Ironbridge Holdings Pty Ltd (admin apptd) (rec and mgr apptd) v O'Grady

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

PROPERTY LIST

S CI 2016 05210

IRONBRIDGE HOLDINGS PTY LTD (ACN 009 341 011) (ADMINISTRATORS APPOINTED) (RECEIVERS AND MANAGERS APPOINTED)	Plaintiff
v
SONJE PATRICIA O’GRADY	Defendant

(by original proceeding)

AND BETWEEN:

SONJE PATRICIA O’GRADY	Plaintiff by Counterclaim
v
IRONBRIDGE HOLDINGS PTY LTD (ACN 009 341 011) (ADMINISTRATORS APPOINTED) (RECEIVERS AND MANAGERS APPOINTED)	First Defendant by Counterclaim
IAN WALLACE	Second Defendant by Counterclaim
CAROLYN MARGARET DEFREYNE WALLACE	Third Defendant by Counterclaim
I WALLACE & ASSOCIATES PTY LTD (ACN 008 936 132)	Fourth Defendant by Counterclaim

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JUDGE:	Ginnane J
WHERE HELD:	Melbourne
DATE OF HEARING:	12-14,16, 19, 21-22 August, 16 September 2019; Further written submissions 27 March and 1 April 2020
DATE OF JUDGMENT:	11 June 2020 First revision 30 September 2020
CASE MAY BE CITED AS:	Ironbridge Holdings Pty Ltd (admin apptd) (rec and mgr apptd) v O’Grady
MEDIUM NEUTRAL CITATION:	[2020] VSC 344

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SALE OF LAND – Purchaser’s default in paying purchase price – Variation deeds extending payment dates and providing for interest payments – Rescission following purchaser’s receivership – Whether vendor can recover interest

RESTITUTION – Unjust enrichment – Contract for the sale of land – Rescission by vendor following default by purchaser – Part of land already transferred to purchaser – Amount paid for transferred land – Whether total failure of consideration – Identification of consideration – Right of purchaser to restitution of purchase price paid – Benefits conferred on purchaser – Whether contract severable – Change of position defence – Detriment caused to land – Remediation costs – Rights and liabilities of vendor and purchaser.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff and Defendants by Counterclaim	Mr R Hay QC with Ms L Papaelia	Logie-Smith Lanyon
For the Defendant and Plaintiff by Counterclaim	Mr M Borsky QC with Ms E Murphy	Gilbert + Tobin

Background

The O’Grady Land purchase price
Summary of claims and counterclaims
List of issues
Terms of the O’Grady Contract
Ironbridge’s proposed development
Deeds of Variation
The First Deed
The Second Deed
The O’Gradys seek payment of outstanding interest and costs
The September 2009 rescission notices
The Third Deed
The Fourth Deed
The O’Gradys seek payments under the variation deeds
Death of Mr O’Grady
The Fifth Deed
The Sixth Deed
Events after the Sixth Deed
The Variation Letter
Termination of the Contract
The development of the O’Grady Land
Development of stage 6
Stage 6A land
Stage 6B land
Lot P

The temporary stormwater basin
Stockpiling soil
Stage 7

Legal issues

Principles applicable to claims of unjust enrichment

Issue 1: What was the consideration, and did it totally fail?

Ironbridge’s submissions about Issue 1
Mrs O’Grady’s submissions about Issue 1
Analysis of Issue 1: What was the consideration and did it totally fail?
Analaysis of the legal significance of the benefits provided by the O’Gradys
Was the Contract an entire contract or a severable contract?
Submissions about severability

Analysis of whether the Contract was an entire or severable contract
Conclusion on Issue 1

Issue 2: Does Mrs O’Grady have a defence to any restitutionary claim for failure of consideration?

Issue 2(a): Change of position defence
Legal principles concerning change of position defence
Mrs O’Grady’s submissions about the change of position defence
Ironbridge’s submissions about the change of position defence

First detriment: the transfer of stage 6 and Lot P
Conclusion on whether transfer of stage 6 and Lot P was a relevant detriment

Second detriment: the temporary stormwater basin on the Retained Land
The cost of remediation works due to the temporary stormwater basin
Conclusion on costs of remediation works due to the stormwater basin

Third detriment: The section 173 agreements
Analysis of whether the section 173 agreements was a relevant detriment

Value of the Retained Land and the change of position defence
Valuation evidence called by Mrs O’Grady
Valuation evidence called by Ironbridge
Analysis of the valuation evidence
Conclusion about the value of the Retained Land

Issue 2(b): Good consideration defence
The parties’ submissions
Analysis of good consideration defence

Issue 2(c): Mrs O’Grady’s reliance on the principle of restitutio in integrum
Conclusion on Mrs O’Grady’s reliance on the restitutio in integrum principle

Issue 2(d): Would it be otherwise unjust to make an order for restitution?
Analysis of Issue 2(d)
Analysis of Issue 2

Issue 3: In what amount, if any, should Mrs O’Grady make restitution? Is Ironbridge entitled to interest on any amount recovered?

Issue 3(a): How much did Ironbridge pay the O’Gradys for stage 6 and Lot P?
Mrs O’Grady’s submissions on issue 3(a)

Ironbridge’s submissions on issue 3(a)
Analysis of issue 3(a) – the amount paid by Ironbridge for stage 6 and Lot P land

Issue 3(b): Payments made by I Wallace & Associates Pty Ltd
Issue 3(c): Ironbridge’s claim for interest
Conclusion on Issue 3

Issue 4: Is Ironbridge entitled to an equitable lien?

Analysis of Issue 4: whether Ironbridge is entitled to an equitable lien

Issue 5: In what amount, if any, should the Ironbridge parties be required to pay Mrs O’Grady interest?

Issue 5(a): Was the $2,265,258.80 all paid for interest? – The issue of the $109,938.88
Analysis of issue 5(a) the payments of $2,265,258.80

Issue 5(b): Is Ironbridge entitled to restitution of the interest paid to Mrs O’Grady under the deeds of variation?
Issue 5(c): Is Mrs O’Grady entitled to payment of any further interest?
Ironbridge’s submissions on interest

Issue 6: The soil stockpile trespass claim

Liability of the Guarantors

Conclusion

Answers to the issues raised by the parties

Issue 1: What was the consideration, and did it totally fail?
Issue 2: Does Mrs O’Grady have a defence or defences to any restitutionary claim for failure of consideration?
Issue 3: In what amount, if any, should Mrs O’Grady make restitution? Is Ironbridge entitled to interest on any amount recovered?
Issue 4: Is Ironbridge entitled to an equitable lien?
Issue 5: In what amount, if any, should the Ironbridge parties be required to pay Mrs O’Grady interest?
Issue 6: Has Ironbridge committed a trespass? And, if so, what relief should be ordered?

