Mortgage Investment Group (ACT) Pty Ltd v SAP Canberra Pty Ltd [2025] ACTSC 356

1. This is an application to extend a caveat over certain land (the Land) in Lawson (Lawson Section 51, Block 1 in Deposited Plan 16353). As a result of an ex parte application on 6 August 2025, the caveat was extended by Baker J up until the close of business today. Following argument this morning, I reserved my decision and indicated that, in case I was unable to deliver a decision today, the caveat was extended until further order with the intention that this cover the position up until the point where I could deliver my decision. This is my decision.

2. The caveat identifies the nature of the estate or interest in the Land as being “Pursuant to terms of Loan Agreement dated 25 September 2024”.

3. The document said to comprise the loan agreement is a letter (the Letter) sent by the director of the plaintiff to Mr Shane Anderson and Mr Arthur Choi headed: RE: FINANCE PROPOSAL HORSE PARK ENTERPRISES PTY LTD

4. Mr Anderson was a director of Horse Park Enterprises Pty Ltd (Horse Park). He was also, and remains, the sole director of the first defendant, SAP Canberra Pty Ltd.

5. At the time of the Letter, the first defendant had a contract to purchase the Land and subsequently became the registered proprietor of that land.

6. Mr Choi was, and remains, a director of Horse Park.

7. Horse Park was the registered proprietor of certain land in Taylor.

8. The Letter sets out the terms of a loan of $430,000 to Horse Park. There are terms related to security which are described shortly. Amongst the “Other Terms” is the statement: “The borrower agrees to execute full loan documents in due course.” The Letter concludes: “Please confirm your acceptance of these terms.” The Letter is not signed by the director of the plaintiff, but contains a signature block. After the signature block are the words “TERMS ARE AGREED” and space for signatures by Mr Anderson and Mr Choi. Both Mr Anderson and Mr Choi have signed where indicated.

9. Amongst the terms are those next to a heading “Security” which provides as follows:

Security: Personal guarantees from Shane Anderson & Arthur Choi Caveat over Block 1 Section 51 Lawson 2617. Upon settlement of this Block, a second ranking mortgage shall be registered against it. GSA over SAP Canberra SA Pty Ltd (ACN: 658 854 294).

10. SAP Canberra SA Pty Ltd is a different company to the first defendant. As pointed out, the first defendant was not the registered proprietor of the Land at the time the Letter was signed. Therefore, the terms contemplated later action by the first defendant to grant a second ranking mortgage, and it is that obligation to take later action which is said to give rise to the equitable interest.

11. Following receipt of the signed Letter, the director of the plaintiff transferred $430,000 to Horse Park and provided a copy of the more formal loan agreement to Mr Choi. Notwithstanding the receipt of the money, the agreement was never executed or returned to the plaintiff.

Submissions

12. The plaintiff submitted that it has an equitable interest in the Land by reason of the term set out in the Letter (“Upon settlement of this Block, a second ranking mortgage shall be registered against it”) and the fact that the term remains unfulfilled.

13. The plaintiff submitted that the Letter falls within the first or second categories of agreements identified in Masters v Cameron (1954) 91 CLR 353. The court there identified three categories of case where parties have agreed upon terms of a contractual nature. Those were identified (at 360) as follows: Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three classes. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract. In each of the first two cases there is a binding contract: in the first case a contract binding the parties at once to perform the agreed terms whether the contemplated formal document comes into existence or not, and to join (if they have so agreed) in settling and executing the formal document; and in the second case a contract binding the parties to join in bringing the formal contract into existence and then to carry it into execution. Of these two cases the first is the more common.

14. The first defendant, on the other hand, submitted that the signed Letter was clearly no more than a term sheet and hence fell within the third category, which does not create a binding contract. It was, according to the first defendant, simply a document designed to provide the plaintiff with some assurance before expending time and cost in the preparation of the required document.

15. In addition to contesting whether or not there was a serious question to be tried as to the existence of any binding contract, the first defendant contended that: (a) the description of the equitable interest on the caveat was inadequate; and (b) the balance of convenience did not favour the continuation of the caveat.

Decision

Defective description of the interest in land

16. So far as the first of these two points is concerned, the defendant relied upon four authorities: Hanson Construction Materials Pty Ltd v Vimwise Civil Engineering Pty Ltd [2005] NSWSC 880; (2006) NSW ConvR 56-137 at [28]; Bellissimo v JCL Investments Pty Ltd [2009] NSWSC 1260 at [7]; Andara Homes Pty Ltd v Palm [2014] ACTSC 141 at [19]; ACN 601 158 507 Pty Ltd v Damodaran [2019] NSWSC 647 at [38]-[40].

17. In the Territory, the relevant provision is s 104(6) of the Land Titles Act 1925 (ACT), which requires that “[e]very such caveat … shall contain a sufficient description to identify the land and the interest therein claimed by the caveator”.

18. Andara at [16]-[20] summarises the authorities and identifies that it is not sufficient, for the purposes of s 104(6), to simply describe the interest as “an equitable interest”. Having regard to that decision, it is even more clearly inadequate to meet the requirement of s 104(6) that the interest simply be described as “Pursuant to terms of Loan Agreement dated 25 September 2024”. That contains no description at all of the interest, even though it makes reference to the source of the interest.

19. That of itself provides a sufficient basis for requiring the removal of the caveat.

20. Some reference was made to the potential to amend the terms of a caveat and whether, and to what extent, that was available in the Territory: see Pacific Building Services Pty Ltd v Lau [2017] ACTSC 245 at [25]-[26].

