FEATURE ARTICLE -
Advocacy, Issue 99: March 2025
In Rose v Manno Kingsway Pty Limited [2025] NSWCA 23 (27 February 2025), the New South Wales Court of Appeal (Bell CJ, Mitchelmore and Adamson JJ) addressed argument concerning enforceability of an alleged loan agreement. The particular focus of this note concerns the argument – unsuccessful on appeal – that the making of the loan advance prior to the formal agreement being entered into did not derogate from the trial judge’s finding of an agreement by dint of the advance itself being part of an entire transaction. There was a useful essay of the authorities, coup-led with an application of them to the particular facts. Bell CJ, for the court, wrote:
[1] Five matters are clear about this contractual dispute which comes to this Court by way of an appeal from the decision of Campbell J (the primary judge) of the Common Law Division of the Supreme Court: Manno Kingsway Pty Ltd as trustee for the Manno Kingsway Unit Trust v Rose [2024] NSWSC 1065 (primary judgment or PJ).
[2] First, the parties entered into a written loan agreement on 2 February 2022 by which the Respondent agreed to advance to the Appellant the sum of $1.3 million for a term of 12 months at an interest rate of 3.85% per annum (the Loan Agreement).
[3] Second, the loan was subject to the provision of executed copies of Deeds of Release relating to the parties’ engagement with each other in respect of a development project being undertaken by them at Geralle Street, Cronulla and known as the Wavelength Project.
[4] Third, the Deeds of Release as contemplated by the Loan Agreement were executed on 2 February 2022.
[5] Fourth, the Appellant paid ten monthly instalments of interest in accordance with the contractual provisions in the Loan Agreement, calculated on a principal amount of $1.3 million and interest rate of 3.85%: PJ [38]–[39].
[6] Fifth, the Respondent refused to repay the principal amount at the expiry of the term of the Loan Agreement notwithstanding demands for repayment.
[7] So recited, one might legitimately wonder how this matter came to court. The answer to that question lies in the fact that $1.3 million (the amount specified in the Loan Agreement) was advanced to the Appellant on 24 January 2022 (nine days before execution of the Loan Agreement) and this advance was made by Manassen Holdings Pty Ltd, a party related to the Respondent, Manno Kingsway Pty Ltd. The Appellant admitted receiving that sum but denied that, upon a proper construction of the Loan Agreement, any money was owing and “by reason of that fact”, denied that the Loan Agreement was supported by consideration. It submitted that, because the advance of $1.3 million chronologically predated execution of the Loan Agreement, it was “past consideration” which was incapable of supplying the “quid pro quo” to support the contractual bargain documented in the Loan Agreement. This argument was rejected by the primary judge but is re-agitated on appeal.
[8] By a Further Amended Statement of Claim (the FASOC), dated 30 January 2024 which was the first day of the hearing, the Respondent amended its claim to plead, in addition to the claim under the Loan Agreement, that the parties reached an agreement “in respect of a loan on or around 14 December 2021 for a term of one year”. The agreement was said to be in writing, recorded in two emails exchanged on 13 December and a further email of 14 December 2021.
[9] The first of these emails was sent on 13 December 2021 at 12.45pm by Mr Robert (Roy) Manassen, the principal of the Respondent, to Mr Christopher (Chris) Rose (the Appellant) and summarised a meeting held with Mr Rose that day. The email read as follows:
Chris,
Just confirming our meeting.
We will lend $1m to CR by 24 Dec for 1 year at 5% subject to:
No litigation against any Manassen entities from Manny/other.
An Orville guarantee and a personal PG from yourself.
We will agree to PM/DM fees until June 2022 unless all units are sold before and then fees will cease.
Half the $1m will go to Vince.
After a 12% interest coupon is calculated from Haley the 50% profit share will be determined.
We lost SOPA case…I’ll contemplate whether to appeal.
Not discussed and [subject to appeal] not sure if this SOPA loss has been added to pref units or not but I guess it will need to be if it hasn’t.
Agreed that 407, 704 and 803 will all settle on the 28 January but that these are now time of the essence contracts.
Please confirm agreement.
Mr Rose replied to Mr Manassen’s email two minutes later, stating “[c]onfirmed Roy”.
