Citation : KWS CAPITAL LTD -v- LOVE [2014] WADC 119

Mortgage broker - Agency - Agent of borrower - Loan not ultimately advanced - Whether any loan was 'approved' - Proper construction of mandate agreement between borrower and broker - Whether broker had an entitlement to a fee on a proper construction of the mandate document

Personal Property Securities Act 2009 (Cth)

Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570

Baltic Shipping Co v Dillon (The Mikhail Lermontov) [1993] HCA 4; (1993) 176 CLR 344

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337

Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd [2012] WASCA 216; (2012) 45 WAR 29

Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310

KWS Capital Pty Ltd v Love [2014] WADC 119

Love v Brien [2012] WASC 457

Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 89 ALJR 990

Nelson v Moorcraft [2014] WASCA 212

Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [2014] WASCA 164; (2014) 48 WAR 261

1 McLURE P: This appeal concerns whether the appellant, a finance broker, is entitled to a fee for procuring a conditional financing agreement for the respondent.

2 In December 2012, the respondent was seeking funding to refinance an existing mortgage and discharge a caveat registered on the title of 4 ha of industrial land he owned in Wangara. The respondent retained the appellant to arrange that funding.

3 The respondent also owned other real property, including but not limited to, a residential property and a vacant lot in City Beach and a residential property in Scarborough. The residential properties in City Beach and Scarborough were the subject of first and second registered mortgages.

4 The respondent provided to the appellant a Statement of Affairs signed by him on 24 January 2013. The Statement of Affairs shows the Wangara, City Beach and Scarborough properties as having a combined value of $15.1 million, with the respondent's combined equity therein valued at $9.375 million.

5 The appellant procured an offer of finance dated 1 February 2013 from Balanced Securities Ltd (BSL) (the February finance offer). The principal was $4.6 million or 65% of the current market valuation of the Wangara property, whichever was the lesser. The proposed security was a first registered mortgage over the Wangara property and a second registered mortgage over the City Beach and Scarborough properties. A total of $3.76 million was required to refinance the existing mortgage and caveat on the Wangara property and existing second mortgages on the City Beach and Scarborough residential properties.

6 Under cover of a facsimile transmission dated 1 February 2013, the appellant provided to the respondent a copy of the February finance offer, a Security Letter and a document headed 'Acceptance of Loan Conditions and Payment Authority' which provided for a 'structuring fee' of $101,200 payable by respondent to the appellant.

7 On 6 February 2013 the respondent signed and returned to the appellant the February finance offer, Security Letter and Acceptance of Loan Conditions and Payment Authority. The transaction the subject of these documents did not proceed because the first registered mortgagees of the City Beach and Scarborough properties declined to execute a deed of priority that was a condition of the February finance offer.

8 The February finance offer was replaced by a restructured finance offer in a letter dated 1 March 2013 from BSL (the March finance offer) in which the principal was increased to $6.845 million or 55% of the current market value of the Wangara, City Beach and Scarborough properties, whichever was the lesser. First registered mortgages over each of the Wangara, City Beach and Scarborough properties (the security properties) were to be the security for the loan, $5.775 million of which was required to refinance all existing mortgages on the security property and to remove the caveat. BSL was to obtain valuations of the security properties which were satisfactory to it.

9 Under cover of a facsimile transmission dated 1 March 2013 (the covering fax), the appellant forwarded to the respondent, for his approval and execution, the March finance offer, a Security Letter and an Acceptance of Loan Conditions and Payment Authority, which provided for the respondent to pay to the appellant a structuring fee of $154,000 (the Mandate). The respondent executed all the documents on 1 March 2013 and returned them to the appellant. This appeal concerns the proper construction of the Mandate which expressly relates to the March finance offer (the finance agreement).

10 The valuations of the security properties obtained by BSL presented a combined value of $10.1 million, 55% of which was $5.555 million. Following receipt of the valuations, the loan did not proceed. The trial judge appears to have accepted that BSL had withdrawn the offer [40].

11 The trial judge dismissed the appellant's claim for the structuring fee on the basis that it was not payable unless and until an advance was made by BSL. To be liable to pay the structuring fee irrespective of whether or not an advance was made was said to be an uncommercial construction [43] - [44].

(2) in relying on inadmissible surrounding circumstances and post-contractual conduct in construing the Mandate;

(3) in construing the Mandate by reference to surrounding circumstances to the exclusion of the text of the Mandate;

(4) in holding that the structuring fee was not payable unless and until BLS had advanced the funds the subject of the finance agreement, when he should have held that the liability to pay arose upon execution of the Mandate in the context of the finance approval the subject of the finance agreement.

13 In oral submissions in the appeal the respondent submitted that the March finance offer accepted by him did not give rise to a binding and enforceable agreement, it being in the third class of case identified in Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353, 360 - 361.

I, Ross Maitland Love, sole director of Newco (TBA), severally as the Borrower (the 'Borrower')

And its officers and each of them our agent for the purpose of negotiating for an Approval and Advance of a loan (the 'Loan') from

$6,845,000.00 or 55% of the current market valuation of security properties (exclusive of GST) commissioned by the lender, whichever is the lesser

for acting as agents and obtaining approval for the loan from the Lender to the Borrower

We irrevocably authorise the Lender to disburse the structuring fee of $154,000.00 ... payable to KSW CAPITAL PTY LTD ... for acting as agent when advancing the loan.

In consideration of the Lender approving the Loan to the Borrower, the Borrower hereby agrees to pay the structuring fee to KSW Capital Pty Ltd and hereby specifically charges their interest in the properties to secure payment of the structuring fees and costs to KSW Capital Pty Ltd.

15 The penultimate paragraph must mean 'We irrevocably authorise the Lender, when advancing the Loan, to disburse $154,000.00 to [the appellant] for acting as agent'.

16 It is apparent that the structuring fee is a 'success fee', the liability for which is conditional upon achieving an outcome. Absent the outcome, the appellant is not entitled to any remuneration for its work. The issue is what is the triggering 'outcome' which enlivens the appellant's unconditional entitlement to the fee.

17 In the recent case of Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 89 ALJR 990, the High Court refers to, but does not determine, the outstanding issues relating to the principles of contractual construction. Accordingly, I will continue to apply the 'true rule' of construction as explained in Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd [2012] WASCA 216; (2012) 45 WAR 29 [9], [74] - [81] and Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [2014] WASCA 164; (2014) 48 WAR 261 [33] - [48].

18 It is apparent from the terms of the Mandate that the 'Loan' to which it refers is the March finance offer which, on acceptance, became the finance agreement. Accordingly, regard can be had to the finance agreement in construing the Mandate (and in assessing whether the gateway requirement of ambiguity is met).

