Turning Point Capital Pty Ltd v Dempsey

Case •

[2022] NSWDC 185

•

01 June 2022

No judgment structure available for this case.

District Court


New South Wales

  • Amendment notes
Medium Neutral Citation: Turning Point Capital Pty Ltd v Dempsey [2022] NSWDC 185
Hearing dates: 25 May 2022
Date of orders: 1 June 2022
Decision date: 01 June 2022
Jurisdiction:Civil
Before: Russell SC DCJ
Decision:

(1)   Judgment for the defendant.

(2)   Order the plaintiff to pay the costs of the defendant.

Catchwords:

CONTRACT – businesslike interpretation of commercial contract – what a reasonable businessperson would have understood those terms to mean in context – commercial purpose of parties to secure refinance in the amount of $12,500,000 – such finance not obtained – whether plaintiff as mortgage broker entitled to fees set out in mandate – whether there was a letter of offer in accordance with the mandate

UNJUST ENRICHMENT – alternative claim in quantum meruit – whether there was unjust enrichment of defendant

Legislation Cited:

Corporations Act 2001, s 127

Cases Cited:

McCann v Switzerland Insurance Australia Limited [2000] HCA 65; (2000) 203 CLR 579

Category:Principal judgment
Parties: Turning Point Capital Pty Ltd (Plaintiff)
Barry Dempsey (Defendant)
Representation:

Counsel:
M Klooster (Plaintiff)
Self-represented (Defendant)

Solicitors:
Matthew Grew (Plaintiff)
File Number(s): 2021/00128064

Judgment

Introduction

  1. By a Statement of Claim filed on 7 May 2021 the plaintiff Turning Point Capital Pty Ltd (Turning Point) has sued the defendant Mr Barry Dempsey for breach of a written agreement.

  2. Paragraph 3 of the Statement of Claim pleads that the written agreement was entered into on 13 May 2019 and was an agreement for Turning Point to procure a loan for the benefit of Mr Dempsey. The pleading alleged that the agreement was entirely in writing and comprised the following documents:

  1. A document entitled “Terms of Engagement – Commercial Lending” comprising two pages dated 11 May 2019.

  2. A document entitled “Authority to Proceed” comprising one page dated 11 May 2019 and signed by Mr Dempsey on 13 May 2019.

  1. Mr Dempsey represented himself at the hearing, which was conducted by audio visual link since Mr Dempsey was unwell and resided in Queensland.

  2. The evidence for the plaintiff consisted of an affidavit of Mr Shahani sworn on 14 February 2022 (PX 1) together with an exhibit to the affidavit comprising 563 pages (PX 2). Mr Shahani was not cross-examined. I made a limiting order in relation to the evidence of Mr Shahani, so that any assertion he made about the nature or characterisation of a document (eg describing a letter as a “loan offer”) was not received as evidence as to the legal effect of the document.

  3. There was no objection to PX 1 or PX 2.

  4. Mr Dempsey did not give evidence or call any evidence. He did not tender any documents.

  5. The resolution of the case requires the court to construe the construction of the contract pleaded by Turning Point. The court must also consider whether two documents provided by potential lenders mean that Turning Point is entitled to a fee.

Evidence of Mr Shahani

Background

  1. In his affidavit Mr Shahani said that he had been a full-time mortgage broker for 21 years. In late 2019 he became aware that Mr Dempsey was looking for finance. He asked a Ms Corak to contact Mr Dempsey to offer his services. Mr Dempsey then communicated with Mr Shahani through email or through Mr Shahani dealing with Mr Dempsey’s internal accountant Mr Kupfer.

  2. On 11 May 2019 Mr Shahani sent Ms Corak a copy of a document entitled “Terms of Engagement – Commercial Lending” which he described in his affidavit as the “Mandate”. I will use that term in this judgment.

The Mandate

  1. The Mandate reads as follows:

“11 May 2019

Dempsey Asia Pty limited ABN: 36 070 966 031

Dempsey Australia Pty Limited ABN: 20 378 422 703

CDS Pty Ltd ABN: 42 156 020 847

Dempsey RDA Trust ABN: 95 988 341 252

Dempsey Unit Trust ABN: 28 485 828 085

Mr Barry Dempsey - Director

Mrs. Veronica Dempsey- Director

91 XXXXX Street

Mount Pleasant QLD 4740

Dear Barry and Veronica,

TERMS OF ENGAGEMENT - Commercial Lending

SECURITY PROPERTY(s): XXXXX Street, Mount Pleasant QLD 4740, 8/20-XXXXX Street, Rose Bay NSW 2029 & XXXXX Street, Paget QLD 4740, Equipment as per Gray Valuation Report.

