New South Wales Supreme Court CITATION : Lungo v Royal Guardian Mortgage Corporation Pty Limited [2005] NSWSC 1041 HEARING DATE(S) : 14 October 2005 JUDGMENT DATE : 20 October 2005 JURISDICTION : Common Law Division JUDGMENT OF : Associate Justice Malpass at 1 DECISION : The summons is dismissed; the plaintiff is to pay the costs of the summons. CATCHWORDS : Appeal from Local Court - attempt to present new case on appeal - no error in point of law - findings of fact supported by evidence - no case for leave on questions of costs. Suzy Lungo (Plaintiff) PARTIES : Royal Guardian Mortgage Corporation Pty Limited (Defendant) FILE NUMBER(S) : SC 11988/05 Mr D Burwood (Plaintiff) COUNSEL : Mr J Hogan-Doran (Defendant) Johnston Vaughan Solicitors (Plaintiff) SOLICITORS : Gadens (Defendant) LOWER COURT JURISDICTION : Local Court LOWER COURT FILE NUMBER(S) : 0858 of 2003 LOWER COURT JUDICIAL OFFICER : Reiss LCM - 8 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION Associate Justice Malpass 20 October 2005 11988 of 2005 Suzy Lungo v Royal Guardian Mortgage Corporation Pty Limited JUDGMENT 1 His Honour: The defendant is what has been described as a "mortgage originator". As such, it acts as an intermediary between a borrower and a lender. 2 In about February 2002, the plaintiff and her husband made a loan application. By letter dated 6 February 2002, the defendant advised that there had been conditional approval subject to satisfactory valuation for a loan amount in the sum of $800,000. The funds were to be provided by Perpetual Trustees Australia Limited and the purpose of the loan was to purchase an investment property. Two further letters from the defendant, dated 19 March 2002 (the letters), advised of formal approval for loans in the amounts of, inter alia, $330,000 and $480,000 respectively, to be secured against specified properties (one of which was a property intended to be purchased). 3 The letters contemplated the preparation of mortgage documents by the solicitors for the defendant. The letters advised that these solicitors would be in contact with the solicitors for the plaintiff. 4 The plaintiff made no response to the letters. However, on 22 March 2002, the plaintiff and her husband exchanged contracts for the purchase of a property at Kogarah (the property). 5 On 17 April 2002, the plaintiff and her husband made a second loan application. The amount of the loan then sought was $420,000 ($180,000 was to be provided from their own funds). It was also for the purchase of an investment property. 6 Complaint was then made of delays in providing the finance. A notice to complete had been given by the vendor. 7 On or about 13 May 2002, a housing loan contract was made in respect of a loan of the sum of $420,000 for the purchase of the property. The lender was to be Permanent Custodians Limited and the defendant was described as the "mortgage servicer". 8 A private loan in the sum of $156,703.50 was also arranged through the defendant at an interest rate of 18 per cent. 9 Settlement took place on or about 21 May 2002 using moneys advanced by the two lenders. 10 The plaintiff then brought proceedings in the Local Court for damages (the husband was not a party to the proceedings and his non-joinder has been left unexplained). The plaintiff claimed the sum of $16,669.36 (inter alia, comprising a delayed settlement fee, penalty interest and costs associated with the private loan). 11 Despite what may have been pleaded in the process, it appears to have been a claim conducted on the basis of alleged breach of contract. It was pleaded as a breach of contract to advance loan moneys (the breach being a failure to advance the full amount of the alleged loan approval given by the defendant). It was argued that the two letters dated 19 March 2002 constituted an offer that was accepted by the plaintiff's subsequent conduct (by exchanging contracts for the purchase of the property). The letters were said to be unconditional. 12 A hearing took place before Reiss LCM. On 2 March 2005, the Magistrate found in favour of the defendant and ordered that the plaintiff pay costs on an indemnity basis. 13 The Magistrate had before him a document which contained certain agreed facts. He had a statement from the plaintiff and a statement from Mr Tomazin on behalf of the defendant. These two persons were both cross-examined. The Magistrate was asked to determine certain issues including the following:- 1. Whether a contract arose in March 2002 between the plaintiff and the defendant whereby the defendant agreed to provide finance to the plaintiff. … … … 4. If such a contract did arise, whether an oral agreement arose between the plaintiff and the [sic] Mr Tomazin in late March 2002 or early April 2002 to bring the contract to an end. 14 The Magistrate made an assessment of both witnesses. He was of the view that the plaintiff was far from an impressive witness. The Magistrate came to the conclusion that he should give greater weight to the evidence from Mr Tomazin to that of the plaintiff (inter alia, he accepted the evidence of Mr Tomazin as to conversations that he had attributed to the plaintiff, including an agreement not to proceed with the original loan application and to pursue a different option). 