Lorraine Parker v Juan Campos

[2011] NSWSC 306

Supreme Court

New South Wales

Medium Neutral Citation:

Lorraine Parker & Anor v Juan Campos [2011] NSWSC 306

Hearing dates:

24 March 2011

Decision date:

14 April 2011

Jurisdiction:

Common Law

Before:

McCallum J

Decision:

1.that judgment be entered against Juan Campos in favour of Lorraine Parker in the sum of $132,326.24.

2.that judgment be entered against Juan Campos in favour of Michael Moulds in the sum of $134,531.24.

3. the cross-defendant to the fourth cross-claim pay the cross-claimant's costs on the fourth cross claim

Catchwords:

DAMAGES - assessment - after default judgment entered against accountant who provided false accountant's letter to obtain Lo-doc loan - borrowers forced to surrender home

Legislation Cited:

Fair Trading Act 1987

Cases Cited:

Todorovic v Waller [1981] HCA 72, (1981) 150 CLR 402;
Whttaker and Paxad Pty Ltd [2009] WASC 47;
Zoneff v Elcom Credit Union Limited (1990) ATPR 41-058

Category:

Principal judgment

Parties:

Lorraine Parker and Michael Moulds (cross-claimants on the fourth cross-claim)
Juan Campos (cross-defendant to the fourth cross-claim)

Representation:

Counsel:
Mr P Batley (for cross-claimants on the fourth cross-claim)
No appearance for the cross-defendant
Solicitors:
Legal Aid New South Wales (for cross-claimants on the fourth cross-claim)
No appearance for the cross-defendant

File Number(s):

2008/285661

Judgment

1. HER HONOUR: The primary claim in these proceedings was a claim by Secure Funding Pty Limited against Ms Lorraine Parker and Mr Michael Moulds seeking an order for possession of their home (a property at Fisherman's Paradise) and judgment in a money sum. Secure Funding's claim was settled by agreement between those parties on terms that required Ms Parker and Mr Moulds to surrender possession of the home to Secure Funding. Secure Funding agreed to accept the net proceeds of sale of the property in full and final satisfaction of its claim against them.

1. Ms Parker and Mr Moulds brought a number of cross-claims in the proceedings including, by the fourth cross-claim, an action against Mr Juan Campos, an accountant. Mr Campos was alleged to have provided a false accountant's letter relied upon by a broker to obtain an earlier loan which was subsequently refinanced by the loan from Secure Funding. Mr Campos has not defended the action and on 1 October 2010 the court entered judgment against him on the fourth cross-claim for damages to be assessed. This is the assessment of those damages.

1. The evidence before me at the assessment hearing establishes the following facts to my satisfaction on the balance of probabilities. Ms Parker and Mr Moulds bought the property at Fisherman's Paradise in 2004 after Ms Parker sold a house she had inherited from her mother. Until about October 2005, they held the Fisherman's Paradise property unencumbered. In September 2005, Ms Parker's daughter approached her for assistance to obtain a loan for $50,000 on the understanding that Ms Parker would receive $10,000 and the daughter would receive $40,000. It was agreed that the daughter would make all of the loan repayments.

1. The loan was arranged with the assistance of a mortgage broker, Mr Robert Diaz. Mr Diaz arranged a loan in the sum of $165,000 from Avahlon Pty Limited. The loan was for a term of 12 months and included an amount for pre-paid interest for the term of the loan. Of the amount advanced, $50,000 was paid to Ms Parker's daughter whilst almost $80,000 was paid at the direction of Mr Diaz as a loan to him to be repaid in 12 months. The whole of the amount advanced was secured by a mortgage over the property at Fisherman's Paradise. The only benefit of the loan received by Ms Parker was the sum of $10,000. Mr Moulds received no benefit from the loan. Neither Ms Parker's daughter nor Mr Diaz repaid the amounts received by them. Mr Diaz is an undischarged bankrupt.

1. In February 2007, Avahlon commenced proceedings for possession and obtained judgment against Ms Parker and Mr Moulds. The Avahlon loan was subsequently refinanced with the loan from Secure Funding secured by a first mortgage over the property and a small further loan from Avahlon secured by a second mortgage.

