National Equity Financial v The Home Loans Group [2006] NSWSC 310

An aggregator terminated broker and stopped paying trail after the ATO issued a winding up notice against the broker. The debt to the ATO was paid and the winding up application dismissed.

In terminating the Introducer’s Agreement the aggregator relied on the filing of the winding up application against the broker. The trailer was more than $50,000 per month. 

The issues before the court were:

  1. Was the broker in breach of the Introducer Agreement as at the date of termination?
  2. Was the aggregator entitled to terminate the Introducer Agreement on that date of termination?
  3. Whether the aggregator is entitled to justify that termination on grounds other than that specified in the original termination notice.
  4. Was the aggregator entitled, following that termination, to cease paying any commissions to the broker, including commissions which were, at that date, unpaid? 
  5. if, as a matter of construction, the Introducer Agreement did have that effect, is the broker unable to rely on the relevant clause, because it is unenforceable as a penalty? If so, is the aggregator nevertheless entitled to damages for breach of any provision of the Introducer Agreement by the broker?
  6. is there any relevant estoppel or waiver which prevented the broker from relying on any breach of the Introducer Agreement by using other aggregators?
  7. Whether National Equity is entitled to relief against forfeiture.

The court interpreted the Introduction Agreement as follows:

Before the aggregator would be entitled to cease paying commissions:

  • A party must have terminated the Introducer’s Agreement.
  • There must be an extant unremedied breach by the broker of any part or clause of the Introducer’s Agreement at the point in time when the Introducer’s Agreement is terminated.
  • The third element that must be satisfied (in addition there being an extant breach at the time the agreement is terminated) is either that National Equity must be found to have made misleading, deceptive or untrue statements or must be found to have been a party to fraudulent or misleading conduct.
      

There was no accusation of misleading or fraudulent conduct and so the judge held there was no entitlement under the agreement to stop paying trail commission. This mean the broker won on the most important question.

The next question was whether the aggregator was entitled to terminate i.e.: had there been a breach? This questioned turned on whether the broker was able to deal with other aggregators (which the aggregator found out it had been doing). The Introducer Agreement forbade it but the broker claimed a side agreement existed based on the following conversation:

AGGREGATOR
If you use us, you are not to use any other aggregators. It’s either everything or nothing
 
BROKER:
We have had a longstanding relationship with Domain and have only known you for a short time. Domain is an Adelaide Bank aggregator. We enjoy the benefit of them having their own approval limit and discretions on approvals. It gives us an advantage in the market place. I would find it very difficult to terminate our relationship with Domain in order to fulfil your requirement. We also have a good relationship with Fintrack who has the same panel lenders as you.
 
AGGREGATOR
That’s fine, I am happy if you continue to use Domain

After extensive cross-examination the judge found both witnesses were credible and therefore he was unable to decide which one was telling the truth holding:

The issue cannot be determined on the balance of probabilities. The issue cannot be determined in weighing the respective demeanour of Mr Taglialegna as against that of Mr Christian. The onus of establishing that the telephone conversation took place in the terms contended for by Mr Taglialegna, was not discharged.

Thus the broker lost on this ground and the Introducer Agreement was found to have been properly terminated. However it does not seem that any material damages flowed from this

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