Gippsreal Ltd v Registrar of Titles & Kurek Investments Pty Ltd [2007] VSCA 279

Court of Appeal (Vic)|2007-12-13|Before: NEAVE, REDLICH and KELLAM JJA

PROPERTY - Right to charge land and maintain caveats. CONTRACT - Standard form loan agreement contained provisions to charge land to secure monies payable under the loan agreement - Loan agreement unenforceable because wide reservations made consideration illusory - Whether there was a separate enforceable bilateral agreement relating to ancillary steps - Whether a unilateral contract arose after the ineffective loan agreement - Australian Woollen Mills Pty Ltd v Commonwealth [1954] HCA 20; (1954) 92 CLR 424 applied - No enforceable agreement, either bilateral or unilateral - Appeal dismissed.

2 The learned trial judge held that the charge was unenforceable because the loan agreement contained a provision reserving Gippsreal's right not to advance the loan, which made the consideration provided by the appellant illusory.[1] Thus Gippsreal did not have a caveatable interest. On appeal, the appellant abandoned any challenge to the conclusion that the consideration for the loan agreement was illusory and relied primarily on the contention that it had a right to charge the land under a unilateral contract that came into existence some time after the parties had entered into the ineffective loan agreement.

3 The appellant relied on the reasoning of White J in the New South Wales case of Gippsreal Pty Ltd v Boyle and Anor,[2] which concerned a standard form agreement, which for present purposes was relevantly identical with the loan agreement entered into between Gippsreal and Kurek. In that case, White J also held that the contract created by the borrower's acceptance of Gippsreal's loan offer was based on illusory consideration.[3] However he found that a subsequent unilateral contract had come into existence when the borrower offered to pay the cost of title searches and document preparation and Gippsreal accepted that offer by performing those acts. The question whether this analysis applied was the primary issue pursued on the appeal.

4 Gippsreal is a non-bank lender based in Leongatha, Victoria. The second respondent, Kurek, is a property developer. The first respondent is the Registrar of Titles. She has not participated in the proceedings and, at the trial of this matter, indicated she would abide by the orders of the court.

5 On 1 September 2005, a finance broker acting on behalf of Kurek submitted an application for a loan for $2,325,000 from Gippsreal, to assist in the purchase of a property in North Melbourne.

6 On 6 September 2005, Gippsreal made an offer in writing to lend Kurek $2,015,000, secured by first mortgage and $310,000 by second mortgage, subject to valuation requirements, satisfactory title searches and various other conditions precedent being met. The loan was repayable within 30 days of a receipt of a letter of demand.

7 The letter of offer dealt with the provision of security in the following terms:**

In accepting this offer of loan you agree to charge in favour of Gippsreal Limited all your estate or interest in the security property (and in any and all other property including real estate property you may own) as from the date of the acceptance of this offer, with payment of the moneys due under this offer, the Acceptance and Acknowledgement and the proposed Mortgage.

The mortgagor/guarantor and all directors of the mortgagor/guarantor additionally agree to be personally liable for all moneys due to Gippsreal hereunder and agree that Gippsreal may look to their estates in their entirety jointly and severally and that this offer and the Acknowledgement and Acceptance herein shall constitute a Charge both fixed and floating over all assets of any bodies corporate listed as mortgagor or guarantor herein.

Gippsreal Limited may at its discretion lodge a Caveat against the title to any properties the above parties [including Kurek and the sole director of Kurek, Ms Zatorski as guarantor] may own or have any form of interest in including the property offered as security or register a Charge over any bodies corporate, to secure payment of any moneys outstanding under this Offer or the Mortgage...

This Charge shall not merge in any discharge of the mortgage and Gippsreal may rely on this charge to lodge a caveat or debenture charge for any moneys presently or contingently due under the mortgage or any personal covenants of the mortgage before or after the discharge of mortgage.

**8 As can be seen, the agreement to create a charge in favour of Gippsreal came into operation on acceptance of 'this offer' which was defined on the first page of the Letter of Offer as being 'the terms and conditions set out in this letter of offer'.

9 A central issue at trial and to a lesser extent in this appeal concerns the effect of the reservation in the letter of offer, which provided as follows:**

This offer is not be construed as an agreement binding Gippsreal to make an advance under the facility. Such agreement shall only come into existence on the making of the advance which may be delayed, or may not occur at all, unless all of Gippsreal's requirements including any additional requirements to those set out herein are satisfied fully and promptly.

Gippsreal may, in case of any error, correct any particulars of or relating to the proposed advance and, if any term of this proposal is breached for whatever reason, Gippsreal shall not be liable for any damage, loss, cost or expense suffered by the borrower or by any third party as a result of such variation.

Gippsreal reserves the right to impose additional terms and conditions to the facility at any time (both before the advance and at any time during the term of the loan) should it become aware of other matters or issues which may affect the terms of the facility and which are at the time of issue of this offer unknown, unclear or unverified.

Gippsreal reserves the right to withdraw this offer at any time up to and including the date of settlement should the borrower fail to comply with each condition (either set out herein or subsequently imposed by Gippsreal as a result of its enquiries) or any undisclosed information is determined from its enquiries and upon the withdrawal of this offer the mortgagor and any borrowers, covenantors and guarantors will be liable to make payment of all monies due hereunder.

