Mango Media v Bassal [2004] NSWSC 1253

This was an application to extend a caveat until further order and a declaration that the plaintiff had an equitable interest in the form of a charge over the land.
The plaintiff Mango Media was a financier. The defendants Bassal were people who wanted to borrow money. The defendants approached a mortgage broker, Rook & Associates, seeking mortgage finance. The principal person dealing with the matter at Rook & Associates 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 faxed by the plaintiff to the broker, then 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 3rd parties to the plaintiff. This document had the following terms in relation to fees:

“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.”

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%”. The security 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 land to secure its fees and expenses.
Three challenges were made to the agreement by the defendant:

1. The first challenge made was that there was illusory consideration for the agreement to give a charge.

Court held that it was a long standing principle in law that consideration is illusory if there is a promise, performance of which is at the sole discretion of the promisor. Each case is to be analysed by looking at the individual agreement and the surrounding 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. Court also held there was an implied promise to give the loan application bona fide consideration. The court rejected the submission that the agreement is void by reason of illusory consideration.

2. Allegation that broker said to defendant that if he didn’t get the loan he would not have to pay “any fees or anything.”

There was evidence from director of plaintiff 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 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. The Court did not regard that as indicating anything more than that the broker did not wish the defendant to know the identity of the plaintiff financier from whom an offer had been received until the deal was made firm. Held the broker was not the agent of the plaintiff.

3. Agreement should be void under doctrine of “non est factum” (ie. not my deed).

The defendant had only basic English. There was however, evidence that he was dealing with a broker, and that broker was his agent. There was 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. This defence was not made out.
Order that the contract between the parties be given effect to and solicitor/client costs to the plaintiff.
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