ANNEXURE A

ANNEXURE B

HIS HONOUR:

Background

This case concerns the liabilities of parties to a contract for the sale of land at Torquay, which the vendors sold as vacant farming land to the purchaser who wished to develop it as a housing estate. Much of the development did not proceed. The purchaser did not pay the purchase price on time, and did not pay the final instalment of $13,500,000 at all and in 2017, after 11 years, the surviving vendor rescinded the contract.

On 27 March 2006, Mrs Sonje O’Grady and her late husband, John O’Grady, granted an option to Ironbridge Holdings Pty Ltd (‘Ironbridge’) to purchase their land of approximately 32.43 ha located at 35 Duffields Road, Torquay, Victoria (‘O’Grady Land’) for a fee of $20,000. Ironbridge exercised the option and entered into a contract of sale with the O’Gradys dated 18 May 2006, with a Settlement Date no later than seven years thereafter (‘Contract’). The purchase price was $20,000,000.

More than 11 years later, after Ironbridge had been placed into administration by its bankers, Mrs O’Grady rescinded the Contract with much of the land still to be transferred to Ironbridge and much of the purchase price still to be paid by it. Ironbridge sues Mrs O’Grady in unjust enrichment for total failure of consideration, seeking restitution of much of the purchase price and interest that it did pay, while Mrs O’Grady disputes Ironbridge’s claims and counterclaims against Ironbridge and its directors and a company associated with them for unpaid interest and other remedies.

Mr Ian Wallace, a director of Ironbridge, was a property developer and initiated the Contract. He and Ms Carolyn Wallace, his wife, guaranteed the obligations of Ironbridge under the Contract and are defendants to Mrs O’Grady’s counterclaim. He founded Ironbridge in 1988 to develop residential subdivisions, particularly in Western Australia. He is also a director of I Wallace & Associates Pty Ltd, which is also a guarantor and the second defendant to Mrs O’Grady’s counterclaim.

Mr O’Grady died on 5 April 2014, leaving Mrs O’Grady, who is an elderly lady, as the sole proprietor of the O’Grady Land.

The land Ironbridge sought to develop comprised approximately 57 ha of farm land, which was vacant save for a small flock of grazing sheep (‘Development Land’). The O’Grady Land formed 80 acres or 32.43 ha of this land. The balance of the land, about 24.57 ha, was purchased by Ironbridge from a third-party vendor on 23 August 2007 (‘Ironbridge Land’).[1]
[1]Court Book, Ironbridge Holdings Pty Ltd v O’Grady (Supreme Court of Victoria) 508 (‘CB’).

Ironbridge intended to develop the Development Land into a housing estate. The O’Grady Land was to be subdivided into 297 lots, with an additional 18 lots spanning the boundary between the O’Grady Land and the Ironbridge Land.[2]
[2]CB 793.

The Development Land is located inland approximately 1.75 km west of Torquay Beach and has elevated sea views at its northern edge. The elevation slopes downwards towards a creek cutting across the land at its southern border. A waterway reserve dissects the land between the midpoint of its southern boundary and the midpoint of its western boundary. The Development Land is bordered by another property to the north which itself connects to Grossmans Road, Duffields Road to the west, Spring Creek to the south and its eastern border travels along Attunga Drive and nearby side streets.

The O’Grady Land purchase price

The purchase price was $20,000,000. A $2,000,000 deposit, less the option fee of $20,000, was paid on 9 May 2006. The balance was to be paid in three instalments:

(a) $1,250,000 to be paid within 30 days from the date of sale, which was ultimately paid on about 20 June 2006 (‘First Instalment’);

(b) $3,250,000 to be paid within two and a half years of the option date (‘Second Instalment’); and

(c) a final sum of either $13,500,000, $12,500,000 or $11,500,000 to be paid within seven, six, or five years after the option date; in other words, there was a discount for early payment (‘Final Instalment’).

Summary of claims and counterclaims

Ironbridge’s claim is that it paid the O’Gradys a total of $13,858,344.48 between March 2006 and May 2016, comprising $11,593,085.68 in instalments of the purchase price and $2,265,258.80 in interest.[3] It accepts that Mrs O’Grady should retain the $2,000,000 deposit and the $1,812,500 received for land that was transferred to Ironbridge. Ironbridge has lodged a caveat on the remaining O’Grady Land, claiming an equitable lien. Ironbridge’s claim for restitution totals $10,156,005.90, calculated as follows:
[3]Taking the figures from the Amended Annexure A to Ironbridge’s Third Further Amended Statement of Claim.

Total purchase price and interest paid

$13,968,505.90

Less agreed amount paid for land transferred

($ 1,812,500.00)

Less deposit

($ 2,000,000.00)

$10,156,005.90

List of issues

The parties identified the following issues to be decided, which I list together with the answers I reach in this judgment:

What was the consideration, and did it totally fail? (Issue 1);(a)

The consideration for the Contract dated 18 May 2006 was the conveyance of title to the O’Grady Land. The Contract was severable and the Transferred Land of stage 6 and Lot P was severed. The consideration for the Contract in respect of the remaining O’Grady Land, being the Retained Land, totally failed.

Does Mrs O’Grady have a defence or defences to any restitutionary claim for failure of consideration? (Issue 2);(b)

No, Mrs O’Grady does not have a defence to Ironbridge’s restitutionary claim for failure of consideration. However, she is entitled to counter restitution for the remediation and rehabilitation of the temporary stormwater basin land. That counter restitution is fixed in the sum of $315,467.00 plus GST.

In what amount, if any, should Mrs O’Grady make restitution? Is Ironbridge entitled to interest on any amount recovered? (Issue 3);(c)

Subject to hearing from counsel about the precise figure, I consider that Mrs O’Grady must make restitution to Ironbridge of the sum of $10,156,005.90. Ironbridge is entitled to interest on that sum under the Supreme Court Act 1986.

