Douglas Ian Stewart Financial Services Pty Ltd v Conliffe [2010] QDC 250

1-1 [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 -- 1 of 16 -- 1-2 ORDER 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 -- 2 of 16 -- 1-3 ORDER 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 -- 3 of 16 -- 1-4 ORDER 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. -- 4 of 16 -- 1-5 ORDER 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. -- 5 of 16 -- 1-6 ORDER 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. -- 6 of 16 -- 1-7 ORDER 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, -- 7 of 16 -- 1-8 ORDER 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 -- 8 of 16 -- 1-9 ORDER 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. -- 9 of 16 -- 1-10 ORDER 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 -- 10 of 16 -- 1-11 ORDER 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 -- 11 of 16 -- 1-12 ORDER 1 10 20 30 40 50 60 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 -- 12 of 16 -- 1-13 ORDER 1 10 20 30 40 50 60 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, -- 13 of 16 -- 1-14 ORDER 1 10 20 30 40 50 60 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 -- 14 of 16 -- 1-15 ORDER 1 10 20 30 40 50 60 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. -- 15 of 16 -- 1-16 ORDER 1 10 20 30 40 50 60 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. ------ -- 16 of 16 --