19 The trial judge was correct in his assessment that the language of the Mandate is relevantly ambiguous (see Hancock Prospecting [77]). It is ambiguous in its identification of the event that triggers the respondent's liability to pay the structuring fee and, if the event is conditional, whether liability to pay is conditional. The appellant contends that the March finance offer was the relevant 'approval' that triggered the respondent's (unconditional) obligation to pay. The respondent contends his liability is enlivened by the advance of the loan, or alternatively, unconditional approval of the loan. In the further alternative, the respondent contends that his liability came to an end when BSL withdrew the offer of finance.

20 The trial judge did not err in taking surrounding circumstances into account in construing the Mandate and the financing agreement.

21 As the covering fax is admissible as a surrounding circumstance, it is unnecessary to determine whether it would be admissible absent ambiguity. As to what are admissible surrounding circumstances, see Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337, 352.

22 It can be accepted for present purposes that evidence of post contractual conduct is inadmissible for the purpose of construing the contract: Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570 [45], [163].

23 However, post contractual conduct may be relevant and admissible for other purposes, such as establishing whether and if so in what circumstances the finance agreement was terminated. In this case, the respondent defended the claim for the structuring fee on the factual basis that the March financial offer was 'withdrawn' by BSL. Putting the factual defence in a legal framework, I infer it is linked with the respondent's submissions in the appeal that acceptance of the March financial offer did not give rise to a contract, it falling within the third class of case identified in Masters v Cameron. The withdrawal was also relevant to the respondent's claim below that 'approval' means 'unconditional approval'. I am not persuaded that the trial judge misused the evidence of withdrawal.

24 However, in construing the Mandate the trial judge relied on the appellant's failure to demand payment on or shortly after the withdrawal of the March financial offer. That is inadmissible in the construction exercise.

25 It is also clear from the trial judge's reasons as a whole that the text of the Mandate played no role in the construction exercise after the general finding of ambiguity. That is an erroneous approach to contractual construction.

26 Yet the errors made by the trial judge will come to nought if they are incapable of changing the outcome. It is to ground 4 that I now turn.

27 The respondent claims that the objectively determined common intention of the parties was not to make a concluded bargain at all unless and until they executed a formal contract. That is so, according to the respondent, because the parties contemplated that there would have to be agreement on other matters incorporated into formal documents and/or because they wished to reserve to themselves a right to withdraw at any time until the execution of the formal documents.

28 I have no doubt that the March finance offer, upon acceptance by the respondent, gave rise to an immediately binding and enforceable agreement. That is apparent from the obligations that expressly arise on execution, including the respondent's obligation to do all things necessary to assist BSL with lodging a financing statement or other document under the Personal Property Securities Act 2009 (Cth), and the respondent's liability for interest, costs, charges and expenses upon acceptance of the March letter of offer, which obligations are secured by a charge over the respondent's security properties under the Security Letter attached to the financing agreement. Further, the interest commencement date is seven days from the date of settlement or seven days after the dispatch of mortgage documents to the borrower, whichever is the earlier.

29 There are a number of contingent conditions (sometimes described as conditions precedent) in the financing agreement. For example, the offer to lend the funds is made subject to BSL 'verifying the accuracy of information contained in your application and further subject to execution by each party of ... the Facility Agreement and other ... Transaction Documents as required' by BSL.

30 The defined term 'Transaction Document' includes the March finance offer, the Security Letter, the Facility Agreement (which is not otherwise defined) and each Security Document (for the mortgages and other securities for the loan). Under the side heading 'Conditions Precedent' is the following:

Conditions Precedent to any loan will be usual for facilities of this nature including (but not limited to) duly executed originals of each Transaction Document, receipt by the Lender of satisfactory searches and satisfaction by each Obligor of the Lender's know your customer requirements.

31 It is clear that all contingent conditions or conditions precedent relate to the performance of BSL's obligation to advance the loan, not the existence of the finance agreement. That conclusion is mandated by the text of the conditions and the existence of immediately enforceable obligations in the finance agreement.

32 It is convenient at this juncture to deal with the appellant's contractual duties under the Mandate after entry into the finance agreement. I do not accept that a finance broker would be expected to have any significant negotiating role beyond the matters in the March financing offer. The terms and conditions in the March finance offer cover all relevant variables in the bespoke and core aspects of the financing arrangement. The other documents contemplated in the March finance offer, including the Facility Agreement, will be the lender's standard form documentation for loans and securities of the type the subject of the offer. The financing agreement is subject to execution of specified and other documents 'as required by the Lender'.

33 This style of documentation (letter offer accepted by the borrower subject to documentation and contingent conditions) is commonplace in the finance industry.

Other relevant provisions of the finance agreement

34 There are ten 'Special Conditions' in the finance agreement, two of which are of particular relevance. Special Condition (SC) 1 concerns the allocation of the principal under the finance agreement. It relevantly provides:

Subject to receipt of the Lender's formal valuation the allocation of the Principal under this offer is as follows:

(a) $5,275,000 to refinance the current mortgage debt on the Properties ...

(b) $230,000 to meet costs, fees and expenses set out herein and any brokerage payable to your broker;

(c) $500,000 to provide for a court fund ... to secure the release of the existing caveat on the Wangara property ...

(d) $110,000 to assist with the completion of the proposed 6 Lot subdivision of the Wangara property ...

(e) $690,000 being an interest capitalisation allowance that, subject to the terms and conditions below, will be used to service this facility.

35 The costs, fees and expenses referred to in SC1(b) include:

(b) a loan approval fee of 1.50% (plus GST) of the Principal agreed to be lent is payable at the settlement of the loan proposed under this Letter of Offer or on demand if that matter does not proceed;

...

(d) an evaluation fee of $12,850 made payable by BANK cheque to [BSL] which sum includes the payments to the Lenders valuer.

36 In relation to the sum allocated for the capitalisation of interest in SC1(e), SC4 provides that the amount allocated would not meet all of the interest for the approved loan term of 12 months unless the principal was reduced by asset sales early in the term. It continues:

By signing below where indicated the Obligors acknowledge that if the interest allowance becomes fully utilised while any portion of the loan remains outstanding all interest thereafter must be met by them as and when it falls due and they acknowledge for the benefit of the Lender that they have the capacity to do so.

37 The respondent is the only 'Obligor' under the finance agreement. Further, the allocation of $110,000 in SC(1)(d) to assist the completion of the proposed subdivision of the Wangara property was to be advanced at the lender's discretion and was subject to the lender being satisfied that the construction of a road had been substantially completed by the adjoining landowner: SC 2 and 5. SC5 also provides that if the development costs for the five lots exceeded $150,000, it had to be met by the Obligor.

38 I am not persuaded that SC1 reflects an assumption or expectation that 55% of the current market value of the security properties would exceed $6.845 million. That construction is inconsistent with the fact that the allocation is subject to receipt of the lender's formal valuation of the security properties. Further, the upper and lower amount of the loan was fixed, the latter by reference to 55% of the current market valuation of the security properties. SC1 expressly contemplates a reallocation of the principal in the event that it is less than the maximum of $6.845 million.