1. Ms Parker and Mr Moulds were unable to repay either of those loans. Both mortgagees commenced proceedings against Ms Parker and Mr Moulds. Their claims were compromised by agreement with Ms Parker and Mr Moulds. As already noted, the settlement agreement with Secure Funding included a term requiring Ms Parker and Mr Moulds to surrender possession of the security property for the purpose of a mortgagee sale. A cross-claim brought by Ms Parker and Mr Moulds against a firm of solicitors was also resolved. After deduction of legal costs, Ms Parker and Mr Moulds each received $25,000 from the settlement of that claim.

1. The Avahlon loan was advanced after Mr Campos provided an accountant's letter dated 13 October 2005 to Avahlon on the letterhead of Marrickville Accounting Services. The letter represented that Mr Campos had acted as accountant for Ms Parker and Mr Moulds for the previous three years; that he knew their income and expenditure and that, based on that knowledge and his understanding of their financial position, he was of the opinion that they could repay interest on the Avahlon loan and repay the principal in accordance with the terms of the loan and without substantial hardship.

1. Mr Campos had not in fact spoken to either Ms Parker or Mr Moulds before providing the letter. He had not been their accountant for the previous three years or at any time and knew nothing of their income and expenditure. There was no basis for his forming the opinion expressed in the letter.

1. The letter provided by Mr Campos was plainly calculated to induce Avahlon to advance the loan arranged by Mr Diaz. After receiving the letter, Avahlon advanced the amount of $165,000 as directed by Mr Diaz. In those circumstances, it may fairly be inferred that Avahlon relied upon the letter in deciding to advance those funds and that the funds would not have been advanced otherwise.

Assessment of Damages

1. The fourth cross-claim pleads causes of action in contract, tort and under the Fair Trading Act 1987. It was not urged upon me that there should be any different amount awarded according to which basis of assessment was adopted. Mr Batley, who appeared for Ms Parker and Mr Moulds, noted that to the extent that damages were to be assessed under the Fair Trading Act , the Act as it was in force before the commencement of the Australian Consumer Law applies: see schedule 5, clause 16 of the Fair Trading Act . Section 68(1) of the Act as it then stood provided for recovery of the amount of the loss or damage suffered by conduct of another in breach of a relevant provision of the Act.

1. On the strength of the facts summarised above, I am satisfied that the loss of the Fisherman's Paradise property and related expenses incurred by Ms Parker and Mr Moulds were caused by Mr Campos' provision of the letter and amount to loss or damage suffered by that conduct.

1. The damages claimed by Ms Parker and Mr Moulds on that basis (verified by the affidavits read at the assessment hearing) are as follows.

1. The sum of $200,000 is claimed for the loss of the value of the security property. That claim is supported by valuation evidence adduced at the assessment hearing. I am satisfied that is a proper assessment of the value of the property lost. The cross-claimants held the property as joint tenants and seek half that sum each.

1. After surrendering possession of the security property, the cross-claimants moved to rental accommodation. The second head of damages sought is the reimbursement for their removal costs, consisting of petrol costs and "tip fees". The total amount claimed is $282. I am satisfied that it is appropriate to award that amount.

1. In addition, the cross-claimants seek reimbursement for the housing expenses they now incur. Before the Avahlon loan was made, the security property was unencumbered and was the cross-claimants' home. The evidence at the assessment hearing sets out the costs now incurred by them in rent, allowing a deduction for previous housing costs no longer payable (rates and water). The net housing cost increase calculated in the evidence is a total of $6,775.48 for the period from September 2009 (when the cross-claimants left the security property) until August 2010. At the end of August 2010, the cross-claimants moved to a different rental property.

