Supreme Court New South Wales Medium Neutral Citation: VA Holdings Pty Ltd t/as Granton Homes v Global Capital Corporation Pty Ltd [2023] NSWSC 1522 Hearing dates: 15 November 2023 Date of orders: 7 December 2023 Decision date: 07 December 2023 Jurisdiction: Equity Before: McGrath J Decision: Plaintiff and Second Cross-Defendant are jointly and severally liable to pay the Cancellation Fee of $116,050 to Defendant Catchwords: CONTRACTS — construction — where the plaintiff is a property developer borrower and the defendant is a finance broker — where the parties entered into a contract titled 'Mandate to Act' which provides for the payment of a facilitation fee by the plaintiff in exchange for the defendant procuring the approval of a finance facility — where the defendant procured a satisfactory finance facility from a third-party lender but, prior to the drawing-down of the loan, the plaintiff caused the reduction in the amount of security available under the loan resulting in the alteration of the terms of the facility by the lender which the plaintiff did not proceed with — whether the facilitation fee remains payable — HELD — the facilitation fee remains payable — whether the cancellation fee which provides for 100% of the facilitation fee to be payable after the lender issues security documents is void as a penalty — HELD — the cancellation fee is not a penalty — whether the services provided by the defendant to the plaintiff are "financial services" and, if not, is the cancellation fee unenforceable as an unfair contract term CONTRACTS — construction — whether the second cross-defendant is jointly and severally liable as guarantor of the plaintiff's obligations under the Mandate to Act — HELD — second cross-defendant is jointly and severally liable Legislation Cited: Australian Securities and Investments Commission Act 2001 (Cth) Competition and Consumer Act 2010 (Cth) Cases Cited: Australia Capital Financial Management Pty Ltd v Linfield Developments Pty Ltd; Guan v Linfield Developments Pty Ltd [2017] NSWCA 99; (2017) 18 BPR 36,683 Australian Competition and Consumer Commission v CLA Trading Pty Ltd [2016] FCA 377 Bellas v Powers [2023] NSWSC 1198 Clark Equipment Credit of Aust Ltd v Kiyose Holdings Pty Ltd (1989) 21 NSWLR 160 Commonwealth v McLean (1996) 41 NSWLR 389 Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12 Harris v Burrell & Family Pty Ltd [2010] SASCFC 12 HP Mercantile Pty Ltd v Hartnett [2016] NSWCA 342 Jones v Dunkel (1959) 101 CLR 298 at 321; [1959] HCA 8 Laundy Hotels (Quarry) Pty Ltd v Dyco Hotels Pty Ltd [2023] HCA 6 Manly Council v Byrne [2004] NSWCA 123 Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 NEC Information Systems Australia Pty Ltd v Linton (1985) NSW ConvR 55-240 Owners v Strata Plan No 66375 v King [2018] NSWCA 170 Pannozzo v Fowler [2013] NSWCA 269 Private Mortgages Australia Pty Limited ACN 600 628 813 as trustee for the PMA Trust v Stever [2019] NSWSC 462 Scottish Amicable Life Assurance Society v Reg Austin Insurances Pty Ltd (1985) 9 ACLR 909 Singh v De Castro; Dhaliwal v De Castro; Brar v De Castro [2017] NSWCA 241 Ta Lee Investment Pty Ltd v Antonios [2019] NSWCA 24 TW Timber Treatment Pty Ltd v Giddings [2022] VSCA 147 Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522; [2005] HCA 17 Category: Principal judgment Parties: VA Holdings Pty Ltd t/as Granton Homes (Plaintiff/First Cross-Defendant) Global Capital Corporation Pty Ltd (Defendant/Cross-Claimant) Hong Long Vu (Second Cross-Defendant) Representation: Counsel: S Reuben (Plaintiff/First Cross-Defendant and Second Cross-Defendant) A Djurdjevic (First Defendant/Cross-Claimant) Solicitors: Hunt & Hunt Lawyers (Plaintiff/First Cross-Defendant and Second Cross-Defendant) Summer Lawyers (Defendant/Cross-Claimant) File Number(s): 2021/349969 Publication restriction: Nil JUDGMENT INTRODUCTION 1. The parties to this dispute are the plaintiff/first cross-defendant, VA Holdings Pty Ltd t/as Granton Homes (a property developer borrower), the defendant/cross-claimant, Global Capital Corporation Pty Ltd (a finance broker) and the second cross-defendant, Mr Hoang Long Vu (the sole director and secretary of VA Holdings). 2. At the heart of the dispute is the proper construction of the express terms contained in a written contract titled "Mandate to Act" dated 21 January 2020 (and signed on 24 January 2020 by Mr Vu) between VA Holdings (as a potential borrower), Mr Vu (as a guarantor of VA Holdings' obligations) and Global Capital (as a loan facilitator) for VA Holdings to use the services of Global Capital to source and procure the approval of a finance facility in order for VA Holdings to proceed with the construction of a 14-lot housing development in Mudgee, New South Wales. 3. VA Holdings, after executing the finance facility with Ingwersen and Lansdown (a lender to whom it had been introduced by Global Capital), but prior to the settlement or drawing-down of any amount under the finance facility, proceeded to construct and sell 4 of the 14 lots, which had the effect of reducing the security available under the finance facility. Ingwersen then proposed the amendment of the terms of the finance facility and provided an updated version of those terms to VA Holdings, who rejected the updated terms and terminated the agreement with Ingwersen. 4. VA Holdings contends that in those circumstances it is not liable to pay Global Capital a "Cancellation Fee" of $116,500 under the terms of the Mandate to Act. Global Capital cross-claims that under the terms of the Mandate to Act, VA Holdings is liable to pay the Cancellation Fee and Mr Vu is also liable as the guarantor of the obligations of VA Holdings to pay it. PROCEDURAL BACKGROUND 1. VA Holdings commenced these proceedings by summons seeking interlocutory and final relief, filed in court on 9 December 2021 before Kunc J sitting as duty judge, at which time Kunc J made orders abridging the time for service of the summons and the affidavits in support and permitting them to be served on Global Capital by email. 2. The interlocutory relief sought was, in summary, an injunction requiring Global Capital to do all things to prevent publication by the credit reporting body Equifax that VA Holdings is a payment defaulter by reason of its non-payment of the cancellation fee under the Mandate to Act. 3. On 14 December 2021, the summons was returnable before Kunc J, at which time his Honour made orders by consent as follows: 1. ORDERS that pending the determination of these proceedings the First Defendant, its servants or agents be restrained from publishing or providing notice to any credit reporting body to the effect that the Plaintiff is a payment defaulter by reason of non-payment of a cancellation fee charged by the First Defendant to the Plaintiff. 2. NOTES the undertaking of the First Defendant given to the Court that pending the determination of these proceedings the First Defendant will forthwith withdraw its listing of the Plaintiff as a payment defaulter with the credit reporting body Equifax. 3. NOTES the undertaking given by the First Defendant inter parties, that the First Defendant will use its best endeavours and do all acts and things necessary on its part to require the Second Defendant to remove the listing of the Plaintiff as payment defaulter at the instance of the First Defendant with the credit reporting body Equifax. 1. At that time, Kunc J also ordered that the matter continue by way of pleadings and made several procedural orders, including that the parties were to participate in a mediation, which ultimately proved unsuccessful. 2. On 2 March 2022, VA Holdings filed the statement of claim. 3. On 23 March 2022, Global Capital filed its defence and the statement of cross-claim. 4. On 19 April 2022, VA Holdings and Mr Vu filed their defence to the cross-claim. EVIDENCE 1. At the hearing, VA Holdings and Mr Vu relied on the following evidence: 1. affidavit of Hoang Long Vu affirmed 9 December 2021; 2. affidavit of Hoang Long Vu affirmed 25 July 2022 and the exhibit to that affidavit; and 3. affidavit of Hoang Long Vu affirmed 18 November 2022. 1. As stated above, Mr Vu is the sole director and secretary of VA Holdings. 2. At the hearing, Global Capital relied on the affidavit of Bill Salouris affirmed 14 October 2022 and the exhibit to that affidavit. Mr Salouris is a director of Global Capital. 3. Mr Vu and Mr Salouris were each cross-examined. No issues of credit were raised during either cross-examination. I accept the evidence of both of them as honestly given. 4. VA Holdings and Mr Vu were represented by Mr S Y Reuben of counsel instructed by Hunt & Hunt Lawyers. Global Capital was represented by Mr A Djurdjevic of counsel instructed by Summer Lawyers. The hearing was completed in less than the allocated time because of the succinct and concise manner in which the case was presented by counsel for both parties and the comprehensive written submissions they each provided. 5. Global Capital submitted that by reason of VA Holdings' unexplained failure to call David Xiao of Gordon Wealth Pty Ltd (who acted as agent for VA Holdings in its negotiations with Global Capital and would have been expected to be called by VA Holdings), it would be open to the court to draw an inference that his evidence would not have assisted VA Holdings' case: Jones v Dunkel (1959) 101 CLR 298 at 321; [1959] HCA 8. That principle is well established, as is the principle that a trial judge is more readily able to draw an affirmative inference in support of the opposing party's case in such circumstances: Ta Lee Investment Pty Ltd v Antonios [2019] NSWCA 24, Bathurst CJ, Beazley P and Macfarlan JA at [136], citing Commonwealth v McLean (1996) 41 NSWLR 389; Manly Council v Byrne [2004] NSWCA 123 at [51]. 6. The absence of Mr Xiao as a witness at the hearing was unexplained and if he was to be called, then it would be expected to have been by VA Holdings. However, even where the circumstances for potentially drawing a Jones v Dunkel inference arise, a trial judge is not required to draw the inference. Rather, it is an available inference: Ta Lee Investment at [137]. If Mr Xiao was to be called, I do not know the issues on which he would be expected to have given evidence. Even if I was to draw the inference that nothing that Mr Xiao might have said would have assisted VA Holdings, I cannot see how that assists the case of Global Capital on the issues to be determined. 7. Global Capital did not ask me to draw an affirmative inference in support of its case arising from the unexplained failure of VA Holdings to call Mr Xiao. In all the circumstances, I have decided that any Jones v Dunkel inference is of very limited utility in the determination of this case. SALIENT FACTS 1. As mentioned above, the dispute originated in the context of VA Holdings seeking construction finance to facilitate a 14-lot development of houses at Mudgee, in what was proposed to be a two-stage development, with 7 properties to be developed in stage 1 and then, after sales, for the development to proceed with stage 2 (Construction Project). 