Gippsreal additionally and specifically reserves the right to withdraw this offer at any time up to and including the date of settlement for any other reason whatsoever without it being obliged to explain or justify the decision to withdraw the offer, however in the event that the offer is withdrawn without explanation than (sic) Gippsreal will not be entitled to demand payment of the liquidated damages set out herein, though the mortgagor will at all times remain liable for all costs and disbursements incurred by Gippsreal.

10 The letter provided for acceptance of Gippsreal's offer in the following terms:

If you wish to proceed with the loan please arrange for the attached copy offer and Acknowledgement and Acceptance to be completed, signed and returned.

Upon acceptance of this offer Gippsreal Ltd will instruct various agents (ie. solicitors, property valuers) and may also allocate mortgage funds for the loan advance and will generally incur costs as a result. The mortgagor and guarantor's acceptance of this Offer may not be revoked without Gippsreal's consent in writing which consent will only be considered upon receipt of a written request from the mortgagor/guarantor and shall be determined at the absolute discretion of Gippsreal Limited.

11 On 9 September 2005,[4] Ms Zatorski, the sole director of Kurek, signed and returned to Gippsreal, on behalf of Kurek, the Acknowledgement and Acceptance of Loan Offer, which was part of the letter of offer. The relevant provisions of this acknowledgment were as follows:

that if I/we accept this letter of offer, I/we cannot subsequently withdraw or revoke that acceptance without incurring the substantial financial costs and charges as set out herein, unless Gippsreal Limited agrees in writing to my/our doing so.
that by signing this acceptance, I/we authorise Gippsreal Limited to instruct its solicitors to begin with all necessary searches and to proceed with preparation of all security documents and to charge me/us the application fee plus all outlays and I/we shall be responsible for payment of the whole of those charges to be paid within 7 days of demand irrespective of whether or not this loan proceeds to completion. (emphasis ours)
that if I/we choose not to proceed with the loan once I/we have accepted the offer or it is not drawn down within the required time limit, I/we have breached our agreement and Gippsreal Limited will have suffered loss. In that event, I/we agree that the following liquidated damages will apply;

8.2 $62,484.38 being three months interest at the lower rate;

8.3 any other costs and disbursements incurred by Gippsreal Limited or its agents at the actual costs or if the actual cost cannot be reasonably quantified, then pursuant to the Victorian Supreme Court scale of costs item remuneration

and a Certificate issued by Gippsreal Limited pursuant to this agreement will be sufficient evidence as to any Liquidated Damages determined to be so outstanding.

that the liquidated damages are fair and reasonable.
If I/we have not made payment in full within seven days of any written demand, then the following will apply;

10.1 the amount due to be paid shall be deemed to be an equitable Mortgage over any property owned by me/us (or any property that I/we have any estate or interest in either at the date of this agreement or any future date) including the security property herein, with the amount due herein as Liquidated Damages and along with any interest costs or charges thereon, being the principal sum repayable within seven days of written demand;

10.2 Gippsreal Limited may lodge a Caveat(s) over any property owned by me/us (or any property that I/we have any estate or interest in either at the date of this agreement or any future date) including the security property set out herein and I/we will not request the removal of that Caveat(s) nor bring any Court proceeding to have it removed whilst any money remains owing by me/us to Gippsreal Limited;

10.3 interest at the higher rate and default costs and legal costs as set out herein shall be payable on the principal sum and/or on any subsequent Judgment Debt and will be capitalised and added to the principal sum and bear interest thereon as set out herein.

Gippsreal Limited may immediately commence Court proceedings to recover such money and I/we confirm that I/we will not defend those proceedings and hereby consent to judgment being entered against us for all monies outstanding hereunder.

**12 Following valuation of the North Melbourne property, Gippsreal reduced the amount it was prepared to lend Kurek.[5] Kurek's solicitors then asked Gippsreal to consider advancing funds for purchase of the North Melbourne property on a title by title basis, with settlement of the loans to occur at different times.[6] Gippsreal's solicitors prepared mortgage documents to reflect the changes requested by Kurek.[7]

13 In September and November, Gippsreal lodged three caveats with the Registrar of Titles. The first of these was lodged over the North Melbourne property, in which Kurek never obtained an interest. The appeal relating to this caveat was abandoned in the third further amended notice of appeal.[8] The other two caveats were lodged over properties at Loch Sport, of which Kurek is the sole registered proprietor,[9] and at Richmond, the joint proprietors of which are Kurek and Geelic Pty Ltd.[10]

14 In early October 2005, prior to settlement but before any money was advanced under the loan documents, Kurek decided not to proceed with the proposed loan.

15 On 27 October 2005, Gippsreal demanded the sum of $128,174.64, as moneys owing under the loan documents signed by Kurek. This sum was said to comprise:**

16 Gippsreal sought payment of these costs under the terms of the letter of offer, which required 'all costs including legal costs connected with the Mortgage' to be borne by the Mortgagor and included the following clause:

The mortgagor/guarantor ... additionally indemnify Gippsreal against all costs incurred by Gippsreal after the mortgagors/guarantors acceptance of this offer (including legal costs).