Is Ironbridge entitled to an equitable lien? (Issue 4); and(d)

No.

In what amount, if any should the Ironbridge parties be required to pay Mrs O’Grady interest? (Issue 5).(e)

The Ironbridge parties, including subject to any further submissions of counsel the guarantors, are required to pay Mrs O’Grady interest, being the amount of interest owing under the deeds of variation as at the date of the rescission, which was either 12 July 2017 or 2 October 2017. I will hear the parties as to the date that should be adopted and the amount of interest owing as that date. Mrs O’Grady is also entitled to interest under the Supreme Court Act 1986 on that sum to the date of rescission.

Mrs O’Grady also identified the following issue:

Has Ironbridge committed a trespass and, if so, what relief should be ordered? (Issue 6).(f)

Not necessary to answer.

Terms of the O’Grady Contract

The terms of the Contract included that time was to be of the essence, that Ironbridge had a right to call for early transfer of the O’Grady Land, and that the O’Gradys were to execute documents at Ironbridge’s expense and to assist in the registration of a plan of subdivision of the Development Land and at Ironbridge’s expense, execute any documentation to assist in its rezoning.[4]
[4]Special conditions 7 and 8; CB 122.

The Particulars of Sale defined the ‘Settlement Date’ as:

… the date upon which vacant possession of the property must be provided, namely, upon acceptance of title and receipt by the Vendor under the terms of this contract of the sum of $3,250,000.

Vacant possession of the entire O’Grady Land was not provided when the sum of $3,250,000 was paid, or appears to have been paid. The Settlement Date appears to have been extended by the deeds of variation referred to below.

General condition 7 of the Contract provided that:

Breach
7. A party who breaches this contract must pay to the other party on demand:-
(a)compensation for any reasonably foreseeable loss to the other party resulting from the breach, and

(b) any interest due under this contract as a result of the breach.

The provisions of Table A of the Seventh Schedule of the Transfer of Land Act 1958 applied to the Contract,[5] subject to any inconsistencies in the express terms of the Contract, in which case those express terms would prevail. Table A operated so that:
[5]See general conditions cl 9.1 of the Contract; CB 119.

(a) if Ironbridge defaulted in making payment under the Contract, then interest would be charged at the rate fixed under s 2 of the Penalty Interest Rates Act 1983 plus 2% in lieu of any rate named in the Contract;

(b) while time was of the essence, a notice of default needed to be issued and served by the O’Gradys on Ironbridge before any rights arising from a default could be exercised;

(c) if Ironbridge defaulted and failed to remedy such a default, all monies unpaid under the Contract became immediately payable and recoverable at the option of the O’Gradys; and

(d) if the Contract was rescinded after a notice of default was issued and served, the deposit paid by Ironbridge was forfeited to the O’Gradys and the O’Gradys were entitled to, within one year, either sue for damages for breach of contract or resell the land and recover any deficiency on resale as liquidated damages from Ironbridge.

The Contract contained a special condition 7 that applied if the O’Grady Land was rezoned residential and a plan of sub-division for it was approved by the Land Titles Office prior to the expiration of seven years from the option date. If those events occurred, upon Ironbridge paying the O’Gradys $250,000, or any multiple thereof, they would transfer to it land equivalent in value to the amount paid, valued at the agreed rate of $250,000 per acre.

Ironbridge’s proposed development

Mr Wallace’s plan was to develop the Development Land into a 14 stage residential development to be called the ‘Surf View Estate’.

Stages 1-5, 7 (save for land comprising Lot P) and 8 (in small part) were to be constructed mainly on Ironbridge Land. Stages 6, the Lot P part of stage 7, 8 (in large part), and 9-14 were to be constructed mainly on the O’Grady Land.[6]
[6]Witness Statement of Ian Wallace, dated 21 June 2019 (‘Wallace Statement’) [40], Annexure A.

Lot P is an area of land within stage 7 of the development which Mrs O’Grady transferred to Ironbridge on 25 November 2015 and which was allocated a notional value of $50,000. The transfer of Lot P enabled Ironbridge to build a sewer line to service other stages of the development.[7]
[7]T 229-30.

A plan of the Development Land showing the stages that were to be developed is attached to this judgment as Annexure A.

The Court and the parties conducted a view of the Development Land at an early point in the trial.

Ironbridge commenced the development of stages 1 and 2 on the Ironbridge Land in 2009.[8]
[8]T 195.

On 15 November 2007, the O’Grady Land was rezoned to residential[9] and the Surf Coast Shire approved a Development Plan of the proposed 14 stage development on the Development Land.
[9]Witness Statement of Ian Wallace, dated 19 July 2019 (‘Second Wallace Statement’) [9(a)].

Stages 1 to 6 have been developed and stage 6 has been subdivided and sold to purchasers for residential housing. But the remaining development has stalled and receivers and managers have been appointed to Ironbridge.

Deeds of Variation

After Ironbridge paid the First Instalment of the purchase price in June 2006, it was unable to make further payments as required by the Contract. The parties entered into a series of deeds of variation of the Contract which extended time for payment of instalments, allowed Ironbridge to take early possession of parts of the O’Grady Land, and permitted it to apply the proceeds from early sales of land to paying debts owed to third parties before those owed to the O’Gradys. For Ironbridge, the price for such deeds was often added interest on the sum that it owed the O’Gradys, which was payable at fixed dates unconnected to the dates on which title was to be conveyed.

I will next describe the deeds of variation and events that provide the context in which they were made.

The First Deed

On 12 November 2008, the parties entered into a deed (‘First Deed’) which extended the time for payment of the Second Instalment by dividing it into four instalments, to be paid between 12 November 2008 and 12 March 2009, with Ironbridge to pay interest on the Second Instalment at the rate of 13% per annum.[10]
[10]CB 207.

The Recitals to the First Deed stated that Ironbridge was unable to make payment of the instalment of $3,250,000 due on 12 November 2008 and noted that the O’Gradys had agreed to Ironbridge’s request for an extension of time ‘on condition that’ Ironbridge and Mr and Mrs Wallace enter into the First Deed and ‘in consideration of [the O’Gradys] agreeing not to enforce the payment of the [Second Instalment] on [12] November 2008’.