BORROWER(s): Dempsey Asia Pty Limited, Dempsey Australia Pty Limited, CDS Pty Ltd, Dempsey RDA Trust, Dempsey Unit Trust, Mr Barry Dempsey & Mrs. Veronica Dempsey

This letter sets out the terms of our engagement and the nature and limitations of the services we will provide.

Scope of the Engagement

Turning Point Capital Pty Ltd has relationship and agreements with various banks, Non-Bank Lenders and other private investors to arrange Non Coded commercial finance for your property situated In Queensland and New South Wales (Security Property). We now have confirmed an interest by a private investor for the refinance of your Security Property .

Once you have read and signed our Terms of Engagement we will forward to you the original letter of offer as discussed.

Fee for service

Our commitment fee is $10,000.00 (exclusive of GST) and is paid on acceptance of this agreement. The fee to complete this engagement is 2.0% of the loan amount (exclusive of GST). The indicative loan amount ls $ 12,500,000.00 (incl. capitalised interest and fees and charges for 6 months) but no more than 65% LVR of the value of Security Property based on the valuation by our panel valuer.

The Borrower acknowledges that once the Letter of Offer has been issued the fees owed under this agreement become due and payable by the Borrower at the time the Letter of Offer is received by the Borrower.

Any fees payable by the Borrower under this agreement shall be a charge on the land or Security Property referred to herein and any other property owned by the Borrowers or Guarantors.

In the event the parties agree that the fees in this agreement are paid at settlement then all fees owed by the Borrower to Turning Point Capital Pty Limited are still due and payable at the time the Borrower receives the Letter of Offer and the delayed payment is merely for convenience.

Regardless if the Borrower proceeds or not with the finance the fees in this agreement are due and payable once the Letter of Offer is received by the Borrower. The Borrower will pay all fees and costs incurred by Turning Point Capital Pty Limited on an indemnity basis.

The Borrower(s) agrees not to communicate directly with any Lenders disclosed by us directly (or through their agent) for a period of 2 years. In the event the Borrower approaches the Lender within the 2 year period then the Borrower acknowledges that it will be liable to pay brokerage fees and any costs incurred by Turning Point Capital Pty Limited for any further advancement.

In the event that the Borrower decides to withdraw and does not proceed with the loan after a letter of offer has been provided a withdrawal fee equal to the fees in this agreement is payable immediately on the withdrawal.

Referral fees

TPC Pty Ltd may pay fees or commissions to persons who referred you to us and to persons who have assisted with the process of obtaining you an offer from the LENDER. The Lenders Mortgage Manager will charge a fee that will be disclosed in the offer.

Next steps

Please provide us with written confirmation of your acceptance of the terms of engagement by signing and returning the attached Authority to Proceed.

The Offer is valid for 7 days.

Please do not hesitate to contact me if you have any questions or would like to discuss this further.

Yours sincerely

Dalip Shahani”

  1. The Mandate signed by Mr Shahani and dated 13 May 2019 is at PX 2, pp 8-9.

  2. The document associated with the Mandate, being the Authority to Proceed (PX 2, p 10) was signed by Mr Dempsey as “Company Director” on 13 May 2019 and returned to Mr Shahani. Another version was signed on the same day in two places by Mr Dempsey, as an “individual” and also as “Company Director” (PX 2, p 12).

  3. Mr Dempsey sent these documents back to Mr Shahani under cover of a letter dated 13 May 2019 (PX 2, p 7). The letter is on the letterhead of Dempsey Australia Pty Ltd. The letter simply says:

“I authorise you and Turning Point Capital Pty Ltd to arrange the finance for the take out of my debts.”

