Vero Insurance Limited v Down Under Home Loans Pty Ltd [2008] NSWSC 1198

New South Wales Supreme Court

CITATION : Vero Insurance Limited v Down Under Home Loans Pty Ltd [2008] NSWSC 1198

HEARING DATE(S) : 20 October 2008 JUDGMENT OF : Hammerschlag J

EX TEMPORE JUDGMENT DATE : 20 October 2008

DECISION : Judgment for the plaintiff in the amount of $302,300

CATCHWORDS : CONTRACT - AGENCY - Agent issues deposit guarantees to third parties on behalf of its principal beyond the authority expressly conferred upon it to do so - Principal nevertheless bound to honour guarantees and sues on indemnity given by agent in agency agreement - Principal also claims delivery up of unused deposit guarantee forms - but fails to establish that defendant still has them or where they otherwise are - no issue of principle

PARTIES : Vero Insurance Limited (formerly Royal & Sun Alliance Insurance Australia Limited Down Under Home Loans Pty Ltd (formerly known as Azar & Lambert Financial Services Pty Limited

FILE NUMBER(S) : SC 50090/2007

COUNSEL : A.C. Casselden (Plaintiff)

SOLICITORS : Gadens (Plaintiff) Defendant by its director S. Azar

- 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

HAMMERSCHLAG J

20 OCTOBER 2008

50090/2007 VERO INSURANCE LIMITED (FORMERLY ROYAL & SUN ALLIANCE INSURANCE AUSTRALIA LIMITED) -V- DOWN UNDER HOME LOANS PTY LTD (FORMERLY KNOWN AS AZAR & LAMBERT FINANCIAL SERVICES PTY LIMITED EX TEMPORE JUDGMENT 1 HIS HONOUR: The plaintiff (previously called Royal & Sun Alliance) is an insurer. The defendant was a mortgage broker. 2 By a written agreement made on 7 December 2001 described as a "Deposit Power Guarantee Agency Agreement" ("the agreement") the plaintiff appointed the defendant to act as its agent for the purpose of issuing guarantees described as "Azar & Lambert Deposit Power Guarantees", which are instruments intended to secure payment of the deposit by a purchaser of real property to the vendor in respect of the sale of real property. The guarantees were issued in lieu of cash and under their terms could be called on when the sale of land contract was terminated for the purchaser's breach and the deposit was to be forfeited to the vendor. 3 Clause 5 of the agreement provides: "5.1 Subject to Clause 5.2 the Agent is authorised to accept applications ("Applications") on behalf of the Principal from persons wishing to apply for the product known as the Azar & Lambert Deposit Power Guarantee, a specimen of which is annexed to this Agreement and marked as 'Annexure A'. 5.2 The Agent is only authorised to accept applications and issue guarantees for and on behalf of the Principal if: …(c) the Agent fully complies with the issuing guidelines and procedures ("Issuing Guidelines") (including "Guarantee Fee Payable") as annexed to this Agreement and marked as Annexure C") 4 Clause 6 of the agreement provides: "Without prior written approval of the Principal, the Agent has no authority to accept an Application or to issue a guarantee for and on behalf of the Principal where the Agent has not complied with the terms of this Agreement. 5 Clause 11.1 of the agreement provides: "The agent acknowledges that the Principal is the sole proprietor of the name, concept and product "Deposit Power", "Deposit Power Bond", "Deposit Power Guaranteed" and "Deposit Power Guarantee" and all related application forms, guarantees, materials and documents and may promote, market, publish and/or issue any product bearing any of those names or similar names and related literature and material in its own right or through other agents." 6 Clause 16 of the agreement provides: "The Agent shall indemnify and keep indemnified the Principal against all losses, damages, claims, expenses and demands whatsoever which the Principal shall now or hereafter sustain, incur or be called upon to satisfy by reason of the default, failure, omission or neglect in any manner whatsoever of the Agent, or any employee, or agent of the Agent, or sub-agent to comply with or observe any provision of this Agreement (including any schedule or annexure hereto) or by reason of any other act or omission of the Agent or its employees, or agents, or sub-agents." 7 Whilst there is no Annexure C attached to the copy of the agreement signed by the defendant which was admitted into evidence it accepted that Annexure C was in the following form: