Douglas Ian Stewart Financial Services Pty Ltd v Conliffe

[2010] QDC 250

[2010] QDC 250

DISTRICT COURT

CIVIL JURISDICTION

JUDGE ROBIN QC

No 1021 of 2009

DOUGLAS IAN STEWART FINANCIAL SERVICES PTY LTD	Plaintiff
and
JAMES ASHLEY CONLIFFE	Defendant

BRISBANE

..DATE 18/06/2010

ORDER

Catchwords:

Claim by mortgage broker to establish a right to maximum consultancy fee of $19,800 (GST included) for bringing about a loan of $303,150 - fee agreement referred to home loans, property investment loans and Cash flow Manager loans with increasing levels of fees - defendant stopped banks cheque for $19,800 provided from loan amount by lender's solicitors - whether loan a "Cash Flow Manager Loan" - whether plaintiff should be denied remuneration for unconscionable misleading conduct or abuse of its superior expertise - plaintiff denied interest because of court's disapproval of defendant client not being provided with copies of important documents

The statement of claim filed on the 15th of April 2009 reads
as follows:

"STATEMENT OF CLAIM

This claim in this proceeding is made in reliance on the
following facts:

1.  At all times material to this action, the Plaintiff:

(a)  was a company duly incorporated and capable of suing;

(b)  conducted a business of mortgage brokering and financial
services.

2.  At all material times the plaintiff:

(a) was a natural person;

(b) resided at 3 Esmonde Place, Coorparoo in the State of
Queensland and in this District of the District Court of
Queensland.

3.  On or about 23 May 2008 the Defendant engaged the
Plaintiff for the purposes of obtaining a mortgage and/or loan
in relation to a property at 4 Kookil Street, Rochedale South
in the State of Queensland ('the loan').

4.  On or about 17 June 2008 the Defendant and the Plaintiff
entered into an agreement whereby the Plaintiff would provide
services to the Defendant, namely arranging the loan sought by
the Defendant ('the agreement'), for reward.

Particulars of the terms of the agreement

'I/we agree to pay Douglas Ian Stewart Financial Services Pty
Ltd a consultancy fee of $3,850.00 GST inclusive or 1% of the
loan amount whichever is the greater for finance or re-finance
of home loans.  For Property Investment Loans purchased
through us the finance fee is a further $4,950.00 GST
inclusive or 1% of loan amount whichever is the greater, for
acting on my/our behalf.  For Cash Flow Manager loans the
originator fee is $19,800.00 GST inclusive.  I/we acknowledge
that the Consultancy Fee will become due and payable to
Douglas Ian Stewart Financial Services Pty Ltd immediately
I/we accept the loan approved by the Lender unless such fee
has been included in the loan amount, in which case it will be
paid at the time of the first loan draw.

I/We also acknowledge the full amount of the Consultancy Fee
will be payable if a loan is approved at our request but I/we
choose not to proceed with the loan.  I/we understand that
this fee will be used to offset the costs involved in
obtaining such loan approval.

I/we authorise and direct Douglas Ian Stewart Financial
Services Pty Ltd to collect the said consultancy Fee directly
from the Lender in the case of the fee being included in the

loan amount.  In the event that the loan does not proceed,
I/we will personally attend to payment of the full Consultancy
Fee.

Dated this 17th day of June 2008.

James Conliffe.'

5.  On or about 17 June 2008, pursuant to the agreement, the
Plaintiff issued to the Defendant a tax invoice for the
services rendered, in the sum of $18,000.00 plus GST in the
sum of $1,800.00 (Total: $19,800.00).

6.  The tax invoice was due and payable on the approval of
finance of the loan for the Defendant.

7.  On or about 9 July 2008, the loan for the Defendant was
approved by Pepper Home Loans Pty Ltd, ABN 860 921 100 79
('the lender').

8.  On or about 27 August 2008, Cooper Grace Ward Lawyers, the
solicitors for the Lender, forwarded a cheque in the sum of
$19,800.00 to the Plaintiff.  On or about 29 August 2008,
Cooper Grace Ward Lawyers, the solicitors for the lender, gave
notice to the plaintiff that the cheque for $19,800.00 had
been stopped.

10.  On 29 August 2008, Cooper Grace Ward Lawyers, the
solicitors for the lender, advised the Plaintiff that the sum
of $19,800.00 would be held in their trust account.

11.  In the premises, the Defendant is indebted to the
Plaintiff in the sum of $19,800.00 and that sum is due and
payable.

