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[2026] NSWCA 107
respondent. Appeal dismissed with costs. The Court held that the loan agreements required interest to be paid in advance and did not decide the remaining damages grounds: [35]-[36].
2 cited instruments linked from this judgment.
The loan schedules contained conflicting wording about when interest had to be paid. The Court of Appeal did not treat that conflict as making the interest provisions void. It read the agreements together, including the term that allowed the lenders to retain the first month’s interest from the loan advance. The court concluded that the first interest payment was made in advance and that the remaining monthly payments were intended to be made in advance too. The borrowers’ appeal was dismissed with costs. The court did not decide the damages grounds.
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2,386 words · generated 07/10/2026
The case concerned two short-term, interest-only loans made to Aldrich Pty Ltd, with Jovan Sarai guaranteeing Aldrich’s obligations. The loans were entered into on 26 September 2024. The first was for $10.5 million, and the second for $2.325 million, making a combined borrowing of $12.825 million. Each had a three-month facility term and provided for interest to be paid monthly ([2]-[4], [10], [15]).
The loans were connected to the purchase of a property at Darling Point. Mr Sarai had contracted to buy it for $14 million and was required to complete by 27 September 2024, after an agreed extension of the original settlement date. The loans enabled Aldrich to pay the balance of the purchase price ([8]-[9]). The loan proceeds were advanced and the purchase settled on 30 September 2024 ([18]).
The dispute arose from inconsistent payment wording in each Finance Offer Schedule. Under “Payment type”, the schedule said: “Your interest charges for a payment period are due on the last day of the period.” Under “Payment period”, it said: “Monthly in advance”. It also provided for monthly repayments on the anniversary of the first drawdown ([15]). Special condition 2 provided that the first interest instalment was deducted from the facility limit and retained by the lenders ([16]-[17]).
The lenders treated the interest as payable in advance. After interest allegedly due on 1 November 2024 was not paid, they served default notices on 4 November 2024 ([19]). They commenced possession proceedings on 20 November 2024 and appointed a receiver the following day ([20]). Aldrich and Mr Sarai disputed that they were in default and brought a cross-claim seeking, among other things, a declaration that the receiver’s appointment was void and damages based on an alleged lost opportunity to refinance ([5]).
The primary judge accepted the lenders’ construction that interest was payable in advance. The judge also rejected the damages claim, including because the evidence did not establish that a final refinancing agreement had been made before the receiver was appointed ([6], [21]-[22]). On appeal, the Court of Appeal’s principal question was whether interest was payable in advance or in arrears ([2]). Ball JA gave the substantive reasons. Mitchelmore JA and Free JA agreed ([1], [37]). The appeal was dismissed with costs ([36]).
Ball JA began with the legal approach to inconsistent provisions. A conflict between clauses does not, by itself, mean a contract or one of its provisions is void for uncertainty. The task is to identify the parties’ objective intention by construing the contract as a whole ([26]). The court should resolve an inconsistency where possible, and only in the rare case where the contractual intention cannot be determined should it conclude that the contract or part of it is void for uncertainty ([27]).
That approach mattered because the appeal was not resolved simply by choosing one sentence and disregarding the rest. Ball JA considered the overall structure and operation of these particular agreements. He noted that the loans ran for three months and required monthly interest, which meant there would be three interest payments ([29]).
The court gave particular weight to special condition 2. It provided for the amount of the first interest instalment to be deducted from the facility limit and retained by the lenders. Clause 63(z) of the Common Provisions stated that a special condition overrode a Common Provisions term to the extent of any inconsistency ([14], [29]). Ball JA considered the natural reading to be that the lenders could deduct and retain the amount for their own purposes, thereby discharging the interest obligation for that month ([30]). He rejected the appellants’ suggestion that the amount might instead have been held in escrow until interest became due. The clause did not say that the money was to be held in escrow ([30]).
