New South Wales Supreme Court CITATION : Mango Media v Bassal [2004] NSWSC 1253 HEARING DATE(S) : 15 December 2004 JUDGMENT DATE : 15 December 2004 JURISDICTION: Equity JUDGMENT OF : Campbell J DECISION : Caveat extended. Declaration that plaintiff has charge over defendant's land. CATCHWORDS : CONTRACT - consideration - whether illusory consideration for prospective borrower's agreement to give charge to cover lender's costs of considering application - agency - question of fact - PRACTICE - costs - payment of costs on solicitor/client basis when agreement exists to do so CASES CITED : Saunders (Executrix of the Will of Rose Maud Gollie, Deceased) v Anglia Building Society [1971] AC 1004 Mango Media Pty Ltd - Plaintiff PARTIES : Abdullah Bassal - First Defendant Samira Bassal - Second Defendant FILE NUMBER(S) : SC 6558/04 COUNSEL : MW Young - Plaintiff M Sahade - Defendants SOLICITORS : WKA Legal Pty Ltd - Plaintiff Unrepresented - Defendants IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION DUTY JUDGE LIST CAMPBELL J WEDNESDAY 15 DECEMBER 2004 6558/04 MANGO MEDIA PTY LTD v ABDULLAH BASSAL & ANOR JUDGMENT – Ex Tempore (Revised 16 December 2004) 1 HIS HONOUR: This is an application for an order that a caveat be extended until further order and a declaration that the plaintiff has an equitable interest in the form of a charge over the land. Because the amount of money involved is comparatively small, the parties have agreed that it is appropriate to have a final hearing. 2 The plaintiff is a financier. The defendants are people who were desirous of borrowing money. The defendants approached a mortgage broker, Rook & Associates, seeking mortgage finance. The principal person dealing with the matter at Rook & Associates was Mr Nathan Daley. He contacted the plaintiff, and obtained an offer of a loan. The offer took the form of a document headed "Letter of Offer Terms & Conditions." It appears that it was faxed by the plaintiff to the broker, that the broker removed some, but not all, of the portions of the document which identified the financier, and faxed it on to the defendants. The defendants then signed it, on 6 August 2004, and it was returned, through conduits which do not matter, to the plaintiff. The document contains the following terms: "Immediately after we receive a signed copy of this letter of offer the proposed security property/ies will be valued and we will incur or pay legal fees and other expenses including the fees and expenses referred to herein in relation to your proposed loan ("Our fees and expenses"). By signing this letter of offer you hereby agree as follows: 1. To pay all of our fees and expenses from the monies to be advanced at settlement of the loan. 2. In the event the loan does not proceed, either because you elect not to proceed with the loan or because any of our requirements are unable to be satisfied for whatever reason within 60 days of the date of this offer, you agree to immediately upon demand pay to us all of our fees and expenses which we estimate will be $3000.00. This estimate may be more or less depending on the nature of the security property/ies and due to circumstances which are not known to us at this time. 3. That our fees and expenses, if any, together with interest at the rate prescribed by the rules of the Supreme Court of NSW, will create a caveatable and equitable interest and charge in the proposed security property/ies. 4. To secure our above fees and charges and interest thereon until such amounts are paid to us in full you consent to us lodging a caveat on the title to the proposed security property/ies or any other real property in which you have an interest or may at any time in the future acquire an interest. 5. To pay all of our legal fees and expenses on a solicitor and client basis incurred in lodging any caveat or in respect to the recovery of any of our fees and expenses and interest thereon." 3 The document also contained a statement of how the sum being borrowed was made up, which included a brokerage fee and establishment fees for the financier, legal fees for the financier, a valuation estimate, and various other amounts. It included the statement "Max LVR = 70%". 4 As it turned out, upon investigation the security which the defendants had to offer had insufficient equity in it to meet a loan to value ratio of 75 percent. Thus, the loan did not proceed. However, the financier lodged a caveat, claiming an interest in the plaintiff's land to secure its fees and expenses. 5 The terms of the letter of offer on their face purport to create an equitable interest and charge, and the right to caveat. The challenge that is made to the document is not related to this aspect of its terms. The first challenge which is made is that there is illusory consideration for the agreement to give a charge. 6 The principle is well established that consideration is illusory if there is a promise, performance of which is at the sole discretion of the promisor. In the present case, the agreement between the parties needs to be ascertained not only from the letter of offer terms and conditions, but also from the circumstances in which the offer was made, and from implications inherent in those circumstances. There was a term that, upon receipt of the signed letter of offer, the property would be valued. That is, in itself, sufficient to provide a consideration, as a matter of contract law. As well, it seems to me that there is, at the least, an implied promise to give the loan application bona fide consideration. It is true that the precise lending criteria against which the loan would be assessed are not stated in their totality, apart from that there would be a maximum lending value ratio of 70 percent, but that does not preclude there being an implied term that the plaintiff would give bona fide consideration to the application. I reject the submission that the agreement is void by reason of illusory consideration. 7 The second attack on the documentation arises from evidence of the first defendant that he was told by Mr Daley that if he didn't get the loan he would not have to pay "any fees or anything." There is no dispute about Mr Daley having made that statement. The defendants submit that Mr Daley was the agent of the plaintiff, and therefore that the plaintiff is visited with the consequences of that statement. 8 The evidence which has been given by Mr Derums, a director of the plaintiff, is that the plaintiff had not, prior to this transaction, dealt with that particular broker, except possibly if the broker rang making an enquiry about rates, concerning a transaction which did not proceed. It was submitted that the fact that the documentation of 6 August 2004 was sent to the defendant via the broker and with some of the references to the plaintiff removed, demonstrates some sort of a relationship between the plaintiff and the broker. I do not regard that as indicating anything more than that the broker did not wish the client to know the identity of the financier from whom an offer had been received until the deal was made firm. I reject the submission that Mr Daley was the agent of the plaintiff. 9 The third submission is that the agreement is one which should be held void, under the doctrine of non est factum. The first defendant has worked as a welder in the time since he came to Australia from Lebanon, and has only basic English. There is however, evidence that he was dealing with a broker, and that broker was his agent. There is evidence of him having a solicitor, if he wished to consult that solicitor. The standard of evidence which needs to be established to make good a claim of non est factum is a very high one: Saunders (Executrix of the Will of Rose Maud Gollie, Deceased) v Anglia Building Society [1971] AC 1004. I am not persuaded that that defence is made out either. In those circumstances, I make orders 1 and 2 in the summons. 10 Counsel for the plaintiff seeks an order that costs be paid on a solicitor/client basis. Clause 5 of the terms and conditions is in the following terms: "To pay all of our legal fees and expenses on a solicitor and client basis incurred in lodging any caveat or in respect to the recovery of any of our fees and expenses and interest thereon." 11 As these proceedings are ones where there would have been costs occurred "in respect to the recovery of any of our fees and expenses" the contract between the parties should be given effect to. I order the defendant to pay the plaintiff's costs on a solicitor and client basis. 12 These orders may be entered forthwith. ********** Last Modified: 12/21/2004 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.