Prime Capital Securities Pty Ltd v Gore Hill Transport Pty Ltd

Supreme Court of NSW|2021-02-17|Before: Darke J, Mr P

Introduction

The plaintiff conducts a business providing finance to small and medium size enterprises. In these proceedings it seeks to recover almost $80,000 from the defendants as money said to be payable pursuant to the terms of a Loan Approval dated 11 September 2018. The amount claimed consists of an Establishment Fee of $52,800, liquidated damages of $17,100, Legal Fees of $6,308.08, and Valuation Fees of $3,300. The plaintiff further claims that it has an equitable charge over a property in Artarmon owned by the second and third defendants which secures the amounts claimed to be owing.
The plaintiff alleges that the Loan Approval was accepted by the defendants on about 13 September 2018 - the first defendant as Borrower, and each of the second and third defendants as a Guarantor. It is common ground that no loan was ever entered into pursuant to the Loan Approval. However, the plaintiff contends that upon the true construction of the Loan Approval, and in the events that happened, the amounts claimed became payable. The defendants advance various arguments in support of their contention that no amounts became payable. The principal arguments advanced are: 1. No contract as alleged came into existence as any promises made by the plaintiff were illusory, such that no consideration was given by the plaintiff; 2. In any event, upon the true construction of the Loan Approval, no amounts became payable to the plaintiff; and 3. no charge was created in favour of the plaintiff.

Summary of salient facts

On about 7 September 2018 the plaintiff commenced consideration of an application for finance for the first defendant (Gore Hill Transport Pty Ltd) that had been submitted to it by a broker, Mr Henson Liang.
On 11 September 2018 the plaintiff sent a Loan Approval document for Gore Hill Transport Pty Ltd to Mr Liang. Mr Liang promptly forwarded the document to the second defendant, Mr Robert Liu. Mr Liu was the joint owner of the property at 7A Dickson Avenue, Artarmon with the third defendant, Ms Rebecca Liu. Ms Liu (who, prior to 27 August 2005, had been known as Ms Yan Tang) was the sole director and secretary of Gore Hill Transport Pty Ltd.
The Loan Approval was addressed to Gore Hill Transport Pty Ltd and dated 11 September 2018. It was stated to be a Loan Approval for $2,400,000, and the offer was stated to expire on 16 September 2018. Section 1.0 contained a summary of "your loan approval terms". It was stated that "full terms and conditions will be included in our standard loan agreement and securities (the General Terms)". It was further stated that the loan approval was subject to satisfactory valuation. The summary of the Loan Approval referred to a Facility Limit of $2,400,000, described the interest rate and interest payments, and set out "Other fees & costs as set out in the General Terms" as follows: Establishment Fee 2.2% of Facility Limit Loan Management Fee 0.1% per month Legal Fees At cost, per lawyers Valuation Fee At cost, per valuer
Section 2.0 contained a list of the "securities" the plaintiff would require. These included a first ranking all monies mortgage over 7A Dickson Avenue, Artarmon and Guarantees to be given by Robert Liu and Rebecca Liu. Reference is made to Yan Tang being a Guarantor as well as Rebecca Liu, but this would appear to be an error, as they are one and the same person.
Section 3.0 concerned Drawdown Requirements. It provided: The following must be completed to our satisfaction (or waived) prior to the first drawdown: Condition Details Valuation report Completion of a satisfactory independent valuation (owners estimate: $4,000,000) Loan documents The Borrower and Guarantors sign the documents and authorisations which we or our lawyers consider are necessary or desirable General terms All conditions precedent as outlined in our standard loan and security documentation are either satisfied or waived

Section 4.0 concerned information the plaintiff would require prior to the first drawdown.
Section 5.0 concerned "Other Fees" which would be payable if there was default under the loan.
Section 6.0 was headed "Terms & Conditions". It included 24 clauses and various acknowledgements on the part of the Borrower and each Guarantor. The Terms & Conditions relevantly provided: Capitalised terms used have the meaning given in our standard loan agreement and securities (the 'General Terms'). This document represents a brief summary of facility terms, and full terms will be outlined in the General Terms. This loan approval is conditional on the terms and conditions outlined herein. This is not an unconditional offer. Any reference to 'you' or 'your' means the Borrower and Guarantor(s) jointly and all of them together. 'We' or 'us' means Prime Capital Securities Pty ACN 623 195 871. Valuations You hereby instruct us to engage a valuer to complete a valuation of the security property. You agree to pay for the cost of the valuation(s). Such valuation(s) is to be to our satisfaction in our absolute discretion. We are under no obligation to provide you a copy of the valuation(s). … Loan Documents 10. You hereby instruct us to engage a law firm to prepare loan and security documents. 11. You agree to pay for the cost (on a full indemnity basis) of all legal work in connection with the transactions contemplated by the parties including (without limitation) preparation of any document; investigating, considering, reviewing and negotiating the transactions; and any recovery or enforcement action. Independent Legal Advice 12. We recommend you obtain independent legal advice before signing this document. 13 You must obtain independent legal advice before signing the General Terms. Fees And Costs 14. The fees, costs and outlays outlined herein are payable by you on the earlier of: (i) the first drawdown date (ii) your withdrawal from this offer (if applicable) and (iii) and 30 days from the date of acceptance by you. 15. We require an Application Fee as outlined in section 7.0 to be paid upon acceptance of this offer by you. Withdrawal By You 16. Once you accept this offer it cannot be withdrawn by you unless you request so in writing and we agree in writing to your withdrawal. 17. If you withdraw from the offer after signing it, or the loan is not drawn down for any reason within 30 days after acceptance, or the proposed funding is cancelled by us in any circumstances, then you agree to immediately pay (i) all fees, costs and outlays payable herein including any recovery costs and (ii) liquidated damages equivalent to one month's interest at the Lower Rate. 18. You (including each Guarantor) charge all present and after acquired property in favour of us in respect of monies payable under these terms. Withdrawal By Us 19. This approval may be amended, withdrawn or cancelled by us at any time prior to the loan (or any part) being advanced to you if: (i) any information provided by you is incorrect; (ii) circumstances or facts arise which, in our opinion, may be prejudicial to our interests; (iii) the valuation is less than your estimate; or (iv) settlement is not effected within 30 days after acceptance. 20. We shall incur no liability whatsoever if we amend, withdraw or cancel this approval. … By accepting this offer the Borrower also acknowledges and agrees that: a legally binding contract between you and us is created on the terms set out in this offer and the General Terms; fees, costs, outlays and other monies are payable even if the loan does not proceed or is cancelled; … Acceptance by Guarantor(s) Each Guarantor: accepts and agrees to be bound by this offer and irrevocably and jointly and severally unconditionally guarantees to us the due and punctual payment of the Secured Money to us and the due and punctual performance of all the obligations of the Borrower. … (iv) acknowledges that they have read and understood the terms and conditions contained in this offer and agree to be bound by it and acknowledges they may be liable for payment of fees, costs, outlays and other monies in accordance with the terms and conditions contained within this offer.
Section 7.0 was headed "How to accept this Loan Approval". Three steps were provided for. Step 1 was the signing of the document in the places provided adjacent to the printed names Gore Hill Transport Pty Ltd, Rebecca Liu, Yan Tang and Robert Liu. Step 2 was the provision of details of a contact person for "valuation access" and details of "Your lawyers" for loan documents. Step 3 concerned an Application Fee. It was stated: We require an initial payment of $7,200 to be made towards the fees, costs and outlays. Payment is easy! Just click this link OR choose one of these EFT, BPAY or credit card options.
On 13 September 2018 Step 1 of Section 7.0 of the Loan Approval was attended to in the following fashion. The document was signed twice by Rebecca Liu - first, above her printed name and above and to the right of the printed name Gore Hill Transport Pty Ltd and, secondly, above the printed name Yan Tang. The Loan Approval was also signed by Robert Liu, above his printed name. Mr Liu's signature, and Ms Liu's second signature, were witnessed, as apparently required by the form. Ms Liu's first signature was not apparently required to be witnessed, and it was not. Details were included in Section 7.0 as required by Step 2, and credit card details were included to facilitate payment of the Application Fee the subject of Step 3.
The Loan Approval documents, so completed, were sent by Mr Liu to Mr Liang on 14 September 2018. Mr Liang gave evidence that he promptly forwarded the documents to the plaintiff. It appears that payment of the Application Fee was effected later on 14 September 2018.
The plaintiff, having received the documents and the Application Fee, proceeded to commission a valuation of the Artarmon property from JPM Valuers. The valuers inspected the property on 19 September 2018. The report they later prepared expressed the opinion that the market value of the property was $2,800,000. That is well below the estimate, provided to the plaintiff by the owners, of $4 million.
It appears that in these circumstances the plaintiff was prepared to lend only $1,680,000 (being 60% of $2.8 million), not the envisaged $2,400,000 (being 60% of $4 million). Loan and security documents were accordingly drafted by solicitors engaged by the plaintiff. On 3 October 2018 these documents were provided to a solicitor who was acting for the defendants at that time.
Also on 3 October 2018, Ms Liu sent another version of Section 7.0 of the Loan Approval to Mr Liang. This version included a further (third) signature of Ms Liu's, this time placed above the printed name Gore Hill Transport Pty Ltd. Mr Liang gave evidence that he forwarded the further version of Section 7.0 to the plaintiff.
It appears that the loan and security documents were executed by the defendants on about 17 October 2018. It is not clear on the evidence whether the documents were provided to the plaintiff or its solicitors or, if so, the terms upon which the documents were provided. In any case, it is clear that the proposed loan and mortgage transaction did not proceed to settlement.
On about 21 December 2018 the plaintiff lodged a caveat on the title to the Artarmon property, claiming a charge over the property pursuant to the terms of the Loan Approval. The plaintiff subsequently demanded that the defendants pay various fees said to be payable in accordance with the terms of the Loan Approval.
As noted earlier, the plaintiff now claims that it is entitled to an Establishment Fee of $52,800, liquidated damages of $17,100, and recompense for Legal Fees of $6,308.08 and Valuation Fees of $3,300. Monetary judgments are sought against each of the defendants. In addition, a declaration is sought that the amount outstanding is secured by an equitable charge over the Artarmon property.