Mrs O’Grady gave evidence that she and her husband agreed to Ironbridge’s various requests for more time to make payments due under the Contract on the condition that interest would be paid on the unpaid amounts. She also gave evidence that she would not have agreed to extend the due dates for payments if Ironbridge had not agreed to pay interest and that, in agreeing to extend payment dates, she acted on the basis of Ironbridge’s promises to make all outstanding payments and in the belief that Ironbridge would perform all obligations under the Contract as varied. Ironbridge submitted that Mrs O’Grady had no memory of events that would support this evidence and I consider this submission later in the judgment.

Mr Wallace gave evidence that, in causing Ironbridge to enter into the First Deed, he understood that Ironbridge was receiving an extension of time for payment and that the price to pay for the extension was interest.[11]
[11]T 178.

The Second Deed

By early 2009, Ironbridge was significantly in arrears of the payments to the O’Grady due under the Contract.

On 29 January 2009, Ms Birk of Logie-Smith Lanyon, Ironbridge’s solicitors, emailed Ms Fox of Coulter Roache Lawyers, the O’Gradys’ solicitors, regarding Ironbridge’s request for further time within which to pay an instalment of $1,000,000 due under the First Deed. The email noted, among other things, that interest would continue to accrue and that the O’Gradys required the ‘current interest’ of $44,609.65 ‘to be paid now’.[12] On 3 March 2009, Mr Carmody of Ironbridge emailed Mr Lamb of Coulter Roache Lawyers stating that Ironbridge would be requesting a further six months extension to the terms that had been arranged in November 2008. He stated that Ironbridge would bring the interest payments up to date before the end of March and keep them up to date. He also said that the approval for the land adjoining the O’Grady Land had finally issued and that Ironbridge would be able to start construction shortly and ‘extract the capital [it] expected 12 months ago’.[13] He also referred to other sources of capital that would enable it to provide funds to the O’Gradys.[14]
[12]CB 1736.
[13]CB 1738.
[14]Ibid.

The O’Gradys agreed to the request for an extension of time and a second deed of variation was executed on 27 April 2009 (‘Second Deed’).[15] It extended the time for payment of $2,250,000 on account of principal instalments which was due on or before 12 September 2009 and provided for Ironbridge to pay interest. As security for its obligations, Ironbridge, the Wallaces and I Wallace & Associates Pty Ltd agreed to give the O’Gradys a mortgage over a property in Western Australia.[16]
[15]CB 209.
[16]CB 210.

Recital F to the Second Deed recorded that Ironbridge was in default of the Contract (as varied) in that it had failed to pay interest on the principal instalments due on 12 December 2008, 12 January 2009, 12 February 2009 and 12 March 2009 and had failed to pay the sum of $1,000,000 on account of the purchase price due on 12 March 2009. Recital G noted that Ironbridge and the guarantors had requested that the O’Gradys ‘refrain from enforcing the Contract, and allow [Ironbridge] further time in which to make the payments now overdue’. Recital I noted that the O’Gradys had agreed to the request ‘on condition that [Ironbridge] enter into the [Second Deed] to provide for a further variation of the Contract.’

Pursuant to the Second Deed, ‘in consideration of the Vendor refraining from enforcing the Contract …’ (as varied), Ironbridge and its guarantors agreed with the O’Gradys as follows:

(a) that the sum of $73,125, being arrears of interest, payable (as referred to in recital F(i)) ‘shall be paid to the Vendors via the Vendors solicitor on or before 30^th April 2009’;

(b) that Ironbridge was obliged to pay the sum of $146,250 (being interest on the overdue purchase price component of $1,000,000 for the period 12 March 2009 to 12 September 2009) on or before 12 May 2009;

(c) that, save as expressly provided, the terms of the Contract (as varied) were affirmed; and

(d) if Ironbridge (or the guarantors) defaulted in their obligations under the Second Deed, then the ‘entire balance of the purchase monies payable under the Contract, the Variation Deed and this Deed shall immediately become due and payable, without prejudice to the Vendor’s rights under the Contract’.

The O’Gradys seek payment of outstanding interest and costs

On 19 May 2009, the O’Gradys’ solicitor, Ms Fox, emailed Ironbridge’s solicitor, Ms Birk, asking for confirmation as to when the O’Gradys could expect payment of outstanding interest and costs. Ms Birk replied the following day that she was sorry Ms Fox had to run around for the payments, and that she would chase up her clients and let Ms Fox know when she had a response.[17]
[17]CB 1739.

On 20 May 2009, Coulter Roache Lawyers again wrote to Logie-Smith Lanyon regarding breaches by Ironbridge of the Contract as varied and stated that ‘[o]f grave concern to both ourselves and our client is the lack of response by [Ironbridge]’.[18] The letter noted that ‘[w]e are now in a position of crisis in the matter’, noting that Ironbridge had not complied with the O’Gradys’ further indulgences to allow more time to pay arrears and instalments, and that the sum of $146,250 due on 12 May 2009 was outstanding, together with legal costs of $1,500.
[18]CB 1740.

On 5 June 2009, Coulter Roache Lawyers wrote to Logie-Smith Lanyon regarding outstanding amounts under the Contract, noting ‘with concern’, that no further response had been provided other than that Ironbridge would pay the balance of funds payable within 14 days.[19]
[19]CB 1744.

On 5 August 2009, Coulter Roache Lawyers wrote to Logie-Smith Lanyon acknowledging receipt of a $20,000 payment ‘without prejudice to [the O’Gradys’] rights’.[20] The letter noted that an interest and costs payment was to be made by 7 August 2009 and that an instalment of $2,235,000[21] was due on 12 September 2009.
[20]CB 1745.
[21]The amount may have been intended to be $2,250,000.

The September 2009 rescission notices

On 4 September 2009, the O’Gradys issued a rescission notice to Ironbridge requiring payment of amounts then outstanding within 14 days. The rescission notice stated that Ironbridge had defaulted by failing to pay $66,250 of the $146,250 due on 12 May 2009 and $1,650 on account of legal costs due under the Second Deed on 9 April 2009.[22]
[22]CB 1747.

On 15 September 2009, Ms Birk of Logie-Smith Lanyon emailed Ms Fox of Coulter Roache Lawyers seeking confirmation that Ms Fox’s office had received the funds necessary to remedy the default referred to in the rescission notice. The email noted that $2,235,000 was due on 12 September 2009 and sought to extend the date for the payment of that instalment, including that part be paid in six months’ time. The next day, Ms Birk asked Ms Fox if the O’Gradys would like the next month’s interest paid in advance.