From the first payment, Ball JA drew an inference about the remaining payments. If the first monthly instalment was paid in advance, it was natural to infer that the other two would also be paid in advance, particularly given the short, three-month term ([31]). The schedule’s statement “Monthly in advance” supported that interpretation. So did the provision that monthly repayments were to be made on the anniversary date of the first drawdown ([31]-[32]).
The appellants argued that “Monthly in advance” appeared under the heading “Payment period”, which they said was not apt to describe when a payment was due. Ball JA accepted that the drafting was unsatisfactory, but concluded that the heading could not change the clear effect of the words “in advance” ([28], [33]). The appellants also argued that “repayments” did not include interest because interest is not “repaid”. Ball JA considered that, in an interest-only loan, the monthly payments were interest payments, so “repayments” in this context included those payments ([34]).
The conflicting sentence, stating that interest charges were due on the last day of the period, remained relevant. But Ball JA concluded that, read as a whole, the agreements showed that the parties intended interest to be paid in advance. He therefore rejected that sentence as representing their intention ([35]). The resulting construction meant the court did not need to determine the remaining appeal grounds about damages ([36]).
The judgment’s stated approach to contractual uncertainty was not presented as a new doctrine. Ball JA described a method of construction grounded in earlier authorities. He cited McGowan v Commissioner of Stamp Duties for the proposition that, where provisions are irreconcilably inconsistent, a court’s task is to resolve the inconsistency where necessary by rejecting a provision repugnant to the substance of the whole ([26]). He also referred to Baloglow v Konstanidis, Mainteck Services Pty Ltd v Stein Heurtey SA, and The Council of the Upper Hunter County District v Australian Chilling and Freezing Co Limited in connection with the principle that uncertainty arises only where intention cannot be determined from the contract as a whole ([27]).
The judgment’s contribution in this case was to apply that approach to conflicting payment terms in short-term loan documents. Ball JA expressly said the principle applied not only where a particular clause was obscure, but also where the difficulty arose from inconsistent provisions ([27]). The practical point is that the court did not treat inconsistency as an automatic endpoint. It examined the surrounding terms and the intended operation of the payment arrangements.
The judgment did not identify a change in the law before and after this decision, nor did it state that it was overruling or limiting an earlier authority. Its reasoning instead applies the cited principles to the wording and structure of these two agreements. The result is specific to the contractual material before the court: a special condition providing for the first instalment to be deducted and retained, a three-month term, monthly interest, and schedule wording that included “Monthly in advance” ([29]-[35]).
The judgment also does not establish that every loan agreement with a retained first interest instalment necessarily requires all later interest instalments to be paid in advance. The inference depended on the combined terms of these agreements. Ball JA considered the first advance payment alongside the limited number of later payments, the schedule’s other statements, and the agreements as a whole ([29]-[35]).
At [26], Ball JA said: “The fact that a contract contains clauses which are inconsistent is not of itself a reason for concluding that the contract, or some part of it, is void for uncertainty.” In plain English, conflicting wording does not automatically make a contract legally ineffective. The court first tries to work out what the parties objectively meant by reading the document as a whole.
At [27], Ball JA said that only in “those rare cases where it is impossible to determine the intention of the parties from the contract as a whole” will a court conclude that the contract or part of it is void for uncertainty. This describes the threshold applied in the judgment. If the contractual material permits the court to discern an intention, the court construes the agreement rather than treating uncertainty as established merely because the drafting conflicts.
At [30], Ball JA explained that the natural reading of the retained-interest clause was that the lenders could deduct the amount of the first interest payment from the amount advanced and keep it, discharging the borrower’s obligation for that month. He rejected the proposed escrow reading because there was no wording in the clause suggesting the money was to be held until a later due date. The passage shows how the court assessed what the particular clause did in operation, not just its label.
At [31], Ball JA reasoned that if the first monthly payment was made in advance, it was natural to infer that the later monthly payments would also be made in advance. The three-month loan term was relevant because only two further interest payments followed the first. This was an inference from the agreements’ structure, not a general statement that every first instalment determines the timing of all later instalments.