[10] By email dated 14 December 2021, Mr Rose added that Mr Manassen had “[f]orgot to add the return of the deposit on 801”, which was apparently a reference to a payment in the sum of $315,000 made personally by Mr Rose in relation to the Wavelength Project: PJ [36]. No response to this email was pointed to or relied upon.
[11] The primary judge found that the exchange of emails on 13 December 2021 evinced an intention by the parties immediately to be bound and resulted in a binding enforceable agreement which it is convenient to refer to in these reasons as the Email Agreement. His Honour found that the Email Agreement fell within what has become known as the fourth category of Masters v Cameron (1954) 91 CLR 353; [1954] HCA 72 (Masters v Cameron) although such a category is not in fact mentioned in that celebrated case: see further at [41] below.
[12] The FASOC, dated 30 January 2024, described the Loan Agreement of 2 February 2022 as a “formal” loan agreement, presumably by way of contrast with the alleged Email Agreement. The pleading did not allege what the relationship if any was between the two agreements. In particular it was silent as to whether one was a variation of the other or superseded it.
[13] His Honour went on to hold that, even if his characterisation of the 13 December exchange of emails were wrong and no binding agreement was reached by that exchange, it remained his view that the Loan Agreement was nevertheless binding, “applying a functional test by treating the advance and entry into the Loan Agreement as forming part of one single transaction”: PJ [43]. The primary judge evidently took the language of “a functional test” from the decision of Almond J in Twenty Ninth Macorp Nominees Pty Ltd v Normal George [2017] VSC 136 at [231] –[232] (Macorp). His Honour also made reference in this context to Kestell v Davey (No 3) [2023] WASC 289 at [453] (Kestell). According to this line of authority, the fact that a payment may be made chronologically prior to the execution of terms is not decisive, and does not necessarily mean that a prior advance acquires the status of “past consideration” for the purposes of assessing whether a subsequent promise (such as those contained in the Loan Agreement) binds the recipient of the early advance.
…
The Email Agreement — grounds 1-4
[41] As already noted, the primary judge held that the exchange of emails on 13 December 2021 (set out at [9] above) gave rise to a binding agreement and fell within what has become known as the fourth category of Masters v Cameron. As explained by JD Heydon in Heydon on Contract: The General Part (2019, Thomson Reuters) at [3.110] (Heydon on Contract):
Though its origins are older, modern recognition of the fourth class began with Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 at 628; see also Tern Minerals NL v Kalbara Mining NL (1990) 3 WAR 486 at 494 –495; Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) 22 WAR 101; [2000] WASCA 27 at [24] –[25]. There McLelland J quoted the dicta of Knox CJ, Rich and Dixon JJ in Sinclair, Scott & Co v Naughton (1929) 43 CLR 310; [1929] HCA 34 at 317, relying on Love and Stewart Ltd v S Instone & Co (Ltd) (1917) 33 TLR 475 at 476. They identified a class ‘in which the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms’. The reasoning of McLelland J was upheld by the New South Wales Court of Appeal on appeal: GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 at 635 –636.
There is a clear distinction between the second class and the fourth class. The second class comprises cases where the parties “intend no departure from or addition to that which their agreed terms express or imply”. The fourth class comprises cases where the parties are “expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms”. An intention not to do something is different from an expectation that one will do it.
[42] The primary judge’s conclusion that the Email Agreement fell within the fourth class of Masters v Cameron necessarily entailed the conclusion that the parties, by their conduct, manifested an intention immediately to be bound and create contractual relations. Such an issue is to be determined consistently with the objective theory of contract: Masters v Cameron; Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 548 -549. As the plurality said in Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95; [2002] HCA 8 at [25], the word “intention” in this context is used in the same sense as in other contractual contexts, namely it:
describes what it is that would objectively be conveyed by what was said or done, having regard to the circumstances in which those statements and actions happened. It is not a search for the uncommunicated subjective motives or intentions of the parties.
[43] As a consideration as to whether the parties intended immediately to be bound, a matter going to the existence (as opposed to the terms) of a contract, subsequent conduct of the parties may also be taken into account: Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61 at [25] –[26], citing Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68 at 77; [1907] HCA 38; Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647 at 668 , 669 , 672; [1908] HCA 88.
