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[2005] QSC 273
Supreme Court of Queensland
2005-09-30
Moynihan J
Original judgment source is linked above.
[1] MOYNIHAN J: The applicant seeks determination of it's and the respondent's rights "in the events surrounding":
(a) the parties entering into a loan agreement on 7 January 2005 ("the loan agreement");
(b) the applicant, as mortgagor, executing an instrument of mortgage ("the mortgage") over Lot 27 on Crown Plan G1410 in the County of Clinton, in the Parish of Gladstone ("the property") in favour of the respondent, as mortgagee, on 7 January 2005 to secure the loan the subject of the loan agreement;
(c) the respondent not advancing the moneys the subject of the loan agreement and registering the mortgage over the property.
[2] Alternatively, the applicant seeks a declaration that the mortgage is unsupported by consideration and is void and unenforceable. There are further applications for consequential relief which can be dealt with later.
[3] The application was instituted under UCPR 11 on the basis that the only or main issue in the proceedings was an issue of law and that a substantial dispute of fact was unlikely. Moreover it was submitted that because of the application seeming to be in default under another security[1], there was insufficient time to prepare a claim because of the urgent nature of the relief sought was satisfied.
[4] The respondent contends the proceedings should be by claim and statement of claim. It is necessary to postpone considering that until the circumstances referred to in paragraph 1 of the application are developed in some more detail.
[5] The applicant owns land at Gladstone. It engaged a finance broker Ciprie Pty Ltd (Ciprie) to obtain a loan secured on that property. Ciprie submitted a loan submission to the respondent and received a letter of offer dated 9 December 2004 from the respondent for a loan of $1.5 million secured inter alia by a mortgage over the Gladstone property.
[6] The letter of offer provided that the applicant pay the respondent an approval fee and its solicitor's costs in relation to the work done. The approval fee was $16,500 and the legals cost $6,050.
[7] The letter of offer also provided that the respondent reserved the right to vary or withdraw the offer at any time before settlement. The preparation and forwarding of security documentation did not affect this right.
[8] The letter also included a provision that the applicant provide a registered company charge by "any other entity which may be required"; paragraph 4(c).
[9] The applicant accepted the terms and conditions of the letter of offer by Mark Andrew Crapper (Crapper) the director and shareholder of the applicant signing a duplicate copy of the letter on 9 December 2004 and returning it to the applicant. The binding effect of the letter is not in issue although its application in the circumstances is.
[10] On 13 December 2004 the respondent forwarded a revised letter of offer, tax invoice for $2,200 establishment fee, and other documents to Ciprie, which forwarded them to the applicant. On 13 December 2004 Crapper accepted the terms and conditions and signed the declaration.
[11] The letter of 13 December 2004 by paragraph 4(d) imposed an additional requirement to those in the 9 December 2004 letter. This was that a registered company charge be provided by Olpoho Pty Ltd as trustee for the Olpoho Discretionary Trust. The provisions of clause 4 otherwise remained the same.
[12] By a letter dated 24 December 2004, the respondent's solicitors requested that the applicant discharge a charge from the Commonwealth Bank over Olpoho Pty Ltd and at settlement enclosed an account for $12,865.60 for legal costs, outlays and charges.
[13] By a letter of 4 January 2005 the applicant's solicitors stated that they were surprised to see the requirement of Item 7 in the letter of 24 December 2004 and that no indication was given that this would be a requirement of the advance and since the charge supported other securities over other land it could not be released. An offer of a second registered mortgage debenture or similar security was put forward but was apparently not acceptable to the respondent.
[14] On 7 January 2005 Crapper on behalf of the applicant executed a number of documents including a loan agreement and a mortgage over the Gladstone property and forwarded them to the respondent under cover of a letter of 10 January 2005.
[15] On 20 January 2005 the respondent's solicitors wrote to the applicant referring to the fact that the applicant was not proceeding with the transaction and drew attention to the provisions (clauses 7 and 9) of the letter of offer dealing with the applicant's liability to pay the approval fee and professional costs and sought payment of $16,500 to the respondent for the approval fee and $6,050 to its solicitors for legal costs and outlays. It was said that if those amounts were not paid in seven days proceedings would be commenced to recover them.
[16] The applicant did not pay the money and on 19 April 2005 the respondent's solicitors wrote to the applicant noting that they held the signed mortgage document and were instructed that if the outstanding amounts were not paid by 5 pm on 22 April 2005 they were to stamp the unlodged mortgage documents for registration in which case their client would look to the applicant for the costs of stamp duty and registration fees amounting to $6,105.60. The letter went on to say that once the mortgage documents were registered in the Department of Natural Resources and Mines the respondent would exercise its rights under the mortgage.
[17] On 29 April 2005 the respondent's solicitor paid the duty assessed on an amount of $1.5 million, executed the mortgage and lodged it for registration. On 12 May 2005 the solicitor gave notice of exercise of power of sale on the basis of clause 5 of the mortgage and on 3 June 2005 gave notice of the exercise of the power of sale founded on a breach of that clause. It obliged the mortgagor to pay all costs, charges, expenses and payments incurred in or about the preparation executed and registration of the mortgage.
[18] The respondent claims the applicant now owes it:
[19] Neither the loan agreement nor the mortgage is to the effect that the applicant's obligations are conditioned on the advancement of $1.5 million being made. The letter of offer accepted by the applicant on 9 December 2004 approved the applicant's application for finance on the terms and conditions set out in the letter, paragraph 1 of which acknowledged that the respondent was prepared to advance $1.5 million with a qualification that is not relevant for present purposes.
[20] The loan agreement acknowledged agreement between the parties for the advance of the moneys identified by the mortgage and the mortgage was expressed to be in consideration of $1.5 million "lent or agreed to be lent" to the mortgagor by the mortgagee.
[21] It seems to me that the applicant's acceptance of the letter of offer of 9 December 2004 was a concluded agreement. The parties intended to be immediately bound to the performance of the term but acknowledged that full or more precise documentation was necessary to give effect; Masters v Cameron[2], GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd[3]. This case is in the first category of Masters[4].
[22] The documentation contemplated was to give effect to the contract by complying with the necessary regulatory and registration requirements to give effect to the securities. Baulkham Hills Private Hospital[5] spoke of a fourth class of contract where the parties were agreed whilst expecting to make a further contract in substitution for the first containing "by consent" additional terms.
[23] The respondent's requirement that the applicant discharge the charge in favour of the Commonwealth Bank over Olpoho Pty Ltd appears to be within the contemplation of clause 4(c) of the letter of offer of 9 December 2004. The insertion of sub-clause (d) in the letter of 13 December 2004 simply was identification of an "entity" from which a registered charge was required.
[24] The requirement in the letter of 24 December 2004 that the Commonwealth Bank charge over Olpoho Pty Ltd might fairly be considered to imply a rejection of the proposal for a second registered mortgage.
[25] If that is to be regarded as a "counter offer" given the view I take of the agreement the respondent was not obliged to accept it.
[26] It is not, as was submitted for the applicant, a question of any entitlement to lodge the mortgage to secure the legal fees or the advance must be supported by the loan agreement which did not create a legal registerable mortgage over the property. The question is rather whether any terms of the mortgage deed are inconsistent with the contract constituted by the applicant's acceptance of the offer of 9 December 2004.
[27] It is submitted that the respondent terminated its agreement with the applicant by the letter dated 20 January 2005. The letter speaks of the respondent's solicitors having "been advised" that the applicant was not proceeding with the transaction which is entirely consistent with the respondent's accepting termination by the applicant.
[28] The submission that at the time the respondent executed and registered the mortgage it had not and did not intend to advance any money has to be read in the light of the terms of the letter of offer, the loan agreement and the mortgage not requiring the advancing of the money as a pre-condition to them apply to the transaction.
[29] The mortgage provided that in consideration of the sum of $1.5 million the lender agreed to be lent by the mortgagor or the mortgagee the mortgagee covenanted with the mortgagee to repay the $1.5 million within twelve months. There was a covenant to pay interest on the principal sum or so much as was owing from time to time. By clause 5 the mortgagor covenanted to pay all charges, expenses and payment for the preparation, execution and registration of the mortgage or to enable it to be registered or any release etc.
