FISCHER v ELDERS LENSWORTH FINANCE LTD SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL PRIESTLEY, HANDLEY and CRIPPS JJA 25 September 1992, 25 September 1992 [1992] NSWCA 68 CONTRACT — oral — mortgage of land — not intended to be binding until documented. One of two guarantors of a mortgage loan and an executive of the finance company lender made an oral arrangement for outstanding claims to be settled upon payment of a sum of money, part immediately and the balance in a year's time. The balance was to be secured by a charge over the guarantor's home protected by a caveat, and by a bill of sale and mortgage of lease in respect of a shop business. The borrower and guarantors sought specific performance. The trial judge held that there was no binding contract because the parties contemplated that their solicitors would document the transaction. On appeal Held: The trial judge was correct. Handley JA This is an appeal by the plaintiffs from a decision of McLelland J in the Equity Division which was given as long ago as 22 December 1989. The plaintiffs in the proceedings were a borrower and two individuals, Mr and Mrs Fischer, who were guarantors of the borrowers' obligations to the defendant, Elders Lensworth Finance Ltd, under a deed of 5 August 1986 and the securities referred to therein. The plaintiffs applied for specific performance of an oral contract said to have been made between Mr Fischer on behalf of the plaintiffs and Mr Ryan on behalf of the defendant in the course of two conversations in December 1986. McLelland J made findings of fact substantially in favour of the plaintiffs so far as the terms of the relevant conversations are concerned. I am content to adopt his findings of fact without repeating them. They are set out in his Honour's reasons for judgment which is before us in the appeal papers. Having found that an oral arrangement was made between the gentlemen concemed, his Honour went on to find that that arrangement was not legally binding in accordance with the well established principles summarised and restated by the High Court in Masters v Cameron (1954) 91 CLR 353. In particular, his Honour inferred from the conversations, in the light of the surrounding circumstances, that both Mr Fischer and Mr Ryan contemplated that their respective solicitors were to be instructed, and although important provisions of the proposal had been agreed upon in principle, neither party intended to be legally bound until the details had been settled between the solicitors. The relevant conversations found by the Judge were as follows. In the first conversation Mr Fischer said to Mr Ryan: " 'There is still about $6000 to come from the agent for the deposit on Victoria Road. If we leave out the legals and the interest of about $21,500, and say we split the land tax and the maintenance down the middle, that's about $8000, would then owe you about $38,000. I would pay you $20,000 if you discharged the SRA submortgage and the other $18,000 within a year.' to which Mr Ryan replied: 2 UNREPORTED JUDGMENTS 'Let me think about it, Pll get back to you'." Mr Fischer deposed that the second conversation was to the following effect: " 'T said: 'Have you come to any decision about what I have to pay?' Mr Ryan said: 'Yes. Your offer is accepted. We'll take the $38,000 in full satisfaction, $20,000 immediately on discharge of the SRA submortgage and $18,000 within a year. What security can you give us for the $18,000?' I said: "You can have a caveat over my house.' Mr Ryan said: 'Good. But we will also want a bill of sale over your cake shop business and a mortgage of the lease of the shop. I said: 'Okay'. Mr Ryan said: 'Also we would want interest on the $18,000 at 18% to be paid up front." I said: 'Okay I will agree to all that'." It is clear therefore that the arrangement provided for the execution of a bill of sale over the business, and a mortgage of the lease of the shop. The preparation of the mortgage of the lease would require the lease to be produced and examined to ensure that the mortgage would not be a breach of covenant. The agreement that the lender be entitled to lodge a caveat against the title to Mr Fischer's home necessarily involved the preparation of an equitable charge over that property. The evidence showed that the parties contemplated that such document would have to be prepared. It is also clear, although this matter was not relied upon either at the trial or by the respondent on the appeal, that the arrangement involved the disposition of interests in land so that it was not legally enforceable, if the point was taken, unless it was either evidenced in writing or supported by evidence of part performance. An agreement to grant a mortgage of either freehold or leasehold property is within s54A of the Conveyancing Act. This was decided, if it had to be decided, by the Privy Council in Dalgety Co Ltd v Gray (1919) 26 CLR 249. This matter was not relied upon, as I said, either at the trial or on the appeal but it reinforces the conclusion that these parties would naturally contemplate that solicitors would be instructed to carry out the arrangement both because of its complexity and because interests in land were involved. This matter, therefore, tends to support the conclusion of the trial judge. In my opinion, the appeal should be dismissed with costs. Priestley JA I agree. Cripps JA I agree. Priestley JA: The Court's order, therefore, is that the appeal is dismissed with costs. Counsel for the Appellant: C EVATT/JM HARRIS Instructed by: LIPTON and SANKEY Counsel for the Respondent: J KELLY/P TILLMAN Instructed by: GADENS RIDGEWAY