Gippsreal Pty Ltd v Boyle & Anor

LEGISLATION CITED : Uniform Civil Procedure Rules 2005 (NSW)

Placer Development Ltd v Commonwealth of Australia (1969) 121 CLR 353 Gippsreal Limited v Registrar of Titles and Kurek Investments Pty Ltd [2006] VSC 115 Vodafone Pacific Ltd v Mobile Innovations Ltd [2004] NSWCA 15 Gippsreal Ltd v Registrar of Titles and Kurek Investments Pty Ltd (Supreme Court of Victoria, Court of Appeal, 26/5/06 unreported) CASES CITED : DW Greig & JLR Davis, The Law of Contract (1987) Australian Woollen Mills Pty Ltd v The Commonwealth (1954) 92 CLR 424 MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) (1975) 133 CLR 125 Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 ERS Engines Pty Ltd v Wilson (1994) 35 NSWLR 193

Gippsreal Pty Ltd PARTIES : v Norman

COUNSEL : Plaintiff: A C Casselden Defendants: R McKeand SC

SOLICITORS : Plaintiff: Leonard Legal Defendants: N/A

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2839/06 Gippsreal Limited v Norman Boyle & Anor JUDGMENT 1 HIS HONOUR: This is an application to further extend the operation of two caveats which expire today. The plaintiff, Gippsreal Pty Ltd, claims to be entitled to a charge over land of the defendants, Messrs Boyle and Woods. This interest is said to arise "pursuant to charge provisions contained in the letter of offer dated 25 November 2005 and executed by [Mr Boyle and Mr Woods] as guarantor". 2 The defendants say that the letter of offer provided no consideration for the charging provision in it. This was because Gippsreal was given a complete discretion as to what, if anything, it would do for the putative borrower. The issues on the present application are first whether Gippsreal made any promise in return for the defendants' promise to charge their property. If not, there is a further question whether it is seriously arguable that a contract was made and consideration was provided through Gippsreal's spending time and money in investigating the loan. If it is seriously arguable that the defendants' promise to grant a charge is a term of a contract between the parties, the next question is whether it is seriously arguable that any amount is secured by the charge, and if so, what amount. If so, the question then is whether the balance of convenience favours extending the caveat. The Letter of Offer 3 The letter referred to in the caveats was addressed by Gippsreal to "The Director, Tumut Development Co No. 2 Pty Ltd or nomine (sic)". The second defendant, Mr Woods, is the director of that company. He and Mr Boyle signed a form headed "Acknowledgement and Acceptance of Loan Offer" which forms part of the letter. 4 The letter advised that Gippsreal had approved mortgage advances totalling $10,095,000. The mortgagor was to be the registered proprietor of properties in New South Wales at lots 2 and 61, Kunama Drive, Jindabyne, lot 475 DP 751745, McQuillan Road, Leeton; and portion 287, Booral Avenue, Tumut. There is no evidence as to who was the registered proprietor of those properties. The letter set out the term of the loan, the interest rate, a requirement for a performance bond and various other terms. The expression "guarantors" was defined to mean: " All as required including: - · if Mortgagor is a body corporate then all directors of said Mortgagor."

The letter contained no guarantee clause. However, it incorporated various promises to be made by both the mortgagor and the guarantors. 5 The loan offer of $10,095,000 was said to have two components; namely, a fully drawn advance component of $6,500,000 and a line of credit component of $3,595,000. 6 Page 6 of the letter provided that "you" (presumably a reference to Mr Woods, the director of Tumut Development Co No. 2 Pty Ltd) were to be in a position to effect settlement within four weeks of the date of acceptance of the offer contained in the letter, or, if the loan was to assist in the purchase of property, on the date advised to Gippsreal as the settlement date for the purchase. 7 Page 7 contained the note: " Gippsreal caution that this Offer and the proposed mortgage are serious documents which execution by the mortgagor/guarantor is contractually binding upon the mortgagor/guarantor. "