Issues for determination

The plaintiff's case is relatively straightforward. It contends that a binding agreement was entered into with the defendants when they accepted the Loan Approval by signing it and returning it to the plaintiff. The plaintiff then contends that in circumstances where the loan did not proceed within 30 days of acceptance, or at all, cl 17 of the Loan Approval operated so that each of the defendants became immediately obliged to pay "all fees, costs and outlays payable herein" and "liquidated damages equivalent to one month's interest at the Lower Rate". The plaintiff submitted that upon the true construction of cl 17 of the Loan Approval (read in its context, including cl 14) "all fees, costs and outlays payable herein" included the Establishment Fee, and also the Legal Fees and Valuation Fee, that are referred to in Section 1.0 of the Loan Approval. The plaintiff further says that by cl 18 of the Loan Approval the Artarmon property is charged with payment of the amounts so payable to the extent they remain outstanding.
The defendants, by their Amended Defence, disputed all substantial aspects of the plaintiff's case, and specifically raised arguments to the effect that: 1. the Loan Approval was not accepted within the required time; 2. the provisions of the Loan Approval relied upon by the plaintiff are penalties and void and unenforceable; and 3. the plaintiff was not ready, willing and able to perform its obligations under the Loan Approval because it was only prepared to proceed with a loan of $1.68 million, not the $2.4 million the subject of the Loan Approval.
The matters referred to in (a) and (b) above were not pressed at the hearing. Neither was an argument, alluded to in the written submissions, that Mr Liang lacked authority to act as an agent of the defendants. However, the defendants advanced another point to the effect that there was no enforceable contract because the promises made by the plaintiff were illusory and no consideration was given by the plaintiff.
All of the issues (including the illusory promises point) depend upon, or at least largely depend upon, the meaning that is given to the words of the Loan Approval.

