New South Wales Supreme Court CITATION : Hawke v ACN 117 688 356 Pty Limited [2007] NSWSC 1272 HEARING DATE(S) : 23 and 24 October 2007 JUDGMENT DATE : 24 October 2007 JURISDICTION : Equity Division JUDGMENT OF : Windeyer J at 1 EX TEMPORE JUDGMENT DATE : 24 October 2007 DECISION : Order that the cross claim be dismissed and that the defendant withdraw their caveat CATCHWORDS : CONTRACTS – Offer and acceptance – Where first offer of finance accepted – Where second offer made changing loan amount and minimum term – Held second offer was a withdrawal of first offer PARTIES : Elizabeth Hawke (Plaintiff/Cross-Defendant) ACN 117 688 356 Pty Limited (Defendant/Cross-Claimant) FILE NUMBER(S) : SC 4730 of 2007 COUNSEL : Mr M W Sneddon (Plaintiff/Cross-defendant) Mr M Luitingh (Defendant/Cross-claimant) SOLICITORS : Proctor Phair Lawyers (Plaintiff/Cross-defendant) Ziman and Ziman (Defendant/Cross-Claimant) - 2 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION WINDEYER J WEDNESDAY, 24 OCTOBER 2007 4730/07 ELIZABETH HAWKE v ACN 117 688 356 PTY LIMITED JUDGMENT 1 HIS HONOUR: This judgment concerns a cross-claim by the defendant in these proceedings, ACN 117 688 356 Pty Limited, against the plaintiff and cross-defendant in these proceedings, Ms Elizabeth Hawke. I will call the cross-claimant "the company". 2 The core issue in this dispute is whether a later letter of offer withdrew or merely amended an earlier offer. I should note that some confusion arose around the date of the earlier offer. The proceedings were conducted, and this judgment was originally given, on the basis that the earlier offer as accepted by the plaintiff was dated 13 September 2007. However, the evidence shows that the earlier offer as accepted by the plaintiff was actually 14 September 2007. The dates herein have thus been changed from 13 September 2007 to 14 September 2007, with the consent of both parties. 3 The claim under the cross-claim is for the sum of $68,640, said to be due by the cross-defendant to the company pursuant to the terms of a letter of offer dated 14 September 2007 signed by the cross-defendant and another letter, dated 20 September 2007, which is claimed by the cross-claimant to be an amendment to the first offer, and by the cross-defendant to be a withdrawal of the first offer. 4 The position with the whole of the action is that if the cross-claim succeeds then the cross-claimant would be in a position to claim that certain properties of the cross-defendant are charged with the monies claimed to be due, so that the original claim in these proceedings of the plaintiff for removal of the cross-claimant's caveat would fail; on the other hand, if the cross-claim fails then it is clear that an order would have to be made in the original proceeding for withdrawal of the caveat. The cross-claim does not claim a charge but in view of the speed with which this matter has been brought on for hearing, there be would no problem allowing an amendment if that were necessary. The simple fact is if the cross-claim succeeds the caveat can remain in place. If it fails, then the caveat will have to be removed. 5 I should deal with one other matter which was referred to in argument or discussion between counsel and myself which may have created some misunderstanding between us but which I have now found is not a matter which really arises. Under the documents to which I will refer shortly, there is an amount set out for legal fees of $5,500. That amount does not form part of the claim for the $68,640 so that can be disregarded and what was discussed during submissions has no bearing on the matter. 6 The amount claimed pursuant to the two letters of offer is alternatively said to be is made up either as follows: (i) $27,500 lender's application fee, (ii) $26,840 lender's establishment fee, (iii) $14,300 brokerage fee; according to the first letter of offer, or (i) $35,750 lender's application fee, (ii) $18,590 lender's establishment fee, (iii) $14,300 brokerage fee; according to the second letter of offer. The totals are the same but the percentages are somewhat different. 7 In the figures to which I have referred, the fee of $14,300 would have been one percent plus GST on a loan of $1.3 million, as offered in the 14 September 2007 letter. The same amount is claimed for some reason for the proposed loan of $1,250,000, as offered in the 20 September 2007 letter. The difference is probably irrelevant but I set out the figures to show how the $68,640 is made up. 8 The cross-defendant sought finance to enable her to refinance loans which she had on properties at Kirribilli, Pottsville Beach and Kingscliff. It is not necessary to go into the earlier applications. Neither I think is it necessary to go into the history of how the application for finance was put before the company. There is some contention about this but it seems that a Mr Hancock was involved at an earlier time, he being an employee or agent for a finance broker called AAA Finance Services Pty