  1. The letter is signed by Mr Dempsey and dated 13 May 2019.

Assetline Investments Pty Limited (Assetline)

  1. After receipt of the signed Mandate and the Authority to Proceed, Mr Shahani contacted Assetline. At PX 1, par 25 he said:

“Over the next few days, I negotiated with Assetline Investments Pty Ltd (‘Assetline’), a commercial financier to obtain a loan approval in accordance with the Mandate. Assetline indicated that they were interested in providing finance and a formal application should be submitted.”

  1. Mr Shahani said that he also contacted other potential lenders (PX 1, par 26).

  2. Mr Shahani completed an Assetline “Mortgage Application Form” and sent it to Ms Corak for Mr Dempsey to complete, sign and return. This document was signed on 20 May 2019. The Assetline loan application form is at PX 2, pp 119-127. Mr Dempsey’s name appears on p 120. The form says that he is making the application in the capacity of director, shareholder and mortgagor. The applicant for the loan is “Dempsey Australia Pty Ltd”. The execution page of the application is at PX 2, p 125. Mr Dempsey has signed, as has his wife Mrs Veronica Dempsey. While each has signed in a box labelled “Applicant”, the page of the application form at PX 2, p 120 makes it plain that both Mr and Mrs Dempsey were signing in their capacity as directors, shareholders and mortgagors.

  3. On 3 June 2019 Assetline sent Mr Shahani an “Offer Sheet” for a loan to Dempsey Australia Pty Ltd in the amount of $7,120,500. Mr Shehani forwarded the Assetline Offer Sheet to Mr Dempsey and it was signed and returned to Mr Shehani and then submitted to Assetline on 6 June 2019.

  4. The Assetline Offer Sheet is at PX 2, pp 241-251. The case for the plaintiff is that the Assetline Offer Sheet was a “Letter of Offer” within the meaning of that term in the Mandate.

  5. The Assetline Offer Sheet was expressed to be for a proposed loan advance to Dempsey Australia Pty Ltd. It said that the application for finance made by Dempsey Australia Pty Ltd had been “approved on the terms detailed within this Offer Sheet and the attached Offer Terms (Offer)”.

  6. The Offer Sheet was dated 30 May 2019. The lender was said to be “Assetline Investments Pty Ltd and/or its designated nominee”. The borrower was “Dempsey Australia Pty Ltd ATF Rock Dynamics Unit Trust”. The Guarantors were Mr and Mrs Dempsey and four companies, apparently associated with the Dempsey family. The Mortgagors were Mr and Mrs Dempsey. The Loan Amount was $7,120,000 and the loan term was three months.

  7. The Assetline Offer Sheet listed the securities as a first mortgage over a property in Rose Bay NSW, a first mortgage over a property in Paget Qld and first ranking charges over assets of Dempsey Australia Pty Ltd and Mr and Mrs Dempsey.

  8. Under the heading “Accepting this offer” the Assetline Offer Sheet said:

“You may accept this offer by signing and returning the Acknowledgement attached to this letter.”

  1. There was no “Acknowledgment” attached to the letter but there was a document entitled “Borrower Declaration” which performed the function contemplated by the reference to an “Acknowledgement”.

  2. The Borrower Declaration is at PX 2, pp 249-250. It says:

“By signing this indicative Letter of Offer (offer), each of you has made the following declarations and acknowledgments:

1   You have carefully read this document and understand that it establishes a legal contract between you and us. If you have any questions, please ask before you sign.”

  1. The execution provision in the Borrower Declaration says that the document was executed by Dempsey Australia Pty Ltd in accordance with s 127 of the Corporations Act 2001 by being signed by persons authorised to sign for the company. Mr Dempsey signed as “Director/Secretary” and Ms Dempsey signed as “Director”. Mr Dempsey signed again as “Guarantor 1” and Mrs Dempsey signed again as “Guarantor 2”. Mr Dempsey signed on behalf of the four associated companies which were also to be guarantors of the obligations of Dempsey Australia Pty Ltd.

Exponential Investing Pty Limited (Exponential)

  1. Mr Shehani said (PX 1, par 32) that he continued negotiations and had contact with Exponential in relation to a second mortgage on real estate.

  2. On 25 June 2019 Mr Shehani obtained what he described in PX 1, par 36 as a “loan offer” for $698,000 from Exponential. The Exponential letter dated 25 June 2019 is at PX 2, pp 347-349. It is addressed to Dempsey Asia Pty Ltd and is headed “Letter of Intent”. It is said to be a letter of intent between Exponential and Dempsey Asia Pty Ltd. The guarantors are Darcole Industries Pty Ltd, Mr Dempsey and Mrs Dempsey.

