for what period?

3. How did such obligation and/or liability arise and what is the content of such obligation?

4. Depending on the answer to previous questions, is CT Money liable to repay all or part of the fees which it has received from AFIG by reason of:

(i) agreement;

(ii) unjust enrichment;

(iii) payment by it under mistake;

(iv) quantum meruit;

(v) estoppel; and/or

(vi) misleading and deceptive conduct.

5. What money is CT Money liable to repay and is it liable to repay those monies at interest, and if so, from what date?

6. Has CT Money a continuing obligation and/or liability to AFIG with respect to any conduct occurring prior to 31 October 2005 in relation to the DC Corporation loans?

7. If the answer to 6 is “Yes”, how does such obligation and/or liability arise and what is its content?

8. What rights has AFIG to set off, deduct, withhold monies as against monies due to it?

9. What liability has AFIG to recompense to plaintiff for conducting the management of the DC Corporation loans for the relevant period?

10. Does such liability terminate upon the plaintiff ceasing to conduct the management of the DC Corporation loans?

11. Can CT Money be treated as a delegate of the DC Corporation?

12. If 11 is answered “Yes”, can AFIG terminate that delegation?

13. If AFIG can terminate such delegation can it do so immediately or only upon reasonable notice?

14. Have all fees due to the plaintiff been paid by AFIG?

15. What are the consequences of the answers to these questions?

30 I heard evidence and argument on separate questions on 18 and 19 November 2008, Mr A J Sullivan QC and Mr A P Cheshire appearing for the plaintiff and Mr J Svehla and Mr R M Higgins appearing for the first and second defendants, Ms Z Ramsay, solicitor, appeared for the liquidator of DC. Ms Ramsay was involved only as an observer and did not take any active part in the proceedings.

31 A peculiarity of the case is that for diametrically opposed reasons, the parties really saw that most of the questions should be answered in exactly the same way. The observation I am about to make refers to the full questions set out in the schedule to these reasons rather than to my summary, and the answers common to both parties are:

1. No.

2. No.

3. Not applicable.

4. No.

5. Not applicable.

6. No.

7. Not applicable.

8. The plaintiff says yes as to all except 8.2 which should be answered no. AFIG says no.

9. The plaintiff says not applicable: AFIG says no.

10. The plaintiff says this is judicial advice, not a proper question. AFIG says it is not applicable.

11. The plaintiff says no. AFIG says yes.

12-13. The plaintiff says this is judicial advice and should not be answered. AFIG says yes.

14. The plaintiff says no and AFIG says yes.

32 It follows that questions 1 to 7 can be answered without further comment in the way that both parties say they should be answered, and indeed, in the way in which I agree they should be answered. However, the reasons for that view, as I have said, are vastly different on each side and it behoves me to deal with those contentions.

33 Accordingly, before I deal with the individual questions I will deal with matters of broader principle.

34 It is clear that the court needs to deal with three periods: (a) the period prior to 1 November 2005; (b) the period 1 November 2005 to 15 May 2006; and (c) the period after 15 May 2006. 1 November 2005 is the date when DC purported to sell its business to the plaintiff and 15 May 2006 is the day when I will assume that the plaintiff actually entered into a correspondent deed with AFIG.

35 The plaintiff says, in essence, that there was a transfer of the loan book and the mortgages that were originated by DC became mortgages which the plaintiff managed. Mr Sullivan said it was particularly significant that “mortgage” is defined in the CT correspondent deed as meaning, inter alia, a mortgage which is managed by the correspondent under the deed. Clause 15.1 of the CT correspondent deed requires AFIG to pay a servicing fee, the fee is set under the Mark 3 pricing agreement (alternatively under the Mark 1 or Mark 2 pricing agreements).

36 Alternatively, or additionally, cl 1.3 on the “retrospective effect of this deed” means that each mortgage that was originated even though originated by DC, gives rise to the same obligations under the deed as if the mortgage had been originated under the deed.

37 On this analysis there is no reference to any problems that there might have been between AFIG and DC with respect to defaulting mortgages originated by DC, and this is quite irrelevant.