21. However, it is not essential to resolve that issue because the plaintiff indicated that, if the description of the interest was found to be defective, the plaintiff would seek an order under s 107C of the Land Titles Act permitting a successive caveat to be lodged. The plaintiff ultimately sought an order which would permit the lodgement of a caveat that asserted the following interest: Equitable mortgage by the registered proprietor in favour of the caveator to secure repayment of a loan by the caveator to a third party pursuant to a loan agreement dated 25 September 2024. Serious question to be tried

22. For the purposes of considering the application for a successive caveat, I consider that there is a serious question to be tried as to whether or not the Letter falls within the first, second or third categories identified in Masters v Cameron. In form, it is consistent with being a term sheet which outlines proposed terms which, in the usual case, would be not binding until formal documentation is drawn up. However, there are a number of indicators that it was intended to be immediately binding: (a) First, the absence of any provision indicating that it was “subject to contract”. (b) Second, the statement “[t]he borrower agrees to execute full loan documents in due course”, which is consistent with immediately binding obligations which are then to be documented. (c) Third, the positive request: “Please confirm your acceptance of these terms”. (d) Fourth, the positive statement to which the signatures were appended: “TERMS ARE AGREED”.

23. In relation to the question of who might be bound by the agreement, it is true that the capacities in which Mr Anderson was signing the agreement were not identified. However, given the relationship between Mr Anderson, Horse Park and the first defendant, it is at least arguable that, by the acceptance of the terms, the first defendant became bound to give a mortgage upon settlement of its purchase of the Land.

24. The alternative, namely that the only intended parties were the plaintiff and Horse Park, would render any agreement in relation to security ineffective and of no commercial utility. The terms of the Letter are sufficient to give rise to a serious question to be tried in relation to the capacity in which it was signed and whether it was binding upon the conscience of Mr Anderson in his capacity as sole director of the first defendant.

Balance of convenience

25. So far as the balance of convenience was concerned, the first defendant pointed to the terms of its existing finance arrangement and the evidence concerning the steps taken to refinance at lower rates of interest. It also pointed to the evidence that it had expended funds on pursuing those refinancing opportunities. It pointed to evidence in the form of letters from finance brokers that indicated that the continued existence of the caveat would present an impediment to refinancing. The circumstances in which those letters were brought into existence were not clear. They appear to have been prepared following the hearing before Baker J for the purposes of the litigation. Notwithstanding, they appear to raise commercially legitimate concerns about the existence of the caveat and the possible liabilities that the caveat reflects.

26. The evidence did not establish that the mere existence of the caveat, even if able to be removed to facilitate a refinance, would preclude refinancing. In circumstances where it was always contemplated that the mortgage to be granted by the first defendant would be a second ranking mortgage, refinancing on commercial terms should not be precluded. That can be achieved by allowing a caveat which prevents all dealings and addressing any refinance either by consent or court order under s 107A of the Land Titles Act.

27. On the evidence put before the court, I consider that the balance of convenience favours allowing a successive caveat to protect the asserted interest of the plaintiff.

Conclusion

28. For these reasons, it is appropriate to have the existing caveat removed but to permit a successive caveat which properly describes the interest of the plaintiff to be lodged. Directions will be made to permit the matter to proceed on pleadings, and the matter will be put into the Registrar’s directions list so as to permit a more comprehensive directions timetable to be put in place.

Costs

29. So far as costs are concerned, I consider that, except in one respect, costs should be reserved. I consider that reserving them at this stage is better than simply allowing them to be costs in the cause. That is because of the potential for there to be other causes of action asserted by the plaintiff against the defendants in the pleadings that will be required to be filed, and the consequent potential for there to be a differential outcome as between those causes of action and the cause of action reflected in the caveat proceedings.

30. The one exception to reserving costs is in relation to an application in proceeding which was filed but not moved upon arising out of delays by the plaintiff’s solicitors in serving the Registrar-General with Baker J’s orders. It appears to me that, in relation to that application, there should be no order as to costs as those costs arise out of the failure to immediately serve the Registrar-General, and the defendants should not be at risk of bearing those costs. Orders

31. The orders of the Court are: (1) Order that the third defendant is to remove caveat 3380100 from the title to Lawson Section 51, Block 1 in Deposited Plan 16353 (the Land). (2) Upon the undertaking as to damages recorded at paragraph 11 of the affidavit of Stephen Anthony Bates dated 6 August 2025, pursuant to s 107C of the Land Titles Act 1925 (ACT), the plaintiff may lodge, and the third defendant shall register, a caveat over the Land to protect the following interest: “Equitable mortgage by the registered proprietor in favour of the caveator to secure repayment of a loan by the caveator to a third party pursuant to a loan agreement dated 25 September 2024”. (3) Subject to order 4, the costs of the originating application dated 6 August 2025, including the hearing on 11 August 2025, are reserved. (4) There is no order as to the plaintiff’s costs of the application in proceeding filed 8 August 2025. (5) Pursuant to r 39 of the Court Procedures Rules 2006 (ACT), the proceedings shall continue on pleadings. (6) Noting the effect of r 39(3), the plaintiff is to file and serve an amended originating claim and a statement of claim within 14 days. (7) The proceedings are listed for a first directions hearing pursuant to Practice Direction 2 of 2014 before the Registrar at 9:30am on 18 August 2025.

I certify that the preceding thirty-one [31] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Justice Mossop. Associate: Date: