Provident Capital Limited v Agusta Pty Ltd and Nida Ferella

[2007] NSWDC 309

CITATION:	Provident Capital Limited v Agusta Pty Ltd and Nida Ferella [2007] NSWDC 309
HEARING DATE(S):	22 November 2007
EX TEMPORE JUDGMENT DATE:	23 November 2007
JURISDICTION:	Civil
JUDGMENT OF:	Phegan DCJ
DECISION:	1. Verdict and Judgment for the Plaintiff in the sum of $119,341.00 together with interest in the amount of $19,225.34; 2. Defendants to pay Plaintiff's costs as agreed or assessed
CATCHWORDS:	Breach of Contract - Mortgage Finance - Variation of Terms - Damages
CASES CITED:	Jones v Dunkel (1959) 101 CLR 298
PARTIES:	Provident Capital Limited v Agusta Pty Ltd and Nida Ferella
FILE NUMBER(S):	4539/06
COUNSEL:	Mr Carroll (Plaintiff) Mr Stomo (First and Second Defendants)
SOLICITORS:	Tiernan & Associates Lawyers (Plaintiff) Colin Biggers & Paisley Lawyers (First and Second Defendants)

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JUDGMENT

1 HIS HONOUR: In this matter the plaintiff, Provident Capital Limited sues the first and second defendants, Agusta Pty Limited and Nida Ferella as first and second defendants, respectively, to recover monies due by way of application fee, legal fees and other related expenses allegedly incurred by the plaintiff in the processing of an application for mortgage finance on behalf of the first defendant. Mrs Ferella, the second defendant is sued as a guarantor of the first defendant.

2 The Ferella Family Trust, referred to most often as, the Cavallino Unit Trust, which owned property including real estate known as 1 Wingadel Place, Point Piper. That property was registered in the names of Angelo and Gustavo Ferella, the evidence being that they became a registered proprietors in their capacity as trustees of the Cavallino Unit Trust. Angelo and Gustavo Ferella are, respectively, the son and husband of the second defendant Nida Ferella.

3 In the course of time, and following the purchase of the Wingadel Place property, Angelo and Gustavo were replaced as the trustees of the Cavallino Unit Trust, first of all, by a company by the name of Rieva (NSW) Pty Limited in about April 2005 and, subsequently, in the early part of 2006, by the first defendant Agusta Pty Limited.

4 The evidence in these proceedings was, principally, by way of affidavit. In the plaintiff’s case there were, first of all, affidavits of Kenneth John Shepherd who was employed from March 2003 to May 2007 as a solicitor by Bersten Pain who were, during that time, the plaintiff company’s solicitors. Mr Shepherd’s affidavits are dated, respectively, 24 August and 16 November 2007.

5 There was also in the plaintiff’s case, the affidavit of Theresa O’Hare, the plaintiff’s head of credit and lending, her affidavit being dated 15 August 2007. Ms O’Hare also gave oral evidence in the course of the hearing. The other affidavit in the plaintiff’s case was one sworn by Allan Laubham, the plaintiff’s asset manager, on matters largely going to the substantiation of the plaintiff’s case for damages and that affidavit was dated the 25 January 2007.

6 In the defendants' case were two affidavits sworn by Tiziana Ferella who was identified as the secretary of the first defendant and whose affidavits were sworn on the 30 April and 7 May 2007. Her role as secretary was elaborated in the course of her oral evidence to include both company secretary in the formal sense of that term but also the provision of general secretarial services to the company in the course of which the matters most relevant to these proceedings occurred.

7 The process of the application for mortgage finance by the first defendant commenced in December 2005 and appears to have been initiated through the medium of Prime Financial Services Pty Limited, a mortgage broker. It became evident in the course of negotiations that the purpose of the finance was to discharge the existing mortgage on the Wingadel Place property and to provide by way of substitution of security, a mortgage to the plaintiff company. Another purpose of the funds, which were included in the application for finance over and above the repayment of the mortgage to the existing mortgagee, Key Nominees Pty Limited, was payment of other debts associated with the property such as land tax. Any surplus was to be devoted to the further development of the property.