  3. The letter commences:

“Exponential Investments Pty Ltd is pleased to work with you and it is our intention to provide you a secured loan facility of $698,000 for a term of three months with interest payments and fees paid in advanced.”

  1. The document requests that it be signed and returned (PX 2, p 348). Under the heading “Next Step” the document says:

“•   If you are prepared to proceed with our facility offer, please sign and return a copy of this Letter to us via email and pay the application fee. In order to avoid any delays to the due diligence process, please send through a copy of the transaction receipt confirming the transaction.

•   Once we have received all requested information, we will prepare and send through our loan documents and begin the security registration process with you. This letter of intent is subject to completion of our due diligence, registration of security and the receipt of the application fee and our signed documents.”

  1. The Exponential letter was signed by Mr Dempsey as “Director/Guarantor”.

Gordon Brothers

  1. The plaintiff claims to be entitled under the Mandate to a 2% fee arising from the execution of the Assetline letter and the Exponential letter. During the hearing the plaintiff abandoned a claim in relation to a third letter, from Gordon Brothers dated 26 June 2019 (PX 2, pp 492-496).

Construction of the Mandate: Legal Principles

  1. Counsel for the plaintiff set out his submission as to the legal principles applicable to construction of a contract in his written submissions (MFI 3). I accept his submissions as to those principles, which are set out immediately below.

  2. When determining the rights and liabilities of parties to a contract, the court acts objectively, having regard to the expressed intention of the parties.

  3. The court must ascertain the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.

  4. The court must read the contract as a whole.

  5. If the words are clear and fairly susceptible to one meaning only, the court must give effect to those words. Where a clause is open to two constructions, the court will construe it so as to avoid consequences which appear capricious, unreasonable, inconvenient or unjust.

  6. The court must give commercial efficacy to the contract and the obligations contained in it.

  7. Regard will be had to the surrounding circumstances if the language of the contract is ambiguous or susceptible to more than one meaning but it is not permissible to contradict the plain meaning of the words used.

  8. Surrounding circumstances are those existing and known to the parties when the contract was entered into. This includes the genesis of the transaction, the objective framework of facts within which the contract came into existence and the commercial purpose of the parties, in the objective sense of what reasonable persons would have in mind in their situation.

  9. It is well settled that, when interpreting a commercial contract, the court will not adopt a narrow technical or artificial interpretation of the words used in that contract.

  10. In the search for intention, no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements.

  11. The interpretation of the contract must accord with business common sense. If detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business common sense, it must be made to yield to business common sense.

  12. A commercial contract should be given a businesslike interpretation. Interpreting a commercial document requires attention to the language used by the parties, the commercial circumstances which the document addresses, and the objects which it is intended to secure: McCann v Switzerland Insurance Australia Limited [2000] HCA 65; (2000) 203 CLR 579 at [22].

  13. The interpretation must be commercially sensible and accord with commercial reality.

Construction of the Mandate: Consideration

  1. The court has been left largely in the dark as to the commercial circumstances which the document addresses and the objects which it is intended to secure. Mr Shahani simply said that in late April 2019 he became aware that Mr Dempsey was looking for finance. Mr Dempsey gave no evidence on the topic at all. The covering letter from Mr Dempsey, on the letterhead of Dempsey Australia Pty Ltd, asked Turning Point to arrange the finance for the “take out” of debts.

  2. The Mandate itself gives some clue as to the genesis of the transaction. Under the heading “Scope of the Engagement” Turning Point refers to having confirmed “an interest by a private investor for the refinance of your Security Property”. The security properties listed were properties at Mount Pleasant Qld, Rose Bay NSW, Paget Qld, and equipment as per a Gray Valuation Report.

  3. Under the hearing “Fee for service” Turning Point says that “the indicative loan amount is $12,500,000…”.

  4. The Mandate is addressed to three companies (including Dempsey Australia Pty Ltd and Dempsey Asia Pty Ltd), two Dempsey trusts and to “Mr Barry Dempsey – Director” and to “Mrs Veronica Dempsey – Director”.