The construction of the Loan Approval

It is uncontroversial that questions of construction of a written commercial agreement are to be approached by applying the well-known principles as laid down in cases such as: Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; [2004] HCA 35 at [22]; Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35]; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 at [47]; and Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12 at [16]. That is, the meaning of the terms of a commercial contract is to be determined objectively by what a reasonable business person would have understood those terms to have meant. That determination requires consideration of the language used by the parties, the surrounding circumstances known to them, and the commercial purpose or objects to be secured by the contract. It may be added that a commercial contract should be construed as a whole and, if possible, so as to render all the terms harmonious (see Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109).
Here, the evident commercial purpose of the Loan Approval is to prescribe the rules governing the process of assessment and documentation of the proposed loan and mortgage transaction. That is, the process which follows an acceptance of the Loan Approval by the intending Borrower and Guarantors, and which may, but does not necessarily, culminate in the parties entering into a loan and mortgage transaction as envisaged.
The contemplated transaction involved a loan to the first defendant of $2.4 million at an interest rate of 8.55% pa over a 12 month term, secured by a first ranking mortgage over the Artarmon property, and guarantees to be given by the second and third defendants. It is apparent, particularly from the first page of the Loan Approval, that the process from acceptance to settlement (which would at least involve the obtaining of a valuation and perhaps also the preparation of legal documents) was expected to be undertaken within a relatively short period of time.
The Loan Approval is described on its first page as an offer, able to be accepted by completing the three steps set out on the last page (Section 7.0). After the first page, the document proceeds by way of a number of Sections.
Sections 1.0 to 5.0 generally serve the functions of describing the proposed loan and identifying the plaintiff's requirements for the loan to proceed. Section 1.0 is of particular importance to the plaintiff's claim for the Establishment Fee. It is made clear in Section 1.0 that "full terms and conditions" would be included in standard loan agreement and securities documents (together described as the General Terms). The "Other Fees & Costs", which include the Establishment Fee, are said to be set out in those General Terms. It is also made clear in Section 1.0 that the approval was subject to satisfactory valuation.
The terms and conditions of the Loan Approval itself are found in Section 6.0. The salient parts of those terms and conditions have already been set out above at [11]. These terms are examined below in the course of dealing with the various issues of construction raised by the parties.