On 25 September 2009, the O’Gradys issued another rescission notice to Ironbridge because of its failure to pay the amount of $2,250,000 due on 12 September 2009.

On 8 October 2009, Coulter Roache Lawyers wrote to Logie-Smith Lanyon setting out the terms upon which the O’Gradys were prepared to withdraw the rescission notice, including that interest and cost payments be made by specified dates.

Mrs O’Grady’s evidence, in her witness statement, in effect was that whenever she and her husband agreed to grant Ironbridge more time for payments, it was on condition that interest be paid on unpaid amounts, and on the basis _bookmark517of Ironbridge’s promises that it would make all outstanding payments, complete its purchase, and perform all obligations under the Contract. They _bookmark519would not have agreed to withdraw the rescission notice and keep the Contract on foot if Ironbridge had not agreed to pay all amounts owing, including interest on unpaid amounts. _bookmark521As previously mentioned, I consider below the significance of this evidence when assessed in conjunction with Mrs O’Grady’s oral evidence.

By June 2010, stages 1 and 2 were developed and the plan of subdivision for them registered.

The Third Deed

A third deed was entered into on 18 April 2013 (‘Third Deed’) which recited that:[23]
[23]CB 213.

E. The balance of the purchase price is due to [the O’Gradys] on 18^th May 2013 (“the settlement date”).
F. [Ironbridge] is in possession of the land pursuant to the terms of the Contract.
G.[Ironbridge] has been since about August 2012 at its cost in all respects, carrying out works on part of the land for the purposes of subdivision and sale of same. … The [O’Gradys] have not in any manner participated in such works.
H. The area of the land which [Ironbridge] proposes to subdivide prior to the settlement date is:
(a) for Plan 6ai - 0.557 hectares (1.24 acres) being the land in Plan of Subdivision 648126N.
(b) for Plan 6aii – 0.902 hectares (2.23 acres) being the land in Plan of Subdivision 710771M.

…
K. [Ironbridge] requested the [O’Gradys] to agree to the subdivision of the land prior to the settlement date for the benefit of [Ironbridge].
L. The [O’Gradys] have agreed to such request, subject to the terms and conditions herein contained.

The Third Deed contained Ironbridge’s acknowledgement that:

(9) … the [O’Gradys] have agreed to these terms to assist [Ironbridge] in its development and sale of the land and that the $40,000.00 being received by the [O’Gradys] on the settlement of each lot are being applied in reduction of the balance of the purchase price under the Contract.

The Third Deed required the O’Gradys to do all things necessary to assist with the registering of plans of subdivision for stage 6 on the O’Grady Land in return for the payment of $250,000 per acre of part of that land referred to as the stage 6A land, which Ironbridge proposed to subdivide prior to settlement. The Third Deed stated that Ironbridge had executed in the O’Gradys’ favour mortgages over the lots in the subdivisions to secure the balance of the purchase price which were to be discharged upon the sales of the lots. The parties were to execute two transfers of the stage 6A land to Ironbridge with the consideration recorded in the transfers being $400,000 and $600,000, respectively. The Third Deed also required Ironbridge to pay the O’Gradys $40,000 for each subdivided lot that they sold to third parties.[24]
[24]CB 214-215.

Mr Wallace gave evidence that this early possession of land for construction purposes was ‘[i]n accordance with the deed. We were just doing what the deed allowed us to do’.[25]
[25]T 507.

The Fourth Deed

On 18 May 2013, the parties entered into a fourth deed to extend the due date of the Final Instalment and thus the completion of the Contract (‘Fourth Deed’). The Fourth Deed recorded that the ‘balance due under the Contract’ was $13,500,000 as at 18 May 2013 and that Ironbridge had requested a variation of the Settlement Date to 18 May 2014. It also recorded that Ironbridge had agreed to pay interest on the balance of the purchase price at the rate of 20% and that the O’Gradys had agreed to extend the Settlement Date ‘subject to the payment of the interest and subject to’ the provisions of the Contract as varied. [26]
[26]T 205.

By this time, Ironbridge had begun construction of stage 6A on the O’Grady Land and stages 3 and 5 on the Ironbridge Land.

Mr Wallace accepted that ‘the price or consideration that Ironbridge agreed to pay for [the] 12 month extension of time was interest at 20% per annum’.[27] That rate had been the subject of negotiation, with Ironbridge unsuccessfully seeking a lower rate of interest.[28]
[27]T 204.
[28]T 205.

The O’Gradys seek payments under the variation deeds

On 17 May 2013, Mrs O’Grady’s solicitors wrote to Ironbridge’s solicitors demanding payment of $40,000 for the lots of which sale had been settled and $112,500 for interest for the month commencing 18 May 2013. Mrs O’Grady’s solicitors wrote that the sale of seven lots had settled.[29] On 22 May 2013, Ironbridge’s solicitors confirmed that to be the case and enclosed a cheque for $392,000, being $40,000 for each of the seven lots plus interest of $112,500.[30] Costs incidental to the discharges of mortgages over the various lots were also paid.
[29]CB 1858-9.
[30]CB 1861-2.

On 7 August 2013, Mrs O’Grady’s solicitors wrote again to Ironbridge’s solicitors confirming that Mrs O’Grady was due to be paid $1,042,097.10 on 15 August 2013 for interest for the months of June, July and August 2013, and $600,000 as a result of the sale of 15 lots by Ironbridge.[31] On 20 August 2013, Ironbridge’s solicitors advised that a cheque in the amount of $762,096.65 was deposited in Mrs O’Grady’s account for the settlement of eight lots plus the interest for June to August 2013.[32] Incidental costs were again paid by deposit of a separate cheque.
[31]CB 1868-9.
[32]CB 1870-1.

On 23 September 2013, the solicitors exchanged emails about the payment of the September 2013 interest.[33] A letter was sent by Mrs O’Grady’s solicitors on 20 November 2013 confirming receipt of $212,425.93 and confirming that payment of the November 2013 interest of $211,666.66 was due and payable.[34]
[33]CB 1879-80.
[34]CB 1886.

