Business Acquisitions Australia Pty Ltd v GL & SE (Service Station) Pty Ltd

[2007] NSWSC 843

CITATION:	Business Acquisitions Australia Pty Ltd v GL & SE (Service Station) Pty Ltd [2007] NSWSC 843
HEARING DATE(S):	26 July 2007
JUDGMENT DATE :	26 July 2007
JURISDICTION:	Equity Division
JUDGMENT OF:	Palmer J
EX TEMPORE JUDGMENT DATE:	26 July 2007
DECISION:	Summons for leave to lodge caveat dismissed.
CATCHWORDS:	CAVEATS – LEAVE TO LODGE FURTHER CAVEAT – Whether sufficient evidence to support prima facie case of caveatable interest.
LEGISLATION CITED:	Real Property Act 1900 (NSW) – s.74O
CASES CITED:	Bell v Mainbader Pty Ltd (unrep.) 07.11.1991
PARTIES:	Business Acquisitions Australia Pty Ltd – Plaintiff GL & SE (Service Station) Pty Ltd – Defendant
FILE NUMBER(S):	SC 3592/07
COUNSEL:	J.M. Harris – Plaintiff G.P. George – Defendant
SOLICITORS:	Galilee Solicitors – Plaintiff L.G. Parker & Co – Defendant

3592/07 Business Acquisitions Aust Pty Ltd v
GL & SE (Service Station) Pty Ltd

JUDGMENT – Ex tempore
26 July, 2007

1 By its Summons, the Plaintiff seeks an order granting it leave under s.74O of the Real Property Act 1900 (NSW) to lodge a further caveat securing an interest which it says it has over the subject property of the Defendant pursuant to charging clauses within a Mandate Agreement between the parties, dated 4 May 2007.

2    The Plaintiff had earlier lodged a caveat claiming the same secured interest. The Defendant filed a lapsing notice but the Plaintiff did not obtain an order extending the operation of the caveat by the time required in the lapsing notice. The Plaintiff says it did not do so as a result of miscommunication and misunderstanding, and not through any conscious decision on its part not to seek to enforce the security interest said to be created by the Mandate Agreement.

3 However, in this application I have to determine whether or not the interest claimed by the Plaintiff pursuant to the Mandate Agreement is sufficiently made out, at least on a prima facie basis and whether, if that is so, the circumstances are such that the Court should, in the exercise of its discretion under s.74O(2)(a), grant leave for the lodgement of another caveat. The circumstances, briefly, are as follows.

4    The Defendant wished to develop certain land and approached a broker to assist it to obtain finance. The broker approached the Plaintiff. The Plaintiff sent a letter of offer to the Defendant on 13 April 2007. There is no evidence as to what information had been supplied by the Defendant to the Plaintiff in order to generate that letter of offer.

5    The letter of offer states:

“Your application has been considered to the limited extent of the information provided are subject to the statements made in connection therewith being correct. This letter is strictly confidential and should not be disclosed in whole or any part to any third party without the prior written consent of the Lender.

This letter is for information purposes only and must not be construed as creating any legal obligations on any parties. These proposed indicative terms are only available for 7 days from the date of this letter.

We are able to indicate that the funds can be made available for settlement generally on terms and conditions.

…

15) Upfront fees – The borrower is required to provide an upfront application fee of $5,000,000 to be deducted from fees due under the mandate.

…

This letter is an indicative offer only and is not a binding agreement for a loan and creates no obligation on the lender. The lender reserves the right to amend or decline to proceed without providing any notice or reason.

Should the above terms be acceptable to you, please return a signed copy of this letter and we will progress the transaction.”

The letter contains, at the foot of page 3, a box headed:
“ Acceptance
The terms of this conditional indicative loan proposal are accepted.”

There is a space for the signature of the Defendant but, in the document which is annexed to the affidavit of the Plaintiffs director, there is no signature in this space.

6    What appears to have happened next is that, in May, the Plaintiff forwarded to the Defendant's solicitor a Mandate Agreement in respect of this particular loan. The relevant terms of the Mandate Agreement are as follows:

“1. This Exclusive Mandate to Act (‘ Mandate ’) confirms that BAA has been appointed as an exclusive agent for the Borrower to arrange a commercial loan as detailed in Schedule A on reasonable terms and conditions from a willing lender(s) and to provide ancillary and incidental services.

2. Upon execution of this document by the Borrower, BAA will use its best endeavours to deliver the service described in Item 1 of Schedule A (the ‘ Service ’).

…

5. BAA will assess the Borrower’s information and prepare for submission to potential lenders as selected by BAA and which BAA in its dole discretion considers are appropriate to the proposed application(s) for loan on behalf of the Borrower and will take all reasonable steps to procure approval of the amount of the loan sought.

…

7. In consideration of BAA providing the Service, the Borrower acknowledges that BAA is entitled to claim all fees detailed in Schedule A.

8. It is acknowledged and agreed by the Borrower that on execution of this Mandate by the Borrower, all fees are payable regardless of whether the loan proceeds or not.

9. The Borrower acknowledges that it is liable for any disbursements incurred by BAA or an associated entity in the course of BAA providing the Service and that all disbursements are due and payable by the Borrower regardless of whether the loan proceeds or not.

10. In the event of default of payment of any part of the Fees or Disbursements, the Borrower and Guarantor hereby charges the Security Property(s) listed in Schedule A and all the estate and interest of the Borrower and Guarantor of that Security Property(s) and all other land of which the Borrower and Guarantor is/are the registered proprietor.

11. In addition to the charge referred to in paragraph 10, the Borrower acknowledges that it is liable to BAA for all costs incurred by BAA in enforcing its rights to recover all outstanding fees. The Borrower consents to BAA lodging a caveat over the Security Property(s) and all other land of which the Borrower is the registered proprietor.”