1. The net increase in housing costs from September 2010 is calculated to be $8,252.28 per annum. The future cost of housing on that basis has been calculated for Lorraine Parker on the basis of a life expectancy of 24.1 years and for Michael Moulds on the basis of a life expectancy of 16 years. Mr Batley accepted that those future costs should be discounted to present value (he applied the discount from September 2010 but that is to the advantage of the cross-defendant). Mr Batley submitted that appropriate discount rate would be 3%, being the rate applied at common law: see Todorovic v Waller [1981] HCA 72, (1981) 150 CLR 402. I am satisfied that it is appropriate to discount the award for future housing costs to present value at that rate.

1. Subject to that qualification, I am satisfied that the cross-claimants are entitled to the amounts calculated as set out in their affidavits. On that basis, there should be an award of damages to Ms Parker in the sum of $99,439.97 discounted with a multiplier of .492 to $48,924 and to Mr Moulds in the sum of $66,018.24 discounted with a multiplier of .623 to $41,129.

1. The next head of damages claimed is for loan refinance expenses not paid by the amounts financed. I am satisfied that the cross claimants are entitled to those amounts. They are as follows:

1.	Brokerage paid to Banca Avanti	$562
2.	Brokerage paid to AMT Mortgages	$1,100
3.	Legal fees of R Bayliss for advice on second Avahlon loan	$600
4.	Accounting fees to J Campos	$800
Total loan refinance expenses	$3,062

1. The next head of damages claimed is the loan repayments made to Secure Funding Pty Ltd in the sum of $6,685. I am satisfied that it is appropriate to include an award for that amount.

1. The next head of damages claimed is for legal expenses. The contribution imposed by Legal Aid New South Wales for professional costs and disbursements for defending the claims brought by Avahlon and Secure Funding and the costs of the first, second and third cross-claims is the sum of $25,000. As already noted, that amount was paid out of the proceeds of settlement of the third cross-claim and it is not necessary to include it in the calculation of damages.

1. The next head of damages claimed is for distress, inconvenience and vexation. The amount claimed by each cross-claimant under that head is $20,000.

1. In support of that claim, Mr Batley relied upon the decision of Hill J in Zoneff v Elcom Credit Union Limited (1990) 94 ALR 445. In that case, his Honour noted (at 468) that the recovery of damages for distress, inconvenience and anxiety is permitted under section 82 of the Trade Practices Act for breach of section 52 of the Act, the measure of such damage being akin to that in tort. Hill J awarded $1000 on that account.

1. The evidence establishes that Ms Parker and Mr Moulds have suffered substantial stress and anxiety as a result of losing their home. I am satisfied that an award of damages under that head is appropriate. However, the authorities to which I have been referred to Mr Batley suggest that the amount claimed in the schedule of damages prepared on their behalf is out of the appropriate range. I have considered the decision of Whitaker and Paxad Pty Ltd [2009] WASC 47 relied upon by Mr Batley. In that case an award of $7,500 was allowed. It appears to me that the cross-claimants in the present case have suffered greater anxiety than was considered in that case. I consider that an appropriate award for each cross-claimant is the sum of $10,000.

1. The total calculation of damages for each cross-claimant is accordingly as follows:

Item	Ms Parker	Mr Moulds
Value of property	$100,000.00	$100,000.00
Removal costs of $282.00	$141.00	$141.00
Past rental housing costs of $6,775.48	$3,387.74	$3,387.74
Future rental housing costs discounted to present value	$48,924.00	$41,129.00
Loan refinance expenses of $3,062.00	$1,531.00	$1,531.00
Loan refinance expenses of $6,685.00	$3,342.50	$3,342.50
Stress and anxiety	$10,000.00	$10,000.00
Total	$167,326.24	$159,531.24
Less settlement on third cross-claim	$25,000.00	$25,000.00
Less benefit of loan received	$10,000.00	Nil
TOTAL	$132,326.24	$134,531.24

1. Accordingly, I make the following orders:

(1) That judgment be entered against Juan Campos in favour of Lorraine Parker in the sum of $132,326.24.

(2) That judgment be entered against Juan Campos in favour of Michael Moulds in the sum of $134,531.24.

(3) The cross-defendant to the fourth cross-claim pay the cross-claimant's costs on the fourth cross claim.

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Decision last updated: 19 April 2011