At [33], Ball JA acknowledged the appellants’ concern about the heading “Payment period”, but said that the heading could not alter the clear effect of the words “in advance”. The significance is that the court looked beyond the heading where it considered the actual payment wording clear.
At [35], Ball JA gave the decisive conclusion: taking the agreements as a whole, the parties must have intended interest to be paid in advance. He treated the last-day sentence as inconsistent with that intention and rejected it as expressing what the parties intended. That construction resolved the appeal’s central contractual question.
The judgment is relevant where a contract contains inconsistent provisions and a party argues that the inconsistency makes the contract, or a particular obligation, void for uncertainty. Its stated method is to consider whether the parties’ objective intention can be determined from the agreement as a whole ([26]-[27]). A lawyer applying the judgment would likely examine the complete contractual structure, including any priority clause, special conditions, definitions, schedules, and provisions describing how payments operate.
The decision is especially factually close where a short-term, interest-only loan has apparently conflicting schedule entries about whether interest is due in advance or at the end of a payment period. In this case, the court considered the three-month term, monthly payment intervals, deduction and retention of the first interest instalment, the words “Monthly in advance”, and the monthly anniversary date ([29]-[34]).
The judgment may also be relevant where one contractual provision appears to be an operative mechanism for payment and another provision appears to state a different due date. Here, the first interest instalment was not merely described as retained: it was deducted from the facility limit, and the court considered that the deduction discharged the first month’s interest obligation ([29]-[30]). The agreement also expressly stated that special conditions prevailed over inconsistent Common Provisions ([14], [29]).
The precedent should not be treated as a substitute for examining the particular words and context of another contract. The court’s conclusion depended on this combination of terms. The judgment does not decide how different drafting, a different payment structure, or an express escrow arrangement would be construed. Nor does it decide whether some unrelated contractual inconsistency would make a different clause uncertain.
The supplied judgment contains no later decisions discussing or applying Sarai v N1 Loans Pty Ltd. It is dated 5 June 2026, and the material provided does not include subsequent case history. Accordingly, no conclusion about later judicial treatment can be drawn from this source.
The judgment itself identifies its relationship with earlier authorities. It applies the approach in McGowan v Commissioner of Stamp Duties at [26], and refers to Baloglow v Konstanidis, Mainteck Services Pty Ltd v Stein Heurtey SA, and The Council of the Upper Hunter County District v Australian Chilling and Freezing Co Limited at [27]. Those references support the court’s stated approach to resolving contractual ambiguity or inconsistency before finding uncertainty. The judgment does not say that it overrules, reverses, or disapproves any of those authorities.
For research purposes, the safe account of the judgment’s precedential treatment is therefore limited: it applies and illustrates the whole-contract approach to a conflict between loan schedule entries. The source does not establish how any later court has interpreted the decision or its reach.
The judgment resolves the construction of these loan agreements, but it leaves several matters outside its decision. First, it does not determine the appellants’ damages grounds. Ball JA said those grounds only arose if the appellants succeeded on the construction issues. Once the court concluded that interest was payable in advance, it was unnecessary to deal with the remaining grounds ([25], [36]). The court therefore did not decide whether the receiver’s appointment prevented refinancing or whether the alleged refinancing loss could otherwise be established.
Second, the judgment does not provide a comprehensive treatment of every consequence that may follow from a finding of contractual uncertainty. The appellants accepted that identifying precisely which provisions would be void, and the consequences of that conclusion, presented difficulty ([23]). The court resolved the case through construction and did not need to answer those questions.
Third, the judgment does not determine how a different schedule would be read if the first interest payment were expressly held in escrow, if the first payment were not deducted from the facility limit, or if the contract contained clearer language for later instalments. Ball JA rejected the escrow interpretation on the wording before him, which contained no indication that the retained money was to be held until a later date ([30]).
