The owner of land granted a charge over it to secure brokerage. The broker sought an extension of its caveat which was opposed by the owner’s co-developer of the land.
The law is that the court must determine whether the caveator’s claim “has or may have substance” under section 74K of the Real Property Act 1900. If so, where the balance of convenience lies is then relevant to whether an extending order is in fact made.
The broker argued that its brokerage fees owed under an earlier transaction were picked up and secured by the charging clause in the later documents, pursuant to which the caveat was lodged.
The question for the court was whether, as a matter of construction, the charging clause extended so as to secure the prior indebtedness. The documents containing the charging clause were not stamped. The law is that land charged with the payment of money is a “mortgage” and must be stamped to be enforceable. The documents were not stamped and so were unenforceable and incapable of creating an interest and inadmissible since no undertaking was proffered by the broker to pay the duty. The court also noted that any stamping that may in future occur cannot operate retrospectively to create, as at the date of the caveat, an interest. Accordingly the claim failed.
The court noted it was irrelevant that stamp duty had been paid on the caveat. In any case, the court also noted two separate reasons which would cause the claim fail, namely that:
- the charging clause creating security for the fees was not capable of attaching to the pre-existing fees because security had already been obtained for those earlier fees and was still in force. The security created by the charging clause in the later set of documents attached to an entirely separate loan; and
- the liability to pay brokerage fees was contingent on a letter of offer to loan the funds being given and no such offer was made. Only a preliminary consideration had been given but was expressed not to be an offer of finance.