CT Money v AFIG Wholesale [2008] NSWSC 1336

In this case CT Money, a mortgage originator and manager, purported to purchase the loan book off DC Corporation Australia, the wholesaler being AFIG Wholesale Pty Ltd.

Upon being notified AFIG began to pay DC’s commission direct to CT. CT entered into its own correspondent deed with AFIG and began to write loans.

Time went by and the DC loan book began to perform badly. AFIG sought to deduct its losses from the trail commission pursuant to a right of set-off. It deducted from both the DC loan book and the CT originated loan book. CT sued for its commission arguing that it was not responsible for breaches in the DC loan book but was entitled to the commission.

The court found that the assignment of the DC loan book was ineffective and that the parties must be treated as if CT was receiving the money as delegate of DC. Although CT Money entered into a correspondent deed with AFIG the court found that it only applied to loans written by CT (not to the legacy loans in the DC book).

The net effect was that CT was entitled to the outstanding commission from loans it had originated. AFIG was entitled to deduct DC loan book losses from the DC loan book commission and these exceeded the commission. CT was not required to repay commissions it had already received.

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