Fourth, the court did not decide the effect of the particular payment terms on every issue arising from the mortgages, guarantees, default notices, or receivership. The appeal grounds described in the judgment focussed on the interest construction and the conditional damages issues ([23]-[25]). The decision should therefore be read as resolving the contractual timing issue in the appeal, not as a general determination of all possible enforcement questions under short-term secured loans.
This is general legal information, not legal advice. Zoe can make mistakes. Before acting on or relying on this analysis, have a qualified Australian lawyer check it.
Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: Sarai v N1 Loans Pty Ltd [2026] NSWCA 107
Hearing dates: 29 May 2026
Date of orders: 5 June 2026
Decision date: 05 June 2026
Before: Mitchelmore JA at [1]
Ball JA at [2]
Free JA at [37]
Decision: Appeal dismissed with costs.
Catchwords: CONTRACTS – construction – whether monthly interest under short-term interest-only loans payable in advance or in arrears – whether provisions relating to payment of interest void for uncertainty – where drafting of provisions unsatisfactory but the intention of the parties is discernible from the loan agreements as a whole
Legislation Cited: Real Property Act 1900 (NSW) s 57(2)(b)
Cases Cited: Baloglow v Konstanidis (2001) 11 BPR 20,721; [2001] NSWCA 451
Brown v Gould [1972] 1 Ch 53
Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633; [2014] NSWCA 184
McGowan v Commissioner of Stamp Duties [2002] 2 Qd R 499; [2001] QCA 236
The Council of the Upper Hunter County District v Australian Chilling and Freezing Co Limited (1968) 118 CLR 429; [1968] HCA 8
Category: Principal judgment
Parties: Jovan Sarai (First Appellant)
Aldrich Pty Ltd (ACN 107 410 668) (Second Appellant)
N1 Loans Pty Ltd (ACN 142 259 854) (First Respondent)
N1 Venture Pty Ltd (ACN 602 937 851) (Second Respondent)
N1SY Pty Ltd (ACN 655 918 415) (Third Respondent)
N1 WH2 Pty Ltd (ACN 650 801 068) (Fourth Respondent)
Sam Kaso (Fifth Respondent)
Representation: Counsel:
RD Marshall SC with M Fernandes (Appellants)
M Young SC (First to Fourth Respondents)
Submitting Appearance (Fifth Respondent)
Solicitors:
Swaab Lawyers (Appellants)
Summer Lawyers (First to Fourth Respondents)
Kingston & Partners (Fifth Respondent)
File Number(s): 2026/98830
Publication restriction: Nil
[This headnote is not to be read as part of the judgment]
Aldrich Pty Ltd (Aldrich) borrowed $12,825,000 under two short-term interest-only loan agreements, guaranteed by Mr Jovan Sarai, Aldrich’s director, and secured by mortgages over two properties. Each loan was for a period of three months and both loan agreements provided that interest would be paid monthly. The lenders claimed that Aldrich was in breach of the loan agreements by failing to pay interest in advance and appointed a receiver to the assets of Aldrich and Mr Sarai. In proceedings by the lenders for possession of the two properties, the primary judge concluded that the provisions relating to the payment of interest were not void for uncertainty and, on their proper construction, interest was payable in advance. Aldrich and Mr Sarai appealed to this Court.
The Court held (Ball JA, Mitchelmore and Free JJA agreeing) dismissing the appeal:
McGowan v Commissioner of Stamp Duties [2002] 2 Qd R 499; [2001] QCA 236, applied.
Baloglow v Konstantinidis (2001) 11 BPR 20,721; [2001] NSWCA 451; Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633; [2014] NSWCA 184; The Council of the Upper Hunter County District v Australian Chilling and Freezing Co Limited (1968) 118 CLR 429, referred to.
MITCHELMORE JA: I agree with Ball JA.
BALL JA: The principal question raised by this appeal is whether interest payable under two short term loan agreements both of which were entered into on 26 September 2024 by the second appellant, Aldrich Pty Ltd (Aldrich), as borrower, and the first appellant, Mr Jovan Sarai, as guarantor of Aldrich’s obligations under the loan agreements, and both of which were on substantially the same terms, was payable in advance or in arrears.