2. On 20 January 2020 at 2:31pm, Mr Xiao of Gordon Wealth (acting as agent for VA Holdings) sought the assistance of Vahe Hovagimian and Andrew Beattie of Global Capital in order to procure a finance facility offer from a third-party lender to VA Holdings, by sending an email on the following terms: Hi Vahe and Andrew, I have a development finance opportunity to discuss with you. My client Granton Homes / VA Holdings is seeking finance to construct 14 lots at Mudgee (10 duplexes and 4 detached houses). The development is understood to be 100% pre-sold with total Gross Realisations of $9,600,000 Granton Homes is the building entity and VA Holdings is the borrower (related party). Client has 7 years' experience in development of over 50 properties in the Mudgee area Total Development Value: $9,592,500 Land Cost: $1,615,000 + Stamp Duty $74,128 = $1,689,128 Cost: Duplex $400k x 10 + $250k x 4 = $5,000,000 DA Costs: $120,000 Salaries 12 months plus super: $500,000 Marketing Costs: $0, all these are sold (emphasis in original) 1. On 20 January 2020 at 3:46pm, Mr Beattie sent an email to Mr Xiao saying that Mr Hovagimian would review the scenario and provide feedback, which he duly did by asking a number of questions set out in an email that day at 4:02pm to Mr Xiao, which were then answered by Mr Xiao in an email that day at 4:14pm to Messrs Hovagimian and Beattie. Importantly, Mr Xiao said in the email that VA Holdings were flexible with the funds they need to inject, initially seeking 60 – 65% of the construction cost and "he can pay the rest". The reference to "he" in this exchange is clearly to Mr Vu. 2. On 23 January 2020, Global Capital emailed a composite document titled Indicative Funding Proposal to Mr Xiao, with a covering letter dated 21 January 2020 addressed to "The Directors Granton Homes", which was expressed as "not an offer of finance", and contained the following section under the heading "ACCEPTING THIS OFFER": You may accept this offer by signing and returning the Schedule and Acceptance section attached to this letter. In addition, you will be deemed to have accepted our offer and you will immediately be bound by the terms of the offer if after the date of this letter you do any one (or more) of the following things: You pay to us any part of the Engagement Fee, Valuation Fee or the Legal Fee, or You request to have the loan and security documentation prepared, or You represent to anyone that we have made this offer to you, or You disclose this offer to anyone other than your legal advisers or accountants. 1. The covering letter was followed by a number of different parts which were attached to it. The first part was headed "DETAILS OF PROPOSED FACILITY" underneath which the following details appeared: BORROWER Granton Homes FACILITY AMOUNT $5,275,000 limited to 60% of the Gross Realisable Value (GRV) (excluding GST) as determined by an approved panel valuer and also limited to 70% Total Development Costs (TDC), whichever is the lesser The initial advance for the land component will be determined by taking the total loan amount minus 100% of costs to complete including but not limited to capitalised interest, contingency, etc INTEREST RATE An indicative rate is 6.75% per annum LINE FEE Not Applicable FACILITY TERM 18 months REPAYMENTS Interest Only – Capitalised for the term ESTABLISHMENT FEE 1.00% plus GST VALUATION $To Be Advised (GST Inclusive) Valuation report to be prepared by one of the panel valuers and the cost to be borne by the borrower ENGAGEMENT FEE $3,300 (GST Inclusive) payable upon acceptance by the borrower of this Indicative Funding Proposal GCC FACILITATION FEE 2.00% plus GST in accordance with the Mandate to Act FUTURE INTRODUCTION FEE In addition to all other fees and charges set out in this offer, you hereby agree to pay GCC a fee equal to 0.50% of the facility limit of any future loan obtained, if following execution of this offer you are introduced to an investor (or lender) by GCC and you secure any finance in the future from the investor introduced to you by GCC Registered First Mortgage over the land situated at 14 lots at Mudgee NSW; SECURITY Registered General Security Interest Agreements (PPSR) over the Borrowing Entity and Guaranteeing Entities; Directors Personal Guarantees; Tripartite Agreement between the Borrower, the Lender and the Builder 1. The next two parts of the Indicative Funding Proposal were headed "INFORMATION REQUIREMENTS" and "PRIVACY" and are not germane to the determination of this case. 2. The critical part of the Indicative Funding Proposal is the Mandate to Act, which contains that capitalised heading, an issue date of 21 January 2020 and was stated to be between Global Capital (defined as "GCC") and Granton Homes (defined as "Borrower"). The Mandate to Act relevantly stated: This Mandate to Act ("Mandate") confirms that GCC has been exclusively and irrevocably appointed by the Borrower for the sole purpose of providing its services on a reasonable efforts basis to obtain approval for a finance facility as detailed in the below Schedule and the attached Indicative Funding Proposal or otherwise on reasonable terms and conditions. The Borrower acknowledges that the finance facility terms contained in the Schedule and Indicative Funding Proposal merely summarise what the Borrower has requested and is not necessarily what is commercially available in the marketplace. GCC makes no representation, guarantee or warranty that the finance facility offer procured will match the Borrower's requested terms. The Borrower authorises GCC to give to and receive from potential investors, lenders and their associated entities, advisers or agents any such information about the Security Property, the Borrower or any other party related to this transaction as is considered necessary or prudent by GCC or the lender in their absolute discretion. GCC will assess the Borrower's information and prepare a submission on the Borrower's behalf to any potential lender and will use all reasonable efforts to procure approval of the finance facility sought. The Borrower acknowledges that the valuation fees, the lender's establishment fees and any other lender fee or third-party fee is payable by the Borrower in connection with the envisaged finance facility transaction and are unascertainable at the time of signing this document. THE BORROWER ACKNOWLEDGES THAT … b) The Borrower and Guarantor are jointly and severally liable for any fees incurred by, or payable to GCC in relation to this finance facility transaction; c) The Engagement Fee is payable solely for the retention of GCC's services rendered and that such services are offered by GCC on a reasonable efforts basis; d) The Engagement Fee is non-refundable in all circumstances and is payable to GCC upon execution of this document; e) The GCC Facilitation Fee as contained in the Schedule is a fee for the procurement of a finance facility offer and is irrevocably payable to GCC; f) The GCC Facilitation Fee is deemed due and payable to GCC upon the Lender issuing a Formal Letter of Offer; g) Should the Borrower, or Guarantor decide not to proceed for whatever reason a Cancellation Fee is payable as follows: 0% of the GCC Facilitation Fee for cancellation before the Investor/Lender issues an Indicative Letter of Offer; 25% of the GCC Facilitation Fee for cancellation after the Lender issues an Indicative Letter of Offer; 50% of the GCC Facilitation Fee for cancellation after the Lender issues a Formal Letter of Offer; 100% of the GCC Facilitation Fee for cancellation after the Lender issues Security Documents. In the event that the borrower cancels the agreement and in turn arranges finance through the lender introduced by GCC then 100% of the GCC Facilitation Fee is payable. Note: Cancellation fee does not apply in circumstances where the valuation comes in significantly below expectations and the funding package as a result becomes unworkable. … 1. The final paragraph of the Mandate to Act provides: The Borrower irrevocably authorises and directs the lender and the lender's solicitor to deduct the GCC Facilitation Fee in full, from the loan amount at the first settlement drawdown and further irrevocably directs that sum be paid directly to GCC immediately thereafter. 1. Immediately behind the Mandate to Act, the Indicative Funding Proposal attached a part headed "SCHEDULE & ACCEPTANCE" which provided: BORROWER DETAILS Granton Homes TYPE & PURPOSE OF FACILITY Construction Facility LOAN AMOUNT Up to $5,275,000 and also limited to 60% of GRV & 70% of TDC LOAN TERM 18 months SECURITY PROPERTY/S 14 lots at Mudgee NSW ENGAGEMENT FEE $3,300 (GST Inclusive) $116,050 (GST Inclusive) OR 2.00% plus GST of the loan amount plus GST, whichever is greater, and being comprised of: GCC FACILITATION FEE 1.00% of the loan amount payable to Global Capital Corporation Pty Ltd 1.00% of the loan amount payable to Gordon Wealth By accepting this offer the Borrower & Guarantor also acknowledges and agrees that the Mandate to Act is a legally binding contract between you and us. I declare that I am duly empowered as the Borrower, or Guarantor, or on behalf of the Borrower and Guarantors, to execute this document and that all information provided is true and accurate at the date of signature. I further declare that there are not any factors which remain undisclosed to GCC which may impair or impede loan approval. 1. Beneath those words under a heading in bold "SIGNATURE" there is provision for the insertion of a name, signature and date and underneath each of the lines allowing for these matters to be completed, are the words "(Sole Director and Secretary/Director/Secretary/Guarantor) *cross out inapplicable" 2. On 24 January 2020, Mr Vu executed the Schedule & Acceptance document by handwriting his full name in capitals "HOANG LONG VU", his signature and the date written as "24/1/20". 3. Immediately below Mr Vu's handwritten name, signature and date, he had not crossed out any of the "(Sole Director and Secretary/Director/Secretary/ Guarantor)" titles. 4. Also attached as part of the Indicative Funding Proposal was a document headed "TAX INVOICE" dated 21 January 2020 for the Engagement Fee of $3,432 ($3,000 plus GST of $300 plus a service charge of $132), which Mr Vu completed with the details of his VISA credit card to make the payment of the Engagement Fee, which he also signed. 5. The circumstances surrounding the execution of the Mandate to Act include that Mr Vu is an educated, experienced and sophisticated businessman with extensive knowledge about the property development industry in which he operated, including financial lending. 6. During the cross-examination of Mr Vu, the following evidence was given by him (Tcpt, 15 November 2023, p 19-21): Q. Mr Vu, in 2007 you graduated from the University of New South Wales with a bachelor's degree in business and commerce. Is that right? A. Yes. Q. You're currently a company director of about 11 companies. Is that so? A. I can't remember, but I need to cross check that. Q. Is that about that? A. Maybe, yes. Q. You are currently a company secretary of about 11 companies. Is that so? A. Yes. Q. One of those companies of which you are a director was, in fact, your agent in respect of the formal letter of offer, Global Wealth. Is that right? A. No. Q. You're not a director of Global Wealth Pty A. Gordon Wealth. Q. Sorry, Gordon Wealth. Yes. A. Yep. Q. You are a director of it? A. I yes, I am still. Q. You own 100% of it, don't you? A. Yes. … Q. Is it fair to say that "Gordon Wealth has over 20 years of experience in providing home loans and financial advice, and the team at Gordon Wealth can help clients find the arrangement that works best for them"? A. Yes. Q. Now, Gordon Wealth also creates tailored financial strategies based on the comprehensive analysis of their client's financial position and financial goals. Doesn't it? A. Yes. 1. On 30 January 2020, Global Capital issued a receipt acknowledging the payment of the Engagement Fee in the amount of $3,432.00 by VA Holdings. 2. From February to June 2020, Global Capital attempted to secure a construction loan for VA Holdings from Bankstown Unity Bank, which was ultimately unsuccessful. 3. On 15 June 2020 at 10:25am, Mr Xiao sent an email to Trang Nguyen of Global Capital stating that: Mr Vu has started constructions on the properties as he cannot wait for that long. However he still needs the loan. When do you reckon the lender will come back to us with advice? 