On 5 February 2014, Mrs O’Grady’s solicitors again wrote to Ironbridge’s solicitors confirming Ironbridge owed Mrs O’Grady $493,495.56.[35] Ironbridge deposited a cheque into Mrs O’Grady’s account on 6 February 2014 in the amount of $211,931.74.
[35]CB 1890-1.

The payments which Ironbridge contends it made to the O’Gradys are listed in Annexure B to this judgment.

Death of Mr O’Grady

On 5 April 2014, Mr O’Grady died and, as the surviving joint tenant, Mrs O’Grady became the sole registered proprietor of the O’Grady Land.

The Fifth Deed

By May 2014, Ironbridge had commenced construction on stage 6B of the Development Land. However, it did not complete the purchase on the due of 18 May 2014, and owed significant amounts to Mrs O’Grady.

A fifth deed was entered into on 27 October 2014 (‘Fifth Deed’). The Fifth Deed recorded that the amount owing to Mrs O’Grady as at 30 June 2014 was $13,854,771.80, comprising the balance of the purchase price of $12,700,000 and interest of $1,154,771.80, and that Ironbridge had requested an extension of the Settlement Date from 18 May to 14 November 2014. The Fifth Deed also extended the date for payment, with interest on the outstanding sum(s) to be calculated daily at a rate of 20% per annum from 1 July 2014.[36]
[36]CB 252-60.

Ironbridge agreed to pay to Mrs O’Grady the net proceeds of the sale of any lot arising from the subdivision of the land prior to the Settlement Date. Those proceeds were to be applied by paying to Mrs O’Grady the proceeds of any such sale, less any agent’s commission, the legal costs of Ironbridge’s solicitors on the sale of the lots, rate adjustments and any GST applicable on the sale. The proceeds were to be applied: firstly, towards any arrears owing to Mrs O’Grady, to her legal and accounting costs; and secondly, in reduction of the principal sum. Ironbridge promised to use its best endeavours and do all things reasonably required of it to pay to Mrs O’Grady on account of the principal sum the amount of $1,500,000 by 15 September 2014. The Fifth Deed recorded that Mrs O’Grady had agreed to extend the Settlement Date ‘subject to the payment of the interest and subject to’ the provisions of the Contract (as varied).

The extended Settlement Date of 14 November 2014 pursuant to the Fifth Deed passed without settlement. On 11 March 2015, Mr Lanyon, Ironbridge’s solicitor, sent an email to Mr Lamb, Mrs O’Grady’s solicitor, stating that Ironbridge’s financier would provide funding as follows:[37] $6,000,000 would be provided at settlement to ‘repay part of the O’Grady loan’; that the ‘balance of the O’Grady loan [would] be secured by a second mortgage’; ‘the financier [would] advance [$1,000,000] to complete [S]tage 6’; ‘[a]ll net proceeds from [S]tage 6 … would be paid to Mrs O’Grady, reducing that loan by a further [$6,000,000], meaning that [$12,000,000] shall have been repaid within, say, 3 months’; the financier would provide an additional $3,500,000 to carry out works on stage 8 on the O’Grady Land ‘which will enable the O’Grady loan to be repaid in full’. The email concluded by Mr Lanyon stating that he would keep Mr Lamb informed but that Ironbridge was expecting a letter of offer on finance ‘in the next few days’. Ironbridge’s own documentation earlier referred to the O’Grady ‘loan’. Further reference was made to the O’Grady loan in correspondence.[38]
[37]CB 1901.
[38]See CB 2088.

The Sixth Deed

On 17 August 2015, the parties entered into the sixth and final deed (‘Sixth Deed’), which was an extensive document in which Ironbridge acknowledged that it had failed to pay the Outstanding Principal Amount under and in accordance with the Contract. Ironbridge acknowledged and agreed that it had not paid the principal sum of $12,700,000 and that unpaid interest of $4,481,336.07 as at 31 July 2015 was owing and accruing daily at 20% per annum. The Sixth Deed did not provide for a completion date despite the previous date of 14 November 2014 having passed.

Ironbridge agreed to apply settlement funds from the sale of stage 6B lots: first towards amounts due to Draper’s Civil Contracting Pty Ltd (‘Draper’s’), which had performed subdivisional works totalling $821,696.70;[39] second towards land tax; third for outstanding shire rates; fourth towards payment of commission that Ironbridge owed Hayden Real Estate for sales of stage 6B land; and finally towards any expenses that Mrs O’Grady might nominate in connection with the development. The Residual Settlement Funds, as defined, were absolutely and unconditionally assigned to Mrs O’Grady, and she was given an absolute discretion to apply them towards the outstanding principal, the interest owing in respect of that outstanding principal, or towards any other amounts owing to her under the Transaction Documents, as defined.
[39]CB 293-4.

Under the Sixth Deed, Ironbridge was obliged to ‘carry out … all works and things required to achieve settlement under the Individual Lot Contracts’, as defined, within four months and to ‘diligently and expeditiously carry out … all works and things required to achieve settlement under the Individual Lot Contract, to the satisfaction of’ Mrs O’Grady (cl 4.1). It was expressly obliged to comply with the Project Documents, which term was defined to include the ‘Construction Contracts’ relating to stages 5 and 6B (cl 4.5). Mrs O’Grady was given ‘step in’ rights to ensure that settlement under the Individual Lot Contracts was achieved (cl 5). Mr Wallace agreed that there was a benefit to Ironbridge in deferring its obligations to pay the O’Gradys over the years because it enabled Ironbridge to fund development works on stage 6.[40]
[40]T 208.

Events after the Sixth Deed

On 13 April 2016, Ironbridge’s solicitors wrote to Mrs O’Grady’s solicitors regarding the Contract. By this stage, the 14 November 2014 Settlement Date under the Fifth Deed had passed without completion and the Sixth Deed, which was silent as to the date for completion, had been entered into eight months earlier. Mrs O’Grady had not taken any further action to terminate the Contract for breach. By their letter, Logie-Smith Lanyon put a proposal to Mrs O’Grady ‘to enable the O’Grady loan to be repaid’.[41] Again, security for the loan was suggested, a second-ranking mortgage. The letter referred to the O’Grady ‘loan’ or the ‘O’Grady debt’ several times. Mr Wallace agreed that the proposal was for the O’Grady loan to be repaid and that he approved the proposal and was across its details.[42] He also gave evidence that negotiations occurred about the rate of interest to be paid.
[41]CB 2088.
[42]T 199.