15 The judgment contained the following:- It is not entirely clear if the parties were focusing at all stages in these proceedings and in submissions on the issue of a contract to lend money or a contract to provide loan funds from a third party. The agreed issue on this point is also somewhat ambiguous in this regard. The plaintiff appears to have wavered from one to the other whilst the defendant appears to have focused more on the latter. It is certainly the case that the defendant is a mortgage originator and not a moneylender and that it was not entering into arrangements to provide money directly. Further, for the loan to be formalized an agreement had to be finalized between the arranged lender and the borrower. Nevertheless, there remains the issue of whether or not there was an agreement to provide a loan, albeit by a third party. For such an agreement to be binding, if it was not specifically made subject to any further conditions, it would not be necessary for the formal loan documents with the third party to be finalized. There was nothing conditional in the offers made by Royal Guardian on 19th March 2002 in respect to it arranging for the finance. Mr Tomazin made it clear that all that needed to be done by Royal Guardian had been done. It was capable of being accepted and becoming binding upon them. However, I am not of the persuaded [sic] that offer was one in such a form that it could be accepted by unilateral actions involving a third party. I am not persuaded that the law is such that the actions of Ms Lungo in exchanging contracts with the vendor of the Kogarah property was at law an acceptance of Royal Guardian's offers. Even if I had concluded that the offer had been accepted in the manner advanced on behalf of the plaintiff, the issue of whether that contract was mutually ended provides a further significant obstacle to Ms Lungo's claims. [p8] 16 The judgment concluded with the following:- The evidence is clear that the parties mutually varied the arrangements from that originally offered. The evidence clearly support a mutual abandonment of the original arrangement in favour of a smaller formal loan secured only by the Kogarah property and ultimately the provision of a private loan as bridging finance. The above findings deal with the issues identified by the parties as those in dispute. I therefore enter judgment for the defendant. [p9] 17 The plaintiff has brought proceedings in this court. She seeks to challenge the decision of the Magistrate. She now proceeds on the grounds of appeal set forth in an amended summons filed on 8 August 2005. 18 There is an appeal as of right from the Local Court where error in point of law is demonstrated. The onus rests with the plaintiff. She must demonstrate that the error of law justifies the disturbing of the decision of the Magistrate. A decision on a question of costs can only be challenged where leave to appeal has been granted. 19 In a written outline of submissions, the plaintiff argument is put as follows:- 11. The plaintiff contends that the necessary offer and acceptance in the formation of the contract between the parties is to be found in the plaintiff's application for finance made in February 2002 (a document that his Honour noted was not before him) being an offer by the plaintiff seeking mortgage finance through the defendant (as a mortgage originator or intermediary between borrower and lender) which, after due processing and checking by the defendant, was accepted in writing by its two letters dated 19 March 2002. 12. The fee that the defendant 'mortgage originator' would earn for acting as broker on the finance constitutes, in the plaintiff's submission, consideration for this contract. 13. It is submitted that there was a contract that legally bound the parties and that his Honour erred in finding that it had been varied. It is submitted that the evidence supports the proposition that the defendant, being bound by its acceptance of the plaintiff's offer on 19 March 2002, breached the contract by varying its terms by requiring the plaintiff to: (a) verify her financial position and (b) discharge a mortgage over her Cabramatta property. 