Limited. He may have passed Ms Hawke on to another person, who seems to have been unknown to her, but she in any event engaged a Mr Diamond and a colleague of his to attempt to obtain finance for her, and in some way they appear to have taken over what might be considered as the AAA Finance application. This does not seem to me to matter for the decision in this case. 9 Under a letter dated 14 September 2007, the company sent to Ms Hawke what was described in the letter as an Amended Indicative Letter of Offer (the first offer). That was a document which set out that the lender would be the company as trustee for the Toe Trust, that the loan amount was $1.3 million and that on settlement certain fees would be deducted from the loan amount, including pre-paid interest for 6 months, a lender's fee, a lender's establishment fee and the brokerage fee, as I have set out above. The term of the loan was to be 6 months with a 6 months option to extend, and the interest rate was to be 24.5 percent per annum reduced to 20 percent per annum on payment on the due date. The first 6 months' interest would, of course, be paid on or prior to the due date as it was to be deducted and paid from the advance. The security was to be a second mortgage over the properties mentioned. 10 The first mortgage was held by a company, Challenger Commercial Lending Ltd, which, according to the first offer, held valuations which the company had agreed to accept. There was as part of the said offer a provision under the heading "Fees and Expenses", which in part was as follows: You, the Borrower and/or the Guarantor agree to pay the Lenders fees, legal costs, stamp duty, valuation fees and other expenses incurred by the Lender in relation to the proposed loan on request irrespective of whether the loan proceeds. If the lender withdraws his offer prior to settlement, no fees are payable to the lender. The Lender will deduct the fees and expenses from the loan amount at settlement unless other arrangements are made. You, the Borrower and/or the Guarantor acknowledge that by accepting this indicative offer you agree that: 1. to secure our above fees and charges and interest thereon until such amounts are paid to us in full you consent to the Lender lodging a caveat on the title to the proposed security property/ies or any real property in which you have an interest or may at any time in the future acquire an interest. 2. 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. Under another heading "Withdrawal" the following appears: The Lender reserves the right to withdraw this indicative offer at any time prior to settlement of the loan without reason. 11 The letter went on to say that to accept the indicative offer the borrower must sign and date the acknowledgement attached to it and initial every page. Ms Hawke did that and she sent the acceptance back. 12 The first offer included some special conditions such as provision of income details, which are not really relevant, with a final condition as follows: V. Any other condition the lender may reasonably require to be met. 13 There were then negotiations conducted between Mr Banovec for the cross-claimant and Mr Diamond for Ms Hawke under which certain requests for more information were made, some of which were agreed to by Mr Diamond and some of which were not agreed. 14 In any event, on 20 September 2007, as a result of discussions between Mr Banovec and Mr Diamond, there was issued a document called Further Amended Indicative Letter of Offer (the second offer). This was for a reduced loan amount of $1,250,000 with a term of 8 months. The interest rate was the same, pre-payment of 8 months interest was required, and the securities were the same. 15 Once again, the broker was named as AAA Finance Services Pty Limited. The fees and expenses were altered to bring about the alternative figures which I have mentioned. The application fee was reduced from 2.5 percent to 2 percent plus GST, the establishment fee was increased from 1.3 percent to 1.8 percent plus GST, the mandate fee or brokerage fee remained the same, and legal expenses, which in any event were only estimated, remained at $5,500. 16 The provision about the fees and expenses was varied in part to add some additional terms, one of which was as follows: All fees are considered payable once this offer has been accepted and before the Lender instructs his solicitors with preparation of security documentation but for practical reasons the Lender will deduct the fees from the loan amount at settlement. This offer may be substituted by another offer on identical or similar terms. There was then in bold print the following: If the lender withdraws his offer prior to settlement, and no substituted offer has been presented, no fees are payable to the lender. 17 There was a statement that to accept the second offer the borrower must sign the acknowledgement. There were some special conditions set out which I do not think to be of any real significance in this matter. 