  5. The Mandate lists the three companies, the two trusts and Mr and Mrs Dempsey as the “BORROWER(s)”.

  6. The heading on the Mandate describes the terms of engagement as relating to “Commercial Lending”.

  7. From the use of such language, the only reasonable inference to be drawn is that while Mr Dempsey was seeking finance, this was in the context of the need for a refinance of $12,500,000.

  8. While the document listed three companies, two trusts and two individuals as the “BORROWER(s)”, under the heading “Fee for service” the bulk of the references in the Mandate were to a “Borrower” singular. The last paragraph on the first page of the Mandate (PX 2, p 8) contemplates a letter of offer being issued by a financier to a borrower and such letter of offer being received by a borrower.

  9. The obligation to pay a fee to Turning Point is found on the second page of the Mandate (PX 2, p 9). It says that regardless of whether the Borrower proceeds or not with the finance, the fees in the agreement are due and payable once the Letter of Offer is received by the Borrower.

  10. The court has been left to discern the commercial purpose of the parties from the terms of the Mandate itself. As previously recited, the commercial purpose was to secure refinance in the amount of $12,500,000. This is apparent not just from the mention of that figure under the heading “Fee for service” but also by the statement under the heading “Scope of the Engagement” that Turning Point had “confirmed an interest by a private investor for the refinance”.

  11. Under that same heading, Turning Point said that once the Mandate was signed and returned, Turning Point would forward “the original Letter of Offer as discussed”. There was no evidence of any such discussion. In submissions Mr Dempsey indicated that he expected to receive a formal letter of offer for a loan in the amount of $12,500,000. There was no such letter put into evidence by the plaintiff. Mr Shahani did not explain whether or not such a letter did exist at the time of creation of the Mandate.

  1. Counsel for the plaintiff submitted that a possible understanding of the reference to forwarding an “original Letter of Offer as discussed”, was that the discussion was to the effect: “Once we have your signed Mandate, we will approach a lender and obtain an original letter of offer”. If that was so, Mr Shahani could have explained and given evidence about such discussion. He did not. The reference to confirming an interest by a private investor for the refinance together with a promise to forward an original letter of offer, could suggest that Turning Point was attempting to convey to Mr Dempsey and his companies and trusts that such a letter of offer was in existence and that it would be forwarded upon receipt of the signed Mandate.

  2. In the absence of either party putting forward evidence of the discussions referred to in the Mandate, it is impossible to come to a conclusion about what the reference to the “original Letter of Offer as discussed” really means.

  3. I find that the plain language of the Mandate, together with the need for the Mandate to be given a businesslike interpretation, to be commercially sensible and to accord with commercial reality, means that Turning Point was to become entitled to its 2% fee if and when it provided to its clients a letter of offer from a financier for a loan of $12,500,000, which Mr Dempsey and his various companies and trusts needed to refinance an existing debt of $12,500,000.

  4. It goes without saying that a borrower who needs to refinance a $12,500,000 debt is not interested in a loan for less than that amount, unless it is one of several available loans which total $12,500,000, thus enabling the refinance of the existing debt.

Performance of the Contract

Was the Mandate performed by procurement of the Assetline Offer?

  1. Counsel for the plaintiff submitted that the Mandate entitled Turning Point to fees not only for the particular loan referred to (being an interest by a private investor for the refinance in the amount of $12,500,000) but also entitled Turning Point to a fee of 2% of the loan amount for any subsequent or other letter of offer which was procured. Mr Dempsey submitted that at its highest, the Mandate could only apply to the particular prospective loan for $12,500,000 referred to in the Mandate.

  2. The Mandate clearly refers to a particular prospect of refinance, by a private investor who had confirmed an interest in providing the refinance. It also says that the indicative loan amount is $12,500,000.

  3. Mr Shahani gave no evidence to identify the private investor referred to in the Mandate who had confirmed an interest in providing refinance in the amount of $12,500,000. Part of PX 2 is the telephone records of Mr Shahani and Turning Point. There is one phone call to Assetline prior to the date of the Mandate. However, Mr Shahani says in his affidavit that he negotiated “over the next few days” after the Mandate was signed, to obtain a loan approval in accordance with the Mandate. He also says that Assetline indicated, presumably during those next few days, that they were interested in providing finance and that a formal application should be submitted (PX 1, par 25).