**In addition Gippsreal relied on the provisions of the acknowledgement and acceptance of loan offer, which are set out above.

17 Over the following months there was negotiation between the parties as to the amounts owing under the loan documents, but the dispute was not resolved.**

18 The judge below held that the effect of the reservation in the letter of offer was to give Gippsreal a complete discretion as to whether or not to advance the loan to Kurek. Her Honour said:

The first reservation expressly states that the offer is not to be construed as an agreement binding the caveator to make an advance, and that "such agreement shall only come into existence on the making of the advance which may be delayed, or may not occur at all". It is hard to imagine a clearer statement of the fact that the caveator has made no binding promise to do anything. Coupled with additional reservations which entitle the caveator to withdraw the offer at any time up to and including settlement, including for any reason whatsoever "without being obliged to explain or justify the decision," it is in my opinion clear beyond doubt that the consideration offered by the caveator is illusory.[11]

**As we have said, White J reached the same conclusion in relation to a loan agreement containing identical terms in Gippsreal Pty Ltd v Boyle & Anor.[12]

19 Her Honour also considered an alternative argument put by counsel for Gippsreal, based on the decision in British Empire Films Pty Ltd v Oxford Theatres Pty Ltd.[13] In that case the plaintiff, a film distributor, sought to enforce a provision in a written contract under which the exhibitor granted the distributor an exclusive right to supply films to it for five years. It was common ground between the parties that the distributor was not contractually bound to supply any films. Therefore the promise to supply films was an illusory consideration for the grant of the exclusive right.

20 Nevertheless, O'Bryan J held that the clause under which the exhibitor agreed to hire all films from the distributor was enforceable. He reached this conclusion on two grounds. First, under another clause in the contract the distributor had agreed not to supply films to theatres charging less than a minimum admission price. This provided valuable consideration for the exhibitor's promise.[14] Secondly, even if that was not the case, he held that:**

...the acceptance by the defendant of the film "Professor Mamlock" and a supporting feature offered by the plaintiff ... brought about a legal contractual relation between the two companies, the terms of which are to be found in the written documents relied upon. In other words ... the contract did not spring into existence on the execution of the document, but upon the acceptance of the first film supplied. For the contract so constituted by that offer and acceptance there is ample consideration ...[15]

**21 By analogy, counsel for Gippsreal in the proceedings below contended that the effect of Gippsreal's conduct in 'obtaining a valuation, conducting searches, corresponding about proposed contract variations and possible settlement dates and taking internal steps to have the loan moneys available for settlement' made the original contract binding.[16]

22 At trial, counsel for Gippsreal did not contend that a new unilateral contract had come into existence between Kurek and Gippsreal as the result of Kurek offering to pay Gippsreal for preliminary expenses and Gippsreal accepting that offer by performing the stipulated acts. Rather, he said that the steps Gippsreal had taken in preparation for settlement were 'part performance'.[17] Her Honour said that this expression was misleading and that 'the more appropriate enquiry is to determine whether a binding contract has "sprung into existence" by reason of any subsequent conduct'.[18]

23 Her Honour said that she did not disagree with the analysis in British Empire Films where there was a fresh offer and acceptance supported by consideration, but that that reasoning could not be applied to the transaction between Gippsreal and Kurek because:**

there [was] no equivalent fresh offer and acceptance in this case. The developer, unlike the film exhibitor, did not accept any offer constituted by the later conduct of the caveator. No additional evidence could change the simple fact that no moneys were in fact advanced to and accepted by the developer, and no matter what steps the caveator took to be in a position to settle, it was still free under the loan documents to decline to make any advance right up to the moment of settlement.[19]

**24 Her Honour therefore dismissed Gippsreal's application for a declaration that the caveats were valid and made an order under s 89A(7)(a) of the Transfer of Land Act 1958 for their removal.[20] These orders were stayed pending determination of this appeal.

25 On 11 April 2006, Gippsreal and Kurek agreed that, in consideration of the removal of the caveats over the properties, Kurek would pay $200,000 into a bank account under the control of the solicitors for the parties. That sum remains in the joint account pending determination of this appeal.

26 On the appeal it was common ground that the reservations in the letter of offer of Gippsreal meant that the purported consideration given by Gippsreal was illusory.[21] Nevertheless, it was said her Honour should have found that Gippsreal had caveatable interests in the relevant properties.

27 The grounds of appeal were prolix and confusingly drafted. The appellant's second further amended notice of appeal contained 17 grounds, several of which repeated allegations made in other grounds. During the hearing of the appeal, leave was granted to delete those grounds of appeal which were no longer pursued. Only four grounds of appeal were deleted.[22]

28 It is necessary to explain only the effect of deletion of ground 4, which was that:**

The judge should have held that the letter of offer from Gippsreal Ltd to Kurek Investments did contain consideration by Gippsreal and was therefore a binding agreement, once Kurek Investments accepted the letter of offer.

**29 The deletion of ground 4 reflected a concession by Gippsreal's counsel that the consideration for Gippsreal's promise to lend money to Kurek was illusory, as the judge below found.