[44] I respectfully disagree with the primary judge’s conclusion that the exchange of emails on 13 December 2021 objectively manifested an intention to be immediately bound. This is so for a number of reasons.
[45] First, when regard is had to the entirety of Mr Manassen’s email of 13 December, as opposed to the first four lines of that email to which the primary judge paid particular regard, there were a number of matters which were still to be determined between the parties (including the precise identity of the contracting parties, at least on Mr Manassen’s side). These matters included the terms of the two guarantees contemplated in the 13 December email, the actual date upon which any moneys would be advanced and what was meant by the entry “No litigation against any Manassen entities from Manny/other.” Who “Manny” was referring to was not obvious, nor was it known who the “other” being referred to was. Moreover, it was not evident what was meant by “No litigation …”: it may have meant a moratorium on litigation for a period, such as the duration of the Wavelength Project, or no litigation indefinitely, or an agreement to enter into a deed of release or compromise. These uncertainties militated against a conclusion that the parties intended immediately to be bound and, by the exchange of emails, to enter into immediate contractual relations. This was further reinforced by the reference to the potentiality of an appeal in relation to a Building and Construction Industry Security of Payment Act 1999 (NSW) claim, success in which may have affected the commerciality of any arrangements.
[46] Secondly, Mr Manassen’s email of 13 December 2021 is “book-ended” by the expressions “[j]ust confirming our meeting” and “[p]lease confirm agreement”. It will be recalled that Mr Manassen and Mr Rose had met together earlier on 13 December 2021 before the exchange of emails. The expression “[j]ust confirming our meeting” is ambiguous: it may simply have been a way of seeking to confirm what was discussed at the meeting. The closing statement “[p]lease confirm agreement” when seen in this context, is capable of being interpreted as seeking confirmation from Mr Rose that he agreed with Mr Manassen’s summary of the points discussed at the meeting as opposed to something far more fundamental, namely an intention immediately to be bound by the contents in Mr Manassen’s email. In context, the former interpretation is to be preferred.
[47] Thirdly, none of the matters purportedly “confirmed” as having been contractually agreed was in fact implemented: thus, no monies were advanced prior to 24 December 2021; no interest of 5% was charged or paid; and when moneys were advanced on 24 January 2022, they were in a different sum to the $1 million referred to in Mr Manassen’s email.
[48] Fourthly, no complaint was raised by Mr Rose shortly after 24 December 2021 as to the non-advance of the $1 million referred to in the 13 December 2021 email, another matter that militates against the primary judge’s conclusion. Had the parties in truth intended immediately to be bound by the exchange of emails on 13 December 2021, one would have expected such a complaint, especially given the tone of the earlier correspondence between the two principals that had pre-dated their meeting of 13 December 2021.
[49] For these reasons, I would uphold the Appellant’s challenge to the primary judge’s conclusion in relation to the Email Agreement. As explained above, however, it does not follow that the appeal must succeed, given his Honour’s conclusion in relation to the Loan Agreement and the Appellant’s “past consideration” argument. It is to this aspect of the appeal that these reasons now turn.
The Loan Agreement and past consideration — ground 5
[50] There was no contest that the Loan Agreement was executed by the Appellant nor that, after its entry, interest had been paid at the rate specified in it, as detailed in the Table at [35] above.
[51] Significantly, the first of those interest payments encompassed not only monthly interest but an amount calculated at the contractual rate for the 9 day period between the advance of $1.3 million on 24 January 2022 and the execution of the Loan Agreement.
[52] This conduct was consistent with the Appellant and the Respondent treating the advance and the Loan Agreement as part and parcel of a single transaction. The Appellant, however, by ground 5, challenges this characterisation and the application by the primary judge of the decisions of the Victorian and Western Australian Supreme Courts in Macorp and Kestell respectively to the facts of the present case.