[30] Clause 18 of the mortgage provided that secured not only "the moneys thereinbefore mentioned" but all moneys which were or may in the future be owing by the mortgagor to the mortgagee "on any account whatever" whether absolutely, contingently or subject to a condition. That clause might arguably include the sums in issue here.
[32] In Jacobsen[9] the assignee of a mortgage obtained as part of a fraudulent transaction on the part of the mortgagee was held to have no right to take under the mortgage and the amount agreed to be advanced never having been advanced could not succeed in a foreclosure action.
[33] Walsh J (Alberta Supreme Court) took the view that the money to be secured by the mortgage never having been advanced, the equity (of redemption) arising out of the fact that the mortgage money was never advanced related to the state of the mortgage account the mortgagee could not realise on the security.
[34] For this purpose he considered there was no difference in principle between a case in which it was never intended the money be advanced and one where in fact it was not. In either case if the question asked how much money was owing on the mortgage the answer would be nothing. He declared that the mortgage was null and void.
[35] In Re GM Industries[10] Needham J held that the purported creation of the charge over the property to secure debt when there was no debt and no contractual liability to raise one was an act without legal effect.
[36] As I have said in this case the contractual obligations were not dependent on the money being advanced. In this case it may be the mortgage was signed and registered after the respondent accepted the applicant's non-compliance with the security provisions.
[37] As will emerge in the present case there is no question of the kind of fraudulent activity which rendered the security transaction a nullity in those cases does not arise.
[38] It is submitted that the respondent's failure to proceed in advancing the finance was a frustrating event that deprived the applicant of any benefit under the mortgage and defeated the commercial purpose of the mortgage so that it was "terminated automatically".
[39] As I have already said it is not clear that the respondent did not accept the applicant's non-compliance with the provision about the Olpoho Pty Ltd security. It seems to me difficult to consider the agreement frustrated in those circumstances.
[40] In any event it is not clear that the applicant could not complete the transaction as distinct from choosing not to comply with the requirements.
[41] It is submitted that the Registrar of Titles should be directed to remove the mortgage from the Register and cancel it pursuant to s 187 of the Land Title Act 1994. Reference is also made to s 184(3)(b) which provides that if there has been fraud by the registered proprietor or by a person from whom the registered proprietor derived a registered interest. Reference was then made to UNIC SA v Quartermain Holdings Pty Ltd[11] where Wilson J spoke of "fraud" within the meaning of the Land Title Act 1994 could include "wilful blindness, an abstention from inquiry, fear of learning the truth and possibly reckless indifference". It was held that in any event it must amount to "actual dishonesty".
[42] In the circumstances of this case I am not persuaded that the completion and lodgement of the mortgage three months after the contract (not negotiations as was submitted) between the applicant and the respondent had terminated without a good deal of moneys is capable of satisfying the requirements of fraud.
[43] The state of mind of the respondent and its agent appears to be a relevant consideration and cannot be determined in these proceedings.
[44] In any event s 187(1) and s 184(3)(b) are postured on fraud "by the registered proprietor".
[45] I am not satisfied that Morris v Redland Bricks Ltd[12] justifies that the respondent should be ordered by mandatory injunction to take all necessary steps to redeem the mortgage from the mortgagor.
[46] In summary the application is not one in which the only or main issue is one of law. There are substantial issues of fraud. It is not made out, although this is not a decisive consideration in the circumstances that there was insufficient time to prepare a claim.
[47] In any event the applicant has not made out a case for the relief sought on this application and it should be dismissed. The proper procedure would appear to be an action for redemption of the mortgage.
[2] [1954] HCA 72; [1954] 91 CLR 353 at 360
[7] (1919) 48 DLR 51 at 57
[8] (1994) 13 ACSR 592 at 595.3
Oasis Dalby Pty Ltd
Sovereign Capital Ltd
(1986) 40 NSWLR 631