The lenders — the first, second and third respondents, N1 Loans Pty Ltd, N1 Venture Pty Ltd and N1SY Pty Ltd (together, the First Loan Lenders), in the case of the first loan of $10.5 million and the fourth respondent, N1 WH2 Pty Ltd (the Second Loan Lender), in the case of the second loan of $2,325,000 — claimed that interest was payable in advance and that Aldrich was in breach of both loan agreements by failing to pay interest on time. In accordance with rights granted by the loan agreements, they appointed a receiver to the assets of Aldrich and Mr Sarai.
Mr Sarai’s obligations under the guarantees he gave in respect of the first loan agreement were secured by a registered mortgage over a property on Eastbourne Road, Darling Point, NSW (the Darling Point Property) and in respect of the second loan a registered mortgage over a property in Keppel Road, Ryde, NSW (the Ryde Property). The parties also on 26 September 2024 entered into a Deed of Cross-Collateralisation the effect of which was that a default under one loan agreement was a default under the other and the security given in respect of each loan was given in respect of the other.
On 20 November 2024, the lenders commenced proceedings in the court below to obtain possession of the two properties. Aldrich and Mr Sarai filed a cross‑claim naming the lenders and Mr Sam Kaso, the receiver, as cross‑defendants. By that cross-claim, they sought relevantly a declaration that the appointment of the receiver was void ab initio because they were not in breach of the loan agreements and damages. Ultimately, they sought to quantify their damages on the basis that but for the wrongful appointment of the receiver, they would have been able to refinance the loans at a lower interest rate. They claimed the difference between the interest for which they are liable under the loans (and guarantees) and the interest for which they would have been liable if they had been able to refinance the loans, which was said to be $4,550,000 in the case of the first loan and $1,007,500 in the case of the second loan.
The primary judge accepted the lenders’ construction of the loan agreements, with the consequence that the orders sought in the statement of claim were made and the cross-claim was dismissed. The primary judge also held that, even if he was wrong and that interest was payable in arrears, the claim for damages must fail. That was because his Honour was not satisfied that the appointment of the receiver prevented Mr Sarai and Aldrich from obtaining alternative financing.
On 1 February 2022, Mr Sarai entered into a contract to buy the Darling Point Property for $14,000,000. He paid a deposit at that time of $700,000 and he and his family moved into the property and have remained there ever since. Between about 27 June 2022 and 10 September 2024, Mr Sarai paid further amounts totalling $1,400,000 as a deposit. Under the terms of the contract, settlement was due to occur 30 months after the date of the contract (that is, on 1 August 2024).
Mr Sarai did not settle by that date. On 15 August 2024, the vendor served a notice to complete. On 12 September 2024, Mr Sarai and the vendor entered into a deed to extend the date of completion until 27 September 2024 with time of the essence. The two loan agreements were entered into to enable Aldrich to pay the balance of the purchase price for the property.
As I have said, both loan agreements contain substantially the same terms. Both relevantly comprised a “Finance Offer Schedule” setting out the details relevant to each loan to which was attached a guarantee signed by Mr Sarai, and standard terms contained in a document entitled “Kingston & Partners Memorandum of Common Provisions Version 5 (LFMCPV5)” (the Common Provisions).
Clause 3.5 of the Common Provisions provides:
3.5 If your payment type is "interest only**”**
If the offer states that your payment type is "interest only", you do not need to make any payments of principal during the interest only period. However, you must pay interest charges as set out in this clause 3.5.
If the offer does not specify:
(a) a period for which interest only applies, interest only is payable for the whole of the facility term,
(b) when interest charges are due in each payment period, they are due on the last day of each payment period.
If the offer specifies that interest payments are due on the last day of each payment period (in arrears), the following applies.
You must pay the accrued interest charges on the last day of each payment period (unless we otherwise agree).