39 Further, I would not infer from the terms of the financing agreement that the parties did not contemplate, as a reasonable probability, the provision of funds from other sources. It is not supported by the following:

(a) the respondent's representation in SC4 that he intended to sell the City Beach properties;

(b) development costs of the Wangara property over $150,000 were to be met by the respondent (SC5);

(c) the amount allocated for capitalisation of interest was inadequate to cover the term of the loan (SC4).

40 Moreover, the respondent's Statement of Affairs disclosed that he owned assets with a total gross value of $18.71 million with his equity therein valued at $12.1 million. To describe the respondent, as the trial judge does, as 'a retired gentleman' is at odds with the significant commercial activities associated with the use and deployment of his assets.

Prior to any advance under this Letter of Offer the Lender requires the following to be provided which must all be satisfactory to the Lender in all respects

(a) A valuation from a valuer instructed by the Lender confirming:

(i) the 'as is' value of the Wangara property ... and an 'as if complete' value of Wangara assuming approval of the 6 lot subdivision. The valuer must confirm that there is no planning impediment that would prevent the immediate subdivision of the property ...

(ii) the current market value of City Beach and Scarborough properties.

...

(b) Initial cost budget from the Lender's engineer or QS confirming the cost to complete the proposed 6 Lot subdivision does not exceed $150,000 inclusive of all physical construction work and any contributions and levies payable to any council or service authority.

(c) Original signed and dated current statement of Assets and Liabilities from the individual Guarantor.

42 SC10(a) is a contingent condition of performance of BSL's obligation to advance the loan. Contingent conditions of this nature are not unusual in this context. It confers on BSL the right to terminate the financing agreement if the contingency is not fulfilled. Non-fulfilment depends on proof of BSL's subjective state of satisfaction (or more precisely, lack of satisfaction) with the valuations. BSL (but not the respondent) has the right to elect to terminate; it does not occur automatically. There being no agreement to the contrary, termination for non-fulfilment of a contingent condition has prospective, not retrospective, effect.

43 I would not characterise a contingent condition dependent on BSL's lack of satisfaction with the valuations (which condition is subject to BSL's duties to act honestly and to co-operate) as constituting the second stage of a two-pronged approval process. This contingent condition and the others in the finance agreement make BSL's approval of finance conditional.

44 SC10(b) may be a condition of performance of SC 1(d) rather than the finance agreement as a whole. However it is unnecessary to determine that issue.

45 In my view, SC10 is not a condition precedent to the formation or performance of the Facility Agreement. It is, in terms, a condition precedent to the performance of the lender's obligation to advance the loan the subject of the March finance offer.

46 Finally, the use of the term 'confirming' in SC10(a) supports the inference that, at or before entering into the finance agreement, BSL knew of the valuations of the security properties in the respondent's Statement of Affairs. That inference is supported by the acknowledged absence of the provision by the respondent of a cash flow (SC4), his obligation to provide an original signed and dated current statement of assets and liabilities (SC10(c)), and the contents of an email dated 3 April 2013 from Mr T Wilson of BSL to the appellant. Accordingly, the Statement of Affairs is a surrounding circumstance to which regard can be had for construction purposes.

Further to our telephone conversation please find attached the finance offer. Please indicate acceptance of the same by signing and returning the attached together with a receipt of transfer for the acceptance payment of $22,550. This payment consists of the following:

$10,000 upon receipt, this amount will be deducted from the total Structuring Fee advised in the Payment Authority

To expedite the above, below are the account details to transfer the amount of $22,650.

48 The documents attached to the fax were the March finance offer (which refers to the evaluation fee), the Security Letter, and the Mandate (which refers to the structuring fee).

49 I do not regard the absence of any request or requirement for immediate payment, in whole or in part, of the loan approval fee as significant in the construction of the Mandate. First, the amount of the fee could not be calculated until the principal was known. Second, liability to pay the loan approval fee if the matter does not proceed is conditioned on demand having been made. Further, I am not persuaded that satisfaction of the contingency in SC10(a) or (c) is necessarily a condition of liability to pay the loan approval fee if the matter does not proceed. I am unable to see how satisfaction with SC10(b) could be a condition of liability because the payment of the relevant amount is discretionary and likely to post-date settlement for the other parts of the advance.

50 The language of the Mandate is positively inconsistent with a construction that the respondent's liability to pay the structuring fee is triggered by the advance of the loan at settlement. The Mandate expressly recognises the distinction between approving the loan and advancing the loan, yet repeats that the structuring fee is payable for, or in consideration of, the lender approving the loan. Further, there would be no point in obtaining present security for a future contingent liability that the lender is authorised to discharge by payment to the appellant on the occurrence of the triggering event. Finally, an entitlement to remuneration conditioned on the borrower proceeding to settlement could be productive of uncommercial outcomes for the appellant who had no control over securing that outcome.

51 It is clear that the Mandate is intended to perform a number of functions. They are (1) to identify the scope of the appellant's retainer, the amount of its fees, and the event triggering liability for payment of those fees; (2) to obtain security for payment of the fees by a charge on the security properties; and (3) to obtain the respondent's authority to permit the lender to pay the structuring fee directly to the appellant on settlement of the loan. The last function links with SC1(a) which allocates part of the principal to payment of the structuring fee to the appellant.

52 The scope of the appellant's retainer is identified in the Mandate by reference to negotiating for and obtaining the March finance offer. That flows from: (1) the expression 'negotiating for an Approval and Advance of a loan ... from [BSL]' on terms and conditions which correspond with the March finance offer; (2) the purpose of the Mandate described in the heading as 'Acceptance of Loan Conditions'; and (3) the context in which the contractual documents were provided to the respondent. Thus what the appellant has negotiated with BSL, being that contained in the March finance offer, is the outcome it was retained to achieve. This construction is also supported by the text of the final paragraph of the Mandate which indicates that the relevant 'approval' which triggers the respondent's liability to pay the structuring fee was extant at the time of entry into the Mandate. Further, the request in the covering fax for 'Part of Structuring Fee' is a request for part payment of that fee, not a refundable conditional payment.

53 That leaves no scope for construing 'approval' in the Mandate to mean 'unconditional approval'. Further, 'unconditional approval' as the trigger could also produce uncommercial outcomes for the appellant, whose entitlement to remuneration is all or nothing. The March finance offer, which became the finance agreement, contains many contingent conditions. In addition to those in SC10(a), they include verification of the accuracy of the information in the respondent's application (not in evidence), satisfactory searches, satisfaction by the Obligors of the know your customer requirements, and the lender's satisfaction with the respondent's current statement of assets and liabilities to be provided by him. Thus, the finance agreement could be terminated without the approval ever having become unconditional.

54 In summary, on the natural and ordinary meaning of the text of the Mandate, in the context of the covering fax and the March finance offer, the objectively determined common intention of the parties is that:

(a) the structuring fee is for negotiating for, and obtaining approval of, finance on the terms and conditions in the March finance offer;

(b) approval of finance on the terms and conditions in the March finance offer triggered the respondent's liability to pay the structuring fee, which present liability is secured against the security properties; and

(c) if and when BSL advances the loan the subject of the March finance offer, BSL is authorised by the respondent to pay the outstanding balance of the structuring fee to the appellant.

55 Such a construction is not uncommercial. The relevant question is who was intended to carry the risk of the loan not proceeding to settlement. Having regard to the role played by the respondent in providing the information on which the March finance offer was structured (including the Statement of Affairs) and of the specification of a minimum loan by reference to a nominated percentage of the market value of the security properties, the objectively determined common intention is that the respondent would bear that risk.

56 It is the case that the trigger enlivening the appellant's entitlement to remuneration is pre-contractual in nature. That tends to be obscured because the respondent's consent to the scope of the appellant's retainer is evidenced by his acceptance of the March finance offer. It is the existence of that offer that is the trigger enlivening the appellant's entitlement to remuneration. Looked at from that perspective, the issue is whether, on the proper construction of the Mandate, the obligation to pay the structuring fee is contingent upon BSL not subsequently withdrawing its approval. However, the answer is no for the same reasons.

57 Accordingly, I would allow the appeal, set aside the orders made by the trial judge and in lieu thereof enter judgment for the plaintiff.

58 This is an appeal against a decision of Fenbury DCJ in relation to the proper construction of a contract dealing with the question of fees payable by a proposed borrower of loan funds to an agent involved in the business of arranging the provision of loans from lenders to borrowers.

59 In summary, the appellant (KWS Capital Pty Ltd (KWS)) claimed that the respondent (Mr Love) was liable for the payment of a fee due to it in connection with the arrangement of a letter of offer of a loan from Balanced Securities Ltd to Mr Love dated 1 March 2013.

60 The letter of offer (described later in these reasons as 'the March finance offer') related to a proposed loan of $6.845 million, or 55% of the current market valuation of certain properties which were to stand as security for the loan, whichever was the lesser.

61 Current market valuations of the properties were obtained. Based on these valuations, a loan in an amount of 55% of the current market value of the properties would have been $5.555 million. As events transpired, Balanced Securities did not advance any funds to Mr Love.

62 The primary judge rejected KWS's claim that it had earned its fee: KWS Capital Pty Ltd v Love.[1]

63 KWS appeals against that decision. I would dismiss the appeal.

64 Mr Love, at all material times, was a retired gentleman who was the registered proprietor of properties in Wangara, City Beach and Scarborough Beach. The properties were mortgaged, and he required financing to refinance the mortgages.

65 As at 24 December 2012, the liabilities in respect of the properties totalled, $5.425 million as follows.[3] In relation to the Wangara property, there was a first mortgage of $2.5 million and a caveat over the property in respect of a judgment debt in favour of a Mr Brien in the sum of $500,000. In relation to the City Beach property, there were first and second mortgages over the property totalling $1.3 million. In relation to the Scarborough Beach property, there were first and second mortgages over the property totalling $1.125 million.

66 In December 2012, Mr Love appointed KWS to act as his agent to obtain funds to refinance the 'first mortgage and a caveat' on the Wangara property, and to refinance the second mortgages over the City Beach and Scarborough Beach properties.

67 On 1 February 2013, KWS obtained a conditional offer of finance from Balanced Securities by way of a letter from Balanced Securities to Mr Love, care of KWS, dated 1 February 2013 (February finance offer). The February finance offer related to a sum of $4.6 million or 65% of the current market valuation of the Wangara property, whichever was the lesser. The security proposed was a first registered mortgage over the Wangara property and second registered mortgages over the City Beach and Scarborough Beach properties. It also provided for a deed of priority to be entered into between the proposed borrower, the lender and the existing first mortgagees over the City Beach and Scarborough Beach properties. KWS sent Mr Love the February finance offer under cover of a facsimile dated 1 February 2013, together with a document headed 'Acceptance of Loan Conditions and Payment Authority'. The latter document related to the payment of a 'Structuring Fee' of $101,200 on certain terms.

68 On 6 February 2013, Mr Love signed the 'Acceptance of Loan Conditions and Payment Authority', and the February finance offer, and the schedule thereto.

69 The transaction contemplated by the February finance offer did not proceed. Mr Love informed KWS, in effect, that the first mortgagees would not participate in the proposed arrangement and that, accordingly, he would also need to borrow sufficient moneys to pay out the first and second mortgages on the City Beach and Scarborough Beach properties.[4]

70 No 'Structuring Fee' as referred to in the facsimile of 1 February 2013 and in the 'Acceptance of Loan Conditions and Payment Authority', was claimed by KWS or paid by Mr Love.

71 KWS was then instructed later in February 2013 to procure finance for an increased amount, which would also cover the discharge of the existing first mortgages over the City Beach and Scarborough Beach properties.[5]

72 Following these instructions, KWS obtained another conditional offer by Balanced Securities by way of a letter to Mr Love, care of KWS, dated 1 March 2013 (March finance offer).

73 KWS forwarded the March finance offer, together with a further document headed 'Acceptance of Loan Conditions and Payment Authority' to Mr Love.

74 The documents were forwarded to Mr Love under cover of a facsimile from KWS to Mr Love dated 1 March 2013.

Ross, further to our telephone conversation please find attached the finance offer. Please indicate acceptance of the same by signing and returning the attached together with a receipt of transfer for the acceptance payment of $22,650.00. This payment consists of the following:

$10,000.00 upon receipt, this amount will be deducted from the total Structuring Fee advised in the Payment Authority

To expedite the above, below are the account details to transfer the amount of $22,650.00.

[Account details given]

Please do not hesitate to contact our office should you have any further queries.

76 The March finance offer contained, relevantly, the following terms:

Application for Mortgage Funds

We refer to your application for finance made through your broker.

We advise that we as the Lender are, subject to us verifying the accuracy of information contained in your application and further subject to execution by each party of a facility agreement (the Facility Agreement) and other definitive documents (Transaction Documents) as required by the Lender, prepared to lend you funds upon the following terms and conditions (Letter of Offer) ...

Principal $6,845,000 or 55% of the current market valuation of the Properties detailed below (exclusive of GST) commissioned by us, whichever is the lesser.

Term 12 months with the right to early discharge on payment of Interest to date of repayment plus two months additional interest.

The term is to commence from the Interest Commencement Date.

...

Interest

Commencement Date From the date of settlement or seven days after the dispatch of mortgage documents to you, whichever is the earlier.

Transaction Document to include this Letter of Offer, the Security Letter, the Facility Agreement, and each Security Document.

Security Document [variously described as including first registered mortgages over the three properties in Wangara, City Beach and Scarborough Beach].

...

Special Conditions 1. Subject to receipt of the Lender's formal valuation the allocation of the Principal under this offer is as follows:

(a) $5,275,000 to refinance the current mortgage debt on the Properties. This amount includes a $50,000 allowance to cover an increase in the debt currently owed. If the full amount of this component is not required then the balance will be added to the interest allowance in (e) below.