[53] At one point in his submissions, Mr Parish submitted that these cases and the principle for which they stand do not represent the law in New South Wales. So much cannot be accepted. First, they are decisions relating to the common law of contract, and there is only one common law of Australia: Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 at 563 –4; [1997] HCA 25; John Pfeiffer Pty Ltd v Rogerson (2000) 203 CLR 503; [2000] HCA 36; Lipohar v R (1999) 200 CLR 485; [1999] HCA 65 at [51] –[53]; see also MJ Leeming, Common Law, Equity and Statute: A Complex Entangled System (2023, Federation Press) ch 6. Secondly, it was accepted in SAS Realty Developments v Kerr [2013] NSWCA 56 at [66] (SAS Realty) that, in certain circumstances, “an advance payment would be capable of constituting good consideration.”
[54] In Macorp, Almond J said (at [231]–[232]):
In my view, a functional test should be applied in this case. I have already found that a head agreement was reached… It is plain that this head agreement, the advance of funds by [the lender] on 2 May 2012 (pursuant to [the borrower’s] urgent request), the documentation of the transaction on the same day and the execution of the transaction documents by 6 May 2012 form part of a single transaction, with the execution of the transaction documents reflecting the fact of the earlier agreement.
In Kestell, Smith J said (at [453]):
Although it is established that the time of assessment with respect to which consideration is to be assessed is the time at which the contract is made, consideration will not be past consideration even if it was provided before the making of the promise for which it is alleged to be consideration, where the making of the promise and the provision of the consideration are part of the same transaction. When, by reason of their genesis, background, negotiation and terms, multiple agreements can in substance be viewed as part of a single transaction, then the courts are not bound to apply a strictly chronological test, such that, where the giving of consideration and the making of the promise are substantially one transaction, the exact order of events is not decisive.
[55] These authorities form part of a long line of decisions to similar effect, all of which recognise that “chronology” is not decisive: see, for example: Thornton v Jenyns (1840) 1 M & G 166 at 188– 189 133 ER 291; Westminster City Council v Duke of Westminster [1991] 4 All ER 136 at 145;Classic Maritime Inc v Lion Diversified Holdings Berhad [2010] 1 Lloyd’s Rep 59 [2009] EWHC 1142 (Comm) at [45] –[46]; Forbes Engineering (Asia) Pte Ltd v Forbes (No 4) [2009] FCA 675 at [173] –[174]; Lictor Anstalt v MIR Steel UK Ltd [2014] EWHC 3316 (Ch) at [223]; Hunt v Optima (Cambridge) Ltd [2014] EWCA Civ 714 at [80] –[81]; Marsden v Barclays Bank plc [2016] 2 Lloyd’s Rep 420 [2016] EWHC 1601 (QB) at [30] –[31]. See also Heydon on Contract at [5.240]; H Beale, Chitty on Contracts (Vol 1, 35th ed, 2024, Street & Maxwell) at [6–030]; E Peel, Treitel: The Law of Contract (13th ed, 2011, Street & Maxwell) at [3–018].
[56] In Gay Choon Ing v Loh Sze Ti Terence Peter [2009] 2 SLR(R) 332 at [93] , in turn cited in Ma Hongjin v SCP Holdings Pte Ltd [2019] SGHC 277 at [78], Andrew Phang JA observed that:
[T]he courts look to the substance rather than the form. Hence, what looks at first blush like past consideration will still pass legal muster if there is, in effect, a single (contemporaneous) transaction (the common understanding of the parties being that consideration would indeed be furnished at the time the promisor made his or her promise to the promisee). This was established as far back as the 1615 English decision of Lampleigh v Braithwait (1615) Hob 105 80 ER 255 and, whilst often referred to as an exception to the principle, is not really an exception for (as just stated) its application results in what is, in substance, a single transaction to begin with…
[57] In my view, the primary judge did not err in treating the advance as part of a single functional transaction. It is plain that it was requested by the Appellant and, in short compass, formal documentation was executed identifying the very amount of the advance and the interest payable on it. The advance and the execution of the Loan Agreement and the provision of Deeds of Release in substance amounted to one transaction.
