In this case the borrower had paid an application fee and signed the lenders letter of offer. The lender then incurred costs instructing agents (valuers, solicitors and surveyors) and inspecting the property. The lender withdrew the offer when it came to their attention the sale was by the mortgagee in possession. The lender put a caveat on the property to cover the cost of expenses they supposedly incurred.
The borrower argued there was no consideration for the promise to grant a charge over the property because the letter of offer did not place the lender under any obligations. The lender argued their obligation to investigate whether or not to make the loan was sufficient consideration to support the borrowers promises. The judge found although the reservations in the lenders letter of offer, including to withdraw the offer for any reason up until the time of settlement, were such that the borrower could not have brought a contract into existence by signing and returning the form; the acts done by the lender in instructing agents were quid pro quo for the borrowers promises.
The judge found that the borrowers had not breached the agreement by failing to go ahead with the loan or draw down on the loan within the required time limit because at the time the lender withdrew the offer, they had not assembled enough funds to make the first advance nor had the conditions precedent to the performance of the contract been satisfied. He also found the lenders evidence was insufficient to show they incurred more costs than the application fee would cover instructing agents and inspecting the properties.
The judge refused to extend the caveats, saying that while he does not doubt the borrowers did charge their land to the lender, there is not a seriously arguable case the borrowers owe any money to the lender which would be secured by the charge.