8 The initial application was followed by a further application in January 2006 and after that there was further correspondence between the parties. Mr Angelo Ferella, it appears, acted as the principal representative of the first defendant and in turn the Cavallino Trust. In response to the applications, there were then a series of offers made by the plaintiff company in what can be described as the standard form of offer which was repeated on a number of occasions in February 2006. That was succeeded by a further offer a few days later. The second of the offers was signed by the first defendant and by Angelo and Gustavo Ferella as the registered proprietors of the property which was to be the security for the loan.

9 In March 2006 the solicitors for the plaintiff company became aware, through a solicitor acting on behalf of the Official Trustee in Bankruptcy, that Angelo and Gustavo Ferella were undischarged bankrupts. A title search conducted following receipt of that information indicated that the subject property was secured, not only by the mortgage to the existing mortgagee but also a caveat which had been lodged to protect the interests of the Trustee in Bankruptcy. The consequence of these developments was that the settlement of the original finance arrangement was cancelled and the plaintiff lodged a caveat on the property in order to protect its own interests.

10 There followed a further series of protracted negotiations between the parties during the course of which, and it is not necessary to go into the matter in any detail, a set of conditions were negotiated sufficient to satisfy the plaintiff that the plaintiff’s interests could be adequately protected, notwithstanding the status of the registered proprietors of the property at that stage as undischarged bankrupts.

11 On 10 March 2006 the solicitors for the plaintiff sent by way of facsimile the conditions on which the plaintiff would be prepared to provide the finance which was still sought by the defendant. These requirements included a court order discharging Angelo and Gustavo Ferella from bankruptcy, confirmation that Nida Ferella was the sole director and secretary of the first defendant, a withdrawal of the Trustee in Bankruptcy’s caveat and a stamped transfer evidencing a transfer of the property from Angelo Ferella and Gustavo Ferella to the first defendant which, by that time, had become the trustee of the Cavallino Trust.

12 Following the plaintiff’s communication of the conditions on which the plaintiff was prepared to proceed with the finance, a further letter of offer, still following what I have described in general terms as the plaintiff’s standard form of offer, was sent to the first defendant on 16 March 2006. It was the terms of that particular offer which was prima facie accepted by the first defendant, and by the second defendant as the first defendant’s guarantor, as the contract on which the current proceedings are based.

13 The damages which have been sought by the plaintiff in the Statement of Claim arise out of terms contained in the letter of offer that the first defendant was to pay all costs and disbursements concerning the loan transaction, which included the loan application fee of $92,000, “which is now due and payable”. The terms of the offer, addressed to the first defendant included:

“You are responsible for and must pay all expenses which we incur in connection with this transaction including the valuation fees and legal fees even if the transaction is not settled regardless of whether it is you or us who withdraws from the transaction”.

…
“Also you must pay the legal fees, registration fees and other costs which we incur or are payable relating to the management of the loan, repayment of the loan and discharge of the security. All fees due are non-refundable”.

14 The subsequent history of the matter which I will summarise very briefly in so far as it explains the reason for these proceedings was that the settlement of this particular transaction was never effected. The agreement, which was concluded during the period between 16 March and at the very latest 23 March 2006, was ultimately aborted because of continuing problems with regard to the defendants’ ability to meet one or more of the conditions which the plaintiff had imposed on the provision of finance.

15 There was a further attempt, which ultimately came to an end in early April 2006, to progress the matter and it was the subject of two further letters of offer of the same kind as those which had been proffered on a number of earlier occasions including 16 March 2006. But, once again, because, in particular, of the failure of the existing registered proprietors to transfer the property to the first defendant as required as one of the conditions of finance by the plaintiff, the loan transaction never went ahead.

