Mortgage clients complained, court told

Doug Somers-Edgar

A $36.5 million contributory mortgage raised for Greg Olliver's Long Bay development north of Auckland is at the centre of a court case between Money Managers and a financier.

Money Managers is suing National Mortgage Brokers for $753,000 in commission it claims was due for marketing the LandCo funding deal to clients throughout its 48-office franchised business.

The case, which started on Monday, is before Justice Geoffrey Venning and is set down for five days.

Money Managers' witness list includes its marketing manager, Alasdair Scott, founder Doug Somers-Edgar, contributory mortgage expert Kenneth Moses, accountant Monica Strange, former Browns Bay office manager Hillary Berridge, Manukau investor adviser Michael Jones, Richard Still of its North Harbour office and Stanley Hall of its Browns Bay office.

In opening submissions, Money Managers' lawyer David Chisholm told how the firm received a series of complaints from clients about the deal and eventually lost confidence in National Mortgage Brokers.

He said the $36.5 million loan arranged for Olliver in 2000 was the largest contributory mortgage raised in New Zealand..

National got a $50,000 loan establishment fee from LandCo, a $1,095,000 procurement fee and charged an ordinary interest rate of 9.5 per cent.

Chisholm said Scott, of Money Managers, had advised National that a two-year funding deal would be difficult to market "so the investment was for a period of one year only", with investors having the option to roll over their investment for a further 12 months.

At the end of that first year, Money Managers' clients with $27,296,638 invested the scheme opted to stay in for the second year but clients with $9,203,361 wanted their money back.

Money Managers was now seeking to recover commission payable on the second year of the LandCo mortgage.

On October 14, 2001, Somers-Edgar was the host of a Radio Pacific talkback programme and took a number of calls criticising National, the court heard. On November 13, 2001, a National representative emailed Scott to say the original loan was being rolled over for a further year and Money Managers would be paid a 2.25 per cent commission, Chisholm said.

Money Managers is taking two actions against National: breach of agreement to pay commission and seeking to recover the cost of services provided which resulted from the fruits of its marketing efforts.

But Chisholm said National had raised various defences and counterclaims that included claiming Money Managers was illegally acting as a contributory mortgage broker on the LandCo deal and breached contributory mortgage regulations and that Money Managers breached good faith when Somers-Edgar made comments on the Radio Pacific show in 2001. Chisholm said none of the counterclaims had any substance.

National's counsel is expected to open the defence within the next day.