On 6 June 2016, Coulter Roache Lawyers wrote to Logie-Smith Lanyon regarding the Contract.[43] They noted that Ironbridge was in default by failing to pay the purchase price and all monies owing to Mrs O’Grady by 14 November 2014, that time remained of the essence under the Contract, and placed Ironbridge on notice that all outstanding amounts were to be repaid by 24 June 2016. The letter sought payment of the principal sum, $8,406,915.35, plus interest in the sum of $7,443,874.83 ‘including’ pursuant to cls 2.2 and 11 of the Sixth Deed.
[43]CB 2096.

On 6 July 2016, Mrs O’Grady’s solicitors sent Ironbridge’s solicitors a notice of intention to rescind based on general conditions 5 and 6 of Table A, giving Ironbridge 14 days to remedy the default.[44]
[44]CB 2102-3.

Mr Wallace agreed that, as at 6 July 2016, when Ironbridge was given a warning that Mrs O’Grady’s patience would run out,[45] the Settlement Date remained 14 November 2014 and that Ironbridge owed the principal of $8,406,915.35 and interest of more than $7,700,000 which was continuing to accrue at 20%. He agreed Ironbridge did not comply with the demand for payment and he did not dispute the amount of interest said to be owing at that date. He agreed that the letter was a warning.[46]
[45]T 211.
[46]Ibid.

The Variation Letter

On 18 July 2016, Mrs O’Grady and Ironbridge reached agreement for withdrawal of the rescission notice. The agreement was contained in a letter from Mrs O’Grady’s lawyers, Coulter Roache Lawyers to Ironbridge’s lawyers Logie Smith Lanyon.[47] The letter stated, inter alia:[48]
[47]CB 2108.
[48]CB 2108-9.

We refer to…our client’s notice of intention to rescind the Contract dated 6 July 2016 (Recession Notice).
…
[O]ur client is prepared to withdraw the Rescission Notice on acceptance by each Purchaser Transaction Party (as defined in the Sixth Deed) (PTP) of the following terms:
1.Each PTP irrevocably acknowledges and accepts that the purchase price presently outstanding under the Contract is $8,406,915.35.
2.Each PTP irrevocably acknowledges and accepts that the interest due under the Contract (calculated to 6 July 2016) is $7,703,581.93, and continues to accrue at 20% per annum (calculated daily), and otherwise in accordance with clause 2.2 of the Sixth Deed.
…
4.The due date for payment of all monies owing under the Contract (including the amounts identified at paragraphs 1 and 2 above) is extended to 5 September 2016.
…

13.This offer may only be accepted by each Purchaser Transaction Party (as defined in the Sixth Deed) signing where indicated below, and returning the signed letter to our office by return email to [Coulter Roache Lawyers].

It was accepted by signature of Mr Ian Wallace and Ms Carolyn Wallace, each stating that they signed in their ‘personal capacity and on behalf of Ironbridge Holdings Pty Ltd and I Wallace & Associates Pty Ltd’.

Ironbridge failed to settle and pay all amounts owing under the Contract by 5 September 2016. Mrs O’Grady’s solicitors served a letter on Ironbridge’s solicitors terminating the Contract because of that default.

Termination of the Contract

This proceeding was commenced on 21 December 2016.

On 7 April 2017, Craig Shepard and John Bumbak of KordaMentha were appointed as receivers and managers of Ironbridge and I Wallace & Associates Pty Ltd. Ironbridge’s loans had been obtained from the Bank of Queensland whose loan portfolio was purchased by Goldman Sachs, which is ‘the ultimate interest standing behind the receivers who control this litigation on behalf of Ironbridge’.[49]
[49]T 232.

On 12 July 2017, Mrs O’Grady issued a further notice terminating the Contract on the basis that the appointment of the receivers and managers to Ironbridge and I Wallace & Associates Pty Ltd was an insolvency event under the Sixth Deed entitling her to terminate the Contract.

On or around 21 July 2017, Mr and Mrs Wallace appointed Greg Dudley and Neil Cribb of RSM Australia as joint and several administrators for Ironbridge. On 15 September 2017, a deed of company arrangement was entered into in respect of Ironbridge.

On 2 October 2017, Ironbridge’s solicitors wrote to Mrs O’Grady’s solicitors stating that Ironbridge accepted that the Contract had been terminated by the notice dated 12 July 2017.

On the same day, Ironbridge lodged a caveat over the land retained by Mrs O’Grady,[50] based on its contention that it has a purchaser’s lien securing the repayment of monies paid to her under the Contract.[51] Mrs O’Grady seeks the removal of that caveat in this proceeding.
[50]Caveats had been previously lodged and withdrawn by Ironbridge.
[51]Wallace Statement (n 6) [124].

The development of the O’Grady Land

I will next describe the work undertaken in the development of the O’Grady Land and to the extent necessary on the adjoining Ironbridge Land. The parties each provided submissions as to the facts and, where appropriate, I have adopted their descriptions.

Development of stage 6

In late 2006, Ironbridge engaged Watsons Pty Ltd (‘Watsons’) to prepare a development plan to support an application to rezone the Development Land to residential._bookmark454 Watsons prepared a subdivision layout plan for the development, containing _bookmark46314 stages (‘Surf View Development’).

After completing stages 1 to 4, Mr Wallace prioritised the development of stage 6 on the O’Grady Land so that Ironbridge could use the sale proceeds to pay the final purchase price instalment. Stage 5 could not be so used because Ironbridge had mortgaged it as security for its purchase of the Ironbridge Land. The development of stage 6 raised stormwater basin issues.

On or about 12 May 2010, Watsons prepared a Stormwater Management Plan for the Surf View Development._bookmark530 The plan noted that the O’Grady Land sloped steeply towards Spring Creek in the south_bookmark531 and that two retarding basins, one in the east and one in the west, were required._bookmark532 The eastern basin would service stages 1 to 12 and the western basin stages 13 and 14._bookmark533

In October 2010, Ironbridge obtained a planning permit for stages 4 and 5. The accompanying letter from the Council noted that the public open space required under two s 173[52] agreements with Council, which were registered on the title of the Ironbridge-owned 65 Grossmans Road, had not been provided and that the shortfall open space needed to satisfy the s 173 agreements had to be provided as part of the further subdivision of stages 6 to 14.
[52]Planning and Environment Act 1987 s 173.