(b) $230,000 to meet costs, fees and expenses set out herein and any brokerage payable to your broker;

(c) $500,000 to provide for a court fund in order to secure the release of the existing caveat on the Wangara Property ...

(d) $150,000 to assist with the completion of the proposed 6 lot subdivision of the Wangara Property (subject to Special Conditions 2 and 5 below); and

(e) $690,000 being an interest capitalisation allowance that, subject to the terms and conditions below, will be used to service this facility.

2. The principal in 1(d) above shall be advanced at the Mortgagee's discretion so that sufficient funds are held at all times to enable completion of the first 5 lots within the Wangara Property. Certificates as to the cost to complete will be required from a qualified quantity surveyor or civil engineer ('QS') appointed by the Lender at the Guarantor's expense ...

3. The principal sum includes an allowance for interest capitalisation as per Special Condition 1(e) above. ... You should note that the interest allowance is only made available by the lender whilst the borrower complies with all loan covenants and in the event of any default, the Lender's obligation to capitalise interest to the facility will cease.

4. The Lender has not been provided with a cash flow from the Borrower, however Mr Love has indicated that the properties as [sic] City Beach will be marketed for sale and are expected to be realised during the Term. The Lender advises that the interest allowance in Special Condition 1(e) will not meet all of the interest for the approved loan term unless the principal is reduced via asset sales early in the Term ...

5. The development funding in Special Condition 1(d) above will not be released by the Lender until such time as the Lender is satisfied that the construction of the new road frontages to the west and northern boundaries of the Wangara Property has been substantially completed by the adjoining landowner and the Lender receives confirmation from its civil engineer or QS that the total costs to subdivide the Wangara Property into 6 lots does not exceed $150,000 ...

6. Payment of the development funding in Special Condition 1(c) will be paid direct to the consultants, contractors or authorities by the Lender on a GST exclusive basis and the Borrower is responsible for funding the GST component of any claim.

...

10. Prior to any advance under this Letter of Offer the Lender requires the following to be provided which must all be satisfactory to the Lender in all respects.

(a) a valuation from the valuer instructed by the Lender confirming:

(i) the 'as is' value of the Wangara Property taking into account its current zoning and development potential and an 'as if complete' value of Wangara assuming approval of the 6 lot subdivision. The valuer must confirm that there is no planning impediment that would prevent the immediate subdivision of the property. They are to be valued on a current market;

(ii) the current market value of City Beach and Scarborough [Beach] properties.

All valuations are to be completed on a GST exclusive basis and commenting favourably on the overall security and its saleability.

(b) initial cost budget from the Lender's engineer or QS confirming the cost to complete the proposed 6 lot subdivision does not exceed $150,000 inclusive of all physical constructional work and any contributions and levies payable to any council or service authority.

(c) Original signed and dated current statement of Assets and Liabilities from the individual Guarantor.

...

Fees (a) Legal fees for documentation the Transaction Documents;

(b) A loan approval fee of 1.50% (plus GST) of the Principal agreed to be lent is payable at the settlement of the loan proposed under this Letter of Offer or on demand if the matter does not proceed;

(c) All registration fees and other out of pocket expenses in connection with the Transaction Documents;

(d) An evaluation fee of $12,650 made payable by BANK cheque to Balanced Securities Limited which sum includes the payments to the Lender's valuer. (original emphasis)

Liability for Interest

Costs, Charges and

Expenses It is a condition of this Letter of Offer that, upon acceptance, each Obligor shall jointly and severally become liable to pay on demand all interest costs, charges and expenses incurred in relation to the proposed loan, and that such liability shall not be in any way affected by the fact that the proposed loan does not proceed or that it proceeds for a different principal sum or on different terms than those stated herein. Insofar as such costs, charges and expenses comprise legal fees, they shall be paid by you on an indemnity basis.

...

This offer of finance will remain open for a period of 7 days, exclusive of the date hereof.

The offer may be executed by signing and returning this Letter of Offer and the Security Letter duly signed by the Borrower and each Guarantor.

77 The schedule to the March finance offer included a proposed letter, referred to as 'Form of Security Letter', to be signed on behalf of the borrower to Balanced Securities in the following terms, relevantly:

We refer to the letter of offer dated on or about 1 March 2013 (Letter of Offer) ... We hereby charge:

(a) by way of a fixed charge our right, title and interest in the Property;

(b) all of our assets and undertaking ... for the time being to secure any monies payable under the Letter of Offer.

We will, if so required by the Lender, execute a form of registrable mortgage or any other document to secure the payment of such monies.

78 The document headed 'Acceptance of Loan Conditions and Payment Authority' dated 1 March 2013 was in the following terms:

I, Ross Maitland Love, sole director of Newco (TBA), severally as the Borrower (the 'Borrower')

Hereby Appoint KWS Capital Pty Ltd

And its officers and each of them our agent for the purpose of negotiating for an Approval and Advance of a loan (the 'Loan') from

Balanced Securities Limited

on the following terms and conditions:

Security Property: First Registered Mortgages over

(a) Industrial zoned land ino Ross Maitland Love located at -

19 Destiny Way

WANGARA WA 6065

Certificate of Title Reference

Volume 329 Folio 117a

(b) 3 & 3A Norbury Crescent

WANGARA WA 6015

Certificate of Title Reference

TBC

(c) 269a West Coast Highway

SCARBOROUGH 6019

Certificate of Title Reference

TBC

Amount of Loan $6,845,000.00 or 55% of the current market valuation of security properties (exclusive of GST) commissioned by the lender, whichever is the lesser.

Structuring fee payable to KWS Capital Pty Ltd for acting as agents and obtaining approval for the loan from the Lender to the Borrower:

$140,000.00 plus GST = $154,000.00.

We irrevocably authorise the Lender to disburse the structuring fee of $154,000.00 (one hundred and fifty-four thousand dollars and zero cents) payable to KWS CAPITAL PTY LTD ... for acting as agent when advancing the loan.

In consideration of the Lender approving the Loan to the Borrower, the Borrower hereby agrees to pay the structuring fee to KWS Capital Pty Ltd and hereby specifically charges their interest in the properties to secure payment of the structuring fees and costs to KWS Capital Pty Ltd.

79 On or about 29 March 2013, valuations for the properties were obtained by the lender in which the properties were valued as follows:[6]

(a) the Scarborough Beach property - $1.45 million;

80 Accordingly, the properties were valued in total at $10.1 million, 55% of which was $5.555 million.[7]

81 After Balanced Securities obtained the valuations, on 3 April 2013, Mr Wilson of Balanced Securities wrote to representatives of KWS and said:

I am yet to run these numbers formally but looking at the current debts I expect there will be no way for this deal to be able to progress.

