McBride v Poolman & Associates Pty Ltd SUPREME COURT OF NEW SOUTH WALES — COURT OF APPEAL SHELLER, BEAZLEY JJA and GILES AJA 6 September 1996 [1996] NSWCA 346 Finance broker — commission — entitled if offer of finance broadly reflected proposal for finance — on facts, held it did not. Giles AJA. In the District Court the respondent Peter Poolman and Associates Pty Limited, now known as Duceino Pty Limited, claimed agreed commission or remuneration on a quantum meruit from the appellants or some combination of the appellants, Doctors William and Patricia McBride and McBride Pastoral Company Pty Limited, in relation to services provided as finance broker. On 7 May 1993 His Honour Judge Craigie QC ordered that there be entry of judgment in favour of the respondent in the sum of $34,251.24, which comprised $27,000 as the agreed commission plus interest, and that the appellants pay costs including costs on an indemnity basis from 4 July 1991. The order for indemnity costs was, we have been told, because of an offer of compromise. His Honour found that the relevant term of the oral contract between the parties included that commission would become payable on receipt of an offer broadly reflecting the proposal for finance which the respondent was to prepare and submit on behalf of the appellants. That finding flowed from his Honour's acceptance of evidence given by Mr Peter Poolman that he said to Dr William McBride that the fee was deemed to have been earnedupon a receipt of a letter of offer or letters of offer which broadly reflected the terms and conditions outlined in the proposal which they would mutually agree upon. His Honour held that offers from Barclays Australia Limited and Primary Industry Bank of Australia, which I will refer to respectively as Barclays and PIBA, broadly reflected the relevant proposal, and rejected a defence that the respondent was precluded from recovering the agreed commission by s 7(1) of the Credit (Finance Brokers) Act 1984 ('the Act') for want of a written engagement. On appeal the appellants abandoned their challenge to the finding as to the term of the contract, but contended that his Honour was in error in holding that the offers from Barclays and PIBA broadly reflected the terms of the proposal and in rejecting the defence under the Act, and also contended that, as established by the subsequent decision of this Court in Milosevic v Government Insurance Office of New South Wales (1993) 31 NSWLR 323, there had been no jurisdiction to make an order for indemnity costs. The respondent sought to support his Honour's conclusion as to broad reflection and, on perhaps wider grounds, the rejection of the defence under the Act. While conceding that at the time there had been no jurisdiction to make an order for indemnity costs, it argued that remedial legislation passed after the decision of this Court may have cured the position or that this Court could apply the law as at the present time and make an order for indemnity costs. In addition, it filed a notice of contention in which it sought to support his Honour's substantive result by contending that his Honour should have found that it was an implied term of the agreement between the parties that theappellants would pay the respondent a fee calculated on a particular 2 UNREPORTED JUDGMENTS percentage basis in the event that the appellants obtained finance by virtue of their using the benefit of the respondent's services, and that it should have been found that that had occurred on the receipt of a particular letter of offer from Westpac Banking Corporation. In my opinion his Honour was in error in holding that the offers from Barclays and PIBA broadly reflected the proposal, and for the reasons I will explain that is determinative of the appeal. The proposal was apparently prepared about 8 July 1985. In its summary page it expressed a loan requirement of $4,000,000. That figure appeared as the total of the figures set out seriatim for the utilisation of the facility, utilisation being principally payment out of existing creditors together with an amount of working capital and in effect the expenses of obtaining the finance. The proposal itself described the purpose of the loan as refinancing and providing working capital for a quality agricultural aggregation based in New South Wales, stated that the required facility was of $4,000,000 comprising $3,500,000 of a medium term loan and $500,000 of a 'Revolver', and then set out against marginal headings the desiderata for term, interest and security. Then under another heading were set out in three paragraphs what were described as special conditions. The term was 'Three (3) years interest only with an option to extend for a further ten (10) years on an amortised basis, structured to suit the client's cash flow.' Interest referred to a negotiated rate based on a margin over the AMBA rate, and addedother matters to which it is unnecessary to refer. Against the heading 'Security' there was reference to first registered mortgages over various assets and a second registered mortgage over Barwon Station then subject to an existing charge by way of vendor finance. The special conditions were as