[58] This was not a case, moreover, where there was some other earlier transaction or obligation on the part of the Respondent which was arguably discharged by the advance of the $1.3 million on 24 January 2022: cf SAS Realty. In this context, it is to be noted that the premise of this aspect of the Appellant’s argument was that no agreement was formed by the exchange of emails of 13 December 2021. That raised the question of what the advance of $1.3 million was referable to if not the Loan Agreement that was executed shortly thereafter and by reference to which the Respondent calculated interest payable and the Appellant paid such interest. On the Appellant’s case, the advance was not in fact consideration for anything, but the Appellant properly accepted that the advance was not gratuitous.
[59] This observation reflects the Respondent’s submission, which I accept, namely that:
the references to past consideration [in the case law] are not to simply chronologically anterior matters. The cases in which such issues arise are ones where there are multiple agreements, such that the consideration which is given in the first ‘transaction’ cannot sustain a second contract. It parallels the observation of Mason J in Wigan v Edwards (1974) 1 ALR 497 that a promise to perform an existing contractual duty or obligation is not consideration and also what Ward JA (as her Honour was) stated in SAS Realty Developments at [70] by reference to Agricultural & Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570, namely that fresh consideration is necessary to make valid an agreement which purports to vary another contractual agreement. It follows … that the reliance on notions of past consideration in the present case were inapposite.
[60] As the Respondent submitted, there was, on the Appellant’s case, no relevant counter promise from him which served to render the payment made on 24 January 2022 consideration for anything, still less past consideration. The case was closely analogous to Macorp, as the primary judge held.
[61] The primary judge also made reference to the Privy Council’s decision in Pao On v Lau You Long [1980] AC 614 (Pao On) which is sometimes understood as creating an exception to the proposition that a promise may not be supported by past consideration. In that case, at 629, Lord Scarman said:
An act done before the giving of a promise to make a payment or to confer some other benefit can sometimes be consideration for the promise. The act must have been done at the promisors’ request: the parties must have understood that the act was to be remunerated either by a payment or the conferment of some other benefit: and payment, or the conferment of a benefit, must have been legally enforceable had it been promised in advance.
[62] As has been explained in Heydon on Contract at [5.270] by reference to earlier cases, namely Re Casey’s Patents; Stewart v Casey [1892] 1 Ch 104 at 115 –116 (Casey); Kennedy v Broun (1863) 13 CB (NS) 677 143 ER 268 at 740; and Lampleigh v Braithwaite (1615) Hob 105 80 ER 255:
Assume that before a later promise is made, an act is done or a promise is given by a person who becomes the promisee of the later promise. Assume that act was done or promise given at the request of the later promisor. Assume that it was understood that payment for the earlier act or promise would be made. Assume that payment for the earlier act or promise, had that payment been promised in advance, would have been legally recoverable. In these circumstances the promisee can enforce the promise to pay for the act or promise despite the fact that the act or promise was “past” in the sense that it took place before the promise.
[63] In Casey, Bowen LJ explained the principle at 115–116 as follows:
Even if it were true … that a past service cannot support a future promise, you must look at the document and see if the promise cannot receive a proper effect in some other way. Now, the fact of a past service raises an implication that at the time it was rendered it was to be paid for, and, if it was a service which was to be paid for, when you get in a subsequent document a promise to pay, that promise may be treated either as an admission which evidences or as a positive bargain which fixes the amount of that reasonable remuneration on the faith of which the service was originally rendered. So that here for past services there is ample justification for the promise to give the third share.
[64] Pao On has been applied in Australia in the Federal Court in Re Douglas; Ex parte Starkey (1987) 15 FCR 475 (1987) 75 ALR 97 at 102, and in the Supreme Court of New South Wales by Santow J (as his Honour then was) in Bluebird Investments Pty Ltd v Graf (1994) 13 ACSR 271 who said at 294:
An act done (here payment of the money) before the giving of a promise to confer a benefit (here the promise to transfer the shares) is valid consideration for that promise if the act has been done at the promisor’s request (ie that of Bluebird Canada), the parties understood that the act was to be remunerated by the conferment of a benefit, and the conferment of the benefit would have been enforceable if it had been promised in advance.
[65] These considerations were plainly satisfied on the facts of the present case, and the primary judge was correct to so hold.
[66] Ground 5 of the appeal must be dismissed.
…
(emphasis added)
A link to the full decision may be found here.