16 It was after the matter came to that ultimate conclusion that the plaintiffs proceeded to seek to recover the various items which were identified in the letter of offer and to which I have already referred including, most significantly, the loan application fee of $92,000. I will come back in due course to the details of the other items in the claim. It is sufficient to note, at this stage, that they include a sum for legal fees charged by Bersten Pain solicitors for work done on behalf of the plaintiff company in connection with the loan transaction, the legal fees of the solicitor for the Trustee in Bankruptcy and the costs associated with the lodging of the caveat to protect the interests of the plaintiff company on the title of the Wingadel Place property.

17 The principal defence raised in the defendants’ answer to the plaintiff’s Statement of Claim is that there never was an agreement to the terms of the letter of offer on which the plaintiff now relies in these proceedings. This is based on a history of the matter, particularly on 17 March 2006, which is the subject of the evidence on affidavit of Ms Tiziana Ferella of 30 April 2007 and upon which Ms Tiziana elaborated in the course of her oral evidence in these proceedings. Particular reliance is placed on a document by way of an amended offer of loan to what I have called the standard form of offer which was used consistently by the plaintiff company, subject to some minor alterations from time to time in order to adjust to changed circumstances.

18 It was Ms Ferella’s evidence that, in the course of 17 March 2006, after receipt of the letter of offer from the plaintiff, a number of amendments were made by her brother, Angelo Ferella, and these amendments were faxed to the plaintiff company. Most relevant to these proceedings was the addition by Mr Ferella, according to his sister’s evidence, of the words “not applicable” following each of the clauses which I have quoted as forming the basis of the plaintiff’s claim. Alongside the words “not applicable” against each of those clauses, were the initials “NF” allegedly added to the purported amendment to the letter of offer by the second defendant. There was a corresponding amendment, for reasons I will explain in a moment a non controversial one, to the names of the guarantors which appeared in the original letter of offer as including both Nida Ferella and her husband, Gustavo, by way of deleting Gustavo’s name. The initials “NF” were attached to that deletion. That was an amendment which was consistent with the plaintiff’s concern that Mr Gustavo Ferella, as an undischarged bankrupt, was an unacceptable guarantor of the transaction. It was only Nida Ferella who was not impeded by any such status and who was therefore a satisfactory guarantor from the plaintiff’s point of view.

19 The principal issue in this case with regard to the letter of offer and the ultimate terms of the contract arising out of that letter between the parties turns on the communication to the plaintiff of the of the amendments to the letter of offer. The plaintiff’s evidence is that the letter of offer, in a partially amended form, but only to the extent of the excision of the name of Gustavo Ferella, had been faxed to the plaintiff by the defendant earlier that day, that is 17 March 2006. The faxed amended letter of offer which was signed by Nida Ferella, both as the director of the first defendant and in her own capacity as guarantor was tendered as Exhibit A and is also referred to in a number of the affidavits which were in evidence.

20 With regard to that version of the response by the defendants to the plaintiff’s letter of offer, I am in no doubt that it was that version which was effectively communicated to the plaintiff company early on 17 March at about 8.00am. There is also evidence, which I accept, from Mr Shepherd, that following receipt of the amended letter of offer removing Mr Gustavo Ferella as a guarantor, further steps were taken by way of instructions to Mr Shepherd, who was then acting as the solicitor for the plaintiff company, to proceed with the matter on the basis that the letter of offer as amended and as received at that time was acceptable to the plaintiff. Amongst other steps that were taken in the course of that day, a fresh letter of offer was prepared, reflecting the amendments that had been made in 8.00am version, removing Mr Gustavo Ferella entirely from the document as a guarantor.

21 According to Ms O’Hare, who had both principal and immediate responsibility for the conduct of the matter at that time, no further versions of the letter of offer in any other amended form, including the one allegedly faxed by Ms Ferella at some time during the course of that day, were ever received by the plaintiff. It is that conflict between the evidence of Ms O’Hare and Ms Ferella, that poses the most stark choice that the Court has to make with regard to the evidence in this case. If Ms O’Hare’s evidence is accepted, then the Court is bound to reach the conclusion that the plaintiff, whatever else happened, did not receive and at no stage was aware of the existence of the further amended letter of offer in which an attempt had been made to remove the clauses requiring payment of various amounts of money on which these proceedings are based.