1. On 17 July 2020, Mr Nguyen sent an email to Mr Vu and Mr Xiao which attached a letter from Global Capital to Mr Vu enclosing a letter of offer dated 16 July 2020 from Ingwersen to VA Holdings C/- Mr Nguyen and Mr Salouris (Formal Letter of Offer) which advised that Ingwersen had "conditionally approved your loan application, as a result of the introduction by Trang Nguyen & Bill Salouris of Global Capital Commercial". 2. The purpose of the loan facility in the Formal Letter of Offer was expressed to "provide a development facility for the security property". 3. The terms of the Formal Letter of Offer provided for a loan amount of $3,335,000 which was to be divided into two stages of construction and secured by way of first registered mortgage against each of the 14 properties. The stage 1 payment of $1,200,000 (excluding GST) was for the construction of 10 dwellings on 7 nominated lots, with VA Holdings paying from its own resources between $600,000 – $1,200,000 to complete them. Once the amount of $1,500,000 had been repaid from the settlements of the stage 1 properties, the stage 2 payment of $1,200,000 (excluding GST) was available for the construction of the 13 dwellings on the remaining 7 nominated lots, with VA Holdings contributing from its own resources or the sale proceeds of stage one a minimum amount of $1,200,000. The balance of the loan amount comprised contingency ($200,000), interest provisions on both tranches ($250,000 each tranche), brokerage fees ($72,000), Ingwersen's establishment fee ($155,000) and estimated costs and outlays ($8,000). 4. The interest rate in the Formal Letter of Offer for the proposed loan facility comprised a "higher rate" of 18% per annum and a "lower rate" of 8.5% per annum, which was applicable should VA Holdings comply with the terms of the loan in every respect and meet their repayments "strictly as and when they fall due". The term of the proposed loan facility in the Formal Letter of Offer was 24 months from the advance date. 5. The Formal Letter of Offer also provided for a commitment fee of $10,000, payable by VA Holdings to Ingwersen upon acceptance of the loan offer and a monthly repayment management fee of 0.5% of the loan amount for the full term of the advance, reducible to 0.275% if VA Holdings complied with the terms of the loan in every respect and met their repayments strictly as and when they fell due. 6. In the Formal Letter of Offer, the properties for development in Mudgee were valued "As Is" at $3,041,500 (including GST) and "On Completion" at $10,872,000 (including GST). The latter valuation equated to $9,883,636.36 (excluding GST), which was in excess of the total development value of $9,592,000 stated by Mr Xiao in his email of 20 January 2020 at 2:31pm. 7. On 20 July 2020, Mr Vu signed every page of the Formal Letter of Offer and the "Acceptance Form" and "Borrower's Acknowledgement and Warranty as to Serviceability" attached to it as the sole director of VA Holdings and as the guarantor for the loan. Mr Vu also completed and signed the pages providing for the details of VA Holdings as borrower and himself as a guarantor. 8. On 20 July 2020 at 3:48pm, Mr Xiao sent an email to Mr Nguyen, copied to Mr Vu, which attached the signed and completed Formal Letter of Offer. 9. On 21 July 2020, VA Holdings paid $10,000 as the commitment fee to Ingwersen which was due under the Formal Letter of Offer. 10. On 3 August 2020, VA Holdings paid $23,540 to Ingwersen on account of it obtaining a quantity surveyor report and a valuation report which was due under the Formal Letter of Offer. 11. On 8 September 2020 at 1.45pm, Mr Nguyen sent an email to Mr Xiao and Mr Vu stating that they had received an update from Ingwersen stating that the valuers had been instructed to finalise and issue hard copies of their reports for the security properties and the quantity surveyor was still waiting on several documents from Mr Vu but in the meantime they have been instructed to finalise their initial audit report. Mr Nguyen also said that Ingwersen had begun drafting the loan documentation and would be issuing it to Hunt & Hunt Lawyers as instructed by Mr Vu. 12. On 23 September 2020 at 3:26pm, Mr Nguyen sent an email to Mr Xiao with an update from Ingwersen stating that its directors had reviewed and were satisfied with all three valuation reports, the quantity surveyor was still finalising his report, and the drafting of the loan documentation had been delayed. 13. On 25 September 2020 at 2:46pm, Mr Nguyen sent an email to Mr Xiao with a further update from Ingwersen raising an issue about the possible use of a trust, the issuing of the loan documents and further matters required to be done by the quantity surveyor to complete his report. 14. On 28 September 2020, Ingwersen sent a letter to Hunt & Hunt Lawyers enclosing loan documentation including the mortgages for the 14 properties, the deed of loan and the deed of guarantee. 15. On 29 October 2020, Mr Vu executed the loan documentation on behalf of VA Holdings and also in his own capacity as guarantor of the loan. The loan documentation included the mortgages over the 14 properties, the deed of loan and the deed of guarantee. 16. On 6 November 2020, Ingwersen received the executed loan documentation. 17. On 12 November 2020, Mr Nguyen sent an email to Mr Xiao, copied to Mr Vu, setting out a further update from Ingwersen in which it stated that it had only just received the executed loan documents and had provided a response about outstanding documents and requirements and that the three valuation reports were due to expire and required updating, for which VA Holdings had to pay $8,250. 18. On 26 November 2020 at 10:52am, Mr Nguyen sent an email to Mr Xiao and Mr Vu as a courtesy to check on the progress of the return of the documentation, the quantity surveyor's initial drawdown report and an update of construction cost spent to date and proposed security variation. 19. On 8 December 2020 at 12:59pm, Brett Lansdown of Ingwersen sent an email to Mr Nguyen and Ms Wright, copied to Mr Salouris, stating that they had not been requested for any changes, nearly all the documents were back other than the finance certificate and insurance and that they were waiting for the valuation cost to be paid so they can finalise the settlement, adding: Should we be concerned they may be trying to not proceed with the deal?? 1. On 8 December 2020 at 5:24pm, Mr Nguyen sent an email to Mr Vu stating that Ingwersen had advised that most documents had been returned except for the finance certificate, insurance, payment of the valuation fee and the quantity surveyor to be engaged to conduct the first progress drawdown report. 2. On 8 December 2020 at 5:31pm, Mr Vu sent an email to Mr Nguyen, copied to Mr Xiao, stating that he was not aware of these matters and "[w]hat valuation fees [are] you referring to?". 3. On 8 December 2020 at 7:06pm, Mr Vu sent a further email to Mr Nguyen, copied to Mr Xiao, in which he said: Also these loans offer has been way too long (sic). I already completed 4 houses since you have me the indicative offers (sic). 1. On 9 December 2020 at 9:18am, Mr Nguyen sent an email to Mr Vu saying that the valuation reports expired on 10 and 16 November 2020, that new valuation reports were required as Ingwersen could no longer rely on existing ones and the valuation fee was $8,250, the payment for which was to be deposited into Ingwersen's account, following which Ingwersen would instruct the valuer. 2. On 9 December 2020 at 9:20am, Mr Vu sent an email to Mr Nguyen, copied to Mr Xiao, asserting: That's a lot of money for a new valuation. I won't be proceeding if these is what they wanted (sic). It's not my fault for the quantity surveyor and the solicitor taking there (sic) times with the paperwork. I provided everything that was requested on time 1. On 14 December 2020 at 3:49pm, Mr Salouris sent an email to Mr Vu, copied to Mr Nguyen, commenting that Mr Nguyen was on short term leave and had asked Mr Salouris to look at the file. Mr Salouris said: I completely agree that it has taken an extraordinary amount of time. From what I can see the delays are from your end. You signed the lenders letter of offer in July 2020 and further mortgage documents were issued 29 September 2020 and you signed and returned the mortgage documents on 27th October 2020. The valuation was ordered over three months ago. We remind you that under the terms of the mandate the facilitation fee is due and payable upon the lender issuing the Formal Letter of Offer. Please refer to mandate signed by you specifically point f: [extract of (e) and (f) of Mandate to Act] By any reasonable measure our facilitation fee is well and truly overdue and we would appreciate immediate payment. A copy of the tax invoice is attached for your reference. If you are unable to pay within 5 business days and require an extension of the credit terms please contact us to arrange a payment plan. 1. Attached to the email was a tax invoice dated 11 December 2020 from Global Capital addressed to "The Directors Granton Homes" for the Facilitation Fee in the amount of $116,050 (including GST). 2. On 14 December 2020 at 4:05pm, Mr Vu sent an email to Mr Salouris, copied to Mr Nguyen and Mr Xiao, stating: I'm not saying I'm not going ahead. I'm questioning why you expect me to pay valuations twice when it's not my fault that delays everything. Also your fees were agreed to come out of the loans. I never agreed to pay you direct. 1. On 14 December 2020 at 4:40pm, Mr Salouris sent an email to Mr Nguyen recording that he had just spoken to Mr Xiao who had said that "he will push the client to pay the val fee". 2. On 14 December 2020 at 4:50pm, Mr Xiao sent an email to Mr Salouris, copied to Mr Vu, which clearly followed the conversation that had occurred shortly before between Messrs Salouris and Xiao. Mr Xiao said: The client is willing to pay the valuation fee and settle this loan. Can you please advise to below question before the client makes the valuation fee payment: There are 2 blocks of land and construction that is completed using the client's own funding, what happens to the loan documents? Will the funder issue a new set of loan docs and go through the process again? Will this change further delay the whole process? There are other sites under constructions (sic) too with the client's own funding. The client will go ahead with valuation being the only outstanding requirement, to avoid any possible delays going forward. 1. On 15 December 2020 at 4:39pm, Mr Nguyen sent an email to Mr Xiao, copied to Mr Salouris and Mr Vu, stating that there was no need for new mortgage documents but that a variation deed/letter may be required to confirm some of the updated details. Mr Nguyen asked to be advised which two lots had been completed and when settlement would take place. Mr Nguyen again asked for the outstanding documents, being the finance certificate, insurance, payment of the valuation fee and the quantity surveyor's first progress drawdown report. 2. On 15 December 2020 at 9:26pm, Mr Nguyen sent an email to Mr Xiao, copied to Mr Salouris and Mr Vu, requesting that VA Holdings pay $8,250 to Ingwersen for the updated valuations and once the funds were received Ingwersen will instruct the valuer. 3. Between December 2020 and March 2021, and prior to the settlement or drawing down of any monies under the loan facility from Ingwersen, VA Holdings completed construction of the houses on 4 of the 14 properties using its own funds and sold them. During this period, VA Holdings informed Ingwersen as each of the properties were sold and settlement of those sales occurred. 4. As a result of the sale of those 4 properties, they were no longer available as security under the loan facility. 5. During the balance of December 2020 and into February 2021, further email correspondence took place between Mr Nguyen and Mr Xiao, which was copied to Mr Vu, in relation to the payment of the valuation fees as a result of the completion of 4 of the properties and for those updated valuations to be conducted. 