  4. Mr Shahani gave no evidence that his one contact with Assetline prior to the execution of the Mandate was in relation to a prospective loan for the Dempsey interests.

  5. As previously recited, no original letter of offer for an indicative loan of $12,500,000 was put into evidence by Turning Point.

  6. Assetline did make an offer of a loan to Dempsey Australia Pty Ltd (PX 2, pp 241-251), but that was not a refinance for $12,500,000. The amount of that proposed loan was $7,120,000 for a term of three months at an interest rate between 10.95% and 21.90% per annum. The security proposed for that loan was not the same as the security properties set out in the Mandate. The Rose Bay and Paget properties were listed in both documents, but the Mount Pleasant property did not appear in the Assetline offer. The Assetline offer required personal guarantees by all directors and shareholders of the borrower, but that was not part of the very brief summary of the loan set out in the Mandate.

  7. The Assetline offer was dated 30 May 2019. It did not pre-date the Mandate. The date of 30 May 2019 suggests that Mr Shahani only approached Assetline to provide a loan to Dempsey Australia Pty Ltd, as he swore in his affidavit, in the days after execution of the Mandate. There is no explanation was to why the offer was made in the amount of $7,120,000 and not $12,500,000, as Turning Point had represented in the Mandate.

  8. I make five findings based upon the matters discussed above. My findings are:

  1. The Mandate was an agreement to pay a fee of 2% of the loan amount for a refinance of $12,500,000.

  2. There are no words in the Mandate entitle Turning Point to a 2% fee if other investors or financiers are approached, or if other loans for much lesser amounts than $12,500,000 were sought and obtained.

  3. The Assetline offer post-dates the Mandate by 17 days and came about only because Mr Shahani approached Assetline after the Mandate was executed and not before.

  4. The proposed loan referred to in the Mandate was not the loan eventually offered by Assetline.

  5. The Mandate relates only to the loan stated and described in the Mandate and not to any other, subsequent or different loan procured by Turning Point.

  1. For these reasons, I find that Turning Point is not entitled to a contractual fee of 2% of the loan value in relation to the Assetline offer.

  2. By the same reasoning, Turning Point is not entitled to a contractual fee of 2% in relation to the later Exponential letter of intent. There are additional reasons for reaching such a conclusion in relation to the Exponential letter of intent, which are set out below.

Was the Mandate performed by procurement of the Exponential letter of intent?

  1. The Exponential letter of intent is dated 25 June 2019 (PX 2, pp 347-349). It refers to Exponential having an “intention to provide you with a Secured Loan facility of $698,000 for a term of three months with interest payments and fees paid in advance”. The letter refers to an intended start date and an intended end date.

  2. The letter of intent is addressed to Dempsey Asia Pty Ltd. That company is asked to sign and return the letter of intent and provide documents as requested.

  3. Under the heading “NEXT STEP” Exponential says:

“Once we have received all requested information, we will prepare and send through our loan documents and begin the security registration process with you. This letter of intent is subject to completion of our due diligence, registration of security and the receipt of the application fee & our signed documents.”

  1. The use of the expression “due diligence” is an indication that Exponential is looking into the financial circumstances of Dempsey Asia Pty Ltd and the security providers before it firmly commits to provision of a loan.

  2. On the third page of the letter of intent (PX 2, p 349), Exponential says:

“Once this document is signed and returned and we begin working on your matter, if you subsequently decide not to proceed with this offer for any reason, you acknowledge that you will be liable to us for our legal costs incurred in full and agree to pay the quoted establishment fee within 7 days of our invoice.”

  1. The letter of intent on p 3 also says that it is subject to the due diligence process confirming that what has been told to Exponential is true and correct. Exponential also says on p 3 that the letter of intent is subject to availability of funds. If Exponential has no access to available funds, there will be no loan.

  2. In the light of these matters, I find that the Exponential letter dated 25 June 2019 is not a letter of offer within the meaning of the Mandate. It is, if anything, a commitment by Dempsey Asia Pty Ltd to pay an establishment fee of $1,400 and to provide documents so that Exponential can think about whether or not it will provide the loan. Even then, there is no obligation to provide a loan if Exponential cannot raise what it terms as “available funds”. I find that the Exponential letter is a preliminary step in relation to an application yet to be made for a loan and is not a letter of offer.