If the offer specifies that interest payments are due on the first day of each payment period (in advance), the following applies.
You must pay the interest charges we calculate for the payment period on the date you make your first drawdown and on the first day of any further payment period (unless we agree otherwise).
4.1 Interest charges and how we calculate them
(a) You must pay interest to us on the interest payment date.
(b) At all times you must pay interest calculated at the standard interest rate.
(c) If we believe you have met all your obligations, we will notify you in writing that we shall accept interest calculated at the discount interest rate for that payment period.
(d) If we notify you in writing that we shall accept the discount interest rate for a payment period, we accept the discount interest rate for that payment period only.
(e) Specific interest calculation information is detailed in the special conditions contained in the offer.
4.2 When is interest payable?
If the offer states that for a payment period you must pay interest in advance, you must pay interest on the first business day of the next payment period, unless we otherwise agree (e.g., if you pay interest only in arrears).
If the offer states that for a payment period you must pay interest in arrears you must pay interest on the last business day of the previous payment period, unless we otherwise agree (e.g., if you pay interest only in advance).
If no payment period is stated in the offer, interest is payable in advance on the first business day of the next month (unless we agree otherwise).
14 Default
References in this clause 14 to “you” are references to “you” and/or the guarantor (as applicable).
14.1 Events of default
Each of the following is an event of default.
(a) (non-compliance with obligations) you or the guarantor do not comply with any obligation under this agreement;
(b) (non-payment): without limiting 14.1(a) in any way, you or the guarantor do not pay any amount payable under the finance documents when due;
(c) (insolvency) you or the guarantor are insolvent;
…
…
14.4 What can happen if there is a default?
If an event of default has occurred and has not been remedied within a 14 day written notice period, or waived in writing by us, we may do one or more of the following:
(a) declare at any time by notice in writing to you that the whole of the secured money is immediately due for payment;
(b) require payment of all or part of the secured money, owing to us under the finance documents;
(c) take legal action (e.g., sue you for unpaid amounts, enforce any encumbrance you have given us, and take any other enforcement proceedings);
(d) use the power of attorney granted to us;
(e) appoint one or more receivers to you and/or the guarantor and/or all or any part of the collateral;
(f) do anything that a receiver could do under clause 4 (“Receiver’s powers”) including, but not limited to, taking possession of and selling the land.
…
The terms of appointment and powers of a receiver are set out in cl 15 of the Common Provisions. They are not in issue in this case.
General interpretation
Headings are for convenience only and do not affect interpretation. Unless the contrary intention appears in this deed:
(a) …
…
(z) to the extent of any inconsistency, a special condition overrides a term of this memorandum of common provisions, save to the extent that the special condition is not in accordance with the overriding intent which is that we will be able to recover the secured money from all assets of the grantor;
(aa) no rule of construction applies to the disadvantage of us because we were responsible for the preparation of this document; and
(bb) ...
| Payment arrangements | Payment type Interest only Your interest charges for a payment period are due on the last day of the period. Payment period Monthly in advance Repayment Monthly repayments are to be made on the anniversary date of the first drawdown every month. You must pay us the secured money on the last day of the facility term. |
| 2. Retained interest | • $108,937.50 in interest has been deducted from the facility limit and retained by us to pay towards interest you must pay us. • Notwithstanding any clause to the contrary in this facility or the memorandum of common provisions, once interest accrues for a payment period, those interest charges are non-refundable. This applies even if you repay in a month where interest has already been paid. | | 3. Minimum term | • You must pay at least 3 months' worth of interest and loan management fees calculated on the facility limit. | | … | | | 7. Grantor to dispose of secured property after settlement date | • You have told us that you intend to pay the secured money by the last day of the facility term through business cashflow, a refinance, or the sale of the land [defined to mean the Darling Point Property]. • You must provide evidence of your ability to refinance (including by providing a copy of a signed formal approval form [sic] another lender) or your ability to repay the secured money via your business cashflow no later than 1 month prior to expiration of the facility term. • You and the guarantor must keep us informed of the progress of your exit strategy at all times. A failure to maintain fair and reasonable communication with us, or a failure to respond to any of our queries in respect of the exit strategy, will constitute an event of default. • … … |
The Finance Offer Schedule for the second loan contains similar provisions, except that the amount for retained interest in cl 2 is $24,121.88 and cl 7 gave the address of the Darling Point Property instead of referring to “the land”.