38 On the other hand, Mr Svehla says that loans which were originated by DC did not become loans originated by the plaintiff under the CT correspondent deed. They are governed by the “DC correspondent deed”. The DC sale agreement did not have the effect of transferring the loan book. Indeed, any purported assignment would have been vitiated by cl 18.1 of the DC correspondent deed which reads:

“The rights of the Correspondent and each Correspondent Guarantor under this Deed are personal and are not capable of being assigned or transferred.”

39 Mr Svehla says that the highest effect of the DC sale agreement would have been to assign the receipt of the servicing and other fees once received, not of the right to receive those fees. Indeed, the purported assignment was ineffective for a number of reasons. One of those reasons is that the assignee was not the present plaintiff, but rather two associated companies, CT Franchises Pty Ltd and CT Lending Pty Ltd as joint purchasers. The property allegedly assigned was “the business” which was defined in the DC sale agreement as DC’s business “of acting as a mortgage originator and mortgage manager and of establishing, conducting and administering a network of franchisees which act as mortgage brokers and mortgagor originators including the Business Assets”. “Business Assets” included, inter alia, the loan book, intellectual property, fixed items and goodwill. It cannot be that the assignment of the loan book can be considered separately from the other matters such as the assignment of the rights with respect to the franchisees. There was not an assignment within the meaning of s 12 of the Conveyancing Act 1919 at law. The only effective way of making the assignment was by novation which did not occur. In any event, the assignment, if it were effective, would have operated only in equity and would have been subject to equities in the wide sense in which the word “equities” is used in the law of equitable assignments.

40 It follows that the plaintiff has no entitlement to any monies from AFIG. The parties must be treated as having agreed that the work that the plaintiff was doing it was doing as a delegate of DC and that DC had consented to the fees due to DC being paid to the plaintiff. However, all that the plaintiff was entitled to recover was the net amount due to DC and on the documents this meant the net amount less set-offs. Furthermore, the scheme under the correspondent deeds and pricing agreements was that when the mortgage wholesaler agreed to lend, a rate was worked out which was to include monies due to the originator and the broker, and there was a fixed obligation at that point in time which was not affected by subsequent dealings between the parties.

41 It would seem that after the purported assignment between DC and the plaintiff, there were discussions between representatives of the plaintiff and AFIG. It would seem that the plaintiff was the entity that would have the accreditation, that CT Franchises Pty Ltd is a wholly owned subsidiary of the plaintiff which would be trading as “Capital Trust” and CT Lending, another wholly owned subsidiary would be used for what was called “white label branding” namely acting as an aggregator of smaller originators. These discussions culminated in AFIG issuing four letters to the plaintiff or its subsidiaries on 20 December 2005. One of these letters was to CT Franchises Pty Ltd trading as The Capital Trust where AFIG commenced by noting its delight in confirming “your accreditation … through CT Money Pty Limited”.

42 I have already set out the significant parts of the letter of 22 December 2005 addressed to CT Money Pty Ltd, the present plaintiff, and omitting formal parts, it commenced:

“AFIG Wholesale Pty Limited (AFIG Wholesale) has approved your accreditation to its Programme. This letter outlines the administrative matters required to complete your accreditation.”

As I have already indicated the letter set out a series of documents that were to be executed and returned, only one of which was executed and returned.

43 Mr Sullivan submitted that he did not have to rely solely on the CT correspondent deed of 15 May 2006 as the letter of 22 December 2005 shows that the accreditation commenced then. I cannot accept that submission. It is clear from the whole of the letter that the accreditation was only to take effect once the conditions were fulfilled and because of the reluctance of the directors to give personal guarantees, that never occurred. Accordingly, having mentioned this point I now discard it as having any value.

44 I should add four comments before dealing with the individual questions.

45 First, a whole lot of evidence was given by officers of the plaintiff and AFIG and they were cross-examined at some length. Most of this evidence went to the discussions as to whether AFIG would dispense with the need for personal guarantees and why the accreditation period took so long. I do not need to discuss this evidence at all in view of the legal obligations that I have found. I do not even have to consider Mr Sullivan’s and Mr Cheshire’s analysis of the similarities in the evidence of four of the witnesses for AFIG who each swore that they had presented to the court an independent recollection, yet their evidence was so similar as to make even the most credulous person doubt that statement.

46 The clear fact is that the terms offered in December 2005 were not acceptable to the plaintiff and that it was only when the differences were overcome and the documents were completed that accreditation occurred.