Illusory contract

The first issue to consider is whether the promises purportedly given by the plaintiff under the terms of the Loan Approval are illusory, such that no enforceable contract came into existence when the terms were accepted by the defendants. In this regard, the defendants submitted that the plaintiff had an unfettered or unconfined discretion under cl 5 to regard the valuation as unsatisfactory and hence not proceed further with the proposed loan. It was submitted that this was made clear by the words "absolute discretion". Reference was made to the statement of general principle made by Kitto J in Placer Development Ltd v Commonwealth of Australia (1969) 121 CLR 353 at 356, where his Honour said: …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.
Reference was also made to Anglican Development Fund Diocese of Bathurst v Palmer [2015] NSWSC 1856 at [349], where Hammerschlag J said: …A promise is not illusory because the promisor has some discretion in how its obligations are to be performed. It is only necessary that there be an obligation that the promise be performed and that the discretion is contained within defined parameters: M. Furmston and G.J. Tolhurst, Contract Formation: Law and Practice, (1st ed 2010, Oxford University Press) par 11.20; Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130 at 151; Allcars Pty Ltd v Tweedle [1937] VLR 35; Thorby v Goldberg (1964) 112 CLR 597; Yaroomba Beach Development Co Pty Ltd v Coeur De Lion Investments Pty Ltd (1989) 18 NSWLR 398 at 404.
The defendants submitted that there were no defined parameters here.
The plaintiff submitted that notwithstanding the words "absolute discretion", there was room for the implication of a term requiring good faith or a term of the type referred to by Griffith CJ in Butt v M'Donald (1896) 7 QLJ 68 at 70-1.
For the following reasons, I do not think that the promises purportedly given by the plaintiff under the terms of the Loan Approval are illusory.
The Loan Approval was accepted by the defendants by signing the document and paying the Application Fee. The Application Fee, as described in Section 7.0, is an amount to be paid towards "the fees, costs and outlays". Those words evidently refer back to the expression "fees, costs and outlays" as found in cll 14 and 17 of Section 6.0 and also in the acknowledgments given by the Borrower and the Guarantors. In my view this class of "fees, costs and outlays" at least includes (in addition to the Application Fee itself), the cost of the valuation agreed to be paid pursuant to cl 4. It seems to me that the Loan Approval should be construed such that upon its acceptance and payment of the Application Fee, the plaintiff is bound to engage a valuer to complete a valuation of the security property, as envisaged by cl 4. The plaintiff is thus obliged to take certain action, indeed action that would reasonably be expected to result in it incurring a liability to the valuer.
Moreover, the plaintiff is in my view bound to consider the valuation and make a decision as to whether the valuation is satisfactory. Whilst the plaintiff has what is described as an absolute discretion to decide that a valuation is not to its satisfaction, it is nonetheless required to make a decision about it. An obligation of that character would be imposed as part of an implied obligation to do all such things as are necessary on its part to enable the defendants to have the benefit of the contract (see Butt v M'Donald (supra), cited in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607). The Loan Approval is expressed to be conditional, and in my view (and as appears to be common ground) the plaintiff would not be bound to continue if the valuation is not to its satisfaction. The terms of the Loan Approval contemplate that the defendants will only obtain the benefit of the contract if the plaintiff considers the valuation and makes a decision about whether it is satisfactory. That is the contemplated means by which the plaintiff's requirements concerning the valuation may be satisfied.
I would go further and state that the plaintiff's obligation would additionally require the decision to be made honestly. This aspect of the obligation would arise from the implication of an implied term of good faith (as to which see Burger King Corporation v Hungry Jack's Pty Ltd (2001) 69 NSWLR 558; [2001] NSWCA 187 especially at [146]-[186]; see also Macquarie International Health Clinic Pty Ltd v Sydney Local Health District (2020) 19 BPR 40,463; [2020] NSWCA 161 at [268]-[274]). I do not think that such an implication would be inconsistent with the plaintiff's express right to decide in its absolute discretion that a valuation was not satisfactory to it. Despite the broad language employed in cl 5, the right ought not be construed so as to permit the plaintiff to say that a valuation is not satisfactory to it even if the plaintiff had made no honest decision to that effect. That is most unlikely to have been the reasonable expectation of the parties. I note that in Macquarie International Health Clinic Pty Ltd v Sydney Local Health District (supra) the relevant provision (cl 2.5) conferred an "absolute and unfettered discretion". It follows in my view that cl 5 of the Loan Approval, properly construed, provides that the plaintiff has an absolute discretion to decide that a valuation is not to its satisfaction provided that such decision is made honestly (cf Meehan v Jones (1982) 149 CLR 571 at 589-90 and 597-8).
It can thus be seen that upon acceptance of the Loan Approval, the plaintiff not only had an obligation to engage a valuer to complete a valuation, it also had associated obligations to consider the valuation and make an honest decision about whether it was to its satisfaction. Those promises made by the plaintiff under the Loan Approval were real, not illusory, and they afforded valuable consideration to the defendants.

Amounts payable under the Loan Approval

The next issue to consider is the extent to which the defendants became liable under the terms of the Loan Approval to pay the amounts claimed by the plaintiff. In this regard, the plaintiff relies upon cl 17 of the Loan Approval which provides: If you withdraw from the offer after signing it, or the loan is not drawn down for any reason within 30 days after acceptance, or the proposed funding is cancelled by us in any circumstances, then you agree to immediately pay (i) all fees, costs and outlays payable herein including any recovery costs and (ii) liquidated damages equivalent to one month's interest at the Lower Rate.
The plaintiff contends that cl 17 is engaged in circumstances where "the loan is not drawn down for any reason within 30 days after acceptance". The plaintiff says that the defendants thereby incurred liabilities to immediately pay "all fees, costs and outlays payable herein" and "liquidated damages equivalent to one month's interest at the Lower Rate".
As to the former, the plaintiff contended that "all fees, costs and outlays payable herein" should be construed to include the Establishment Fee and also the Legal Fees and Valuation Fee, as referred to in Section 1.0 of the Loan Approval. These amounts were said to fall within "fees, costs and outlays outlined herein" as referred to in cl 14. The plaintiff submitted that the expression "fees, costs and outlays" is broad, and intended to encompass any fees, costs and outlays that are relevant to the loan approval; that is, the loan approval process as distinct from a future loan contract. So, it was said, the Establishment Fee relates to the loan approval process which entails taking steps towards the establishment of a loan. A contrast was drawn with the Loan Management Fee (also referred to in Section 1.0) which only arises after a loan has been entered into.
The defendants' primary submission was that cl 17 was not engaged because it could not be said that "the loan" was not drawn down for any reason within 30 days after acceptance. The defendants contended that "the loan" meant a loan for $2.4 million, and as no such loan was in existence or offered it could not be said that the loan was not drawn down.
The defendants then submitted that even if cl 17 was engaged as alleged, upon the true construction of the clause, the amounts claimed by the plaintiff, or at least the Establishment Fee, did not become payable. The defendants submitted that Section 1.0 of the Loan Approval was a summary of the terms of a loan agreement that might ultimately proceed in accordance with the plaintiff's standard terms (referred to as the General Terms). It was emphasised that the various fees referred to in Section 1.0 were described as "Other Fees & Costs as set out in the General Terms". The defendants submitted that the terms of any contract arising upon acceptance of the Loan Approval were contained within Section 6.0, and that whilst those terms contained agreements to pay certain fees and costs, such as the cost of the valuation (cl 4) and the cost of legal work (cl 11), they contained no agreement in relation to the claimed Establishment Fee.
Finally, the defendants submitted that the legal costs claimed did not fall within cl 11 because they were not for legal work in connection with a transaction contemplated by the parties. The defendants submitted that the parties mutually contemplated only a loan of $2.4 million, not a loan of $1.68 million as provided for in the documents drafted by the solicitors engaged by the plaintiff.
I do not accept the primary submission made by the defendants. In my view "the loan" referred to in cl 17 is the proposed loan the subject of the Loan Approval, in this case a loan of $2.4 million for a term of 12 months. The relevant limb of cl 17 is engaged whenever the loan is not drawn down "for any reason" within 30 days after acceptance. That must include the present circumstances where the valuation came in at only $2.8 million, well below the defendants' estimate of $4 million, and the plaintiff was only prepared to lend $1.68 million. I note here that under cl 19 the plaintiff is permitted to amend the approval if the valuation is less than the estimate provided. It is not necessary, in order to engage this limb of cl 17, that a loan of $2.4 million be in existence or offered to the defendants. In my opinion, cl 17 was satisfied here as the proposed loan was not drawn down within 30 days after acceptance of the Loan Approval by the defendants on 14 September 2018.
By cl 17 the defendants agreed that in such circumstances they would immediately pay "all fees, costs and outlays payable herein". A similar expression appears in cl 14 which provides that the fees, costs and outlays "outlined herein" are payable on the earlier of three dates, being (a) the first drawdown date; (b) the defendants' withdrawal from the offer; and (c) 30 days from the date of acceptance by the defendants. Clause 14 thus operates so that the fees, costs and outlays "outlined herein" are payable whether the proposed loan (or an amended loan) proceeds to drawdown or not. Those fees, costs and outlays also fall within cl 17 as fees, costs and outlays "payable herein".