If only borrowers were more realistic re asset values we would save a lot of time.[8]

82 It is common ground that no monies were advanced by Balanced Securities pursuant to the March finance offer.

83 It is unnecessary to set out verbatim the two grounds of appeal. In substance, the appellant contends that the judge erred in concluding that on a proper construction of the 'Acceptance of Loan Conditions and Payment Authority' dated 1 March 2013, KWS was not entitled to the Structuring Fee unless Balanced Securities advanced loan monies to Mr Love.

84 In this appeal, KWS referred to the 'Acceptance of Loan Conditions and Payment Authority' dated 1 March 2013 as the 'mandate', and for the remainder of these reasons that term will be adopted.

85 KWS submitted that where a commercial transaction is implemented by several contracts or documents, all of the contracts or documents may be read together for the purpose of ascertaining their proper construction and legal effect, at least where the contracts or documents are executed contemporaneously or within a short period.[9] In this regard, KWS referred to Nelson v Moorcroft[10] and the authorities referred to therein. KWS submitted that the mandate was to be read together with the March finance offer and the accompanying facsimile of 1 March 2013.

86 KWS submitted that there was 'an extant approval' of the Loan by Balanced Securities as at 1 March 2013, and that the March finance offer was issued pursuant to, or reflected, that extant approval of the Loan.[11] It submitted, in effect, that by entering into the contract resulting from the execution of the mandate, Mr Love agreed (on the proper construction of the contract) that KWS had obtained 'approval' for the Loan, and that the obtaining of such approval of the Loan was the 'milestone event that trigger[ed] the right to the relevant success fee'.[12] KWS also submitted that it would be obliged to 'continue to undertake the relevant tasks through until a point of advance' so that the payment of the Structuring Fee was for work done, including work done after the execution of the mandate and prior to the settlement of the Loan.[13] In that regard, KWS contended that not 'all acts contemplated by the agency must have earlier been performed before an entitlement to [the Structuring Fee] ... is earnt'.[14]

87 KWS also submitted[15] that at least where there is ambiguity in the contractual document, the court should be astute to give effect to the discernible commercial purpose of the contract, and reference was made in that regard to Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd.[16]

88 Mr Love resisted the claim by KWS at trial on the basis, amongst other things, that by or on 1 March 2013 there had been no approval of the Loan.[17] That submission was, in effect, repeated at the hearing of the appeal.[18]

89 The respondent had filed a notice of contention by which it was alleged that the judge ought to have made certain findings concerning Mr Love's termination of the appointment of KWS on 14 May 2013. However, it was not pressed at the hearing on the basis that these matters added nothing material to Mr Love's case in opposition to the appeal.[19]

90 The appellant's submission that the mandate is to be read with the March finance offer and the facsimile of 1 March 2013 may be accepted for present purposes. Further, the mandate is ambiguous and accordingly admissible evidence of surrounding circumstances may be taken into account in construing it: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales.[20]

91 When Mr Love first appointed KWS in December 2012 to act as his agent to obtain funds to refinance the first mortgage over the Wangara property and to discharge the caveat over that property, and to refinance the second mortgages over the City Beach and Scarborough Beach properties, there was no express agreement at that time as to the terms of KWS's remuneration. Nor was there any express agreement as to remuneration in February 2013, when Mr Love instructed KWS to obtain additional funding so that the first mortgages over the City Beach and Scarborough Beach properties could also be discharged. Absent any express agreement, the potential sources of remuneration available to KWS would have been based on any asserted implied term as to remuneration arising from custom or usage, alternatively, a quantum meruit. Neither was proposed.

92 KWS proffered the mandate as the basis upon which it should be remunerated. In determining the meaning of the terms of the mandate, it is necessary to ask what a reasonable person would have understood those terms to mean, and that as a commercial contract, it is to be interpreted on the assumption that the parties intended to produce a commercial result.[21]

93 When the mandate refers to Mr Love 'hereby' appointing KWS to act as his agent for negotiating an approval and advance, it is not speaking in the past tense. It is speaking about an engagement with immediate effect for the purposes of 'negotiating' for an approval and advance of a defined 'Loan'. The 'Loan' was defined to mean a loan:

(b) on terms that first mortgages would be granted over the secured properties, ie, Wangara, City Beach and Scarborough Beach; and

(c) for a principal sum of either $6.845 million, or a sum representing 55% of the current market valuations of security properties as commissioned by the lender, whichever was the lesser.

94 As the language of the retainer indicated, as at 1 March 2013, there had been no approval by Balanced Securities of a loan in either amount. Rather, under the terms of the March finance offer negotiated by KWS, there was a contractual process under Special Condition 10 for determining whether Balanced Securities would lend any money at all, and if so, whether it would be $6.845 million, or a lesser sum representing 55% of the current market valuations of the properties.

95 The terms of the March finance offer negotiated by KWS included terms to the effect that:

(a) an evaluation fee of $12,650 would be paid by Mr Love by bank cheque upon acceptance of the March finance offer; and

(b) the lender would thereupon instruct its engineer/quality surveyor and its nominated valuer for the purpose of its assessment of the security proposed by Mr Love, and, in the case of the valuer, with a view also to determining a figure which would represent 55% of the current market value of the properties in connection with ascertaining which, if either, of the two principal amounts it was prepared to advance.

96 Upon Mr Love's acceptance of the March finance offer, or at least upon his acceptance and the payment of the sum of $12,650, Balanced Securities was contractually bound to perform the obligations referred to in (b) above.

97 The matters in respect of which the lender was to be satisfied 'in all respects' before determining whether to advance any moneys (either $6.845 million, or the alternative lesser amount) were, under cls 10(a) - (c):

• the 'as if complete' valuations of the Wangara property assuming approval of a six-lot subdivision;
• whether there were any planning impediments which would prevent immediate subdivision of the Wangara property;
• whether the lender's valuer considered that the overall security and its saleability was favourable from the viewpoint of Balanced Securities;
• whether the cost of completing the proposed six-lot subdivision of the Wangara property would not exceed $150,000, inclusive of all physical construction work and any contribution and levies payable to any council or service authority;
• the current statements of assets and liabilities to be provided by the individual Guarantor.

98 Further, as at 1 March 2013, the broker had not negotiated the terms of an advance of the loan in the event that, following its evaluation of the securities, Balanced Securities determined that it would lend only 55% of the current market valuations of the secured land. Indeed, there was no prospect of a loan in the latter amount on the terms then negotiated by KWS, because under those terms the lender would require any funds advanced to be used in accordance with Special Condition 1, and, as explained below, those terms were inconsistent with an advance less than $6.845 million.