30 On appeal, the primary submission made on behalf of Gippsreal was that Kurek was liable under a separate unilateral contract, which arose when Kurek made a promise to pay the costs specified in the acknowledgement by signing it and returning it to Gippsreal, and Gippsreal accepted that promise by performing the specified acts (investigating title, having documents prepared and arranging to have the amount of the loan available). This submission reflects ground 6A, which was that:**

**...**in sending back to Gippsreal the signed letter of offer, Kurek Investments made promises to Gippsreal, and that the conduct of investigations and the incurring of expenses by Gippsreal were performed in exchange for those promises.

31 The appellant's alternative argument, which was not the subject of written submissions and was only briefly advanced at the end of Gippsreal's oral submissions, was that the letter of offer contained more than one promise. This submission may have rested on ground 6, which was that:

The judge should have held that the letter of offer contained several promises in respect of which there was consideration.

**33 It was said that this amounted to a promise by Gippsreal to undertake steps preparatory to the advancing of the money on security of a mortgage, which was separate from the illusory promise to advance the loan and Kurek had promised to meet the costs of those preparatory steps. It was said that the reservations in the letter of offer were divisible and did not apply to this promise, so that it did not lack consideration.

34 In summary, having regard to the manner in which the appeal was conducted, the essential question to be determined is whether Kurek was contractually bound to pay the cost of the investigations under either:**

an exchange of promises between the parties created by Kurek's acceptance of Gippsreal's offer, which was not subject to the reservation which made Gippsreal's promise to advance the loan illusory (the 'bilateral contract' argument); or
a contract between Gippsreal and Kurek, created by Gippsreal's acts in response to a promise to pay made when Kurek returned the signed acknowledgement (the 'unilateral contract' argument).

35 In light of the decision in Gippsreal Pty Ltd v Boyle and Anor,[23] to which we have referred above, it is not surprising that counsel for the appellant relied mainly on the unilateral contract argument. If this court were to decide that issue in Gippsreal's favour, it would be necessary to decide whether the appellant could rely on that analysis, given that it was not raised below (see para [22]).

Was Kurek liable under a separate promise in the bilateral contract?

**36 Counsel for the appellant contended that, even though Gippsreal did not make a binding promise to make a loan to Kurek, other promises by Gippsreal and Kurek in the loan agreement were enforceable. Kurek had promised to pay Gippsreal for taking preliminary steps towards the making of the loan, including the instruction of various agents and that promise was supported by consideration. The reservation clause in the agreement related only to Gippsreal's promise to advance the moneys and had no relevance to other promises in the agreement.

37 Counsel submitted that this was reflected in the provision in the reservation that:**

...in the event that the offer is withdrawn without explanation than (sic) Gippsreal will not be entitled to demand payment of the liquidated damages set out herein, though the mortgagor will at all times remain liable for all costs and disbursements incurred by Gippsreal.

**38 Thus it was submitted that the reservation allowed Gippsreal to withdraw its offer to make the advance at any time, but had no relevance to the separate promise to undertake preliminary steps to assess whether the loan should be granted. Counsel acknowledged that if the reservation related to all the terms of the loan offer, his argument must fail. However, counsel submitted that it should be construed as relating only to the making of the loan.

39 In our view this submission should not be accepted. We agree with White J's observations in Boyle that the provision, that upon acceptance of the offer Gippsreal 'will instruct various agents', was not promissory and did not oblige Gippsreal to instruct agents or to incur such costs.[24] Nor can any such obligation be inferred from the conduct of the parties. We also agree with White J's view that Gippsreal's reservation of the right to withdraw the offer for any reason, up to settlement, extended to any obligation to investigate the making of the loan.[25] In addition to the other reservations provided for in the loan agreement, Gippsreal specifically reserved the right to withdraw from the loan offer at any time up to the date of settlement 'for any reason whatsoever without it being obliged to explain or justify the decision to withdraw the offer'.

40 As counsel for Kurek submitted, it would be absurd to construe the contract as imposing any obligation on Gippsreal to take these preliminary steps, when it was at all times free to withdraw its offer to advance the loan. Further, neither the letter of offer nor the acknowledgement contain any indication that the offer was divisible. The reservation clause refers to 'this offer' and makes it clear that the offer is for the making of the advance. Similarly, reference is made in the agreement to 'this offer' remaining open for seven days, and provision is made for the manner in which Kurek is to accept 'this offer'. Again, clause 3 of the acknowledgement refers to 'this offer'.

41 For these reasons the sixth ground of appeal is not made out.**

Was Kurek liable under a new unilateral contract?

**42 In Australian Woollen Mills Pty Ltd v Commonwealth the High Court said that the expression 'unilateral contract' was misleading, because a contract must necessarily have at least two parties.[26] It is, however, convenient to use that expression to describe the type of contract which comes into existence when one party promises to do something in return for acts performed by the other party, with the intention of being contractually bound if those acts are performed, and the other party accepts that promise by performing his or her side of the bargain.[27]

43 As we have said, counsel for the appellant relied on the decision of White J in Boyle[28] in support of his argument that her Honour should have found that a new 'unilateral contract' came into existence between the parties. It was said that Kurek had made an offer to pay the costs of title investigation and other preparatory acts and was bound to that offer once Gippsreal accepted it by instructing its solicitors to undertake title investigations and took other steps towards the making of the loan. At that point Gippsreal became entitled to charge the land and lodge caveats in support of the charge.

