Columbus gains short-term fee payment relief over Pioneer

A long-running series of disputes over the level of management fees due to Pioneer Mortgage Services by Columbus Capital will move closer to a resolution in around two months' time.

In the Federal Court yesterday, both parties wrangled over a management fee arrangement that Columbus is attempting to terminate. This is one of several that were in operation between ANZ and a number of non-bank mortgage firms since the 1990s that were transferred to Columbus Capital when it purchased ANZ's Origin mortgage book in September 2012.

In recent years, moves by Columbus to unilaterally vary the terms of several mortgage portfolio management agreements to increase its share of mortgage pool income have instigated court actions by several mortgage originators, including Pioneer.

This case has more complexity than most, leading Justice Jayne Jagot, at a hearing two weeks ago, to order the parties to try to settle at least some of the matters in dispute though mediation. This was unsuccessful.

For instance, there is a separate action underway, initiated by Pioneer and intended to be heard as part of the entire set of disputes between these two parties, to prevent the imposition of a $399  "annual facility fee" on home loan borrowers in the mortgage pools being managed by Pioneer, which was announced by Columbus in late 2014.

In the latest part of this dispute, Pioneer has been seeking an injunction to prevent Columbus from taking certain actions, such as denying Pioneer access to its computer system, and to prevent Columbus from ceasing to pay management fees.

Interestingly, both parties have referred obliquely to an alleged fraud by an unnamed employee at Pioneer, which is the subject of a separate cross-claim by Columbus. How this incident fits into the dispute has not been tested in court so far.

Columbus also told the Court yesterday that it wants to introduce expert evidence of proper business practices of a mortgage manager, ahead of a complete airing of all aspects of the dispute that has been building between both parties.

Jagot asked why was it not possible for the two sides to endure "a short, unhappy marriage" until a more substantial hearing of all matters in dispute could be run, ideally in June or July.  In other words, why was there an urgency to change existing arrangements, when the status quo would be tested in a relatively short time?

The legal representative for Columbus asserted that his client would go ahead anyway, and if the action in terminating the agreement was found to be invalidly carried out, then the loss to Pioneer would be "minor" and all management fees owing to Pioneer could be restored as damages and their rights under the deed fully restored.

He then added that Pioneer had been accessing Columbus' computer systems in order to carry out its duties in managing mortgages, and his client wanted this to stop.  Another method of providing sufficient details to administer the mortgages would be found.

The Court agreed, allowing both the suspension of management fees to Pioneer and for access to be varied as requested by Columbus, until the hearing date in July, with both parties to provide necessary documents to each other.

The case continues in July.