  3. Thus even if Turning Point were otherwise entitled to a contractual fee of 2% under the Mandate (contrary to the findings I have made above), the Exponential letter would not entitle Turning Point to a 2% fee as it is not a letter of offer.

  4. The Gordon Brothers document dated 26 June 2019 was even weaker, and specifically said that it did not constitute an offer. When this was pointed out to counsel for the plaintiff during submissions, instructions were very sensibly given to abandon that part of the claim based upon the Gordon Brothers offer.

Could Mr Dempsey be Personally Liable for the 2% Fee in any Event?

  1. I have held above that there is no contractual entitlement to a fee in relation to the Assetline or the Exponential letters. An additional issue raised by Turning Point was whether, if it was contractually entitled to a 2% fee, Mr Dempsey was the person obliged to pay that fee.

  2. I find that even if there was a contractual entitlement to a 2% fee, Mr Dempsey would not be the person liable to pay it. My reasons are as follows.

  3. The Mandate was addressed to three Dempsey companies, two Dempsey trusts and Mr and Mrs Dempsey both in their capacity as “Director”. The Mandate then listed the “Borrower(s)” as the three Dempsey companies, the two Dempsey trusts and Mr and Mrs Dempsey. There is no evidence that Mr and Mrs Dempsey were seeking finance personally. The Mandate itself through its heading described the application for finance as being “Commercial Lending”. There is no reason to expand the notion of borrower to include Mr and Mrs Dempsey personally, when they have been deliberately listed by Turning Point at the top of the Mandate as directors.

  4. Under the heading “Fee for service”, the last paragraph says that fees owing under the agreement become due and payable “by the Borrower at the time the Letter of Offer is received by the Borrower”. I take as an example the Assetline offer (PX 2, pp 241-251). This was an offer made to Dempsey Australia Pty Ltd as the borrower. Mr and Mrs Dempsey were only involved in two ways. Firstly, they were executing the offer to accept it on behalf of Dempsey Australia Pty Ltd by signing as directors of that company. Secondly, they were giving personal guarantees for the obligations of Dempsey Australia Pty Ltd.

  5. The reference to a letter of offer being received by the borrower in the last paragraph of the first page of the Mandate, can only be sensibly and commercially understood as such a letter being received by the person who is borrowing the money from the proposed financier.

  6. I am fortified in reaching this conclusion by the third paragraph on the second page of the Mandate, which says:

“Regardless if the Borrower proceeds or not with the finance, the fees in this agreement are due and payable once the Letter of Offer is received by the Borrower.”

  1. The only person who could decide whether or not to proceed with the finance offered by Assetline was Dempsey Australia Pty Ltd. It was the borrower. As it turned out, even though the Assetline offer was accepted by Dempsey Australia Pty Ltd executing the document as “Borrower 1” (PX 2, p 249) it was Dempsey Australia Pty Ltd as the borrower which later decided not to proceed with the finance.

  2. To similar effect is the fifth paragraph on the second page of the Mandate which says:

“In the event that the Borrower decides to withdraw and does not proceed with the loan after a letter of offer has been provided a withdrawal fee equal to the fees in this agreement is payable immediately on the withdrawal.”

  1. The only entity which decided to withdraw from the loan was Dempsey Australia Pty Ltd, being the borrower.

  2. The listing of Mr and Mrs Dempsey amongst the borrowers on the first page of the Mandate does not mean that when Dempsey Australia Pty Ltd agreed to borrow money from Assetline, Mr Dempsey personally became the borrower. Such a construction is not commercially sensible and does not accord with commercial reality because:

  1. It fails to recognise that the Mandate was addressed to Mr Dempsey as a director and Mrs Dempsey as a director.

  2. It fails to recognise that, at a time when it was presumably uncertain which entity would make the application for finance, all were listed as the borrowers under the Mandate.

  3. It fails to take into account that the only entity entitled to accept the letter of offer, reject the letter of offer or withdraw and fail to proceed with the finance was the entity to whom the financier offered the loan. In the case of Assetline it was Dempsey Australia Pty Ltd and not Mr Dempsey personally. If Mr Dempsey had personally said to Assetline that he was not willing to proceed with the finance, Assetline would have no doubt said that it was not interested in what he wanted to do, as it had offered the money to Dempsey Australia Pty Ltd and obtained a signed commitment from that company to borrow the money.