It is thus necessary to consider the scope of the expression "fees, costs and outlays outlined herein". I agree that the words "fees, costs and outlays" are capable of wide application, but the words are qualified by "outlined herein". To my mind, the natural meaning of "outlined herein" is outlined here in these terms and conditions (i.e. Section 6.0). This reading is supported by the fact that the terms and conditions do outline certain amounts in the nature of fees, costs or outlays that the defendants agree to pay; in particular the cost of the valuation (cl 4) and the cost of certain legal work (cl 11). I note further that the words "outlined herein" are also employed in cl 2 which provides that the loan approval is conditional on the terms and conditions "outlined herein". That would similarly be read as referring to the terms and conditions set out in Section 6.0.
This construction is preferable to the plaintiff's construction which would extend the scope of the expression to amounts in the nature of fees, costs and outlays referred to in the Loan Approval document even if not referred to in the terms and conditions in Section 6.0, such as the Establishment Fee.
It is true that a fee in the nature of an Establishment Fee may relate to the loan approval process, but the reference to the Establishment Fee in Section 1.0 occurs in the context of a description of various fees and costs "as set out in the General Terms". I accept the submission of the defendants to the effect that Section 1.0 is a summary of the terms of a loan agreement that might ultimately proceed in accordance with the plaintiff's General Terms. In that regard, it should be noted that the Loan, Security and Guarantee Deed later submitted to the defendants provides for each of the fees and costs that are listed in Section 1.0; namely the Establishment Fee (cl 6.1), the Loan Management Fee (cl 6.3), the Legal Fees (cl 12.2(b)) and the Valuation Fee (cl 12.2(a)(i)). It can be inferred that this Deed embodied the plaintiff's General Terms.
For these reasons I do not think that the Establishment Fee of $52,800 (being 2.2% of the stated Facility Limit of $2.4 million) is a fee that falls within either cl 14 or cl 17 of the Loan Approval. It is not payable by the defendants to the plaintiff pursuant to cl 17 as claimed.
However, I think it is clear that the cost of the valuation ($3,300) and the legal costs of $6,308.08 are fees, costs or outlays that fall within cll 14 and 17. Both are "outlined" within the terms and conditions in Section 6.0 and both are payable by the defendants in accordance with those provisions. I am unable to accept the submission of the defendants that the legal costs were not for legal work in connection with a transaction contemplated by the parties. The terms and conditions plainly contemplate that the loan approval may be amended if the valuation is less than the estimate provided. It can be inferred that this occurred here when the plaintiff, following receipt of the valuation, indicated that it was prepared to lend only $1.68 million. The loan and security documents later drafted by the solicitors documented a transaction in accordance with the loan approval as so amended. The plaintiff is entitled to recover both the cost of the valuation and the amount of the legal costs.
The final amount claimed by the plaintiff is the sum of $17,100 by way of liquidated damages. The amount is calculated as equivalent to one month's interest at the Lower Rate of 8.55% per annum on the Facility Limit of $2.4 million.
As is the case with "all fees, costs and outlays payable herein", the amount of liquidated damages becomes payable under cl 17 in certain events, including if the loan is not drawn down within 30 days after acceptance. As I have already said, that is the case here. However, the defendants submitted that the sum is not payable because recovery of the sum is a claim for damages, and it is a necessary part of a cause of action for damages that the party seeking relief was at the relevant time ready, willing and able to perform its obligations under the contract (see, for example, Foran v Wight (1989) 168 CLR 385 at 400-402 and 451). The defendants submitted that the plaintiff was not relevantly ready, willing and able because the plaintiff was not willing to provide a loan of $2.4 million.
I do not accept these submissions. First, the terms of the Loan Approval make it clear that the plaintiff was not bound by any unqualified obligation to provide a loan of $2.4 million. The approval of the proposed loan in that amount was stated to be conditional (cl 2), and the required valuation had to be to the plaintiff's satisfaction (cl 5). As the valuation was less than the estimate provided by the defendants, the plaintiff was entitled to amend the approval and offer a loan of $1.68 million. It cannot be said that the plaintiff was thereby not ready, willing and able to perform its obligations. Secondly, the claim for the amount of what is described as liquidated damages is, despite the label, a claim under the contract for the recovery of a liquidated sum, not a claim for damages. A party seeking to recover a liquidated sum pursuant to a contract is not claiming damages for breach of the contract. The plaintiff here makes no claim for damages. In those circumstances, there is no requirement for the plaintiff to show that it is relevantly ready, willing and able to perform its obligations under the contract. For these reasons, it is my view that the plaintiff is entitled to recover the sum of $17,100 pursuant to cl 17 of the Loan Approval. As noted earlier, the defendants abandoned their arguments based on the doctrine of penalties.
In summary, amounts totalling $26,708.08 became payable to the plaintiff pursuant to cl 17 of the Loan Approval 30 days after the defendants accepted the Loan Approval on 14 September 2018.