99 The sums in pars (a) - (e) of Special Condition 1 total $6.845 million. Under Special Condition 1, the proposed loan is structured on the basis that 55% of the current market valuations of the properties would equal or exceed the sum of $6.845 million, and that if it exceeded that sum, the principal to be advanced would be the lesser of the two amounts, ie, $6.845 million. The proposed loan was on the basis that the funds advanced would be used:

(a) first, to refinance the existing mortgages at that point in time, ie, 1 March 2013, at least $5.225 million was required;[22]

(b) secondly, to pay transaction costs in the sum of $230,000,[23] most of which were to be attributable to the Structuring Fee of KWS in the sum of $154,000;

(c) thirdly, as to $500,000 to remove the caveat;[24]

(d) fourthly, as to $150,000 to assist in the completion of the Wangara subdivision;[25] and

(e) fifthly, as to $690,000, to enable the repayment of interest which, on the terms therein specified, would be capitalised.[26]

100 If, following valuations, the lender agreed to advance the latter of the two alternative principal amounts, where that sum was less than $6.845 million, the terms of any advance would need to be negotiated so that Special Condition 1 was not a term of the advance.

101 A further matter should be observed in relation to the terms negotiated by KWS in respect of transaction fees. The sum of $230,000 referred to in par (b) of Special Condition 1 was 'to meet costs, fees and expenses set out herein and any brokerage payable to your broker'. The reference to 'costs, fees and expenses set out herein' in par (b) of Special Condition 1 appears to be a reference to the fees and expenses referred to under the side-heading 'Fees' on page 6 of the March finance offer. These are relevantly the legal fees for the 'Transaction' documents; the 'loan approval fee' of 1.5%; and all registration fees and other out of pocket expenses incurred in connection with the 'Transaction' documents. These amounts were to be paid out of the amount of the advance, if an advance were made. They were also to be paid 'on demand', even if the 'proposed loan [did] not proceed', by each Obligor (being each Borrower and Guarantor). However, on a proper construction, the obligation to pay such expenses on demand would be dependent upon the demand being properly made consistently with the scheme of the agreement. For example, the parties could not have contemplated that the lender could commence to instruct, or continue to instruct, lawyers to prepare mortgage instruments and demand the borrower to pay the expenses so incurred once it had assessed that the security was inadequate, and inform the borrower that it would not be proceeding with any loan.

102 On the other hand, the 'evaluation fee' of $12,650, which included the fee payable to the lender's valuer, stood in a different category. That was to be paid by bank cheque upon acceptance of the March finance offer, as the facsimile of 1 March 2013 confirms.

103 Accordingly, under the March finance offer negotiated by KWS there is an 'evaluation fee' including the fees payable to the lender's valuer, and a separate 'loan approval' fee. The former, and more modest fee, appears to be a fee (including, in effect, disbursements) for evaluating the transaction proposed in the application for finance. The latter, which upon becoming payable would be a very substantial amount (approximately $103,000 on a loan of $6.845 million), is calculated as a percentage of the amount of any loan agreed to be advanced pursuant to the March finance offer. Although it is payable 'on demand if the matter does not proceed', its description as a 'loan approval fee' and the basis for its calculation suggests that, properly construed, demand would not be made until after the approval of some ascertained loan amount under the March finance offer. On that construction, if after receiving the valuations the Lender was not satisfied with them, and declined to make any advance as it was entitled to do under Special Condition 10, no 'loan approval fee' would be payable. An alternative, but less persuasive, construction of this term is that demand for the loan approval fee could not be made before completion of the process for the Lender to determine whether to lend, and, if so, the amount to be lent, but even if the Lender decided not to lend, the loan approval fee would then become payable on demand. On that construction the 'loan approval fee' is, properly characterised, a fee for the Lender determining whether to approve a loan and, if so, the amount.

104 On either construction, demand for the loan approval fee could not be made before completion of the process of the Lender determining whether to lend and, if so, the amount. Consistently with either of these constructions, the KWS facsimile of 1 March 2013 only sought payment of the 'evaluation fee'. No 'loan approval fee' was sought at that stage.

105 Further, it should be observed that the 'brokerage payable to [Mr Love's] broker' referred to in par (b) of Special Condition 1 is identified separately from the 'costs, fees and expenses set out herein' referred to in the preceding words of Special Condition 1(b). Special Condition 1(b) contemplates that Mr Love's brokerage fees of $154,000 would be payable out of the advance, and it was not a term of the March finance offer that brokerage fees were to be paid to KWS even if the proposed loan did not proceed.

106 Returning then to the terms of the mandate, in my view, the key provision of the mandate is the one which provides that the fee is payable to the broker 'for acting as agent and obtaining approval' for the Loan. It is an obligation to be undertaken, with effect from 1 March 2013, to negotiate for and obtain an approval of the Loan (as defined), ie, a loan either in the sum of $6.845 million, or in a sum representing 55% of the current market valuations of the secured properties, if that sum is less than $6.845 million.

107 Consistently with the arrangement negotiated by KWS for Mr Love to borrow the amount to pay the Structuring Fee, the mandate provides for Mr Love to authorise, irrevocably, the disbursement of an amount for its fee 'for acting as agent when advancing the loan'.

108 The last paragraph of the mandate recognises that up to that point in time, no brokerage fee had been agreed. It provides that Mr Love 'hereby agrees' to pay the fee and charges the properties to secure the payment. It is somewhat loosely worded insofar as it refers to the consideration being the lender 'approving the Loan to the Borrower' without reference to the agency referred to in the earlier provisions of the mandate. Nevertheless, it should not be read as altering the earlier, key provision, which provides that the fee is payable to the broker 'for acting as agent and obtaining approval' for the Loan.

109 Accordingly, on its proper construction and in the events which happened, the broker had not earned its Structuring Fee as it had not obtained the approval of a loan in the sum of $6.845 million, or in the alternative amount of a sum representing 55% of the current market valuations of the properties. Nor had it negotiated the terms of an advance in relation to the latter sum, as the terms in Special Condition 1 of the March finance offer were inconsistent with such a loan. Further, if a sum representing 55% of the current market valuations was below the amount needed to discharge the mortgages and the caveat ($5.725 million), KWS would require further instructions in relation to negotiations beyond those given to it in February 2013.

110 I would not regard that interpretation of the mandate as being inconsistent with the production of a 'commercial result'.[27] Even though Mr Love had provided a balance sheet showing a surplus of assets,[28] much of the surplus (apart from the values ascribed to the proposed secured properties) appears to be associated with an intangible asset, a licence, and it may be inferred that the parties knew that liquidity was an issue if, as negotiated by the broker, the proposed borrowing was to include the borrowing of the broker's fees and interest. The evident purpose of the transaction was to find a lender who would advance Mr Love funds to enable him immediately to refinance his existing current secured debts, whilst giving him time (and money) to generate cashflow through the completion of the subdivision of the Wangara property. As at 1 March 2013, that purpose had not been effectuated.

111 Further, it would seem to me to be difficult to say that a 'commercial result'[29] would be produced if the mandate were construed as contended for by the appellant. It would require the payment to the broker of a substantial fee of $154,000 for negotiating a loan which, under the terms then negotiated by the broker, the lender was never obliged to advance, and in circumstances where if the lender did choose to advance the alternative of the two potential principal amounts contemplated by the March finance offer, the advance of the latter amount would require a further negotiation of the terms and conditions upon which the loan would be made.