44 White J held that Kurek's signature and return of the acknowledgment of the offer amounted to a promise to pay Gippsreal if it undertook the preliminary steps to advancing the loan moneys. By performing those preliminary steps Gippsreal accepted that offer, so that Kurek then became contractually bound to pay the amounts set out in the acknowledgement.[29] As the High Court explained in Australian Woollen Mills, in this type of contract 'the consideration on the part of the offeree is completely executed by the doing of the very thing which constitutes acceptance of the offer.'[30]

45 White J said that the trial judge in the present case was wrong in holding that the reasoning in British Empire Films required a fresh offer and acceptance between the parties. In his view it was not**

...necessary to find a fresh offer and acceptance springing up through the defendants' later acceptance of an offer constituted by the later conduct of Gippsreal in investigating the loan.[31]

The finding in British Empire Films Pty Ltd v Oxford Theatres Pty Ltd [1943] VicLawRp 35; [1943] VLR 163 that a contract came into existence on the acceptance of a film is entirely consistent with the general principles upon which so-called unilateral contracts arise. In DW Greig & JLR Davis, The Law of Contract (1987), the learned authors say (at page 240):

"... in a situation in which a court might be prepared to accept that the illusory content of a bilateral arrangement renders it unenforceable, the court might well interpret the arrangement as giving rise to a unilateral contract in which a subsequent act would create contractual rights and obligations between the parties."

**47 While such reasoning might have provided an alternative basis for finding that the parties in British Empire Films were contractually bound, in our opinion, O'Bryan J's decision was not based on the fact that the parties had made a 'unilateral contract' of the kind described in Australian Woollen Mills. O'Bryan J treated the distributor as having made an offer to the exhibitor by supplying the film, which on acceptance bound the exhibitor to the promise not to take films from other distributors. Contrary to the view expressed in Chesire & Fifoot's Law of Contract,[33] the contract in question was a bilateral one, which was implied from the conduct of the parties[34] and which incorporated the term from the original ineffective contract giving the exhibitor an exclusive right to supply films to the distributor. Thus the judge below was correct in regarding British Empire Films as a case in which a new bi-lateral contract had sprung into existence as the result of a fresh offer and acceptance between the parties. It was not contended on appeal that this had occurred here. Instead counsel for the appellant submitted that a new unilateral contract came into existence when Kurek authorised Gippsreal to take the preliminary steps towards the making of the loan and Gippsreal instructed its solicitors to undertake title investigations.

48 In support of the unilateral contract argument, counsel for the appellant also relied on the decision of the High Court in MacRobertson Miller Airline Services v Commissioner of State Taxation.[35] In that case the tickets issued by the airline company contained a condition reserving the airline's right to abandon any flight or cancel any ticket and provided that the airline would be under no liability to carry passengers at the booked time or at all. It was held that the issuing and acceptance of the ticket itself did not create an enforceable contract between the parties. However if the airline actually carried the passenger, it was entitled to retain the passenger's fare.[36] Barwick CJ said that:**

The situation is an example of the payment of a reward for an act performed at request with no antecedent promise by the person performing the act to do so.[37]

**49 It was submitted that the same principle applied in this case. Although the original contract to advance the loan was unenforceable, Kurek had, in effect, subsequently requested Gippsreal to carry out the title searches and preliminary investigations and Gippsreal had performed those acts in reliance on that promise. Kurek was therefore contractually bound to pay the amounts specified in the contract.

50 Counsel for the appellant submitted that although the clause in the acknowledgement 'authorised' rather than requested Gippsreal, the authorisation should, in the light of the surrounding circumstances, be interpreted as a request by Kurek to Gippsreal to do the relevant acts.[38] It was said that in making this request Kurek intended to be bound to pay Gippsreal the cost specified in clause 8 of the acknowledgement, if Gippsreal undertook the preliminary steps towards the making of the loan. The necessary quid pro quo existed between the promise and the acts undertaken by Gippsreal in response to that promise.

51 Counsel for the respondent submitted that the reasoning in MacRobertson Miller did not apply on the facts of this case. Kurek did not request Gippsreal to carry out the preliminary steps to the granting of the loan, but simply authorised it to do so. Thus it could not be said that Kurek bound itself contractually to pay the amounts specified in the acknowledgement in return for the acts performed by Gippsreal. In Australian Woollen Mills the High Court held that a unilateral contract would only arise if there was a relationship of reciprocity between the promise and the doing of the act. Counsel for the respondent submitted that the necessary quid pro quo did not exist between Kurek's promise and Gippsreal's performance.

52 There will be circumstances in which the commercial realities of an arrangement require the court to look beyond a failed bilateral agreement and to consider whether subsequent conduct gives rise to an enforceable contract. Often this will be a bilateral contract created by the mutual exchange of promises. We have already expressed our view that this was the nature of the contract found to exist in British Empire Films. As MacRobertson Miller illustrates, subsequent words or conduct may also give rise to a new unilateral contract. The question is whether such a contract arose in the circumstances of this case.