6. On 16 February 2021, VA Holdings paid the amount of $7,700 to Ingwersen for the updated valuation reports. 7. On 2 March 2021 at 4:01pm, Kellie-Ann Wright of Ingwersen sent an email to Ian Miller of Hunt & Hunt Lawyers and Mr Nguyen, copied to Mr Vu amongst others, confirming the details of all the properties to be included as security for the loan facility, noting the exclusion of the 4 properties which had been sold. 8. On 8 March 2021 at 11:11am, Mr Xiao sent an email to Mr Nguyen, copied to Mr Vu, saying that the quantity surveyor report and valuation was completed the previous week and that there should be no outstanding requirements for the loan, and asking for an update of the amount of the first draw down and when the settlement was expected to happen. 9. On 10 March 2021 at 9:35am, Mr Xiao sent an email to Mr Nguyen, copied to Mr Vu asking for updates from Ingwersen regarding settlement and stating: Client would like to settle as soon as possible, as the trades need payments to continue the construction. Can we settle the matter by the end of this week? 1. On 11 March 2021 at 7:55am, Mr Nguyen sent an email to Mr Xiao, copied to Mr Vu, stating that Ingwersen had advised that they have now received the quantity surveyor report and the draft valuation reports and once they had reviewed the valuations they would let him know and "advise as to the variation amount available given the reduction in securities". 2. On 16 March 2021 at 11:02am, Ms Wright sent an email to Mr Nguyen, copied to Mr Vu amongst others, attached to which was a letter dated 16 March 2021 from Ingwersen to "The Director VA Holdings Pty Ltd" setting out a proposal for the variation of the proposed facility as expressed in the Formal Letter of Offer (Revised Facility Proposal). 3. The Revised Facility Proposal was also attached to an email on 16 March 2021 at 12:09pm from Mr Nguyen to Mr Xiao, copied to Mr Vu, for Mr Vu's consideration and agreement and stating that should Mr Vu agree to the varied terms, Ingwersen would be issuing a letter of variation. The email also stated that should amendments be required then they were to let Mr Nguyen know. 4. The Revised Facility Proposal provided as follows: We wish to advise we have now received the valuations for the security properties together with the Quantity Surveyors Progress (DrawDown) Report No.1. … We reconfirm your advice that the following four (4) properties are no longer available for security to our loan:– 77 Fairydale Lane, Mudgee NSW 2850, 6 Miller Crescent, Mudgee NSW 2850, 34 Norman Road, Mudgee NSW 2850, 4 Hosking Street, Mudgee NSW 2850 Our original Loan Amount was for $3,335,000.00 with a valuation amount, including the collateral securities, of $10,203,774 (excluding GST). This equated to a 33% "On Completion" LVR excluding GST. We also note that the Borrower was to contribute the total amount of $600,000.00 towards Stage 1 construction and a further amount for Stage 2 (as per clauses 17(k) and 17(l) of the Letter of Offer dated 16 July 2020) prior to our funding being available. We note from the new valuations less the four (4) properties removed as security, the "On Completion" valuation, including the collateral securities, is now $8,340,910.00 (excluding GST). Given this change in security value, we advise we are prepared to offer a Loan Amount based on a similar LVR as was previously offered. The Total Loan Amount is $2,816,359.00 being made up as follows:– Construction $ 2,166,359.00 Contingency $ 150,000.00 Retained Interest Provision $ 300,000.00 Brokerage Fee $ 72,000.00 Our Establishment Fee $ 120,000.00 Estimated Costs & Outlays $ 8,000.00 TOTAL $ 2,816,359.00 … We note from the Quantity Surveyor's report that the total of the construction costs for the balance of ten (10) lots is set at $3,868,499.00 We note the Borrower has spent $718,961.90 towards construction, leaving $3,149,537.10 left to pay. That indicates the Borrower has approximately a further $1,000,000.00 needed to contribute towards construction, prior to us holding the cost-to-complete. Given the Stage 1 lots have now reduced and to provide funding sooner to the Borrower we suggest that individual lot contributions be taken, rather than overall lots contributions. We suggest that the Borrower contribute an amount of approximately 44% towards each construction prior to our funding being available. This is outlined in the table below:- [Table showing total construction of $3,868,499, amount available of $2,166,359, costs to complete and monies to be spent/amount available for the remaining 10 properties] … Please confirm that the above is agreeable, given the reduction in security and we shall prepare a Letter of Variation. Please note the above is without prejudice to our existing rights which shall not be waived until such time we sign a variation to any terms of agreement which shall contain all agreed terms between the parties. 1. There is no evidence that the terms outlined in the Revised Facility Proposal were ever incorporated into a "Letter of Variation". 2. During March and April 2021, Mr Nguyen, Mr Xiao and Mr Vu exchanged a number of emails regarding the implications for VA Holdings of the Revised Facility Proposal. This included an email on 31 March 2021 at 11:08pm from Mr Nguyen to Mr Xiao and Mr Vu, the first part of which stated "[t]he equity contribution as outlined in the lender's letter dated 16 March 2021 offered a better position than the original Letter of Offer". 3. On 21 April 2021, Hunt & Hunt Lawyers for VA Holdings sent a letter to Ingwersen stating: Our client has received a loan offer which is substantially different from the previous loan offers and does not comply as the terms and conditions are unacceptable to our client as the lender would appreciate given the equity which our client has already invested in the proposed security properties. As a consequence, our client has instructed us that he is not proceeding with this loan and now seeks a refund of all monies paid in relation to this loan application. 1. On 4 May 2021, Global Capital sent a letter of demand to VA Holdings requiring payment of the Cancellation Fee under the Mandate to Act, being 100% of the Facilitation Fee in the amount of $116,050. It did so, stating: We have been informed by the lender that your intention is to not proceed. Under the terms of our mandate, the cancellation fee AFTER the lender issues security documents is 100%. By any reasonable measure our facilitation fee is well and truly overdue, and we would appreciate immediate payment. 1. Attached to the letter of demand was the tax invoice dated 11 December 2020 addressed to "The Directors Granton Homes" in the amount of $116,050, which had been attached to the email of 14 December 2020 at 3:49pm from Mr Salouris to Mr Vu. ISSUES FOR DETERMINATION 1. The five issues for determination in this case are: 1. As a matter of construction of the Mandate to Act, is VA Holdings liable to pay the Cancellation Fee to Global Capital, being 100% of the Facilitation Fee, in the amount of $116,050? 2. If yes to (1), is the Cancellation Fee void as a penalty? 3. For the purposes of determining if the Australian Consumer Law (ACL) applies, are the services provided by Global Capital to VA Holdings "financial services"? 4. If not, is the Cancellation Fee unenforceable by Global Capital as an unfair contract term under the ACL? 5. If yes to (1) and no to (2) and (4), is Mr Vu jointly and severally liable with VA Holdings to pay the Cancellation Fee to Global Capital under the Mandate to Act in his capacity as guarantor of VA Holdings' obligations to Global Capital under it? 1. I will deal with each issue in turn. ISSUE 1: IS VA HOLDINGS LIABLE TO PAY THE CANCELLATION FEE? Submissions of VA Holdings 1. VA Holdings argued that Global Capital is not entitled to the Cancellation Fee by reason of the "proviso" contained in the Note to clause (g) of the Mandate to Act being engaged in circumstances where Ingwersen issued the Revised Facility Proposal on terms substantially different to the Formal Letter of Offer and which rendered the funding package unworkable. 2. I have used the word "proviso" rather than "exclusion" as used in submissions by VA Holdings because the form of the Note to clause (g) of the Mandate to Act would not commonly be regarded as a form of exclusion clause because it does not seek to exclude the liability of VA Holdings for the Cancellation Fee but rather provides the circumstances in which portions of it are not payable. 3. VA Holdings proffered that on the proper construction of the Mandate to Act, the Facilitation Fee was to be paid by deduction from the loan advance and consequently it did not become finally due and payable until the loan advance was made and the first draw down occurred. VA Holdings reasoned that in circumstances where it decided not to proceed with the loan for whatever reason prior to the time at which the Facilitation Fee became finally due and payable, a Cancellation Fee would be applicable but by reason of the proviso, the Cancellation Fee "does not apply in circumstances where the valuation comes in significantly below expectations and the funding package as a result becomes unworkable". 4. VA Holdings submitted that the reference to "the valuation" in the proviso referred to the valuation of the Construction Project as a whole, rather than to individual properties. 5. Accordingly, on this argument the construction and selling of houses prior to settlement of the facility and consequently depleting the security under the facility was a foreseeable event of which the proviso was incorporated to guard against in order to avoid the Mandate to Act producing an unjust consequence in those circumstances, such as VA Holdings either being required to proceed with a funding package which as a result of a reduction of security becomes "unworkable" or pay the Cancellation Fee which reflected 100% of the Facilitation Fee. 6. VA Holdings further submitted that the Revised Facility Proposal rendered the funding package "unworkable" as it required VA Holdings to contribute 44% of the equity towards the construction of each of the houses and, further, the Revised Facility Proposal did not accord with the Formal Letter of Offer as under the Formal Letter of Offer, the funding would be available in two tranches but under the Revised Facility Proposal, the funds would be available on a lot by lot basis. Submissions of Global Capital 1. Global Capital submitted a different construction of the Mandate to Act to that which VA Holdings propounded, to the following effect: 1. Global Capital was obliged to assist VA Holdings, on a reasonable efforts basis, with facilitating the provision of a finance facility by a lender; 2. The offer from the lender must be within the specifications provided for under the Schedule and the Indicative Funding Proposal or otherwise on reasonable terms and conditions; 3. Consequently, the Facilitation Fee was irrevocably payable and deemed due and payable to it upon the lender issuing a compliant formal letter of offer; and 4. Should VA Holdings decide not to proceed with the finance facility prior to obtaining loan funds under it, VA Holdings would have to pay the Cancellation Fee calculated as a percentage of the Facilitation Fee, as follows: 1. 50% of the Facilitation Fee for cancellation after the lender issued a Formal Letter of Offer; or 2. 100% of the Facilitation Fee for cancellation after the lender issued Security Documents. 1. Global Capital argued that the Facilitation Fee was payable upon Global Capital performing its primary obligation under the Mandate to Act, being obtaining approval of a Formal Letter of Offer issued by a lender and, accordingly, any events that post-dated the execution of the Formal Letter of Offer, which indicated VA Holdings' acceptance of the terms contained therein, are irrelevant. 