It may be noted that this sentence does not provide that the document would be binding on Gippsreal. 8 On pages 8 and 9 under the heading "Charge", the letter stated: " In accepting this offer of loan the mortgagor/guarantor and all directors of the mortgagor/guarantor agree to charge in favour of Gippsreal Limited all their estate or interest in the security property (without limitation) and in any and all other property including real estate property you may own as and from the date of the acceptance of this offer, with payment of all monies either presently or in future or contingently owing to Gippsreal Limited on any account of the mortgagor/guarantor and all directors of the mortgagor/guarantor and including the monies due under this offer including the Acceptance and Acknowlegement attached hereto and the proposed Mortgage. … It is the express intention of the parties that without limitation to its rights generally Gippsreal Limited will lodge a caveat against the title to any properties the above parties may own or have any form of legal or equitable interest in including the property offered as security and register a charge over any bodies corporate, to secure payment of any monies outstanding under this Offer or the Mortgage. This charge will take effect upon execution of this Letter of Offer irrespective of whether this mortgage advance is made. " 9 Under the heading "Indemnity", the document provided: " Upon acceptance of this offer the mortgagor/guarantor indemnifies Gippsreal (and any other party acting on Gippsreal's behalf) against any and all loss suffered by Gippsreal on account of the mortgagor/guarantor and whether those costs are incurred by Gippsreal directly or indirectly or howsoever incurred. " 10 The letter also provided: " Conditions Precedent - the Mortgagor acknowledges that this offer of finance is conditional on the following matters being satisfied … "