22 However, that does not entirely resolve the matter and certainly it was strongly submitted on behalf of the defendant by counsel that if the offer in the more comprehensively amended form had been sent, but for some reason not received by the plaintiff, it nonetheless indicated an intention on the part of the defendant to further amend the agreement which would render it unenforceable. I find no reason for not accepting Ms O’Hare as a truthful and reliable witness. Her evidence with regard to the receipt of the version of the amended letter of offer which was sent at about 8am on 17 March 2006 is corroborated by a significant amount of evidence of events that followed on that day. There is no other evidence to indicate that either party proceeded on the basis that there had been any communication of and in turn, agreement to, the amendments which were the subject of the later amended letter of offer.

23 I am also satisfied that despite the somewhat confused and inconsistent evidence from Ms Ferella, if her evidence is accepted, there was a further set of amendments made of the kind which she alleged were made and that there was an attempt to fax the amendments to the plaintiff, which must have occurred some hours after the initial communication. However, the plaintiff is entitled to rely on the receipt of the earlier communication given the plaintiff’s acceptance of the amendments that were made by way of removing Mr Gustavo Ferella from the agreement. There was an agreement effective upon the receipt and acceptance of that document by the plaintiff. Any further attempt, whether communicated by the defendant or not to amend the letter of offer could only constitute an attempt to vary the contract and therefore amount to a fresh offer for that purpose from the defendant, which would have to be communicated.

24 There was some confusion in Ms Ferella’s evidence and certainly her recollection of events was, to say the least, uneven on a number of matters that she was questioned about in the course of her cross-examination. She could not remember details because all of the relevant events had occurred more than twelve months ago. It is therefore striking that she had such a clear recollection of sending a particular document, which in many respects, except in that most vital to the defence, closely resembled other versions of the document which had been faxed between the parties from time to time. There must be some considerable doubt whether that evidence could be accepted. But it is not necessary to come to any firm conclusion in that respect because, even if her evidence were accepted, later document can only have the effect of an offer made by the defendant, which on the evidence, was never accepted by the plaintiff. Certainly there is no evidence of explicit acceptance in the light of Ms O’Hare’s evidence. The evidence in the plaintiff’s case was quite to the opposite effect. Indeed, Ms O’Hare did give evidence to the effect that, had such a counter offer or offer of variation have been received by the plaintiff, it would have been rejected out of hand and the negotiations between the parties would have come to an immediate end.

25 But quite apart from the absence of any explicit acceptance, the history of the matter from that date, 17 March 2006, is entirely inconsistent with either any receipt on the part of the plaintiff of any counter offer and certainly any acceptance of it. I referred earlier to the fact that the initial negotiations for finance came to an end without any final resolution and as a consequence of that further negotiations occurred between the parties culminating in early April with the presentation of two successive letters of offer in similar terms, but which ultimately met with the same fate. The significance of that subsequent history is that those later letters of offer continued to contain the very same terms which, it was alleged by the defendants, had been removed in the defendants’ counter offer. It is entirely inconsistent with any acceptance on the plaintiff’s part of such amendments that the plaintiff would have continued to use the original form of offer without the removal of those terms.