2. Global Capital raised the alternative argument that as VA Holdings decided not to proceed with the loan, by terminating it after Ingwersen issued Security Documents, VA Holdings is liable to pay the Cancellation Fee, being 100% of the Facilitation Fee. 3. In the further alternative, Global Capital stated that as VA Holdings decided not to proceed with the loan, by terminating it after Ingwersen issued the Formal Letter of Offer, VA Holdings is liable to pay the Cancellation Fee, being 50% of the Facilitation Fee. 4. With regard to VA Holdings' submissions concerning the proviso, Global Capital submitted that the phrases "significantly below expectations" and "unworkable" must be understood as objective tests, rather than subjective ones, which VA Holdings has not satisfied. In addition, Global Capital asserted that VA Holdings has not proven that the second set of valuations caused the funding package to become unworkable. Legal principles 1. The legal principles applicable to the construction of a written commercial contract were not in dispute. 2. Those principles are well-established and uncontroversial, recently confirmed by the High Court in Laundy Hotels (Quarry) Pty Ltd v Dyco Hotels Pty Ltd [2023] HCA 6, Kiefel CJ, Gageler, Gordon, Gleeson and Jagot JJ at [27], citing Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12, Kiefel, Bell and Gordon JJ at [16] (and the cases cited in turn): It is well established that the terms of a commercial contract are to be understood objectively, by what a reasonable businessperson would have understood them to mean, rather than by reference to the subjectively stated intentions of the parties to the contract. In a practical sense, this requires that the reasonable businessperson be placed in the position of the parties. It is from that perspective that the court considers the circumstances surrounding the contract and the commercial purpose and objects to be achieved by it. 1. The task of construction is to be undertaken in accordance with the principles elucidated in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, French CJ, Nettle and Gordon JJ at [46]-[51] (citations omitted): 46 The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose. 47 In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract. 48 Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning. 49 However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating". It may be necessary in determining the proper construction where there is a constructional choice. The question whether events, circumstances and things external to the contract may be resorted to, in order to identify the existence of a constructional choice, does not arise in these appeals. 50 Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties' statements and actions reflecting their actual intentions and expectations. 51 Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption "that the parties … intended to produce a commercial result". Put another way, a commercial contract should be construed so as to avoid it "making commercial nonsense or working commercial inconvenience". 1. Where a contract to be construed is made up of different components, preference is given to a construction that provides a congruent operation of the various components as a whole: Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522; [2005] HCA 17, Gleeson CJ, McHugh, Gummow and Kirby JJ at [16]. 2. While the court should endeavour to reach an interpretation which reads all terms of the contract harmoniously, if that is not possible then the court should prefer the construction that produces the least disharmony: HP Mercantile Pty Ltd v Hartnett [2016] NSWCA 342, Leeming JA at [182] (Bathurst CJ and Payne JA agreeing). 3. Further principles on the construction of contracts generally are also applicable. In Private Mortgages Australia Pty Limited ACN 600 628 813 as trustee for the PMA Trust v Stever [2019] NSWSC 462, Henry J at [37] summarised these in the following way: If the words used in a contract are unambiguous, they must be given effect to even if the result may appear capricious or unreasonable, or it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language of a contract is open to different constructions, the one that will be preferred is the one which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust: Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 per Gibbs J at 109; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52; McCann v Switzerland Insurance Australia Limited (2000) 203 CLR 579; [2000] HCA 65. Consideration 1. The operative term of the Mandate to Act is set out in paragraph (f) which provides that the "Facilitation Fee is deemed due and payable to Global Capital upon the Lender issuing a Formal Letter of Offer". 2. The operative term in paragraph (f) appears immediately following the provision in paragraph (e) that the Facilitation Fee "is a fee for the procurement of a finance facility offer and is irrevocably payable to Global Capital" and immediately before paragraph (g) which, subject to the proviso in the "Note" to it, provides that 100% of the Facilitation Fee is payable as a Cancellation Fee if the "Borrower or Guarantor decide not to proceed for whatever reason" after "the Lender issues Security Documents". 3. Indeed, the first sentence of the Mandate to Act provides that Global Capital has been exclusively and irrevocably appointed by VA Holdings "for the sole purpose of providing its services on a reasonable efforts basis to obtain approval for a finance facility as detailed in the below Schedule and the attached Indicative Funding Proposal or otherwise on reasonable terms and conditions". The Schedule lists the type and purpose of the facility to be a "Construction Facility" for a loan amount of up to $5,275,000 and a loan term of 18 months. The crucial aspect of the service that is being provided by Global Capital to VA Holdings in return for payment pursuant to the Mandate to Act is to source an approval for such a construction facility from a lender. 4. The language used in the Mandate to Act is unambiguous and makes clear that the Facilitation Fee is payable in full upon the provision of a finance facility offer which is within the scope of the instructions provided by VA Holdings. Nowhere in the Mandate to Act is the obligation to pay the Facilitation Fee expressed to be limited to payment upon settlement or draw-down of the finance facility. Rather, it is expressly provided that the Facilitation Fee is payable on the procurement of a finance facility offer. 5. A reasonable businessperson in the position of the parties would understand that the commercial context and purpose in which the Mandate to Act was entered into was such that VA Holdings as a potential borrower was contracting to obtain a service from Global Capital as a finance broker. That service was clearly the use of a combination of Global Capital's business acumen, contacts and network in order to procure a finance facility offer in terms which accorded with a set of the preconditions provided by VA Holdings. There is no suggestion that the terms of the Formal Letter of Offer issued by Ingwersen to VA Holdings on 16 July 2020 did not accord with the Schedule to the Indicative Funding Proposal. 6. The reliance by VA Holdings on the final paragraph of the Mandate to Act (by which VA Holdings revocably authorised and directed Ingwersen and its solicitors to deduct the Facilitation Fee in full from the loan amount at the first settlement draw down) as establishing that the Facilitation Fee was only ever payable on the first drawing down of the facility must be rejected. That paragraph provides a mechanism by which the Facilitation Fee was able to be paid to Global Capital if it had not been paid at an earlier time than draw down. On the clear words used in paragraph (f), the objective intention of the parties was that the Facilitation Fee was due and payable by VA Holdings once Ingwersen issued the Formal Letter of Offer. From that point forward, VA Holdings was obliged to pay the Facilitation Fee, subject to paragraph (g). 7. Such a conclusion is consistent with a commercial understanding of the service being provided by Global Capital to VA Holdings. To construe the Mandate to Act otherwise would be to place the entirety of the risk that Global Capital would not be paid for its services (apart from the relatively small Engagement Fee of $3,300) arising from any changes in circumstances completely outside of its control, with Global Capital. That is not the plain intention of the Mandate to Act, and would create disharmony with that intention. 8. Accordingly, subject to paragraph (g), the Facilitation Fee was due and payable by VA Holdings to Global Capital on 17 July 2020, when the Formal Letter of Offer was issued by Ingwersen to VA Holdings. 9. The unequivocal and clear language in paragraphs (e) and (f) must, however, be read harmoniously with paragraph (g). 10. Paragraph (g) of the Mandate to Act provides a structure for the calculation of the Cancellation Fee based on an increasing percentage of the Facilitation Fee which operates in circumstances where the potential lender has issued a Formal Letter of Offer and, at any time thereafter, VA Holdings decides not to proceed with that financing arrangement. It is clear that VA Holdings' obligation to pay the Facilitation Fee is thereby subsumed by VA Holdings' obligation to pay the graduating Cancellation Fee in those circumstances. 11. The Cancellation Fee is calculated by reference to the staged increase in the amount of the Facilitation Fee which is payable to Global Capital if the decision by VA Holdings not to proceed occurs before or after particular milestones. The meaning of each milestone is not in dispute. Paragraph (g) provides that the Cancellation Fee is payable by VA Holdings to be calculated at 100% of the Facilitation Fee for cancellation after the Lender issues Security Documents. 12. It is not in dispute that on 29 October 2020, Ingwersen issued Security Documents to VA Holdings. Subject to the operation of the terms of the Note to paragraph (g), VA Holdings would be obliged to pay the Cancellation Fee calculated at 100% of the Facilitation Fee. 13. This then leaves the operation of the proviso in the Note to paragraph (g). 14. The Note to paragraph (g) provides that the Cancellation Fee "does not apply in circumstances where the valuation comes in significantly below expectations and the funding package as a result becomes unworkable". 15. It is plain from the language of the Note that it is intended to operate when two conditions are objectively met: 1. the valuation has come in significantly below expectations; and 2. as a result of (1), the funding package becomes unworkable. 1. I do not accept VA Holdings' submission on the construction of the Note as applying to a foreseeable event, being the sale of one or more of the properties, which brought about a change in the security offered after the original loan offer was made and accepted, as to do so would be to ignore the clear and unambiguous meaning of the words used and read far beyond the plain terms of the Mandate to Act. 2. The second condition in the Note, by using the phrase "as a result", clearly requires satisfaction of the first condition in order for the second condition to be engaged. The phrase also imports a requirement for the party seeking to rely on the Note to establish a causal link between the valuation coming in significantly below expectations and the funding package becoming unworkable. 3. Global Capital submitted that the revised valuation did not come in below expectations and was, in fact, at a better amount than the original valuation. 4. According to the evidence of Mr Vu, the Formal Letter of Offer set out the valuation of the original 14 properties together with the collateral securities as amounting to $10,872,000.00 including GST. The amount of the original valuation of the 14 properties, including the collateral securities but exclusive of GST was set out in the Revised Facility Proposal as $10,203,774.00. 