Fifteen conditions were then stipulated. A sixteenth condition precedent to the offer was " any other conditions which the Mortgagee may impose as a result of its enquiries ". 11 There is no evidence as to whether any of the conditions precedent, other than the condition of a "Privacy Act Consent", was satisfied. 12 The letter also contained the following important provisions: " Reservation This offer is not to 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. Gippreal 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 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. Acceptance 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. " 13 The letter further provided that interest would be payable commencing four weeks from acceptance of the offer, regardless of whether the loan settled on that date, or upon settlement, whichever was the earlier. 14 Pages 14 and 15 of the letter comprised a form entitled "Acknowledgement and Acceptance of Loan Offer". This form included the following paragraphs: "[The Applicants] hereby acknowledge: 2. acceptance of the terms and conditions specified in this Offer and in particular the terms of payment of interest and principal. … 7. that upon acceptance of this 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. 8. 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 and mortgage documents and to charge me/us the application fee and all other amounts as set out herein 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. 9. 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 will have suffered a loss. In that event, I/we agree that the following liquidated damages will apply; 9.1 $35,000.00 for professional costs; 9.2 $264,993.75 being three months interest at the lower rate; 9.3 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 any costs agreement entered into by Gippsreal Limited. ("the Liquidated Damages") and a Certificate issued by Gippsreal Limited pursuant to this agreement will be conclusive evidence as to any Liquidated Damages determined to be so outstanding. 10. that the liquidated damages are fair and reasonable. 11. If I/we have not made payment of the liquidated damages in full within seven days of any written demand, then the following will apply; 11.1 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 along with any interest costs or charges thereon, being the principal sum repayable within seven days of written demand; 11.2 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; … " 15 The application fee referred to in paragraph 8 was a sum of $35,000. The letter provided that this sum was payable "on account of the valuation fee, quantity survey, legal fees and our costs (non-refundable)". 16 Each of the defendants signed the Acknowledgement and Acceptance form. They also signed a consent form said to be required by the Privacy Act 1998 (Cth) as "Applicants/Guarantors". Events Following the Signing of the Acceptance 17 Mr Woods and Mr Boyle signed the acceptance of Gippsreal's offer on 5 December 2005. The loan was not drawn down within four weeks. However, there is no evidence that the loan was available to be drawn down. There is no evidence that the conditions precedent to the "offer" were satisfied or waived. 18 Following the defendants' execution of the acceptance of Gippsreal's letter of offer, Gippsreal incurred costs in instructing valuers, solicitors and quantity surveyors, and inspecting the properties. A manager of Gippsreal, Mr Morton-Pedersen, deposed that the plaintiff had received tax invoices in the following approximate amounts: " A. Valuers - $11,000 B. Solicitors - $15,000 C. Quantity Surveyors - $43,000 ". 19 He also deposed that he had driven hundreds of kilometres over a three-day period to inspect properties at Leeton, Tumut and Jindabyne. Gippsreal received the application fee of $35,000. 20 On 20 February 2006, Gippsreal wrote to Moin & Associates, solicitors, who were apparently acting for the proposed borrower. The heading of the letter indicates that Gippsreal had been proposing to lend to a company called Leeton Development Co Pty Ltd. That company was not a party to the letter of offer. Gippsreal stated that it had recently come to its attention that the mortgagee of the property had been in possession of the property for some time and was selling to "your client's new company" as mortgagee in possession, presumably as a result of a default by the registered proprietor. It contended that this information had not been disclosed to it, and its directors had resolved to withdraw the offer of the loan. It demanded that "your client" pay all liquidated damages due under the terms of the letter of offer within fourteen days. This letter was responded to by a finance broker who had apparently been arranging the finance. The broker claimed that Gippsreal had known that the loan was to be made to the Leeton Development company which would be purchasing the property from the existing mortgagee. He complained about Gippsreal's decision to withdraw the loan and stated that it was a devastating blow for all concerned. The broker's letter acknowledged that a lot of work had been done, that is, obtaining valuations, quantity surveyors' reports, preparation of mortgage documents and the conduct of due diligence by Gippsreal. 21 Gippsreal replied to the broker's letter and asserted that it had been deceived by not having been informed that there was a mortgagee in possession. It acknowledged that its withdrawal of what it called its "loan offer" was a devastating event. It said that Gippsreal had undertaken a significant amount of work "progressing the loan application" and in "finalising the loan advance". It said that it had gathered in approximately $6,000,000 in readiness for the initial settlement. 22 Notwithstanding the initial impression which might be gained from a tax invoice sent by Gippsreal to Leeton Development Co Pty Ltd and dated 3 January 2006, it is clear that no part of the loan was drawn down. No Consideration to Support a Contract Through Exchange of Promises 23 The defendants' principal submission was that there was no consideration for the promise by the defendants to grant a charge over their real property because Gippsreal was under no obligation to make any loan, or to do anything, under the letter of offer. The principle relied upon by the defendants was stated by Kitto J in Placer Development Ltd v Commonwealth of Australia (1969) 121 CLR 353 at 356 as follows: "… wherever words which by themselves constitute a promise are accompanied by words showing that the promisor is to have a discretion or option as to whether he will carry out that which purports to be the promise, the result is that there is no contract on which an action can be brought at all. The succinct statement of the principle in Leake on Contracts , 3rd ed, p 3: ' Promissory expressions reserving an option as to the performance do not create a contract' was approved by the Lord Justice, as it was later by Lord Wright in Hillas and Co Ltd v Arcos Ltd (1932) 147 LT 503, at p 517." 24 The reason the defendants submit that Gippsreal had a discretion or option as to what it would do is to be found in the reservations quoted above. The first paragraph under the heading "Reservation" demonstrates that Gippsreal was under no obligation to make an advance, and that "such agreement" (i.e. an agreement to make an advance) should only come into existence on an advance being made. The fourth paragraph reserved to Gippsreal the right to withdraw the offer at any time if the borrower failed to comply with any condition either set out in the letter of offer or subsequently imposed by Gippsreal as a result of its enquiries. If Gippsreal withdrew the offer on this basis, the mortgagor, borrowers and guarantors would be liable to make payment of moneys "due hereunder", which would include payment of liquidated damages payable under paragraph 9 of the acceptance form. However, the last paragraph of the reservation was even wider. It gave Gippsreal the right to "withdraw this offer" for any reason whatsoever without its being obliged to explain or justify its decision. Hence, the defendants submitted that Gippsreal had a discretion as to what, if anything, it did pursuant to the defendants' acceptance of the letter of offer. There was therefore no consideration for the defendants' promise to charge their land in favour of Gippsreal. 