follows: 1. The borrower to retain the right to pay out the existing first mortgage over "Barwon Station" through increasing the approved loan facility by $1.2 million dependent on the lodgement of first registered mortgage security in favour of the bank. 2. The borrower to have a commitment from the bank to increase the approved facility by an amount of up to $0.5 million to cover the purchase of the property "Corella Station" at Bourke plus required livestock. This commitment to be contingent on an approved valuation and the registering of first mortgage security over the property in favour of the bank. 3. The aforementioned possible extensions to the approved facility to be provided under the same terms and conditions as are applicable to the original loan facility. Loan maturities to be simultaneous. The Barclays offer was primarily by a letter dated 12 September 1985, by which there was offered finance totalling $4,400,000 comprising $3,000,000 plus a further $500,000 for the purchase of Corella Station and required livestock. There was also a letter from Barclays dated the same date, 12 September 1985, by which there was offered a facility of $250,000. The division between these amounts was not explained. The offer from PIBA came initially in a letter of 25 September 1985 offering finance of $4,700,000, and was apparently replaced by an expanded offer by a letter dated 27 September 1985 of the same amount of money. Two later letters of 3 and 4 October 1985 made some amendments to the offer in the letter of 27 September 1985, none of which is presently material. His Honour was invited to treat 'broadly', in consideringwhether the offers broadly reflected the proposal, as meaning substantially. He observed that he did not on the material before him find that it contained what he described as that degree of limitation. He then said — URJ McBride v Poolman & Associates Pty Ltd (Giles AJA) 3 There were three items of main contention as to why those offers were not broadly reflective of the proposal, they were the interest rate and payment, the term and amortisation and to some extent the word extension. On reviewing the interest repayments and the terms and the amortisation extension considerations I come to the conclusion that the offers are broadly reflective of the proposal. I am comforted in coming to that conclusion having heard the evidence of Mr Nottle who has wide experience in banking and I do not think it was controverted when he indicated in terms that the practices of banking then and now were not always that one would achieve absolutely a scheme where there would be fixed interest only for 3 years and then a 10 year amortised extension. I am also mindful of the expression used in the proposal in talking about amortisation reductions where it talks in terms of 3 years to suit the cash flow. To suit the cash flow is a wide expression and it is difficult to see how anyone could reasonably anticipate at any stage in 1985 when these matters were current that a three year fixed interest when ten years amortised subject to cash flow of course would be anticipated as being forthcoming in the terms of an offer. Quite common throughout those considerations are the considerations of interest and, more importantly, the periodic review of the facilities being afforded though it is not necessary to consider that the facility taken up eventually by the defendants from Westpac was subject also to annual review. There can be no doubt that complete correspondence between the offers and the proposal could not be expected, and that no doubt is why Mr Poolman had expressed himself in terms of broad reflection. I do not think it profitable to substitute in the phrase used another word such as 'substantially'. It is enough, and I consider that his Honour did this, to take the words 'broadly reflecting' and to apply them to the offers and the proposal. We were urged by the respondent to pay regard, in so doing, to what I will summarise as the surrounding circumstances. Inbrief, the submission was that there was ambiguity, not in the sense of two or more possible meanings but in the sense of uncertainty of application, in the words 'broadly reflecting', and that that ambiguity was open to elucidation by regard to evidence of the surrounding circumstances within the principle discussed in Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352 and in particular in the light of the statement in DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 429, that a court may admit evidence of surrounding circumstances in the form of mutually known facts to identify the meaning of a descriptive term and may admit evidence of the genesis and objectively the aim of the transaction to show that the attribution of a strict legal meaning would make the transaction futile. It was put that the circumstances revealed by the evidence were that the finance was required, and known by all concerned to be required, to meet an immediate need and overcome pressing financial stress, with no present intention of taking up the so-called extensions, so that the emphasis on an immediate need with no more than the prospect of extending the finance at a