5. According to Mr Vu, the value of the 4 completed properties was $2,067,000. 6. Mr Vu proceeds to purport to calculate the "correct" valuation of the 10 remaining properties by subtracting the valuation of the 4 completed properties ($2,067,000) from the GST inclusive valuation contained in the Formal Letter of Offer ($10,872,000), arriving at $8,805,000. 7. He then reasons that the valuation under the Revised Facility Proposal of $8,340,910 came in at $464,090 less than the equivalent valuation of $8,805,000 in the Formal Letter of Offer, making it a valuation which came in "significantly below expectations". 8. I do not accept Mr Vu's reasoning. Not only are Mr Vu's subjective views as to whether, firstly, the valuation was significantly below expectations and, as a result, the funding package became unworkable, irrelevant to the inquiry I must make, I think that they are wrong. 9. In the Revised Facility Proposal, the amended valuation of the 10 remaining properties including the collateral securities was reduced to $8,340,910.00 excluding GST. 10. Accordingly, in order to compare the original valuation in the Formal Letter of Offer to the amended valuation in the Revised Facility Proposal, the comparison must be undertaken on a like for like basis. In other words, what is required is a comparison between the original valuation (exclusive of GST) of the 10 remaining properties to the amended valuation (exclusive of GST) of the 10 remaining properties. 11. Therefore, the correct comparison method involves taking the original valuation excluding GST of the 14 properties ($10,203,774) and subtracting from that amount the valuation excluding GST of the 4 completed properties ($2,067,000), which results in the original valuation excluding GST of the 10 remaining properties ($8,136,774). That amount is $204,136 below the amended valuation excluding GST of the 10 remaining properties. As a result, the amended valuation was above expectations, not significantly below expectations. 12. Accordingly, VA Holdings has not established that the proviso in the Note has any operation in the present circumstances. 13. For these reasons, subject to the findings to be made in relation to the other issues I am to determine as set out below, in my opinion VA Holdings is liable to pay the Cancellation Fee of $116,050 to Global Capital. ISSUE 2: IS THE CANCELLATION FEE VOID AS A PENALTY? Submissions of VA Holdings 1. VA Holdings submitted that, if the Cancellation Fee is payable by it, it ought to be void as a penalty on the grounds that it was extravagant and unconscionable. 2. VA Holdings submitted that the Cancellation Fee was purely a penalty for VA Holdings not proceeding with the loan as varied by Ingwersen and was exorbitant because the Cancellation Fee was equal to the full Facilitation Fee which would be payable to Global Capital from the loan proceeds upon drawing down a workable loan. According to VA Holdings, the Cancellation Fee was unconscionable because it maintained VA Holdings' obligation to pay the full amount of the Facilitation Fee in circumstances where Global Capital had no obligation to obtain a workable loan and it was not obtained. 3. VA Holdings characterised the Cancellation Fee in the Mandate to Act as neither a success fee nor a fee for Global Capital's services. Submissions of Global Capital 1. Global Capital submitted that the Cancellation Fee does not serve to punish VA Holdings because it is not a charge in addition to the Facilitation Fee, and simply allows for Global Capital to be paid a certain percentage of the Facilitation Fee at agreed milestones in reflection of the work that it had performed in the event the loan did not come to fruition as a result of the decision of VA Holdings not to proceed with it. 2. Global Capital stated that in the situation where the loan is cancelled after the Formal Letter of Offer is issued but before any security documents are issued, the Cancellation Fee provision actually serves as a 50% discount in respect of the percentage of the Facilitation Fee payable to Global Capital, which would otherwise be payable in full under the terms of the Mandate to Act and is therefore the opposite of being punitive in nature. 3. Global Capital contends that VA Holdings failed to meet the onus it had to demonstrate that the Cancellation Fee was extravagant and unconscionable in the sense of being out of all proportion with the interests Global Capital was trying to protect. Legal principles 1. The principles relevant to determining whether a contractual stipulation is a penalty were recently summarised by Robb J in Bellas v Powers [2023] NSWSC 1198 at [69]-[70] as follows: 69 In Australia Capital Financial Management Pty Ltd v Linfield Developments Pty Ltd; Guan v Linfield Developments Pty Ltd [2017] NSWCA 99; (2017) 18 BPR 36,683 (Guan v Linfield Developments Pty Ltd), Ward JA (as her Honour then was) explained the different approaches adopted by the High Court to the test as to when a collateral stipulation is a penalty (with the agreement of McColl and Gleeson JJA) at [367], in the following terms: The different approaches of the High Court to this question in Paciocco (HCA) may be summarised as follows. Kiefel J (as her Honour then was), with whom French CJ agreed (at [2]), identified (at [29]) the test as being "whether a provision for the payment of a sum of money on default is out of all proportion to the interests of the party which it is the purpose of the provision to protect" and noted that this interest "may be of a business or financial nature". Gageler J framed the enquiry (at [166]) in terms of whether the impugned stipulation "is properly characterised as having no purpose other than to punish", stating that this compelled "a more tailored" enquiry than the legitimate interest approach adopted in Cavendish. His Honour expressly noted (at [166]) that this was not to say that the differently framed enquiries "might not lead to the same result". Keane J stated (at [270]) that "the question to be addressed in order to distinguish a penalty from a provision protective of a legitimate interest" was "whether the sum or remedy stipulated as a consequence of a breach of contract is exorbitant or unconscionable when regard is had to the innocent party's interest in the performance of the contract". Nettle J, though in dissent as to the application of the relevant principles, took a broadly similar approach to that of Keane J. His Honour said (at [319]) that "the Andrews and Cavendish formulations accord with Dunlop" and viewed (at [322]) the matter as turning on whether the case was a straightforward case in which the Dunlop tests would be perfectly adequate to resolve the issues on appeal, or whether the case "should be seen as one of the more complex types of cases referred to in Cavendish which necessitate considerations beyond a comparison of the agreed sum and the amount of recoverable damages". His Honour concluded (at [334]) that there was "no reason why the matter should not be determined in accordance with the Dunlop tests" and proceeded on that basis. 70 Her Honour then, at [368], explained the approach that the Court should take to the issue in determining whether a collateral provision is a penalty, as follows: With that in mind, it is necessary, first, to identify the interests which are sought to be protected by the impugned stipulation; and, second, to ask whether the impugned stipulation was a stipulation collateral or accessory to another stipulation (the primary stipulation) which imposed an additional detriment upon SXG to the benefit of Linfield in the sense that (consistently with Andrews) it was in the nature of a security for and in terrorem of the satisfaction of the primary stipulation in a manner that (consistently with Paciocco (HCA) and Cavendish) was out of all proportion to the interests of Linfield intended to be protected by the primary stipulation. Consideration 1. VA Holdings' argument is premised on the understanding that the obligation of Global Capital was to secure a workable loan for VA Holdings, not simply to obtain a formal letter of offer. 2. However, such a submission cannot be maintained in the circumstances where, as I have stated above, the service being provided by Global Capital as the broker was to use its reasonable efforts to obtain approval for a finance facility as detailed in the Schedule. Accordingly, the Cancellation Fee simply serves to outline the amounts payable by VA Holdings to Global Capital in exchange for Global Capital's services already provided, upon satisfaction of certain milestones in circumstances where the facility ultimately is not drawn down because VA Holdings decided not to proceed for whatever reason, subject to the proviso in the Note. Once the milestone of the issuance of the Security Documents by the lender was reached, the parties agreed that Global Capital would receive payment of its facilitation services in full. 3. Starting with Ward JA's (as her Honour, the President, then was) proposition in Australian Capital that the court should first identify the interests which are sought to be protected by the impugned provision, the interest that Global Capital is securing by charging the Cancellation Fee is so that it receives payment for its facilitation services rendered to VA Holdings in the event that VA Holdings decides not to proceed for whatever reason. 4. The second step stated by Ward JA in Australian Capital, is to ask whether the impugned stipulation was a stipulation collateral or accessory to another stipulation (the primary stipulation) which imposed an additional detriment. That second step cannot be satisfied in this case. 5. The Mandate to Act did not provide for any events of default or oblige VA Holdings to enter into the facility agreement on the terms offered. Rather, the Mandate to Act simply set out the contractual obligations of Global Capital to use reasonable efforts to obtain approval for a finance facility that met VA Holdings' requirements, in exchange for which it would be paid fees. The Cancellation Fee is not additional to the Facilitation Fee, it simply replaces it in circumstances where VA Holdings decides not to proceed and then that fee is only calculated on a graduated basis depending on the particular milestone reached. The Cancellation Fee outlined different amounts to be paid to Global Capital in satisfaction of certain milestones, which were fully satisfied once there was issuance of security documents. 6. Therefore, there exists no primary stipulation to which the impugned stipulation is collateral or accessory. 7. Accordingly, the Cancellation Fee does not serve to punish VA Holdings, cannot be considered penal in nature and, absent any evidence from VA Holdings to the contrary, cannot be considered out of all proportion with the interests Global Capital was seeking to protect. 8. For these reasons, the Cancellation Fee is not void as a penalty. 