25 This question was recently considered by Hollingworth J in the Supreme Court of Victoria in a case dealing with a letter of offer in the same terms as the letter with which the present case is concerned (Gippsreal Limited v Registrar of Titles and Kurek Investments Pty Ltd [2006] VSC 115). Her Honour concluded (at [26]) that Gippsreal had reserved its rights to such a degree that it provided no valuable consideration for the bargain, such that the consideration was illusory. Her Honour said (at [33]): "I turn to consider the caveator's ' promise ' to advance money, in the light of those principles. Obviously, the lending of money is at the core of the transaction the subject of the loan documents. 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." 26 Counsel for Gippsreal submitted that it was seriously arguable that this was not correct. In particular, Gippsreal relied upon the concluding words to the first paragraph of the reservation as indicating that, if Gippsreal's requirements were satisfied fully and promptly, then it was required to make an advance. Counsel also submitted that construed as a whole, the letter of offer contained a promise by Gippsreal to investigate whether or not to make the loan, and it was required to do this in good faith. This, it said, was sufficient consideration to support the defendants' promises. In support of its contention that Gippsreal was obliged to investigate in good faith whether to make the loan, counsel pointed to the second paragraph under the heading "Acceptance", which provides that Gippsreal "will instruct various agents". Such an obligation could also be inferred from its receipt of a non-refundable payment of $35,000 on account of valuation fees, quantity surveyors fees, legal fees and its costs. 27 Counsel also submitted that Gippsreal's rights under the reservation, including its rights to withdraw the offer at any time up to settlement for any reason, were not unlimited, but were constrained by an implied obligation that it exercise such a right in good faith and for its legitimate interests, and not arbitrarily or capriciously (see Vodafone Pacific Ltd v Mobile Innovations Ltd [2004] NSWCA 15 at [216]-[217]). 28 Gippsreal also submitted that it was plain that, upon acceptance of the letter of offer, the documents were intended to have contractual effect. The Court should be slow to find that a document which the parties intended to have legal effect was nugatory. 29 Gippsreal relied also upon a judgment of the Victorian Court of Appeal given on 26 May 2006 on an application for a stay of the orders of Hollingworth J (Gippsreal Ltd v Registrar of Titles and Kurek Investments Pty Ltd, Supreme Court of Victoria, Court of Appeal, 26/5/06 unreported). After noting Gippsreal's submissions, which were repeated before me, the Court of Appeal concluded that there were sufficiently arguable grounds to consider granting a stay (at [19]). However, the Court expressed no conclusion on the merits of the argument. I do not accept that the Victorian Court of Appeal's conclusion that there were sufficiently arguable grounds to justify a stay in itself warrants a conclusion that there is a sufficiently serious question to be tried that there was a binding agreement to give a charge to justify extending the caveats. The question raised is purely one of law. 30 I agree with Hollingworth J's conclusion that the reservations in the letter of offer are such that no consideration was provided by Gippsreal which could bring a contract into existence upon the signing and return of the acceptance form. That is to say, I agree, for the reasons her Honour gave, that no bilateral contract was entered into by the exchange of mutual promises. I do not consider that the concluding words of the first paragraph of the reservation can be construed as binding Gippsreal to make an advance if its requirements were satisfied fully and promptly. Such a construction would be inconsistent with the earlier parts of the reservation which provide that no agreement binding it to make an advance would come into existence until the advance was actually made. Moreover, the last reservation by which Gippsreal reserved the right to withdraw the offer for any reason at any time up to settlement, is inconsistent with Gippsreal's being required to make an advance if its requirements were fully and promptly satisfied. 31 But for the last paragraph of the reservations, I would accept Gippsreal's submission that the letter of offer, once accepted, obliged Gippsreal to investigate the making of the loan. I do not accept that the provision that, upon acceptance of the offer, Gippsreal "will instruct various agents", was promissory and obliged it to instruct agents. Rather, those words gave notice to the proposed borrower that the costs of instructing agents would be incurred. They were not a promise by Gippsreal to incur such costs. The engagement of the agents would be for the benefit of Gippsreal, not the mortgagor, and Gippsreal could choose not to instruct the agents without being in breach of contract. However, the provision for it to be paid $35,000 on account of various fees and its costs, which payment was not to be refundable, would import an obligation on it to investigate the making of a loan. However, the last paragraph of the reservation is not confined to Gippsreal's withdrawing the offer to lend money. In this respect, it stands in contrast to the first paragraph of the reservation, which is so limited. The last paragraph of the reservation gives Gippsreal the right to withdraw the offer for any reason up to settlement. This must extend to any obligation which Gippsreal may have expressly or impliedly offered to assume, including any obligation to investigate the making of the loan. It was given a discretion whether or not to do so. 32 Nor can the document be saved by importing implied terms of good faith and fair dealing which, if there is a contract, might constrain the exercise of contractual powers. It does not seem to me to be logically possible to demonstrate the existence of consideration to support a contract by reference to implications which would arise if a contract were made. Moreover, the express term giving Gippsreal the right to withdraw the offer for any reason whatsoever, without its being obliged to explain or justify its decision, would be inconsistent with its only being able to exercise the power to withdraw the offer for a reason which was not capricious or not arbitrary. Hence, any such implied term, assuming it to be relevant on this question, would be contrary to the express terms of the reservation. In my view, the letter of offer provides no consideration from Gippsreal for the promises made by the defendants. 33 Nor am I persuaded that I should construe the letter of offer favourably to Gippsreal so as not to defeat the parties' intentions, as expressed in the document, that a contract had been entered into. The document was drawn by Gippsreal and is heavily in its favour. If it has over-reached itself, I see no reason to rescue it from a situation of its own making. Unilateral Contract 34 The next question is whether consideration for the defendants' promises was afforded by Gippsreal having undertaken its investigations for making the advance and having incurred expense in so doing, and whether those actions brought a contract into existence. Hollingworth J dealt with this question as follows: "35. The caveator raised an alternative argument. If the consideration was found to be illusory, then the caveator says that the loan documents were made enforceable by reason of the steps which the caveator had taken to be ready for settlement. Those steps include such matters as 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. Although the caveator's counsel consistently referred to these as acts of ' part performance ', the use of that expression seems unhelpful and likely to mislead. It seems to me that the more appropriate enquiry is to determine whether a binding contract has ' sprung into existence' by reason of any subsequent conduct.