7    There is some dispute as to the circumstances in which this Agreement came to be signed and returned by the Defendant to the Plaintiff. There is in evidence a copy of the Agreement, apparently executed by the Defendant and by the Plaintiff and dated 4 May 2007. However, there is evidence that the Defendant made known to the Plaintiff that it was not happy with the terms of this Agreement.

8    On 3 May 2007, the day before the executed Mandate Agreement was apparently returned to the Plaintiff, the Defendant's solicitor wrote to the Plaintiff in the following terms.

“We advise we act for Mr & Mrs Crowhurst and the company G.L. & S.E. (Service Station) Pty Ltd. Our clients have received the conditional loan approval and Mandate letter and request your confirmation that it is satisfactory that if such letter is returned to you before the documents and final/formal loan approval are prepared and provided to us, that such mandate letter may be returned to you on the basis that it will only apply if the documentation received contains reasonable commercial terms and conditions and are consistent with the conditional loan approval.

We look forward to receiving clarification that this is acceptable and the letter can then be returned. It is essential for our purposes that the formal loan approval and if possible the documentation, as well, be made available at the earliest possible opportunity.”

9    On 16 July 2007, the Plaintiff wrote to the Defendant stating that the Defendant was indebted to the Plaintiff in the sum of $193,556 pursuant to the terms of the Mandate Agreement dated 4 May. A demand was made for payment of that sum within seven days, failing which the Plaintiff said that it would commence proceedings in the District Court for recovery.

10    The Plaintiff, it should be noted, had lodged the caveat in respect of the alleged interest under the Mandate Agreement prior to sending the letter of 16 July, namely, on 23 May 2007.

11    The Defendant opposes leave being granted to lodge the further caveat on a number of grounds. However, I need only deal with one of them for the purposes of this application, that is, that the Plaintiff has not demonstrated that it is actually entitled to any fees under the Mandate Agreement in respect of which its security interest can attach so that the claimed security interest does not arise at all.

12    The Plaintiff relies on clauses 7 and 8 of the Mandate Agreement as entitling it to a payment of the sum which it has claimed in the letter of 16 July 2007. Clause 7 entitles the Plaintiff to claim fees in consideration of "providing the Service". “The Service” is defined in clause 2 as using the Plaintiff's best endeavours to deliver the Service described in Item 1 of the Schedule. Item 1 of the Schedule describes the Service as:

“Arrange [approval of] a commercial loan … on reasonable terms and conditions from a willing lender(s) and to provide ancillary and incidental services.”

13    Mr Harris, who appears for the Plaintiff, frankly and properly concedes that there is no evidence of anything in particular done by the Plaintiff after the date of the Mandate Agreement, namely 4 May 2007, which can demonstrate that the Plaintiff did anything by way of using best endeavours to arrange any particular loan.

14    The only evidence upon which Mr Harris relies is the letter of offer dated 13 April 2007. That preceded the execution of the Mandate Agreement and it is so lacking in particularity that it leads to the inference that it is nothing more than a pro forma letter.

15    Clause 8 of the Agreement provides that the Defendant acknowledges that, on execution of the mandate, all fees are payable, regardless of whether the loan proceeds or not. I do not construe this clause as meaning that the Defendant is liable on execution of the Mandate Agreement to pay the stipulated fees, regardless of whether the Plaintiff has performed its part of the bargain, i.e., used its best endeavours to procure a loan. In my view, the entitlement to payment of fees arises only when the Plaintiff has, in fact, used best endeavours to procure a loan.

16    Mr Harris points to an assertion in the Plaintiff's affidavit evidence to the effect that it has, since execution of the Mandate Agreement, at all times been, "ready, willing and able" to procure the loan. I do not regard this as of any weight whatsoever when it comes to demonstrating a prima facie entitlement of the Plaintiff to maintain the security interest under the Mandate Agreement which it now claims. It is nothing more than an unparticularised, naked assertion of a conclusion which is for the Court to make. A party has to do better than that, in terms of particularity, in order to demonstrate that it has a prima facie or seriously arguable case in support of a caveatable interest.

17    It seems to me that this is a case in which, if the Plaintiff had sought an injunction to restrain a dealing by the Defendant with the subject land, contrary to the security interest claimed as arising under the Mandate Agreement, the Plaintiff would have failed to demonstrate a prima facie case or serious question to be tried.

18 Whether the Court grants leave to lodge a second caveat pursuant to s.74O Real Property Act depends upon the same kinds of considerations which move the Court to grant an injunction at the instance of the caveator to restrain a dealing with the land contrary the interest claimed. This is made clear, I think, by the decision of the Young J (as he then was) in Bell v Mainbader Pty Ltd (unrep.) 7 November 1991. It has often been said in cases concerning the extension of caveat, or applications under s.74O, that the discretionary considerations relevant to such cases are very much analogous to the discretionary considerations applicable to the grant of injunctions.

19    In short, it seems to me that there is no basis demonstrated in the evidence for the Plaintiff's assertion that it is now presently entitled to a sum of some $193,000 in service fees under the Mandate Agreement. If the Plaintiff is so entitled to any fees, it seems to me that it is perfectly able to make its case for such payment in a money claim for debt in the District Court, as was foreshadowed in the Plaintiff's letter to the Defendant of 16 July 2007.

20    Accordingly, I decline to grant leave to the Plaintiff to lodge another caveat as sought in its Summons. As this is the only relief claimed in the Summons the Summons is dismissed.

21    I order that the Plaintiff pay the Defendant's costs of the proceedings.

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