9. This holding also disposes of VA Holdings' case of unconscionable conduct within the terms of ss 20 and 21 of the ACL. 10. This is evidenced in the following exchange between counsel for VA Holdings and me during the hearing (T53-54): HIS HONOUR: If it's a penalty it's unenforceable REUBEN: Yes. HIS HONOUR: so why do I need to make any findings whatsoever about the Australian Consumer Law, sections 20 and 21? REUBEN: That's what I'm getting to, your Honour. I think your Honour probably would not have to, because in footnote 38, unconscionable within the meeting, on p 12 of my written submissions HIS HONOUR: But your reasoning is this: if you find it's a penalty, then it is unconscionable. REUBEN: Yes. And therefore it comes within the unwritten law. HIS HONOUR: Therefore it comes within the unwritten law. But once I've found it to be a penalty, it's unenforceable. REUBEN: That's right. HIS HONOUR: So why do I need to concern myself at all with The Australian Consumer Law sections 20 and 21? Because what extra relief are you getting, under those provisions, that you're not getting by the penalty becoming unenforceable? REUBEN: I accept what your Honour says, and I accept that. I have referred to - in footnote 39 on page 12 - unconscionable conduct, not limited by the unwritten law in 21. HIS HONOUR: The only means by which you're saying it's unconscionable is because it's a penalty. REUBEN: Yes. HIS HONOUR: So I don't need to go any further than finding it's a penalty, on your case. You're not saying, "If your Honour's against me in relation to it being a penalty, then it is unconscionable under sections 20 and 21, for other reasons." You're not mounting a case of that sort. REUBEN: No. HIS HONOUR: You're only mounting it being unconscionable because it's a penalty. REUBEN: Correct. ISSUE 3: WERE THE SERVICES SUPPLIED BY GLOBAL CAPITAL "FINANCIAL SERVICES"? 1. Subdivision A of Division 2 of the Competition and Consumer Act 2010 (Cth) provides for the application of the ACL, including in relation to corporations. 2. Section 131A of the Competition and Consumer Act provides: 131A Division does not apply to financial services (1) Despite section 131, this Division does not apply, other than in relation to the following provisions of Schedule 2 as they apply as a law of the Commonwealth, to the supply, or possible supply, of services that are financial services, or of financial products: … (2) Without limiting subsection (1): (a) … (b) Part 2-3 of Schedule 2 does not apply to, or in relation to: (i) contracts that are financial products; or (ii) contracts for the supply, or possible supply, of services that are financial services; and 1. Schedule 2 of the Competition and Consumer Act is the ACL. Part 2-3 (ss 23-28) of the ACL contains the unfair contract terms regime. 2. Section 2 of the Competition and Consumer Act gives definitions that financial product has the meaning given by s 12BAA of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) and financial service has the meaning given by s 12BAB of the ASIC Act. 3. Section 12BAA(7)(k) of the ASIC Act provides that a credit facility (within the meaning of the regulations) is a financial product. 4. Regulation 2B of the Australian Securities and Investments Commission Regulations 2001 (Cth) provides that the provision of credit is a credit facility. 5. Section 12BAB(1AA) of the ASIC Act provides that a financial product is a financial service. 6. Section 12BAB(1)(b) of the ASIC Act states that a person provides a financial service if they deal in a financial product. Section 12BAB(7) of the ASIC Act provides that for the purposes of s 12BAB, applying for or acquiring a financial product constitutes dealing in a financial product. 7. Section 12BAB(8) of the ASIC Act provides that arranging for a person to engage in conduct referred to in subsection (7) is also dealing in a financial product, unless the actions concerned amount to providing financial product advice. 8. The actions of Global Capital, as a finance broker, amount to arranging for VA Holdings to apply for a financial product, being the provision of credit by a third-party lender, within the meaning of s 12BAB(8) of the ASIC Act. 9. Accordingly, the ACL (including the unfair contract term regime contained in Part 2-3 of the ACL) does not apply to the financial services provided by Global Capital. 10. If I am wrong in this conclusion for any reason, I will now consider whether the provision in the Mandate to Act for the charging of a Cancellation Fee is an unfair contract term. ISSUE 4: IS THE CANCELLATION FEE UNENFORCEABLE BY GLOBAL CAPITAL AS AN UNFAIR CONTRACT TERM UNDER THE ACL? Submissions of VA Holdings 1. VA Holdings alleged that the Cancellation Fee provision under the Mandate to Act was an unfair contract term and therefore is void and unenforceable. 2. VA Holdings submitted that paragraph (g) of the Mandate to Act which provided for the payment of the Cancellation Fee caused a significant imbalance between the rights and obligations of VA Holdings and Global Capital, for the following reasons: 1. the Cancellation Fee is equal to the full Facilitation Fee which would be payable to Global Capital upon obtaining a workable loan; 2. in circumstances where no workable loan was obtained, the Cancellation Fee maintained VA Holdings' full obligation to pay Global Capital when there was no commensurate obligation on Global Capital to have obtained a workable loan for VA Holdings; 3. the Cancellation Fee remained payable in circumstances where the cause of the inability to obtain a workable loan could lie at the hands of the third-party lender; and 4. in the event that the loan did not proceed, there was a total lack of consideration provided by Global Capital. 1. VA Holdings further submitted that the payment of the full Facilitation Fee extends beyond protecting Global Capital's legitimate interests and would cause significant detriment to VA Holdings in circumstances where VA Holdings did not obtain a workable loan. Submissions of Global Capital 1. Global Capital submitted that the Mandate to Act was not a standard form contract to which the unfair contract terms regime in the ACL applies on the following grounds: 1. Global Capital did not have all or most of the bargaining power relating to the transaction because VA Holdings was represented by an agent, Mr Xiao, in engaging the services of Global Capital and Mr Vu was himself a sophisticated businessman capable of negotiating the terms of the Mandate to Act. 2. The Mandate to Act was not prepared by one party before any discussion relating to the transaction occurred between the parties, the parties having engaged in correspondence prior to the Mandate to Act, including to obtain the requirements of VA Holdings which were then reflected in the Schedule to the Mandate to Act. 3. VA Holdings was not, in effect, required either to accept or reject the terms of the Mandate to Act in the form in which they were presented, with Mr Vu and Mr Xiao both capable of negotiating the terms and no evidence that they raised any concerns regarding those terms. 4. VA Holdings was given an effective opportunity to negotiate the terms of the Mandate to Act, through Mr Vu and Mr Xiao and there is no evidence that they attempted to do so or raised any concerns regarding the terms of the Mandate to Act. 5. The terms of the Mandate to Act take into account the specific characteristics of VA Holdings, being those set out in the Schedule to it. 1. Further, Global Capital submitted that the Cancellation Fee did not cause significant imbalance in the parties' rights and obligations arising under the Mandate to Act, as, if it was to be declared void and unenforceable, Global Capital would not be able to receive fees for its services properly rendered if either VA Holdings, Mr Vu or Ingwersen cancelled the loan agreement for any reason. 2. Global Capital submitted that the Cancelation Fee was reasonably necessary in order to protect its legitimate interest in being able to claim a certain percentage of the Facilitation Fee at agreed milestones, thereby enabling Global Capital to receive compensation for the services it rendered in the event that the loan did not proceed. Legal principles 1. Section 23 of the ACL provides: 23 Unfair terms of consumer contracts and small business contracts (1) A term of a consumer contract or small business contract is void if: (a) the term is unfair; and (b) the contract is a standard form contract. 1. Section 23(4) of the ACL provides: (4) A contract is a small business contract if: (a) the contract is for a supply of goods or services, or a sale or grant of an interest in land; and (b) at the time the contract is entered into, at least one party to the contract is a business that employs fewer than 20 persons; and (c) either of the following applies: (i) the upfront price payable under the contract does not exceed $300,000; (ii) the contract has a duration of more than 12 months and the upfront price payable under the contract does not exceed $1,000,000. 1. Section 27 of the ACL provides: 27 Standard form contracts (1) If a party to a proceeding alleges that a contract is a standard form contract, it is presumed to be a standard form contract unless another party to the proceeding proves otherwise. (2) In determining whether a contract is a standard form contract, a court may take into account such matters as it thinks relevant, but must take into account the following: (a) whether one of the parties has all or most of the bargaining power relating to the transaction; (b) whether the contract was prepared by one party before any discussion relating to the transaction occurred between the parties; (c) whether another party was, in effect, required either to accept or reject the terms of the contract (other than the terms referred to in section 26(1)) in the form in which they were presented; (d) whether another party was given an effective opportunity to negotiate the terms of the contract that were not the terms referred to in section 26(1); (e) whether the terms of the contract (other than the terms referred to in section 26(1)) take into account the specific characteristics of another party or the particular transaction; (f) any other matter prescribed by the regulations. 1. Section 24 of the ACL sets out the meaning of unfair, as follows: 24 Meaning of unfair (1) A term of a consumer contract or small business contract is unfair if: (a) it would cause a significant imbalance in the parties' rights and obligations arising under the contract; and (b) it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and (c) it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on. (2) In determining whether a term of a contract is unfair under subsection (1), a court may take into account such matters as it thinks relevant, but must take into account the following: (a) the extent to which the term is transparent; (b) the contract as a whole. … (4) For the purposes of subsection (1)(b), a term of a contract is presumed not to be reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term, unless that party proves otherwise. 