36 This was an issue which arose in British Empire Films . It may be recalled that O'Bryan J held that the consideration was illusory because the film distributor was under no obligation to ever supply a film to the exhibitor. However, the distributor had in fact subsequently offered the exhibitor two films, which the exhibitor had accepted. ' If then the agreement of the 23rd October 1942 does not constitute a valid contract for want of consideration the acceptance by the [exhibitor] of the film "Professor Mamlock" and a supporting feature offered by [the distributor] in that way in my opinion 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, in this view 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. ' 37. I do not disagree with the analysis in that case of a fresh offer and acceptance, supported by consideration, and on the terms of the written agreement. But there is 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." 35 With respect, I do not consider that it is 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. The finding in British Empire Films Pty Ltd v Oxford Theatres Pty Ltd [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. " 36 In my view this is such a case, as was British Empire Films. Paragraph 8 of the form of acceptance included an express request by the defendants that Gippsreal instruct solicitors, begin all necessary searches and proceed with the preparation of security documents. Gippsreal acted on that request by carrying out investigations and incurring expenses. It is clear that it did so on the basis of the defendants' having signed the acceptance of its letter of offer. Put in terms of offer and acceptance, by sending the signed letter to Gippsreal, the defendants offered to perform the promises given by them in the document in exchange for Gippsreal taking those steps. As the High Court said in Australian Woollen Mills Pty Ltd v The Commonwealth (1954) 92 CLR 424 at 456-457: " Such contracts are sometimes described as 'unilateral' contracts, but the term is open to criticism on the ground that it is unscientific and misleading. There must of necessity be two parties to a contractual obligation. The position in such cases is simply that the consideration on the part of the offeree is completely executed by the doing of the very thing which constitutes acceptance of the offer. … … In cases of this class 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." 37 Another example of a contract arising by the performance of acts which a party had no obligation to perform, and which could not be supported as a contract founded on mutual promises, is to be found in the judgment of Barwick CJ in MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) (1975) 133 CLR 125 at 133. There, his Honour was of the view that an airline ticket was not an agreement, or memorandum of an agreement, between the airline operator and its passengers, because an exemption clause in the ticket "fully occupie[d] the whole area of possible obligation, leaving no room for the existence of a contract of carriage". In his Honour's view, the airline was under no obligation to carry a passenger, and its right to retain a prepaid fare was dependent upon the actual performance of carriage. His Honour said: " But if, in any case, the described carriage eventuates it shall be upon the indorsed terms of carriage. "