reasonably distant time enabled a more generous view of what constituted broad reflection. I have considerable doubt whether it is appropriate to approach the agreement between the parties in that way, but it seems to me that even if one does so the result at which his Honour arrived cannot be upheld. The term in the proposal referred an option to extend for a further ten years, and although that was to be structured to suit the client's cash flow it seems quite clear that, at the veryleast, an expression of willingness on the part of the financier to allow a further ten years on an amortised basis structured to suit the client's cash flow was necessary in order even to broadly reflect that aspect of the 4 UNREPORTED JUDGMENTS proposal. The Barclays offer gave a term of three years only, the PIBA offer provided for a term of five years, neither said anything about an option to extend on any basis, and I do not think that indications of willingness to review the borrower's position were a substitute for what the proposal called for. Then the proposal included the special condition concerning payment out of the existing first mortgage over Barwon Station which, despite some infelicity of expression, clearly contemplated that the financier would increase the finance by $1,200,000 in return for first mortgage security over the property. On no view did the Barclays offer contemplate such additional finance. On one view the PIBA offer included an amount of $1,200,000 referable to payment out of the existing first mortgage over Barwon Station. Even if that view be correct, the $1,200,000 devoted to that purpose would detract from the amount offered by PIBA, such that at the least the finance offered would be $500,000 short of that sought by the proposal. The Barclays finance would be even more deficient. The amounts involved are large, but it seems to me that a difference of $500,000 is quite significant. Other matters can be referred to and have been brought out in the respective submissions. Some of those matters would, if looked at alone, be of relatively minor significance such that the offer could be said broadly to reflect the proposal. The two particular matters I have referred to, however, I do not think can be socategorised. Taken together and in the light of the other matters, the conclusion to which I have come, with sufficient confidence to warrant holding that Judge Craigie was in error, is that the Barclays and PIBA offers did not broadly reflect the proposal. I should add that I do not think it matters that Mr Nottle may have given the evidence to which his Honour referred. That evidence demonstrates what I do not think would be in doubt, that one could not expect complete correspondence between an offer and the proposal which produced it, but I do not think that it warrants such an expansive view of the requirement of broad reflection as agreed between these parties that the Barclays and PIBA offers would meet that test. The notice of contention faces a number of difficulties, of which the first is whether the implied term could be found. Although this was not adverted to, it does not seem that the further amended statement of liquidated claim before Judge Craigie relied upon such an implied term. Putting that aside, it would be necessary, even if the implied term were found, to reach findings of fact which gave it operation. All this is beside the point, because I do not think that the implied term could or should be found. It is quite unnecessary to imply the term suggested in order to give the express agreement business efficacy. Moreover, the express agreement upon entitlement to commission if the offer broadly reflected the proposal seems to me to connote that in the absence of broad reflection there would not be an entitlement to commission, so that the implied term would be inconsistent with the contract between the parties andthus forbidden in accordance with the well-known authority of Heimann v The Commonwealth (1938) 38 SR 691. It follows that it is unnecessary to deal with the defence under the Act. The Act is not easy to construe and apply, and I would prefer not to be taken to agree with his Honour's application of it: grappling with the Act can be left for another day. The question of indemnity costs falls away if, as I consider should be the result, the appeal should be upheld, and I would propose that it be upheld. Sheller JA. I agree with the reasons given by Giles AJA for the conclusion that the appeal should be upheld. URJ McBride v Poolman & Associates Pty Ltd (Sheller JA) 5 Beazley JA. I agree. Sheller JA. I would propose that the order of the Court would be appeal allowed, set aside the judgment and orders of his Honour Judge Craigie QC of 26 March 1993, and in lieu thereof order that the plaintiff's claim be dismissed with costs, the respondent to pay the appellant's costs of the appeal but to have a certificate under the Suitors Fund Act if so qualified. Those will be the orders of the Court. Orders accordingly. Counsel for the appellant: Mr M K Meek Solicitors for the appellant: P A Somerset and Co Counsel for the respondent: Mr R W Seton Solicitors for the respondent: Shanahan Tudhope