12.  Despite Demand, the Defendant has refused to pay the sum
of $19,800.00.

AND THE PLAINTIFF CLAIMS FROM THE DEFENDANT:

1.  The sum of $19,800.00 as a debt due and payable;

2.  A declaration that the moneys in the sum of $19,800.00
held in the trust account of Cooper Grace Ward Lawyers are
held on trust for the benefit of the Plaintiff;

3. Interest pursuant to s.47 of the Supreme Court Act 1995;

4.  Costs."

In paragraph 2 "plaintiff" is an obvious error.  At the

beginning of the trial leave was given, pursuant to rule 375,

to change the reference to "defendant".

Mr Conliffe represented himself, contending that he at no time

obtained a Cash Flow Manager Loan within the meaning of the

"Fee Agreement", as the document whose terms are set out in

the pleading is headed.

The loan agreement which he did obtain, and which, indeed, is

still current, was with Pepper Finance Corporation Limited.

As Mr Conliffe has pointed out the loan purpose is identified

in that document as "Refinance of Existing Home Loans -

Refinancing of Housing Loans of Other Financial Institutions".

Mr Conliffe disputes that he's liable to pay the plaintiff, whose efforts undoubtedly procured the loan agreement which was finally entered into on the 7th of August 2008 either $19,8000, or the alternative fees identified in the Fee Agreement or, indeed, anything at all. He bases that approach on the well known principles of the Trade Practices Act (Cth), which are replicated in the Fair Trading Act of the State, and

are well understood.  He goes beyond that, accusing the

plaintiff's principal, Mr Stewart, of unconscionable conduct,

misrepresentation and the like.

As it happens, the $19,800 the case is all about is presently

under the control of the firm of solicitors identified in the

statement of claim.  It's there at the defendant’s cost,

because the provision of it is being paid for by some of the

interest Pepper has been getting.

Mr Conliffe's counterclaim seeks a determination that he

should get that interest amount as well as a determination

that the $19,800 goes to him.

He accepts that the plaintiff performed useful services but

asserts that the legislation and equitable principles, adverted to above, make it a just outcome for the plaintiff to earn nothing for what it did.

The services the plaintiff carried out were more extensive

than the above recitation of facts would indicate.

For a year or more Mr Conliffe had a home loan through an

entity known as Seiza.

He came across Mr Stewart when it turned out that one Robbie
Johnson, who had been offering financial advice and
assistance, wasn't properly accredited at that stage in his
career to do the work of a finance broker.  Mr Stewart or the
plaintiff company wasn't subject to that disability, and in due course was nominated as in Seize documentation as “originator”.

On the 3rd of January 2008 Mr Stewart organised the
documentation appropriate to procure an increase in the Seiza
home loan which existed at that time of $64,000.  Before that
the amount had been the sum of $192,000.  Mr Stewart indicated
that he would charge no fee for his services in that regard as
other arrangements with Seiza made him entitled to a trailing
commission as payments came in in the future.

Mr Conliffe says, and I'm inclined to accept, that Mr Stewart
gave him advice of the kind which, according to the financial
press, financial advisors in recent years commonly give
clients to the effect that they can make use of equity in
their homes to obtain from lenders funds which can be used for general purposes.  Whether or not Mr Conliffe, who has some commercial experience, having his own import/export business, was aware of it already, that possibility was attractive to him.  No arrangement developed with Seiza.  That appears to have been because they became concerned when credit searches revealed a recent default relating to Optus Financial Services.  There followed a default in respect of obligations
to Seiza itself.

I might note that in connection with the Seiza documentation
Mr Conliffe pointed out that on some 10 pages dates had been
changed from the 3rd of December 2007 to the 3rd of January
2008.  I don't think anything turns on that.  Mr Stewart said
the dates were changed because on the 3rd of December 2007 Mr
Conliffe was unwilling to sign anything other than an
authority to act which is reproduced in the plaintiff's book
of documents, Exhibit 3, at pages 5 to 7.  Other documents
were available on that date for signature but weren't signed
until the next appointment that the protagonists made a month
later, this explaining the alteration in dates. 

The basis on which the plaintiff was willing to act
changed.

The next important date is the 17th of June 2008 when the two
met again. Exhibit 3 (120 pages long, and a demonstration of Mr Stewart’s considerable activity) contains copies of a number of documents which it's clear Mr Conliffe signed on that date. They begin with a document under what's known as the Privacy Act of the Commonwealth, an authority to act, the fee agreement and an associated tax invoice which contains a section at the bottom reading "Agreed by James Ashley Conliffe", is actually signed by him and shows date of issue as the 17th of June 2008.