47 The second matter is that although the plaintiff put a lot of stress on the fact that mortgage under the CT correspondent deed included a mortgage managed by the correspondent under the deed, as the mortgages originated from DC were not under the deed, the definition of “mortgage” lends no comfort to the plaintiff at all.

48 Thirdly, it would appear that there is some dispute between the liquidator of DC and the plaintiff. There is material that the liquidator is alleging that DC’s assets were sold to the plaintiff at a great undervalue. There is also the problem that if the plaintiff was DC’s delegate and the monies that have been paid by AFIG to the plaintiff were the monies of DC, then it may be that AFIG has to pay those monies again to DC’s liquidator (subject to a claim for a refund from the plaintiff) or that the plaintiff has to account to the liquidator of DC for the preference it has received.

49 Fourthly, a comment was made during the hearing that a lot of the difficulties in the case were caused because the defendants’ staff overlooked getting the usual form of deed of assignment executed. This is a fair comment.

50 However, although those matters were mentioned during argument, they do not arise under the separate questions which I have to determine to which I now turn.

51 1. The plaintiff says that it had no obligation or liability to AFIG in respect to any conduct occurring prior to 31 October 2005 in relation to the DC loans as there is nothing in the CT correspondent deed to place that liability on it. Accordingly, the question should be answered “No”.

52 AFIG says that that is certainly correct because the plaintiff never at any stage had any rights in respect to monies from the DC loans except as delegate of DC. I should point out that the DC correspondent deed did allow the appointment of a delegate under cl 6.1. That clause permitted delegation subject to any conditions that AFIG might impose to appoint “as its Delegate any person who, in the reasonable opinion of the Correspondent, is reasonably qualified and competent to exercise the powers and perform the obligations of the Correspondent under this Deed.” However the correspondent was to be liable for the acts and omissions of any delegate.

53 Mr Svehla says in section G of his written submissions:

“16. The DC Sale Contract proceeds and is premised on the basis that the DC Corporation Deed remains effective and does not come to an end. It purports to sell (assign or transfer) the Correspondent’s rights under the DC Corporation Deed.
17. AMS and AFIG are not parties to the DC Sale Contract. By its terms, the DC Sale Contract does not alter the rights and obligations, inter se, between DC Corporation … and AMS (and AFIG as AMS’ agent) under the DC Corporation Deed.
18. The DC Sale Contract did not effect an assignment or transfer of DC Corporation’s rights, including to servicing and other fees, under the DC Corporation Deed to CT Franchises and CT Lending as this is precluded by clause 18.1 of the DC Corporation Deed.”

54 Mr Svehla points out that at least a tripartite agreement would have been needed to effect an assignment. I have already set out other objections to the effectiveness of the DC sale agreement and whilst I consider these are correct, it is not necessary to debate them in detail.

55 Although property generally is assignable, one can have a species of property which is unassignable. I agree with what G Tolhurst says in his book The Assignment of Contractual Rights (Hart Publishing, Oregon, 2006) at p 248:

“When a right owes its existence to a contract between parties, it must be correct that the contract can define the characteristics of that right both in terms of contract and property. Therefore, it is not only impossible to divorce a contractual right from its correlative obligation, it is not possible to separate the transferability of that right from the correlative obligation. Hence if an obligation is personal so too is its correlative right and, if a contract contains a prohibition on assignment, it renders the subject right unassignable.”

56 The learned author points out at p 262 that whilst this is a difficult area of the law and the result may depend on the terms of the prohibition, there are some judgments of high authority which do not quite fit the usual pattern that generally speaking courts find that a provision in a contract prohibiting assignments effectively prevent an assignment.

57 As G Tolhurst points out, this conclusion mainly flows from the decision of the House of Lords in Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85. This has generally been accepted as stating the law; see eg Westgold Resources NL v St George Bank Ltd (1998) 29 ACSR 396 at 415 and see Broadcast Australia Pty Ltd v Minister Assisting the Minister for Natural Resources (Lands) (2004) 221 CLR 178 at 185 and the same case in the Court of Appeal Minister for Land and Water Conservation v NTL Australia Pty Ltd (2002) 122 LGERA 53 at 56-7.