12. [sic] The plaintiff submits that the defendant's requirements constituted a fundamental breach of the contract between the parties with the consequence that the plaintiff was deprived of the funding in the amount contracted in the defendant's correspondence of 19 March 2002 and that, in the circumstance where she had exchanged contracts and the completion date was approaching, she suffered loss and damage which his Honour should have found was as follows: (a) the plaintiff incurred penalty interest arising from settlement that was delayed by the defendant's failure to provide finance under the contract of 19 March 2002: (b) the plaintiff in order to complete on her contract for the purchase of the subject property resorted to bridging finance, arranged by the defendant, who charged her costs and fees for arranging it, to cover the shortfall and (c) the plaintiff paid to the defendant a fee and a rate of interest higher than the rate of interest under the contract of 19 March 2002. Costs in the Court below 14. The plaintiff further submits that his Honour erred in awarding indemnity costs to the defendant in the Court below and seeks leave to appeal his Honour's costs order. 20 It is convenient to first address the argument that was initially advanced on the question of costs. It was properly abandoned during the course of submissions. 21 I am not satisfied that this is a case for the granting of leave. The amount in dispute was modest. The costs of the proceedings would not be large. There is no matter of public interest. Indeed, the making of a costs order on an indemnity basis was reasonably open to the Magistrate (he was entitled to conclude that the proceedings were doomed to failure and there was also an offer of compromise made by the defendant). 22 It can be seen from the content of the written submissions that the plaintiff now seeks to argue a case that was not propounded before the Magistrate. The alleged contract is one that is said to arise from an alleged offer made by the application for finance of February 2002 and an alleged acceptance said to arise from the two letters dated 19 March 2002. It was presented as a contract to arrange finance (as opposed to one which required the defendant to advance it). 23 The application for finance was not before the Magistrate. There was evidence before him that the document had been destroyed in the course of the defendant's usual practice. 24 Its contents may be thought to be a matter for surmise. The subsequent letter from the defendant might suggest that it was an application for finance in the sum of $800,000. 25 Generally speaking, the court does not entertain matters that were not agitated in the lower court. In my view, there are good reasons for not allowing the new argument to be advanced in this appeal. Be that as it may, even if a different view were to be taken, it seems to me that the new argument (like its predecessor) was doomed to failure. 26 In this case, the Magistrate had been asked to determine issues that had been defined by the parties. He had no cause to address the new argument. Indeed, it was inconsistent with what he was asked to determine. 27 If the new argument had been agitated in the lower court, it may be that the proceedings in that court would have taken a different course (inter alia, the defendant may have sought to cross-examine on issues relevant to it). 28 The new argument was beset with problems. It suffices to mention but a few of them. The content of the alleged offer largely remained a mystery. If it was an application for finance in the sum of $800,000, then the two further letters could not constitute an acceptance of such an offer (inter alia, the quantum of the contemplated loans differed). The documentation relied on by the plaintiff did not deal with a number of matters which would be material to a loan (including matters such as the term of the loan, the interest payable and the terms of repayment). It would seem unlikely that the parties intended in such circumstances to be entering into legally binding relations. Indeed, it might be thought that any legally binding relationship that could arise from the documentation would serve no good purpose. 29 In my view, this appeal is doomed to failure. I see no error in what was done by the Magistrate (let alone any error of law). Indeed, it seems to me that he reached the only view that was reasonably open on the material before him. 30 It seems to me that this was just another one of those many cases in which a party is dissatisfied with the findings of fact that were made. In this case, it could not be said that findings of fact were made without supporting evidence. There was abundant evidence for the findings that were made. 31 I should add that the Magistrate came to the view that the claim should fail after making crucial evidentiary findings. In such a context, the plaintiff faced a near-impossible task to succeed in this appeal. 32 The summons is dismissed. The plaintiff is to pay the costs of the proceedings. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.