18 The acceptance acknowledgement was not signed. 19 The letter under which the first letter of offer was sent said: [The company] and/or its relevant subsidiary ('Lender') are pleased to present to you the indicative terms and conditions of a loan facility as detailed in this letter. 20 The letter with the second letter of offer added the words "or underwriting company" after "subsidiary" and both went on to say:- Please note that this indicative letter of offer does not represent a formal offer of a loan facility. The Lender does not offer to provide a loan facility to you until formal credit approval has been obtained and a loan facility agreement has been issued . 21 There are various issues raised in this matter but in my view the matter can be decided on one of the defences to the cross-claim only, namely that the offer of 14 September 2007 was withdrawn. It is accepted that if the offer which had been accepted by Ms Hawke was withdrawn then no fees were payable. Thus, if it is found that the effect of sending the document of 20 September was to act as a withdrawal of the indicative letter of 14 September, rather than operate as an amendment to it, then no fees would be payable. 22 I consider the second offer a new offer: The principal sum is different; the term is different; the provision about withdrawal is different. These are significant matters in short term finance such as this. Even accepting that the interest rates remained the same, the fact that a minimum of 8 months' interest was payable in advance rather than 6 months was a significant matter. The change to the principal sum was a significant matter. These could not, in my opinion, just represent some changes to conditions which the lender might reasonably require. A condition of an offer does not relate to the amount and in my view it could not reasonably be thought to relate to the minimum interest payable. 23 In his evidence given yesterday, Mr Banovec said in relation to the two amounts, the following: Q. What about the offer for 1.3? A. The offer of 1.3 was subsequently reduced. Q. When you say it was subsequently reduced it was no longer on the table, would you agree with that? A. At what point of time. HIS HONOUR Q. At that time. A. Yes it was not on the table, that is right. SNEDDON Q. I suggest to you that you told Mr Russell Diamond that it is withdrawn? A. No the offer was reduced which happens very often but the offer was not withdrawn. 24 There is some conflicting evidence between Mr Banovec and Mr Diamond and also Mr Aldridge as to whether or not in a telephone conversation between Mr Banovec and Mr Diamond on 21 September Mr Banovec said that the offer of 14 September 2007 was withdrawn. It is not necessary to decide that. There is no doubt that by this time Mr Banovec was getting fed up with Ms Hawke and her representatives and probably gave some indication that he was tired of it and that they could all go away but I am not prepared to find that he said that the offer of 14 September was withdrawn. 25 Mr Aldridge's evidence was if the offer was not taken up by 12.30 on 21 September then it was withdrawn but that evidence related to the letter of 20 September, not the letter of 14 September. 26 There is no doubt that the second offer was sent out as a new document, albeit it was called a Further Amended Indicative Letter of Offer. That does not really matter. It was not called a substitute letter of offer or an amendment to the original letter of offer. It was a new letter of offer which required acceptance and it was not accepted. 27 Once it is found that this was a new document on new terms, in my view it must be found that the first offer was withdrawn and I so find. The first offer was not available. That is sufficient to determine the matter. In the circumstances, I do not think it desirable to determine whether or not the argument of counsel for the cross-defendant that there was never any contract is correct. That is partly because I am aware this type of document is rather common in the industry. There is, I accept, a basis for saying that if a party making an offer can withdraw it at any time, then there is no contract between the parties. At the present time I do not think that argument would succeed but I do not propose to determine it. 28 My decision is based upon my finding that the first offer was withdrawn and therefore no fees are payable. Orders 1. Order that the cross-claim be dismissed. 2. Order that the defendant hand to the plaintiff's solicitors by 11am on 25 October 2007 a duly executed withdrawal of caveat AD448791. 3. Order the defendant cross-claimant pay the plaintiff's costs of the proceedings. 4. Order the exhibits be returned. 5. Order that the sum of $40,000 paid to Swaab Attorneys pursuant to the order of 26 September 2007 be paid immediately to the plaintiff or at her direction. 6. Liberty to apply. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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