26 Secondly and more generally, nothing else in the course of conduct of the parties over the intervening period showed any indication on the part of the plaintiff that the plaintiff had received the offer and was, had it been received, satisfied with it. Equally importantly, there is no indication on the defendants’ part that the suggested amendments were being pressed by the defendants. This aspect of the matter did raise some issue in the course of submissions about the application of the High Court decision in Jones v Dunkel (1959) 101 CLR 298. Given the history of the matter which included the presentation of letters of offer on a number of earlier occasions in terms almost identical with those in the letter of offer of 16 March 2006, and the obvious importance, which it could be inferred from the form of letter, which the plaintiff attached to those particular terms, it should have been evident to the defendant that the plaintiff’s silence following the events of 17 March 2006 should have alerted the defendant to the possibility that the suggested amendments had not been received. Or, alternatively, that they had been received and rejected out of hand without any further communication. If that were not the case, then one might have reasonably expected evidence in the defendants’ case particularly from Mr Angelo Ferella, who appears to have had the general carriage of the matter on behalf of the first defendant, to explain the absence of any such evidence. However, Mr Angelo Ferella was not called to give evidence, although his sister indicated that he was available to do so, and in those circumstances I am entitled to draw the inference from his failure to give evidence that nothing he would have said would have assisted the defendants in this respect.

27 In the result, the evidence leaves the court with only evidence, at best from the defendant’s point of view, of a counter offer of which there is no evidence of communication to the plaintiff. Such an offer can in those circumstances have no legal effect. In the face of the resolution by way of agreement in the communications which took place including the return of the letter of offer, amended to exclude Gustavo Ferella as a guarantor, there was a binding contract between the parties which was not, at any subsequent point of time, modified or amended. The clauses contained in the contract, on which the plaintiff’s claim is based, are therefore enforceable terms of the contract which was concluded between the parties more likely than not on 17 March, but certainly by 23 March, following further communication between the parties.

28 In those circumstances the plaintiff is prima facie entitled to the damages which have been sought in the Statement of Claim. However, in its amended defence, the defendant also raised a further defence based upon the assumption that there was a binding contract which included the terms relied upon by the plaintiff. The gist of that alternative defence was that the subsequent conduct of the plaintiff was such that it had the ultimate effect of either depriving the defendant of any consideration in return for the defendant’s commitment to the contract, or such conduct operated as an estoppel which would prevent the plaintiff from enforcing its rights under the contract.

29 I am dealing with this matter in a relatively summary way because there is little to be gained from recording in lengthy detail the subsequent history of the matter between the parties which involved a continuation of the earlier history of repeated attempts on the part of the plaintiff to have the defendant meet a variety of conditions which were imposed and which were summarised in the letter of 10 March but which evolved in order to meet changing circumstances after that time. The gist of the alternative defence was that by insisting on the transfer of the property into the name of the first defendant prior to settlement, the plaintiff was knowingly imposing a condition which simply could not be met and, that in those circumstances, the plaintiff effectively had denied itself the basis upon which it might otherwise rely on the contract.

30 I have some difficulty with that argument for a number of reasons, the first and most obvious of which is that the terms of the contract itself which I have held came into existence on or about 17 March 2006 included the following:

“Even though you may have notified us that you accept this offer”, this is in the letter of offer which was subsequently accepted, “we may withdraw this offer at any time at our sole discretion.”

31 That unfettered discretion is sufficient in itself to deprive the defendant of any defence of the kind on which it sought to rely on the assumption that there was a binding contract. The plaintiff was, in the terms of the contract, entitled to withdraw the offer and that would have to be understood to mean to impose any conditions which it chose to impose, which might lead to the ultimate resolution of the matter without proceeding to any finance being advanced to the defendant consistent with the contract itself. In those circumstances, I find it impossible to accept that the defendant has any foundation on which to raise a defence of this kind. But if I am in error that still leaves the question of whether there was anything done by the plaintiff sufficient to provide the defendant with a defence based on estoppel or some other similar defence. In that respect, again I do not propose to address in any detail the relevant evidence, I am satisfied, having given very careful consideration to the evidence, that nothing done by the plaintiff could be regarded as conduct of a kind which could be on any ground, including any equitable ground, sufficient to deprive the plaintiff of its rights under the contract.