1. In Australian Competition and Consumer Commission v CLA Trading Pty Ltd [2016] FCA 377, Gilmour J at [54] summarised some of the principles from the unfair contract terms regimes in Victoria and the United Kingdom in the following way (citations omitted): (a) the underlying policy of unfair contract terms legislation respects true freedom of contract and seeks to prevent the abuse of standard form consumer contracts which, by definition, will not have been individually negotiated; (b) the requirement of a "significant imbalance" directs attention to the substantive unfairness of the contract; (c) it is useful to assess the impact of an impugned term on the parties' rights and obligations by comparing the effect of the contract with the term and the effect it would have without it; (d) the "significant imbalance" requirement is met if a term is so weighted in favour of the supplier as to tilt the parties' rights and obligations under the contract significantly in its favour — this may be by the granting to the supplier of a beneficial option or discretion or power, or by the imposing on the consumer of a disadvantageous burden or risk or duty; (e) significant in this context means "significant in magnitude", or "sufficiently large to be important", "being a meaning not too distant from substantial"; (f) the legislation proceeds on the assumption that some terms in consumer contracts, especially in standard form consumer contracts, may be inherently unfair, regardless of how comprehensively they might be drawn to the consumer's attention; and (g) in considering "the contract as a whole", not each and every term of the contract is equally relevant, or necessarily relevant at all. The main requirement is to consider terms that might reasonably be seen as tending to counterbalance the term in question. Consideration 1. In order for a clause of the Mandate to Act to be declared void, the Mandate to Act must be a "small business contract" and it must be a "standard form contract" as both those expressions are defined in the ACL. 2. It was not in dispute that the Mandate to Act was for a supply of services, at the time the Mandate to Act was entered into VA Holdings was a business that employed fewer than 20 persons, and that the upfront price payable under the Mandate to Act was $3,300 for the Engagement Fee. 3. The onus was on Global Capital to prove that the Mandate to Act was not a standard form contract (s 27(1) of the ACL). It has not done so. I am satisfied that Global Capital had most of the bargaining power relating to the Mandate to Act, that the Mandate to Act was prepared by Global Capital before any discussion relating to the transaction, that there is no evidence of any real negotiation of the Mandate to Act but only evidence of minor discussion between Mr Xiao and Global Capital representatives before it was executed on 24 January 2020. To the extent that there was any customisation of the Mandate to Act to take account the specific characteristics of VA Holdings and the proposed facility, it was only present in a minor way in the Schedule. The logical inference is that the paragraphs (a) to (g) were standard terms which formed part of the Mandate to Act attaching to each Indicative Funding Proposal issued by Global Capital. 4. Accordingly, Global Capital has not rebutted the presumption that the Mandate to Act was a standard form contract. 5. But I am not satisfied that paragraph (g) of the Mandate to Act is an unfair term. 6. Contrary to the submissions of VA Holdings, the obligation of Global Capital was not to obtain a workable loan, it was to use its reasonable efforts to obtain approval for a finance facility. The correct characterisation of the Cancellation Fee is that it secures payment to Global Capital for the services it provided and cannot be construed as causing any significant imbalance in rights and obligations of the parties. 7. In my view, the Cancellation Fee was reasonably necessary in order to protect the legitimate interests of Global Capital to be paid for the services that it rendered in the event that the loan did not proceed due to the decision of VA Holdings. Without that term, Global Capital would be left without payment for the services that it was engaged to provide. There is nothing unfair for Global Capital to seek to secure that payment in the manner provided in paragraph (g) of the Mandate to Act. 8. Accordingly, I reject VA Holdings' claim for relief under the s 23 of the ACL. ISSUE 4: IS MR VU JOINTLY AND SEVERALLY LIABLE WITH VA HOLDINGS TO PAY THE CANCELLATION FEE TO GLOBAL CAPITAL? 1. Having found that VA Holdings is liable to pay the Cancellation Fee to Global Capital, that the provision to pay the Cancellation Fee was not a penalty, that the ACL does not apply but even if it did, the provision to pay the Cancellation Fee is not an unfair term, I turn now to consider the final issue of the liability (if any) of Mr Vu as guarantor under the Mandate to Act. Submissions of Global Capital 1. Global Capital submitted that by reason of Mr Vu executing the Mandate to Act as guarantor, VA Holdings and Mr Vu are jointly and severally liable for any amount owing under the Mandate to Act to Global Capital by reason of paragraph (b) which states that "the Borrower and Guarantor are jointly and severally liable for any fees incurred by, or payable to GCC in relation to this finance facility transaction". 2. Global Capital points to the relevant parts of the Schedule and Acceptance page to the Mandate to Act which provide: By accepting this offer the Borrower & Guarantor also acknowledges and agrees that the Mandate to Act is a legally binding contract between you and us. I declare that I am duly empowered as the Borrower, or Guarantor, or on behalf of the Borrower and Guarantors, to execute this document and that all information provided is true and accurate at the date of signature. I further declare that there are not any factors which remain undisclosed to GCC which may impair or impede loan approval. 1. Global Capital's claim is premised on the fact that Mr Vu signed the Schedule and Acceptance of the Mandate to Act in his capacity as director and secretary of VA Holdings, as well as in his capacity as guarantor, as he did not strike through the word "guarantor" immediately below the signature block on the Schedule and Acceptance page. Submissions of Mr Vu 1. Mr Reuben submitted that the Mandate to Act did not specifically identify Mr Vu as a guarantor, contending that the principles of construction relating to a guarantee is that liability of a surety must be strictly proven. Accordingly, in circumstances where the relevant instrument was not drafted by either VA Holdings or Mr Vu, he contends that there is no warrant for an imputation that Mr Vu was agreeing to be personally bound by signing the document. Legal principles 1. In Pannozzo v Fowler [2013] NSWCA 269, Hammerschlag J (as his Honour then was, and with whom Ward and Leeming JA agreed) at [59] stated: The determination whether a signatory has assented to be personally bound turns on the objective intention as to that issue, having regard to the construction of the document as a whole and the surrounding circumstances; see Clark Equipment Credit of Australia Ltd v Kiyose Holdings Pty Ltd (1988) 21 NSWLR 160. 1. In TW Timber Treatment Pty Ltd v Giddings [2022] VSCA 147, McLeish, Forrest and Macaulay JJA at [43] recently summarised the principles applicable to whether a signatory to a contract intended to be bound personally as a guarantor as follows (citations omitted): Akin to the way the meaning of the terms of a contract are construed, a person's intention to be legally bound by any contract, including a contract of guarantee, is to be determined objectively and not by reference to uncommunicated subjective motives or intentions of the parties. The intention is manifested in light of 'the subject matter of the agreement, the status of the parties to it, their relationship to one another, and other surrounding circumstances'. 1. TW Timber at [49] also acknowledged that a signature on a document may be applied for a limited purpose or in a qualified way and in deciding whether a person should be bound regardless of any such qualification, the court referred to the statements of Giles J in Clark Equipment Credit of Aust Ltd v Kiyose Holdings Pty Ltd (1989) NSWLR 160 at 174 (which have been cited with approval in Owners v Strata Plan No 66375 v King [2018] NSWCA 170 at [223] and Singh v De Castro; Dhaliwal v De Castro; Brar v De Castro [2017] NSWCA 241 at [86]), as follows: The proper approach is to inquire whether there is to be found an intention that the signatory be personally bound to the contract evidenced in the document, meaning thereby not a subjective intention but an intention to be found objectively, notwithstanding a qualification attached to the signature. That intention, or lack thereof, is to be found upon the construction of the document as a whole, including but not being limited to the qualification attached to the signature, in the light of the surrounding circumstances to the extent to which evidence thereof is permissible. The inquiry is not limited to consideration of the signature and its qualification in order to determine whether or not the signature indicates an assent to be personally bound. 1. The statement of principle by Giles J in Clark was followed by the Full Court of the Supreme Court of South Australia in Harris v Burrell & Family Pty Ltd [2010] SASCFC 12 at [20], in which case the court noted that the approach taken in Kiyose is consistent with the reasoning of McHugh JA in Scottish Amicable Life Assurance Society v Reg Austin Insurances Pty Ltd (1985) 9 ACLR 909 at 923-924. 2. Relevantly, in Harris, the South Australian Full Court found that a director who executed a loan agreement which incorporated a guarantee by the director of the corporation's obligations under the agreement, had signed the agreement both in his capacity as director and also in his personal capacity. Consideration 1. The parties to the Mandate to Act are stated to be Global Capital (defined as "GCC") and VA Holdings (defined as the "Borrower"). Mr Vu was not specifically identified in the document before it was signed. 2. The Mandate to Act contains multiple references to a "Guarantor", in paragraphs (b), (g), (i) and the Schedule and Acceptance. However, "Guarantor" is not defined in the Mandate to Act. 3. The further reference to "Guarantor" is also contained in the words immediately below the signature block in the Schedule and Acceptance, which reads: "(Sole Director and Secretary/Director/Secretary/Guarantor) *cross out inapplicable". 4. Mr Vu did not cross out any of these titles. The titles of sole director and secretary of VA Holdings are true for Mr Vu. There was no reason to think that the title of guarantor did not similarly apply to him when he failed to cross it out. 5. There is no evidence that the precise terms of the signature block were ever specifically drawn to the attention of Mr Vu. Mr Vu is, however, an educated, experienced and sophisticated businessman who demonstrated in the witness box that he is perfectly capable of looking after his own interests, including by reading the documents he signed. 6. In this case, by reason of the references in the Mandate to Act to the Guarantor (including by being jointly and severally liable with VA Holdings), there were unequivocal indications that the intended transaction was one of personal guarantee by Mr Vu and it would lack all commercial utility for an agreement incorporating a guarantee if the named guarantor who signed the agreement without qualification was not liable on the guarantee: NEC Information Systems Australia Pty Ltd v Linton (1985) NSW ConvR 55-240 at 56,281, cited in Singh at [91]. 7. Indeed, Mr Vu was also the sole shareholder of VA Holdings. Mr Vu also demonstrated from his involvement in the correspondence about the transaction that he was significantly invested in the day-to-day operations of VA Holdings, including the arrangements with Global Capital. Further, at the time of execution of the Mandate to Act, Mr Vu had, by way of the Indicative Funding Proposal, indicated a willingness to act as guarantor under the prospective loan agreement. This appeared in the references to "Directors Personal Guarantees" as part of the security to be taken by the Lender. 8. The terms of the Mandate to Act, including several references to a "Guarantor" and that apparent capacity in which Mr Vu executed the Mandate to Act, lead me to the conclusion that, by his signature, Mr Vu's intention, objectively ascertained, was to assent to be personally bound as guarantor of VA Holdings' obligations to pay the fees payable to Global Capital. 9. For this reason, VA Holdings and Mr Vu are jointly and severally liable to pay the Cancellation Fee of $116,050 to Global Capital. CONCLUSION 1. The parties are to bring in Short Minutes of Order reflecting the reasons expressed in this judgment, including a calculation of the interest claimed to the date of judgment. 2. I will deal with costs should it be necessary. I will stand the matter over to a convenient date for directions in order for the parties to confer regarding the appropriate costs order and to make submissions in the event that agreement cannot be reached. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 08 December 2023