53 We do not consider that Kurek was contractually bound to pay Gippsreal the amounts specified in the acknowledgement. In our view, the necessary relationship of quid pro quo did not exist between Kurek's alleged promise and the acts which were to be done by Gippsreal. In Australian Woollen Mills this requirement was explained as follows:**

In cases of this class [that is the class of unilateral contracts] it is necessary, in order that a contract may be established, that it should be made to appear that the statement or announcement which is relied on as a promise was really offered as consideration for the doing of the act, and that the act was really done in consideration of a potential promise inherent in the statement or announcement. Between the statement or announcement, which is put forward as an offer capable of acceptance by the doing of an act, and the act which is put forward as the executed consideration for the alleged promise, there must subsist, so to speak, the relation of a quid pro quo. One simple example will suffice to illustrate this. A, in Sydney, says to B in Melbourne: "I will pay you £1,000 on your arrival in Sydney". The next day B goes to Sydney. If these facts alone are proved, it is perfectly clear that no contract binding A to pay £1,000 to B is established. For all that appears there may be no relation whatever between A's statement and B's act. It is quite consistent with the facts proved that B intended to go to Sydney anyhow, and that A is merely announcing that, if and when B arrives in Sydney, he will make a gift to him. The necessary relation is not shown to exist between the announcement and the act. Proof of further facts, however, might suffice to establish a contract. For example, it might be proved that A, on the day before the £1,000 was mentioned, had told B that it was a matter of vital importance to him (A) that B should come to Sydney forthwith, and that B objected that to go to Sydney at the moment might involve him in financial loss. These further facts throw a different light on the statement on which B relies as an offer accepted by his going to Sydney. They are not necessarily conclusive but it is now possible to infer (a) that the statement that £1,000 would be paid to B on arrival in Sydney was intended as an offer of a promise, (b) that the promise was offered as the consideration for the doing of an act by B, and (c) that the doing of the act was at once the acceptance of an offer and the providing of an executed consideration for a promise. The necessary connection or relation between the announcement and the act is provided if the inference is drawn that A has requested B to go to Sydney.

The position has been stated above in terms of the technical doctrine of consideration, and this is, in our opinion, the correct way of stating it. But it may be referred to a principle which is fundamental to any conception of contract. It is of the essence of contract, regarded as a class of obligations, that there is a voluntary assumption of a legally enforceable duty. In such cases as the present, therefore, in order that a contract may be created by offer and acceptance, it is necessary that what is alleged to be an offer should have been intended to give rise, on the doing of the act, to an obligation.[39]

**54 In our view, Kurek's signature and return of the acknowledgement was not a promise offered as consideration for Gippsreal instructing its solicitors and other agents to undertake the process of title investigation. Rather, it was an acceptance of the terms of Gippsreal's offer to consider the loan to Kurek, which was based on illusory consideration. There was no new promise distinguishable from the promise made by Kurek in accepting the loan offer.

55 Kurek's obligations arose out of the exchange of what were thought to be mutual promises. Although Gippsreal's promises under the bilateral agreement were illusory, both parties intended to enter into a commercial relationship and believed that each had become effectively bound in law to do what it had agreed to do.

56 As the trial judge found, the overriding object or purpose of the contract was for Kurek to obtain the loan and for Gippsreal to obtain a mortgage to secure the loan. When one examines the surrounding circumstances and the meaning of the terms of the bilateral agreement as a reasonable person would have understood them to mean,[40] it is clear that Gippsreal was not performing the preliminary investigations because of a promise by Kurek that it would reimburse Gippsreal for its expenses, but rather with a view to advancing Kurek the loan moneys. Kurek's statement that it would pay for necessary searches and the preparation of security documents was not a promise which could be divorced from the context in which it had been made, as part of the acceptance of Gippsreal's loan offer. That is to say, it could not be treated as a divisible offer to perform a promise separate from its acceptance of the loan offer. Kurek had no interest in having its title investigated for the sake of it, though it was necessary for Kurek to authorise these steps in order to obtain a loan to finance the proposed property development.

57 Kurek's acknowledgement and acceptance of Gippsreal's loan offer contained a number of promissory terms. The consideration for each of these promises was Gippsreal's original loan offer, which was not supported by good consideration. The effect of Kurek's acceptance was that it promised to be bound by the terms of the original bilateral agreement if Gippsreal performed its - illusory - obligations under that agreement.[41] To characterise the searches ordered by Gippsreal as acts of performance constituting acceptance of a promise by Kurek is artificial and not what the parties bargained for. In that regard we observe that it was not contended that any contractual obligation to pay for the costs and disbursements arose as a consequence of any subsequent act or undertaking by Kurek.

58 In our view, the facts of this case are distinguishable from those in MacRobertson Miller, where the obligation of the promisor arose upon the performance of the act requested by the promisor even though the party performing the act had made no antecedent promise to do so.[42] Kurek's promise by way of the acceptance of an offer to enter into a putative bilateral agreement cannot be converted at the same moment into an offer to pay for an act which was divorced from all of the terms of the offer to which it was responding.