The loans were advanced and the purchase of the Darling Point Property settled on 30 September 2024. On the same date, Mr Sarai granted a registered mortgage to the Second Loan Lender over the Ryde Property.
On 4 November 2024, the lenders served default notices under their respective loan agreements and s 57(2)(b) of the Real Property Act 1900 (NSW) in respect of the failure to pay interest allegedly due on 1 November 2024. They also served notices of demand on Mr Sarai.
On 20 November 2024, the lenders commenced the proceedings below and the following day appointed Mr Kaso as receiver and manager of the assets of Mr Sarai. Mr Kaso was appointed receiver and manager of the assets of Aldrich and as agent for the mortgagee in possession of the Ryde Property on 26 February 2025.
(1) The arrears favouring words appear under the heading “Payment type”, but the advance favouring words fall under the heading “Payment period” which is the point at issue, namely when the payment is to be made.
(2) The repayment “on the anniversary date of the first drawdown every month” is consistent with the deduction of interest that occurred on the first drawdown.
(3) A clear distinction is made between interest and principal with the statement that the “secured money” becomes payable “on the last day of the facility term.” The distinction is that on the last day of the term the borrower will pay back the principal, the interest payments having already been made.
(4) Although of much lesser importance there are two instructions favouring payment in advance but only one suggesting payment in arrears.
(1) Firstly, there is no evidence that any final refinancing agreement had been made before the receiver had been appointed.
(2) Secondly, the suggestion that refinancing would have occurred is dependent upon my taking judicial notice that but for the appointment of the receiver refinancing would have been available.
Ground 1 of the notice of appeal challenges both the primary judge’s conclusion that the provisions of the loan agreements relating to the payment of interest were not void for uncertainty and his conclusion that, on the correct construction of the agreements, they provided for the payment of interest in advance. In oral submissions, Mr Marshall SC, who appeared for the appellants, focussed principally on the second limb of this ground. He accepted that one difficulty with the contention that the provisions were void for uncertainty was identifying precisely what provisions were void and the consequences of that conclusion. However, his ultimate submission was that it was not necessary for this Court to reach a final conclusion on the issue. It was sufficient for his purposes that the agreements could not be construed as providing for interest in advance.
Ground 2 is mechanical in nature. It simply asserts that if the primary judge was wrong in his construction of the loan agreements, then his Honour was wrong to conclude that the appointment of the receiver was not void ab initio.
Grounds 3, 4 and 5 concern the primary judge’s conclusions in relation to damages. Ground 3 challenges the primary judge's rejection of certain evidence of what potential lenders are alleged to have said to a finance broker retained by Mr Sarai about their willingness to lend and the primary judge’s refusal to take “judicial notice” of the effect of the appointment of a receiver on Mr Sarai’s ability to obtain alternative finance. Ground 4 was not pressed. Ground 5 contends that the primary judge erred in not awarding damages. Plainly, these grounds only arise if the appellants succeed in relation to grounds 1 and 2.
When two provisions of the same deed or contract are irreconcilably inconsistent and cannot stand together, it becomes the duty of a court in interpreting the contract to resolve the antinomy if necessary by rejecting the provision that is repugnant to the substance of the whole. It is a course which a court of construction does not lightly undertake, the more so perhaps where the parties have deliberately gone to effort and expense to rectify the contract by inserting the very provision that is the source of the problem.
Plainly, the drafting of the loan agreements, and of the Finance Offer Schedules in particular, is unsatisfactory. Nonetheless, in my opinion this is a case where it is possible to discern the intention of the parties from the loan agreements as a whole.