Is the amount payable secured by a charge over the Artarmon property?

The plaintiff submitted that cl 18 of the Loan Approval was sufficient to create an equitable charge over the Artarmon property. Clause 18 provides: You (including each Guarantor) charge all present and after acquired property in favour of us in respect of monies payable under these terms.
It was submitted by the plaintiff that a charge was plainly intended such that the Artarmon property was specifically appropriated for the payment of any monies payable under the terms of the Loan Approval. The defendants submitted that no charge was created because the extremely wide language of cl 18 was not specific about the property to which it was intended to apply, and it did not identify any of the rights (whether of a personal or proprietary nature) the plaintiff was intended to have in relation to property the subject of the clause.
Clause 18 is without doubt widely drawn. However, a mortgage or charge over the entirety of a person's property is not void for uncertainty, and may be later enforced against property if at that time the property can be identified (see Re Clarke; Coombe v Carter (1887) 36 ChD 348 at 352; Bridge Wholesale Acceptance Corporation (Australia) Ltd v Burnard (1992) 27 NSWLR 415 at 421-2). Here, there is no doubt that the Artarmon property, owned by the second and third defendants, falls within the scope of cl 18.
The terms of cl 18 indicate an intention that all property falling within its scope is to be immediately appropriated for the payment of monies due to the plaintiff under the terms of the Loan Approval. That is to say, an intention that the property be available as security for the payment of those monies (see Roberts v Investwell Pty Ltd (in liquidation) [2012] NSWCA 134 at [26]-[29]). It is not necessary that the terms of a charge set out all of the rights and remedies to be afforded to the chargee. If a valid charge is created, the chargee will have equitable remedies available to it to enforce its security interest in the relevant property.
In my opinion, the amount of $26,708.08 that is owed to the plaintiff is secured by a charge over the Artarmon property. A declaration to that effect should be made as sought. I note that the plaintiff does not at this stage seek orders for judicial sale.

Conclusion

The plaintiff is entitled to judgment for the sum of $26,708.08 together with interest pursuant to s 100 of the Civil Procedure Act 2005 (NSW) up to the date of judgment. A declaration should also be made as to the existence of an equitable charge over the Artarmon property that secures the amount owed to the plaintiff. The plaintiff has thus succeeded, although only as to part of its claim. Prima facie, costs should follow the event.
The Court directs the parties to confer and seek to reach agreement as to appropriate orders to give effect to this judgment. Short Minutes of Order should be brought in within 7 days.

Amendments 08 April 2021 - Typographical error in [46]. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 08 April 2021

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