These are the documents referred to in the pleadings.  In the
fee agreement as it appears in Exhibit 3 an asterisk appears
written in alongside the sum $19,800 and furthermore that amount has been prominently circled.  Mr Conliffe in his evidence appears to agree that the fee structure there was discussed.  The “tax invoice”, which bears his signature, is completed to show a total amount payable of $19,800 of which $1800 was for GST.

That documentation and more related to a mortgage application
which was made to ING or a related company.  The mortgage
application pack begins at page 41 of Exhibit 3.  That was
completed by Mr Stewart.  It was signed in various places by
Mr Conliffe who also completed in full and signed the section
relating to the lender’s application fee which authorised debiting his credit card.

Nothing came of the application to ING and it rather appears
because further default in relation to Seiza had caused it to
decline to cooperate in releasing Mr Conliffe from
arrangements with it.  One Warrick Fraser of Blue Coast
Finance, who appears to have occupied some independent role in
all of this, indicated to Mr Stewart, who passed it on, that
Pepper would probably be able to assist.  Indeed, on the 9th
of July 2008 it wrote to Mr Fraser indicating approval in
principle of a loan to Mr Conliffe in the amount of $303,150
at a wholly variable interest rate of 12.75 per cent.

Pepper was apparently prepared to accept the ING loan
application which it took information from for the purpose of
preparing its own loan agreement.  That was signed by Mr
Conliffe in Mr Stewart's presence on the 7th of August 2008 at
a meeting at Dockside.  Significantly, the voluminous material, which appears in Exhibit 3 from page 74, was dispatched to Mr Conliffe at his business address by the solicitors named in the statement of claim by letter of the 4th of August 2008.

Prominent on the first page of the loan agreement is a
statement of the interest rate as I've identified it above.
This is important because Mr Conliffe insists that he never
saw the letter of the 9th of July 2008.  Indeed, in all his
discussions with Mr Stewart he says he was told that the interest rate would be something far more modest, more like 7 or 8 per cent.

Given the problematic aspects of Mr Conliffe's credit history
noted above and the further circumstance that the loans he was
interested in were so-called “low doc” ones which carry a higher interest rate, one must think he would have been lucky to get such a favourable rate.  What is significant is that from receipt of the letter of the 4th of August 2008 Mr Conliffe can be taken as aware of the interest rate which he faced.  It is not particularly helpful to him that his
evidence was equivocal as to his having had possession of
those documents.  Ultimately he accepted that he had.  He told
me that he felt that as things stood in August 2008 he had no
option but to accept the Pepper deal.  He has made inquiries
since with respect to re-financing it, but that hasn't been
possible or worthwhile, taking into account the various fees
that would have to be paid.

There were no new arrangements made to replace the fee
agreement of the 17th of June 2008 on which the plaintiff
relies.  For what it's worth, I accept Mr Stewart's evidence
that the plaintiff would obtain no trailing commission or
equivalent from Pepper.  Mr Stewart was active in protecting
the plaintiff's entitlement to its fee, in particular by
sending to the solicitors supervising settlement a requirement
that the $19,800 be collected.  Those efforts were successful
and the solicitors on the 27th of August 2008 wrote to the
plaintiff enclosing a Westpac bank cheque for $19,800.

That was followed two days later by another letter from the

solicitors advising that the cheque had been stopped.

It's potentially concerning that when the Bank wrote to the

plaintiff following deposit of the cheque on the 1st of

December 2008 - one can only speculate why the depositing took

so long - the bank advised that its own cheque had been

returned unpaid with the answer, "Instrument reported lost or

stolen," which would appear to be a misrepresentation of the

circumstances, as the cheque most certainly was not lost or

stolen.

I accept from Mr Conliffe at the Bar table that he didn't make

any report to that effect.  One would hope that the solicitors

hadn't either.

The catalogue of complaints which Mr Conliffe makes against

Mr Stewart goes beyond misrepresentations or withholding of

information about the interest rate.  He asserts that the

nature of the $19,800 fee was misrepresented to him, that he

was told it was a fee charged by the lender, about which

nothing would be done, so that I suppose the quantum of it

couldn't be negotiated with Mr Stewart, for example.

He says that in taking responsibility for the action the

solicitors took in respect to the bank cheque, that he gave

instructions calculated to deprive the plaintiff of receiving

benefit from the cheque, having checked with the lender to

ensure that the fee would not go to it.