58 Thus, without having to go into the area of whether there was a transfer to the plaintiff or two of its subsidiaries or whether there has been an attempted assignment of part of the chose of action, the conclusion must be that the DC sale agreement did not effectively transfer the DC loans or the right to manage the DC loans or that part of the loan book to the plaintiff.

59 The plaintiff has no right to any commissions from AFIG and likewise did not have any obligations or liability to AFIG in respect of those loans. Accordingly, the question must be answered “No”.

60 2. It follows that this question must be answered “No”.

61 3. Does not arise as it is only to arise if questions 1 or 2 are answered “Yes”.

62 4. AFIG takes the view that the monies were paid to CT Money as delegate of DC. On that basis, CT Money is not liable to repay monies to AFIG. The plaintiff adopts the position that it is not liable to repay any monies, accordingly question 4 must be answered “No”.

63 5. Does not arise because of the answer to 4.

64 6 & 7. For the reasons set out in my answer to 1, 6 must be answered “No” and 7 which arises only if the answer to 6 is “yes”, is not applicable.

65 8. It follows, from my answer to 1, that this must be answered “No” in all parts.

66 9. Accordingly, does not arise.

67 10. Does not arise.

68 11. For the reasons I have given under question 1, it must be answered “Yes” in both 11.1 and 11.2.

69 12 & 13. These questions do seek in my view judicial advice as to future conduct. Either this is an attempt to obtain judicial advice which the court does not give save in the special case of a trustee, or else it is seeking a declaration as to what options are available to AFIG and the court as a matter of discretion will usually not make such a declaration, it will insist that the litigant involved make its own decision. Accordingly, I do not answer 12 or 13.

70 14. It would seem to me that it follows, from what I have said above, that the answer must be “Yes”.

71 15. Accordingly, I answer the questions as indicated. I publish these reasons and will stand the matter over to 9.50am on 19 December 2008 for the purpose of considering the further progress of the proceedings provided that if that date is unsuitable to counsel, and provided my Associate has adequate notice, some other day that week can be substituted.

SCHEDULE


1. Did CT Money, for the whole of the period from 1 November 2005 to date, have an obligation and/or liability to AMS and AFIG with respect to any conduct occurring on or prior to 31 October 2005 in relation to the DC Corporations Loans?

2. If the answer to 1 is no, did CT Money have an obligation and/or liability to AMS and AFIG with respect to the DC Corporations Loans for part of the period 1 November 2005 to date and, if so, was it for the period:

2.1 14 November 2005 to date;

2.2 15 May 2006 to date;

2.3 1 November 2005 to 15 May 2006; or

2.4 14 November 2005 to 15 May 2006.

3. If the answer to 1, 2.1, 2.2, 2.3 or 2.4 is yes:

3.1 did such obligation and/or liability of CT Money arise by reason of:


3.1.1 one or more provisions of the CT Money Deed;

3.1.2 agreement (other than the CT Money Deed);

3.1.3 estoppel; and/or

3.1.4 misleading and deceptive conduct?

3.2 is the content of such obligation and/or liability of CT
Money:
3.2.1 in terms of clause 1.3 and/or clause 13.2 of the CT Money Deed;
3.2.2 in terms of clause 13.2 of the DC Corporation Deed as if CT Money was the “Correspondent”; and/or
3.2.3 that CT Money would have the same obligations and/or liabilities which DC Corporation had under the DC Corporation Deed as if CT Money was a party to the DC Corporation Deed as a “Correspondent”?
3.3 but if the answer to 3.2.1 to 3.2.3 is no, what is the content of such obligation and/or liability of CT Money?


4. If the answer to 1, 2.1, 2.2, 2.3 or 2.4 is no, is CT Money liable to repay:

(a) all; or

(b) alternatively, part,

of the Fees which CT Money received from AMS and AFIG in or referable to the period identified in 1, 2.1, 2.2, 2.3 or 2.4 as the case may be by reason of:


4.1 agreement;

4.2 unjust enrichment;

4.3 payment made under mistake;

4.4 quantum meruit;

4.5. estoppel; and/or

4.6 misleading and deceptive conduct?

