16 December 2010

Subjects: Brokerage

A solicitor agreed to introduce a borrower to a lender in return for a 5% commission. The borrower in question was the Republic of Nauru. The loan they were attempting to refinance was the very sizeable sum of $211 million Nauru owed to GE Capital.

The solicitor set up a meeting between the lender and Nauru and made the introduction. The refinance of the $211 million did not result from the meeting. However, the lender advanced $3.2 million to Nauru over the course of the following two months.

The solicitor sued for 5% of $3.2 million. The trial judge found against the solicitor on the grounds that the $3.2 million loan had nothing to do with the introduction because the introduction for the purpose of the $211 million refinance.

The solicitor appealed and won. The Court of Appeal held that because the commission agreement was expressed in general terms any loan resulting from the introduction would require the lender to pay 5% commission. The agreement stated:

The Introducer wishes to introduce Applicants to the Lender for Lending Products and investors in the Lender in return for payment of commission. The Lender must pay the Introducer commission of 5% of the loan or investment amount.

The Judge said:

As the expression “Lending Products” was not defined, the expression should  be given its ordinary English meaning and therefore be understood as a reference to any loans made available by the lender. Given this generality of language, I do not consider that there is any basis for confining the introducer’s right to commission to commission on specific loans that were discussed at the meeting.

Click here to read the full judgment

LesawebLesa Bransgrove holds a Bachelor of Laws and Bachelor of Commerce from the University of Queensland and a Master of Laws from the University of London. Lesa was admitted as a solicitor of the Queensland Supreme Court in 1996 and the UK Supreme Court in 2002 and as a barrister of the NSW Bar in 2009. After working on the Lehman's litigation Lesa left the bar and joined Bransgroves.

Read more about Lesa Bransgrove