59 In MacRobertson Miller the failed bi-lateral contract contemplated that the passengers would be carried to their destination. The passengers received what they had bargained for, once that occurred.[43] In this case, by contrast, Kurek did not make a bargain with Gippsreal for the purpose of having its title investigated, but for the purpose of obtaining a loan. If the loan moneys were offered and accepted it may well be that a new bilateral contract would have come into existence between the parties, just as a new bilateral contract did come into existence between the parties in British Empire Films when the first film was supplied and accepted. But prior to that time there was no enforceable contract between the parties.

60 Further, Gippsreal did not instruct its solicitor to investigate Kurek's title in return for a promise made by Kurek to pay preliminary costs. Gippsreal carries on the business of money-lending. The title searches and preparation of the mortgage were done for the benefit of Gippsreal, which as a potential mortgagee had an interest in ensuring that Kurek had clear title to the property to be mortgaged. Gippsreal was not induced to carry out the preliminary steps by Kurek's promise. It would not have advanced money on security of the Kurek's property without thoroughly investigating Kurek's title.

61 In Australian Woollen Mills, the High Court said that the test which is often applied in determining whether the necessary relationship existed between the alleged promise and the act:**

...is to ask whether there has been a request by the alleged promisor that the promisee shall do the act on which the latter relies. Such a request may, of course, be expressed or implied. In an interesting article in the Law Quarterly Review, (vol. 69, p. 99) to which Mr. Windeyer referred us and which has already been incidentally mentioned, Mr. J. C. Smith maintains that the presence of a request, express or implied, is an essential element in every true offer. Sir A. Goodhart (Law Quarterly Review, vol. 67, p. 456 and Law Quarterly Review, vol. 69, p. 106) contests this general proposition, maintaining in effect that the essential thing, in a case such as the present, is that the "offeror" should state a price which the "offeree" must pay if he wishes to purchase a promise. This way of putting the position does not seem to differ materially from the way in which we have put it above. At the same time, it can hardly be denied that the presence or absence of an implied request to do the act may often provide a useful test for determining whether there has been a true offer and a true acceptance such as to bring a contract into existence: (cf. Salmond & Williams on Contracts, 2nd ed. (1945), pp. 104, 105). We are really applying the same test if we ask whether the "offer" was made in order to induce the doing of the act.[44]

**62 As counsel for Kurek submitted, it is therefore significant that the acknowledgment 'authorised' rather than 'requested' Gippsreal, 'to instruct its solicitors to begin with all necessary searches and to proceed with preparation of all security documents and to charge me/us the application fee plus all outlays'.

63 In some circumstances words authorising a party to do specified acts could be interpreted as a request to that party to do those acts. However, we do not consider that this is the case here.

64 The acts which Gippsreal was required to perform were not specified with any precision. If Gippsreal's submission were to be accepted, Kurek would have to be taken as promising that as soon as Gippsreal instructed its solicitors 'to begin with all necessary searches and to proceed with preparation of security documents' Kurek became liable to pay the costs specified in clause 8 and to mortgage its property for the amount due to be paid. Subject to the provisions limiting the damages payable if Gippsreal withdrew its offer (see para [11] above), this would be the case even if no moneys were advanced by Gippreal to Kurek, because Gippsreal later decided against making the loan.

65 Clause 8.3 of the acknowledgement provides that Kurek will pay liquidated damages if it does not proceed with the loan including 'any other costs and disbursements incurred by Gippsreal Limited or its agents.' Clause 8.3 places no maximum limit on the expenses which Gippsreal may incur on its own behalf and then call on Kurek for reimbursement. If a unilateral contract were held to arise Kurek would have to be taken as binding itself to pay any preliminary expenses which Gippsreal considered it necessary to incur, without having any control at all on the extent of those expenses. In our view, the acknowledgement cannot be regarded as an open-ended promise by Kurek that it will pay Gippsreal for any investigations and other preliminary steps that Gippsreal considers appropriate.**

Was it open to raise the unilateral contract argument on appeal?

**66 Because we have held that no unilateral contract came into existence between the parties, it is strictly unnecessary to decide whether it was open to counsel for Gippsreal to rely on this point on appeal, when it was not taken at trial. For the purposes of completeness, however, we state our view that the principle in Whisprun Pty Ltd v Dixon[45] would not prevent the appellant from relying on the creation of a new unilateral contract. This case turns entirely on the interpretation of legal documents. The point raised on appeal could not have been met by rebutting evidence at trial. Further, although counsel at trial did not argue that the facts had given rise to a new unilateral contract but said the acts done by Gippsreal were 'part performance' of the original contract, this amounted to a claim that subsequent events had made the original contract binding.

67 There was no divisible promise within the letter of offer which related to the preliminary investigations and expenses. Nor did a unilateral contract arise as a result of the work that Gippsreal performed subsequent to executing the ineffective loan agreement. Therefore, Gippsreal had no contractual right to require Kurek to pay the amounts specified in the loan agreement. Neither did it have a right to a charge over Kurek's property which could support the caveats.

68 Gippsreal does not have a caveatable interest in the Loch Sport or Richmond Properties. As the learned judge below said, this does not necessarily deprive Gippsreal of any remedy against Kurek, for example a remedy based on quantum meruit.