112 The obligation to pay the Structuring Fee is contained in the mandate. Insofar as the facsimile of 1 March 2013 is of contextual assistance in the construction of the mandate, the following matters may be noted. First, as indicated earlier, the only fee that was payable to the lender at this stage was the 'evaluation fee'. It was not the 'loan approval fee'. Secondly, the facsimile of 1 March 2013 did not refer to Balanced Securities as having 'approved' the making of the loan to Mr Love.

Thirdly, if, as KWS submitted, the extant approval was the milestone which triggered the payment of the Structuring Fee, there would be no reason why the broker would not have demanded payment in full of the fee of $154,000 in the same way that the potential lender was at that time demanding (by bank cheque) payment in full of its 'evaluation fee' of $12,650. Fourthly, when the mandate is read as a whole and in the context of the March finance offer, the obligation to act as agent in negotiating for an approval and advance of the Loan and obtaining approval for the Loan, was an obligation in which the consideration for the payment of the Structuring Fee was 'entire and indivisible'.[30] The request for payment in the facsimile of 1 March 2013 is to be understood as, in effect, a request for part payment in advance.

113 Whilst the judge decided that KWS's claim should fail because the Structuring Fee was only payable in the event that an advance were made,[31] his Honour erred in that he did not undertake the conventional task of construing the mandate to reach a conclusion about its proper construction.

114 Nevertheless, for the reasons given earlier, KWS had not established an entitlement to the Structuring Fee on or about 1 March 2013 on the proper construction of the mandate.

115 Accordingly, the judge was correct in his ultimate decision that the claim by KWS should be dismissed, although his Honour did not arrive at that result by the construction of the contractual document.

117 BEECH J: I agree with McLure P, for the reasons that she gives, that the appeal should be upheld. I add the following observations, adopting the statement of the facts and the terminology in her Honour's reasons.

118 In my view, on a proper construction of the Mandate, read with the finance agreement and with the covering fax of 1 March 2013:

(a) BSL's offer to lend on the terms of the finance agreement was the approval of the loan, triggering the appellant's entitlement to the structuring fee;

(b) KWS was not entitled to demand the structuring fee immediately, in that the parties contemplated that if the loan went ahead the structuring fee would be paid to KWS at settlement of the loan, but KWS's right to the structuring fee did not depend upon the advancing of the loan.

119 The structuring fee is expressed to be payable to the appellant 'for acting as agents and obtaining approval for the loan...'. 'Acting as agents' should be read by reference to the scope of the agents identified in the first sentence of the Mandate: acting as agents in negotiating on behalf of Newco and Mr Love in order for them to obtain an approval and advance of the loan. The loan referred to is a loan on the terms of the March finance offer. That statement of the scope of the agency informs the purpose of the agency and thus the nature and object of the agent's activities. It does not make the achievement of the desired ultimate outcome - the advance - essential to whether and when the obligation to pay the structuring fee arises. Moreover, for the reasons given by McLure P, the appellant's contractual duties were substantially complete by 1 March 2013.

120 I agree with McLure P that the last paragraph of the Mandate supports the construction that we have adopted. By that sentence, the borrower 'hereby agrees' to pay the structuring fee. That agreement to pay is not deferred or made conditional in any way. The agreement is expressed to be in consideration of BSL 'approving the loan'. To my mind, that expression of the consideration for the immediate and unconditional agreement to pay the structuring fee reveals and reflects an intention that the approving by BSL referred to is the existing approval constituted by the accompanying, and, by the time the respondent signed the Mandate, accepted, March finance offer from BSL, not some future and uncertain approval. The triggering event is approval, and approval has occurred, hence the unqualified agreement to pay.

121 Like McLure P, I consider that the finance agreement does not provide for any second step that would readily answer the description of the 'approving' by BSL of the loan. Reading the Mandate with the finance agreement, that seems to me to be an indication that distinctly favours the conclusion that the March finance offer is the lender's approval of the loan.

122 I would not construe the finance agreement as containing a term to the effect that the lender was not obliged to lend, and the borrowers were not obliged to borrower, a sum that was 55% of the current market valuations of the security properties if that sum was less than the amount necessary to enable existing encumbrance's to be discharged, and so to enable the lender to be granted a first mortgage over those properties. The amount of the loan is expressed to be the lesser of the stipulated sum and a sum representing 55% of the valuations of the security properties. It was a term of the finance agreement that the lender would obtain registered first mortgages over the relevant properties. If 55% of the sworn valuations was less than that sum, it would be incumbent on or at least open to Mr Love to obtain other funds to enable the discharge of existing encumbrances, failing which BSL would have a right, at its election, to terminate the finance agreement. To my mind the objective intention is that if the borrower sourced other funds, so that the loan funds coupled with those additional funds were sufficient to discharge the existing encumbrances, BSL would be obliged under the finance agreement to lend the sum representing 55% of the valuations.

123 Under the March financing offer, a decision by the respondent to accept its terms was a commercial decision to undertake an obligation to pay certain fees to BSL, even though the contemplated loan might never go ahead. Part of the price of accepting the March financing offer was the undertaking of an unconditional obligation to pay fees to BSL. The parties contemplated that, as the covering fax said, the respondent would accept both the March financing offer and the Mandate at the same time. On my construction, another element of the price of accepting the terms of the March financing offer was the undertaking of an unconditional obligation to pay the structuring fee to the appellant. For the reasons explained by McLure P, I do not think there is anything uncommercial or inherently unlikely about this construction. The appellant became entitled to be paid the structuring fee for having procured an offer of finance that the respondent was prepared to accept, albeit that the offer was conditional, and that the amount of the loan would depend on the valuations to be obtained.

[1] KWS Capital Pty Ltd v Love [2014] WADC 119 (primary reasons).

[2] The background is taken from unchallenged findings in the primary reasons and from exhibits in GB 183 - 209, unless otherwise indicated.

[3] Witness statement of Mr Love 29/7/14, pars 3, 7, 8, GB 79 - 80; ts 56, GB 21; as to the judgment debt see also Love v Brien [2012] WASC 457.

[4] Apostolakos cross-examination, ts 56 - 57.

[5] Apostolakos cross-examination, ts 56 - 57; Mr Love's witness statement, pars 10, 11, GB 81.

[6] Appeal chronology pars 7, 8, 9, WB 36 - 37; GB 122, 131, 136.

[9] Appellant's submissions, par 19, WB 10.

[10] Nelson v Moorcraft [2014] WASCA 212 [79].

[15] Appellant's written submissions, par 16, WB 9.

[16] Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310, 313 - 314.

[17] Re-amended defence and counterclaim, pars 3 - 17, BB 18 - 22.

[20] Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337, 352.

[21] Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 89 ALJR 990 [47], [51].

[22] Special Condition 1(a): $5.275 million less $50,000.

[30] Baltic Shipping Co v Dillon (The Mikhail Lermontov) [1993] HCA 4; (1993) 176 CLR 344, 350.