  1. Hence when Turning Point provided in the Mandate that it was the borrower under the letter of offer who was obliged to pay the 2% fee, this can only be sensibly and commercially understood as a reference to the entity borrowing money under a finance agreement procured by the efforts of Turning Point as a mortgage broker, and nominated as the borrower in the letter of offer.

Alternative Claim: Quantum Meruit

  1. The plaintiff pleaded an alternative claim based upon unjust enrichment in pars 11-13 of the Statement of Claim. The allegation was that Turning Point had provided Mr Dempsey “with the ability to proceed with various loans, being something of value while expecting some compensation in return”. The pleading alleged that Mr Dempsey accepted and benefited from the loans that were procured by Turning Point and that it was unjust in all the circumstances for Mr Dempsey to have the benefit of the services provided by Turning Point when it had not been compensated for the expense incurred by it.

  2. Mr Shahani set out the evidence in support of the quantum of this alternative claim in par 46 of his affidavit (PX 1) as follows:

“I do not keep a record of the time I spend when working for clients in a matter like this one. This is because the work of a mortgage broker is results based and fees are based on lump sums or percentages. If asked to estimate my time and charge an hourly rate in a matter like this I would estimate that I spent 280 hours and I would charge at $400-$500 per hour or more.”

  1. A claim put on such a basis fails for several reasons.

  2. Firstly, there was no unjust enrichment of Mr Dempsey, even if Turning Point had procured a loan from Assetline or a loan from Exponential. The loan from Assetline was always going to be one which would benefit Dempsey Australia Pty Ltd. Mr Dempsey was not the proposed borrower and was never going to obtain any money from that loan. Similarly, the letter of intent from Exponential referred to Exponential considering an application, if made, by Dempsey Asia Pty Ltd for a loan. In any event, as recited above, the Exponential letter was not an offer of a loan to anyone.

  3. Mr Dempsey was not to be the borrower and would not obtain any benefit from such loans. The claim in quantum meruit fails at the outset because it could not be said that Mr Dempsey was unjustly enriched.

  4. Secondly, Turning Point has not shown that any benefit was obtained by Mr Dempsey or his companies or trusts by reason of the Assetline offer. It does not assist a commercial borrower seeking to refinance a $12,500,000 debt to be offered a loan which falls over $5,000,000 short of the amount required.

  5. Thirdly, there is a fundamental problem with the way in which Mr Shahani puts the damages in par 46 of his affidavit. As that paragraph discloses, a mortgage broker is not paid on an hourly rate but is paid on the basis of obtaining a result, being a loan offer. There is no evidence to suggest that there is an alternative basis for a mortgage broker to be recompensed by charging an hourly rate.

  6. A further problem with that evidence is that it is an estimate only. There is no evidence to justify the figure of 280 hours which is presented as a conclusion rather than as a total justified from other evidence. It also appears that the figure of $400 to $500 per hour has simply been plucked out of the air, and there is no evidence to justify that figure. Nor is there any evidence to justify that hourly rate as reasonable compensation for work done by a mortgage broker. As pointed out to counsel for the plaintiff during submissions, a mortgage broker might spend hundreds of hours on one prospective loan but simply go out to lunch and obtain a second prospective loan. Because, as Mr Shahani says, his work was “results based” there is no reason to award compensation on the figures he put forward, even if Turning Point were otherwise entitled to recover on an action in quantum meruit.

  7. For those reasons the alternative claim based upon unjust enrichment fails.

Conclusion

  1. The claim in contract has failed. The alternative claim in quantum meruit has failed. There will thus be judgment for the defendant.

  2. I will make an order that costs follow the event. While Mr Dempsey represented himself at the hearing, he did have lawyers engaged at a prior time, who did work for him including drafting and filing the Defence.

  3. The orders of the court are:

  1. Judgment for the defendant.

  2. Order the plaintiff to pay the costs of the defendant.

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Amendments

09 June 2022 - File no. corrected on cover page

Decision last updated: 09 June 2022

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McCann v Switzerland Insurance Australia Ltd [2000] HCA 65
McCann v Switzerland Insurance Australia Ltd [2000] HCA 65