It is relevant to observe that the loan under both loan agreements was for a period of three months and that both loan agreements provided that interest would be paid monthly. That meant that there would be three interest payments in all. Clause 2 of the special conditions in each agreement – which under cl 63(z) of the Common Provisions overrode the Common Provisions to the extent of any inconsistency – provided, in effect, for the first instalment of interest to be paid in advance because it provided for the deduction of the amount of that payment from the “facility limit” and for it to be retained by the lenders.
Mr Marshall took issue with the proposition of the previous paragraph. He submitted that cl 2 of the special conditions could equally be interpreted as stating that the first interest payment was to be deducted and presumably held in escrow to be paid towards interest when interest became due, which could be at the end of the payment period. In my opinion, that is reading too much into the clause. The natural reading of the clause is that it is saying that the lenders can deduct the amount of the first interest payment from the amount to be advanced and keep it for their own purposes, which would have the effect of discharging the obligation to pay interest for that month. There is nothing in the clause which suggests that the amount deducted was to be held in escrow until some later time.
If interest was to be paid monthly and the first payment was to be made in advance, it is natural to infer that the intention of the parties was that future payments of interest would also be made in advance, particularly since there were only two of them. That conclusion is supported by other terms of the loan agreements. Clause 3.5 of the Common Provisions contemplates that where the Finance Offer Schedule states that the “payment type” is “interest only”, the parties might choose to specify in the schedule whether the payment of interest was to be in arrears or in advance. Clearly, under the heading “Payment arrangements” in the Finance Offer Schedules the parties, picking up the wording of cl 3.5, specified the “Payment type” as “Interest only”.
The balance of the material under the heading “Payment Arrangements” must be understood as giving effect to the option contemplated by cl 3.5. The material under the headings “Payment period” and “Repayment” do not obviously relate to any other terms of the Common Provisions. Taken together, the material is obviously contradictory. However, the statement “Monthly in advance” is a clear statement that interest is to be paid monthly and is to be paid in advance. Similarly, the statement “Monthly repayments are to be made on the anniversary date of the first drawdown every month” indicates that interest payments are to be made “on the anniversary date of the first drawdown”, which can only mean the same date each month as the date of the first drawdown.
Having regard to the conclusions I have reached on grounds 1 and 2, it is unnecessary to deal with the remaining grounds of appeal. The appeal should be dismissed with costs.
FREE JA: I agree with Ball JA.
**********
Sarai
N1 Loans Pty Ltd
Appeal dismissed with costs. The Court held that the loan agreements required interest to be paid in advance and did not decide the remaining damages grounds: [35]-[36].
The appellants appeal against the orders of the primary judge on both the claim and cross-claim. For the reasons which follow, the appeal must be dismissed.
The appellants take issue with the first of these points on the basis that the words “Monthly in advance” appear under the heading “Payment period”, which is inapposite to describe the date on which interest payments are to be made. Neither party ultimately sought to place much weight on the statement in cl 63 of the Common Provisions that “Headings are for convenience only and do not affect interpretation”. There may be a question whether that statement can apply to headings in the Finance Offer Schedules which identify the matters with which the clauses in those documents are concerned. But whatever the position, and whatever the meaning of the heading, it cannot alter the clear effect of the words “in advance”.
The appellants also take issue with the second of the points made above because the relevant sentence only deals with “repayments” and interest is not “repaid”. However, the only payments that are made monthly under an interest only loan are interest payments. “Repayments” in this context must, therefore, be understood as including payments.
Of course, what has been said is contradicted by the sentence “Your interest charges for a payment period are due on the last day of the period” under the heading “Payment type”. But taking the loan agreements as a whole – and, in particular the parties’ clear agreement that the first interest payment was to be paid (and by the terms of the loan agreements, was paid) in advance – what the parties must have intended was that interest would be paid in advance. Consequently, that sentence must be rejected as representing the parties’ intentions.