He charges Mr Stewart with repeatedly informing him that the

payment wasn't for the plaintiff's benefit but for someone

else's.  I think the probabilities are, in accordance with Mr  

Stewart’s evidence, that he said that the fee would be paid by

the lender to him or to the plaintiff, and that the fee was to

be paid to the lender at all.  Mr Conliffe does not suggest

that he found $19,800.

One has to wonder about Mr Conliffe's view as to what the

plaintiff was to obtain for its fairly extensive services on his behalf.  Maybe he had some inappropriate idea of a trailing commission, it is a matter of speculation.  Mr Conliffe is young (born 17 April 1984) but appears to have a reasonable amount of business experience and acumen.

He advances the view, and I think genuinely, that the fee is

out of all proportion to the value of the loan, and I suppose

to the proper value of the services.  He placed before the

Court information obtained by him from the Internet and other

sources indicating that more modest fees may be charged and

perhaps lower interest rates available from other sources. 

One could not be confident that what such material may appear

to promise would be made available in full in the event at no

further cost to a borrower.

What the Court's concerned with here, however, is an agreement

for a fixed fee.  I'm not in a position to make any judgment

about the appropriateness of the amount, which I regard as an

agreed one, of which Mr Conliffe had notice.

I've expressed displeasure at the plaintiff's failure to leave

with Mr Conliffe a copy of the fee agreement or copies of many

of the other documents; he surely should have had that one,

and the “tax invoice”.  It would seem to me a requirement of

fair dealing from every point of view that the client be given

for his own records and reference copies of material of that

kind.  Nonetheless, Mr Conliffe doesn't assert that he'd

forgotten that $19,800 figure.

He, as indicated, puts his defence to the claim on the basis

that the plaintiff forfeits an entitlement to a benefit from

its unconscionable behaviour.  He instances exploiting by

Mr Stewart of his superior knowledge of the industry,

suggesting there's inequality in bargaining power.  He asserts

other instances of misrepresentation, for example, to the

effect that Pepper was a "sub-company" of ING, which he

suggests were calculated to assuage any doubts or concerns he

might have had about the $19,800 fee.

I think that Mr Conliffe was doing his best to give honest

evidence but having heard Mr Stewart, who presents as a person

who knows what he's doing and is likely to be careful,  I

can't avoid concluding that somewhere or other Mr Conliffe has

got the wrong end of the stick, so to speak.  A serious

deficiency in his presentation of the case is that he did not,

speaking generally, put his allegations to Mr Stewart when

cross-examining him.  It would be unfair in these

circumstances for the court to rely on things he says that Mr

Stewart was not given an opportunity to address.

As to his point that he never did receive a Cash Flow Manager

Loan, of which the plaintiff was originator, I cannot accept

that contention.

Throughout, the basis of the finance that was being sought

was that it should be available for purposes in addition to

acquiring refinancing or renovating a house property subject

to mortgage.

I note in the Pepper documents at page 103 of Exhibit 3 under

the heading "Business Purpose Declaration", followed by an

"Important" a warning that, "you should not sign this

declaration unless this loan is wholly or predominantly for

business or investment purposes.  By signing this declaration

you may lose your protection under the Uniform Consumer Credit

Code".

Mr Conliffe's signature appears above the date 7 August 2008

and below a declaration that, "the credit to be provided by

Pepper Finance Corporation is to be applied wholly or

predominantly for business and/or investment purposes or for

both purposes".

The substance of the matter is that, however it may be called,

Mr Conliffe did get, thanks to the plaintiff's services, the

equivalent of a Cash Flow Manager Loan, of which the plaintiff

was the originator.

I'm not satisfied by Mr Conliffe's evidence that he was

overborne in any relevant way or acted to his detriment in

consequence of misrepresentations by Mr Stewart.  The fee

agreement really is quite clear.

The consequence is that the plaintiff ought to have the relief

sought in paragraphs 1 and 2 of the Statement of Claim and

also its costs of and incidental to the proceeding to be

assessed.

I am disinclined to award interest as claimed, essentially

because of my disapproval of Mr Conliffe being kept without

his own copies of important documents that the plaintiff

advised and got him to sign, which tended to be in its

interest and against his.

There's also the consideration that the costs recoverable by

the plaintiff may be seen as inflated.  I'm not limiting it to

Magistrates Courts' scales given that I think there's some

point in the seeking of the declaration which would not have

been available in the Magistrates Court.

So it's order as per paragraphs 1, 2 and 4 of the

statement of claim.

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