I agree with Greig & Davis' analysis of this judgment at page 240 that: " In other words, it was a form of unilateral contract in which the terms became operative once performance of the contract commenced. " 38 Provided the acts done by Gippsreal were done in exchange for, and in response to, the promises made by the defendants in the letter of offer, the doing of those acts was both an acceptance of the defendants' offer, made by their sending back to Gippsreal the signed letter, and the consideration for the defendants' promises. Given the express request by the defendants to Gippsreal in paragraph 8 of the acceptance form, it is clear that the acts done by Gippsreal were a quid pro quo for the defendants' promises. 39 For these reasons, even though I am of the view that the letter of offer is not enforceable as a bilateral contract where the consideration relied on is the exchange of mutual promises, I am of the view that the acts done by Gippsreal pursuant to the defendants' request in the letter of offer brought a contract into existence and provided consideration for the defendants' promises in the letter. Conditions Precedent 40 The conditions precedent to the "offer" were not conditions precedent to a contract coming into existence, but to the performance of the contract (Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 at 552). What Amount is Secured by the Charge? 41 The next question is what amount is arguably secured by the agreement to charge the defendants' land. Gippsreal contended that the charge secured what paragraph 9 of the acceptance form described as liquidated damages. There is a question as to whether the amounts stipulated in clause 9 are a genuine pre-estimate of damage, or whether the clause is a penalty. However, it is unnecessary to go into that question. That is because the obligation to pay liquidated damages only arose if the applicants (defendants) chose not to proceed with the loan, or it was not drawn down within the required time limit. It is clear in this case that it was Gippsreal who chose not to proceed with the loan, not the defendants. The question then is whether the defendants were in breach of the agreement by not drawing down the loan within the required time limit. However, it is equally clear from the correspondence that the loan was not available to be drawn down by the time Gippsreal decided not to proceed. In its letter of 7 March 2006, Gippsreal stated that it was "progressing" the loan application and "finalising" the loan advance. It had not yet assembled sufficient funds to make the first advance of $6,500,000. Nor does it appear that any of the conditions precedent had been satisfied. Accordingly, there is no serious question that the defendants might be liable for liquidated damages. 42 That being so, the only amount which would be secured by the charge is the indemnity against "all loss suffered by Gippsreal on account of the mortgagor/guarantor". The only evidence of any such loss is that of Mr Morton-Pedersen, referred to in para [18] above, that he "believed" that Gippsreal had received tax invoices from valuers, solicitors and quantity surveyors totalling $69,000, and that he had incurred expense in inspecting three properties in southern New South Wales. 43 It does appear that Gippsreal incurred solicitors' costs of $15,092.80. Mr Morton-Pedersen deposed that he believed Gippsreal had received a tax invoice from valuers for $11,000. There is in evidence an invoice from a firm of valuers, Shane Trethewy & Associates, to Gippsreal in the sum of $11,000. However, on 11 February 2006, Mr Morton-Pedersen wrote to Shane Trethewy & Associates and denied liability to pay the valuation fees owing to alleged defaults on the part of the valuer. He said: "In the circumstances we will not be paying for the valuations which are, in essence, worthless for mortgage lending purposes ." 44 Mr Morton-Pedersen did not refer to this correspondence in his affidavit. The observations of Young J (as his Honour then was) in ERS Engines Pty Ltd v Wilson (1994) 35 NSWLR 193 at 197 bear repeating: " It cannot be emphasised too greatly that one's obligation in making an affidavit is the same as when one is giving evidence in the witness box. One is to tell the truth and the whole truth. It is completely unacceptable for a solicitor to prepare an affidavit in which a witness gives a half truth and it is completely unacceptable for a witness … to only give the Court a half truth. " 45 Mr Morton-Pedersen deposed to a belief that the company had received tax invoices from quantity surveyors totalling $43,000. However, there is other evidence that the fees incurred for quantity surveyors totalled $13,200. 46 Gippsreal did not seek to quantify the costs which it incurred in carrying out the inspections of the three properties. 47 Bearing in mind that Gippsreal has received $35,000 on account of such costs, the evidence is quite insufficient to show that prima facie it has incurred costs or expenses in excess of that amount. Nor is there evidence to show that it has suffered any other form of loss against which it is entitled to be indemnified by the defendants. Gippsreal cannot complain that it has had insufficient opportunity to put on such evidence. It would be expected to adduce evidence of the amount secured by the charge when it filed its summons seeking an extension of the caveat. It did not do so. It has not demonstrated that it is seriously arguable that it incurred costs or expenses, or otherwise suffered a loss, beyond the $35,000 it received, by merely stating Mr Morton-Pedersen's belief as to the invoices received. 48 Accordingly, whilst I am of the view that the defendants did agree to charge their land in favour of Gippsreal, I am not of the view that there is a seriously arguable case that the defendants owe any money to Gippsreal which would be secured by the charge. 49 Accordingly, I refuse the plaintiff's application that the caveats be further extended. I order that the plaintiff pay the defendants' costs of that application. 50 Finally, I should say something of the principal affidavit relied on by Gippsreal in support of the summons. It was not paginated as required by rule 35.6(3) of the Uniform Civil Procedure Rules 2005 (NSW). The deponent, who is the plaintiff's solicitor, merely annexed documents. However the documents were not annexed in any logically coherent way. This made it difficult and time-consuming to understand the basis upon which Gippsreal claimed to be entitled to the relief it sought. Had I not concluded that this interlocutory application be dismissed with costs, the manner in which the affidavit was prepared would in any event have led to a particular costs order. As it is, no such order is required.

16/06/2006 - Addition of file number (omitted) - Paragraph(s) 0 16/06/2006 - Removal of 'Compensation Court' as Lower Court (No Lower Court applicable) - Paragraph(s) 0

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