32 The particular matter which was raised by the defendant and which was developed in the course of submissions, was the imposition of a requirement that, before the plaintiff would proceed with the loan, there had to be a transfer of the title of the subject property from the names of the Ferellas into the name of the first defendant, this was a condition which had already been identified prior to this particular contract being entered into. The suggestion therefore that this was a further imposition on the defendant which was developed post-contractually, flies in the face of the evidence to be found in the letter of 10 March 2006 from which I have already quoted. In that letter, a stamped transfer of the property was required as a prerequisite. In the course of his submissions, counsel for the defendants sought to distinguish, between the provision of a stamped transfer on settlement and the actual registration on the title of the first defendant as the registered proprietor. I acknowledge that distinction and I also acknowledge that this was what might be described as a “tightening” of that condition that emerged post contractually. However, while in a strictly legal sense those two requirements are different, they do not in any way evidence a change in the position adopted by the plaintiff in substance, namely that the plaintiff was not prepared to proceed with the loan without the property being transferred to the first defendant.

33 It was suggested that the plaintiff had unnecessarily complicated the process and created a further obstacle by drawing the attention of the parties, including the Trustee in Bankruptcy, to the need for a transfer to the first defendant and that it had been that additional development which had finally brought about the ultimate collapse of the negotiations. That argument fails to take adequate account of the realities of the process. The provision of a transfer as required in the conditions set in the letter of 10 March 2006 would have been of no use to the plaintiff whatsoever if there had been resistance to the registration of that transfer from any of the other parties involved. The substance of the transaction therefore had not been materially altered by the further insistence on having the actual transfer effected before settlement could take place, rather than as part and parcel of the settlement itself. Either process involved the cooperation of the Official Trustee in Bankruptcy and, if it was not going to be forthcoming in one, it is reasonable to assume it would not have been forthcoming in the other. In those circumstances there is no significant change in substance, even though it was clearly a procedural variation which better protected the plaintiff. The plaintiff was not asking for any more than the plaintiff had been asking for from the outset and that was the transfer of the property to the first defendant as a precondition of the loan.

34 Having said all of that, that issue is only relevant if, contrary to my earlier finding, there is some basis on which a defence of the kind on which the defendant sought to rely in this respect was available. The view which I have taken is that the very broad discretion vested in the plaintiff in the express terms of the contract leaves no room for the defendant to raise a defence of that sort, assuming as I have also found, that the contract was concluded and is binding on the defendants.

35 I therefore find that the plaintiff’s claim has been made out and that the defendant has failed in any respect to make good its defences to that claim. I accordingly, enter a verdict for the plaintiff and I come now to the question of damages.

36 The specific amounts identified under the various clauses of the contract on which the plaintiff has relied include first of all the application fee of $92,000. Secondly, there are the legal fees charged by Bersten Pain as solicitors acting for the plaintiff on the loan transaction in the sum of $26,291.24. Thirdly are the legal fees charged by the solicitor for the official trustee in bankruptcy of $364.76. Costs associated with the lodgement of the caveat to protect the interests of the plaintiff amount to $685.00.

37 The plaintiff also makes a claim for interest, but there was no reference to that in submissions and there has been, as far as I know, no calculation of interest. Before I proceed obviously to any final sum, I should clarify that. I assume the plaintiff is asking for interest. Now obviously one matter which does need to be resolved in that regard is from what date that interest should run. It may be that some further evidence is necessary unless the defendant is prepared to accept that all of those sums were due and owing by 17 March 2006. If the plaintiff is prepared to use that date as a universally applicable date, even though some of that money would have already been owing for some time before that, then I have no difficulty in proceeding on that basis, but I think it is only fair on the defendant, if the defendant wants to suggest that some of those monies were not owing until some time after that date, then I would have to have some further evidence about that. In fairness I ought to give you a chance to get some instructions about that. I have to say that on all of the evidence, it looks to me as though every one of those amounts had already been incurred and was owing by 17 March 2006 and that the defendants, if anything, are getting off a bit lightly, if that is the date I use. So it would only be if evidence can be provided, for example, that the caveat was only lodged subsequently or that the bill of costs was issued by Sally Nash and Company at some later date that I would be prepared to look at another date. But if the evidence is that all of these amounts were already identified as at 17 March, then my view is that should be the date that should be used.

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