5. If the answer to 4 is that CT Money is liable to repay part, of those Fees, is the part which CT Money is liable to repay:

5.1 the whole of those Fees less a reasonable amount for CT Money conducting the management or servicing of the DC Corporation Loans in that period;
5.2 if the answer to 5.1 above is no, how is the part which CT Money is liable to repay calculated;
5.3 is CT Money liable to pay interest to AMS and AFIG on the part which CT Money is liable to repay; and

5.4 if the answer to 5.3 is yes, does interest commence to run:

5.4.1 from the date CT Money received each monthly payment of Fees for which it is liable to repay part;
5.4.2 if the answer to 5.4.1 is no, from the date of the commencement of this proceeding;
5.4.3 if the answer to 5.4.2 is no, from the date of AMS and AFIG filing their Defence in this proceeding;
5.4.4 if the answer to 5.4.3 is no, from the date AMS and AFIG file their Cross-Claim in this proceeding;
5.4.5 if the answer to 5.4.4 is no, from some other date and, if so, when?


6. Has CT Money a continuing obligation and/or liability to AMS and AFIG with respect to any conduct occurring prior to 31 October, 2005 in relation to the DC Corporation Loans?

7. If the answer to 6 is yes,

7.1 does such obligation and/or liability of CT Money arise by reason of:


7.1.1 one or more provisions of the CT Money Deed;

7.1.2 agreement (other than the CT Money Deed);

7.1.3 estoppel; and/or

7.1.4 misleading and deceptive conduct?

7.2 is the content of such obligation and/or liability of CT Money:
7.2.1 in terms of clause 1.3 and/or clause 13.2 of the CT Money Deed;
7.2.2 in terms of clause 13.2 of the DC Corporation Deed as if CT Money was the “Correspondent”; and/or
7.2.3 that CT Money would have the same obligations and/or liabilities which DC Corporation had under the DC Corporation Deed as if CT Money was a party to the DC Corporation Deed as a “Correspondent”?
7.3 but if the answer to 7.2.1 to 7.2.3 is no, what is the content of such obligation and/or liability of CT Money?


8. If the answer to 1, 2.1, 2.2, 2.3 or 2.4 and/or 6 is no, and absent any rights which AMS and AFIG have or might have (which CT Money denies) to set off, deduct, withhold, claim damages or obtain judgment arising out of the matters in 5, are AMS and AFIG liable to continue to pay CT Money:

8.1 all; or

8.2 part,

of the Fees?

9. If the answer to 8.1 is no and to 8.2 is yes, is the part of those Fees which AMS and AFIG are liable to continue to pay:

9.1 a reasonable amount for CT Money conducting the management or servicing of the DC Corporations Loans in that period;
9.2 if the answer to 9.1 is no, how is the part which AMS and AFIG are liable to pay to be calculated?


10. If the answer to 8.1 or 8.2 is yes, does that liability of AMS and AFIG terminate upon CT Money ceasing to conduct the management or servicing of the DC Corporation Loans, whether by termination of the CT Money Deed, the DC Corporation Deed or otherwise?

11. Has CT Money acted as or been the delegate of DC Corporation pursuant to clause 6.1 of the DC Corporation Deed or otherwise in relation to:

11.1 the origination of loans and mortgages until the CT Money Deed came into effect; or
11.2 the administration, managing and servicing of the DC Corporation Loans during the period:


11.2.1 1 November 2005 to date;

11.2.2 14 November 2005 to date;

11.2.3 15 May 2006 to date;

11.2.4 1 November 2005 to 15 May 2006; or

11.2.5 14 November 2005 to 15 May 2006.

12. If the answer to question 11(b)(i), (ii) or (iii) is yes, can AMS or AFIG terminate CT Money’s delegation pursuant to clause 6.2 of the DC Corporation Deed or otherwise?

13. If the answer to question 12 is yes, can AMS or AFIG terminate CT Money’s delegation in writing:

13.1 immediately; or

13.2 if the answer to 13(a) is no, upon reasonable notice?

14. Have all Fees which have been paid by AMS or AFIG to CT Money or CT Lending Pty Ltd, a wholly owned subsidiary of CT Money, from:

14.1 1 November 2005 to date;

14.2 14 November 2005 to date;

14.3 15 May 2006 to date;

14.4 1 November 2005 to 15 May 2006; or

14.5 14 November 2005 to 15 May 2006

been, or constituted, payments made by AMS or AFIG at the direction of DC Corporation as the Correspondent of the DC Corporation Deed?
*****************************