69 For the reasons set out above, we would dismiss the appeal.**

[1] Gippsreal Limited v Registrar of Titles and Kurek Investments Pty Ltd [2006] VSC 115.

[2] Gippsreal Pty Ltd v Boyle and Anor [2006] NSWSC 601 ('Boyle').

[4] It seems that the 'acknowledgment and acceptance of loan offer' was not received by Gippsreal until 12 September 2005.

[5] The letter of offer provided that the offered amount was not to exceed a maximum loan to value ratio of 75%.

[6] The North Melbourne property comprised three contiguous titles.

[7] For the purposes of this appeal it is unnecessary to describe the variations made as the result of negotiations between Kurek's solicitors and Gippsreal.

[9] Caveat AD904053R was lodged in respect of certificates of title volume 10537 folios 752, 754 and 756.

[10] Caveat AE029598Q was lodged in respect of certificate of title volume 10784 folio 656.

[11] Gippsreal Limited v Registrar of Titles and Kurek Investments Pty Ltd [2006] VSC 115 [33].

[13] [1943] VicLawRp 35; [1943] VLR 163 ('British Empire Films').

[14] Ibid 169. This is similar to the argument in the present case that the term sought to be enforced was separate from the promise to advance the loan moneys and was supported by consideration.

[16] Gippsreal Limited v Registrar of Titles and Kurek Investments Pty Ltd [2006] VSC 115, [35].

[17] This expression describes conduct which permits the enforcement in equity of a contract which is not enforceable at law because it does not satisfy Statute of Frauds requirements.

[18] Gippsreal Limited v Registrar of Titles and Kurek Investments Pty Ltd [2006] VSC 115, [35].

[20] Her Honour heard Gippsreal's summons together with a summons issued by Kurek seeking an order requiring the Registrar of Titles to remove the caveats, and a declaration that the caveator did not have and was not entitled to any charge on the Loch Sport and Richmond properties.

[21] Thorby v Goldberg [1964] HCA 41; (1964) 112 CLR 597, 605, 613; Placer Development Ltd v Commonwealth [1969] HCA 29; (1969) 121 CLR 353, 356 (Kitto J), 360-1 (Taylor and Owen JJ); Meehan v Jones [1982] HCA 52; (1982) 149 CLR 571, 581 (Gibbs CJ); Biotechnology Australia Pty Ltd v Pace (1998) 15 NSWLR 130, 134-6 (Kirby P); 150-1 (McHugh JA); SVI Systems Pty Limited v Best & Less Pty Limited [2001] FCA 279, [58] (Einfeld J); and H K Lucke, _'_Illusory, Vague and Uncertain Contractual Terms' Vol 6(1) September 1977, Adelaide Law Review, [1].

[22] This became the third further amended notice of appeal dated 19 April 2007, though it was wrongly described as the second further amended notice of appeal. Ground 4 was abandoned and ground 2(a) was amended to remove reference to the caveat over the North Melbourne property, in which Kurek had no interest. Grounds 15, 16 and 17, which again allege error in relation to the costs incurred by Gippsreal and to the effect of the charging clause, were also abandoned. They add nothing to the issues discussed in this judgment.

[24] Gippsreal Pty Ltd v Boyle and Anor [2006] NSWSC 601, [31].

[26] [1954] HCA 20; (1954) 92 CLR 424, 456 ('Australian Woollen Mills').

[27] Peter Heffey, Jeannie Paterson and Andrew Robertson, Principles of Contract Law (Lawbook Co, 2002) 52.

[30] Australian Woollen Mills Pty Ltd v Commonwealth [1954] HCA 20; (1954) 92 CLR 424, 456 (Dixon CJ, Williams, Webb, Fullagar and Kitto JJ).

[31] Gippsreal Pty Ltd v Boyle and Anor [2006] NSWSC 601, [35].

[33] N C Seddon and M P Ellinghaus, Chesire & Fifoot's Law of Contract (8th ed ,2002) [4.17].

[34] For discussion of the circumstances in which a contract may be implied, see Vroon BV v Fosters Brewing Group Ltd [1994] VicRp 53; [1994] 2 VR 32.

[35] [1975] HCA 55; (1975) 133 CLR 125 ('MacRobertson Miller'). The issue which arose in that case was whether stamp duty was payable on an airline ticket because it was an agreement or memorandum of an agreement.

[36] Ibid, 133. Barwick CJ added one possible qualification to this statement, namely, 'if the airline operator has been able, ready and willing to carry the passenger in accordance with the particulars on the ticket and the intending passenger has not presented himself in due time at the airline traffic office at the designated airport, the airline operator may claim to have earned the fare'.

[38] Counsel referred to Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337, 348 (Mason J) in support of the proposition that evidence of surrounding circumstances is admissible in aid of the construction of a contract.

[40] Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165, 179.

[41] See generally Placer Development Ltd v Commonwealth [1969] HCA 29; (1969) 121 CLR 353, 356 (Kitto J), 360-361 (Taylor and Owen JJ)

[42] MacRobertson Miller [1975] HCA 55; (1975) 133 CLR 125 (Barwick CJ) 133.

[43] Though see fn 36.

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