On 23 March 2011, Watsons prepared a revised subdivision layout plan for the Surf View Development. The plan showed a larger public reserve area in the north, with the lots previously abutting the reserve removed and replaced with public open space._bookmark536

On 17 June 2011, Ironbridge obtained a planning permit for the land which included stages 6 to 14 of the Surf View Development. _bookmark537The permit required entry into an agreement pursuant to s 173 of the Planning and Environment Act 1987.

Ironbridge obtained three planning permits for the Surf View Development, the third of which related to stages 6 to 14. By June 2012, stages 3 and 4 were developed_bookmark547 and the plan of subdivision for them registered.

87 _bookmark538On 8 August 2012, Ironbridge obtained an amended planning permit for stages 6 to 14 of the Surf View Development. On 13 August 2012, the subdivision layout plan for the Surf View Development was amended again, showing the shortfall public open space in the reserve to the north.

In order for stage 6 to be developed, a temporary stormwater basin needed to be built toward the southern end of stage 8. The existing temporary basin on stage 5 on the Ironbridge Land had insufficient capacity to service the existing stages 1 to 4 of the Surf View Development as well as stage 6. _bookmark550 It treated and retarded stormwater from the developed stages 1 to 4 in the north and needed to be moved so that development of the stage 5 land could proceed.

On 20 February 2013, the Council sent Mr Wallace an amended planning permit 10/0417 for stages 6 to 14 of the land. The cover letter noted that new conditions 2 and 3 had been inserted, relating to the provision of a staged stormwater management plan to allow temporary stormwater facilities prior to delivery of the final stormwater infrastructure. It also noted that condition 1 of the permit had been amended to reflect the subdivision of stage 6 into four stages: 6A1, 6A2, 6B1 and 6B2. The letter noted that prior to the commencement of stage 7, in accordance with condition 4, an overall stormwater management plan would need to be submitted and approved by the Council. The effect of the letter and permit was to allow the decommissioning of the temporary stormwater basin on stage 5 of the Ironbridge Land and its replacement with the temporary basin on stage 8 of the O’Grady Land. Decommissioning of the basin on stage 5 allowed construction to occur on that stage with the new basin on stage 8 land to service the developed stages 1 to 4 on the Ironbridge Land.

The O’Gradys did not object to the grant of the amended planning permit 10/0417.

Stage 6A land

In August 2012, before the O’Gradys had transferred the stage 6 land to it, Ironbridge’s contractors commenced construction works for the ‘Stage 6A’ of Surf View Development, which _bookmark552comprised stages 6A1 and 6A2._bookmark553 Mrs O’Grady gave evidence in her witness statement that she did not know when Ironbridge started work on the stage 6 land, that it had no lease or licence agreement and did not pay an occupation fee. Had _bookmark554 she and her husband known that Ironbridge would fail to complete the Contract and pay amounts due they would not have permitted Ironbridge to construct a stormwater basin on the land.

It was only on 19 April 2013, about 7 months after construction work commenced, that the O’Gradys and Ironbridge signed a Transfer of Land for the stage 6A1 land, recording the consideration as $400,000.[53]_bookmark609
[53]CB 1457-8.

Stage 6A1 comprised 10 lots, numbered 601 to 610, which were on the O’Grady Land, save for lots 605_bookmark542 and 606_bookmark543 that were in part on the O’Grady Land and in part on the Ironbridge Land._bookmark544 Construction costs for stage 6A1 were $388,616,_bookmark545 yielding Ironbridge a profit. Ironbridge entered into contracts for the sale of the stage 6A1 land between December 2011 and June 2013[54] and the value of those contracts totalled $2,471,000.[55] Mrs O’Grady contended that Ironbridge had made a profit of $1,900,000 from sale of stage 6A1 land and $2,860,000 from the sale of the 6A2 lots.
[54]T 219.
[55]T 219.

Under the terms of the Third Deed, the O’Gradys received $40,000 from the sale of each lot in stage 6A to be applied towards the purchase price.

The transfer of the stage 6A2 land was undated, but was signed on 25 July 2013 and recorded the consideration as $600,000.[56]
[56]CB 963; Wallace Statement (n 6) [73].

Mrs O’Grady gave evidence that she and her husband never agreed to the stage 6 land being given the value recorded in the transfers.[57]
[57]T 538 (submissions).

Stage 6B land

From October 2012, Ironbridge had stockpiled soil on the O’Grady Land in the public reserve area in the north from work associated with stage 6B2.

On 7 March 2014, SMEC Urban, who were engineers acting on Ironbridge’s behalf, awarded the stage 6B contract to Draper’s (‘6B Contract’). The contract price was $893,458.50, however the final payment claim dated 30 January 2016 noted stage 6B construction costs of $917,564. The 6B Contract included works associated with the construction of the temporary stormwater basin on stage 8 of the Surf View Development.

In April 2014, Ironbridge commenced construction works on stage 6B, which had two sub-stages, 6B1 and 6B2. Stage 6B1 comprised 18 lots numbered 611 to 628, which were on the O’Grady Land with the exception of lots 615, 616, 623, 624 and 625 which were partly on the O’Grady Land and partly on the Ironbridge Land. Stage 6B2 was to be subdivided into 10 lots, numbered 638 to 647, each of which was wholly on the O’Grady Land.

Ironbridge did not pay the final instalment of $13,500,000, or any part of it, to the O’Gradys by the due extended date of 18 May 2014. By that stage, Ironbridge had commenced construction on stage 6B of the Surf View Development, although it did not acquire title to that land until November 2015.

Lot P

By email dated 15 October 2015, Jeremy Ashley of Logie-Smith Lanyon asked Tim Ma of Coulter Roache Lawyers whether ‘Lot P’ on the O’Grady Land could be transferred to Ironbridge, along with lots 638 to 647 which formed stage 6B2. That would increase the consideration to be paid because it would transfer a further 808m²of land. Mr Ashley stated that Ironbridge had been in discussions with the mortgagee in respect of the Ironbridge Land and that stage 7 of the Surf View Development, which was predominantly on Ironbridge Land, incorporated Lot P. The mortgagee had apparently requested that Lot P be transferred in the same transaction, as this ‘should make things a little smoother for the stage 7 subdivision’.[58]
[58]T 230.

Mr Wallace agreed that the transfer of Lot P was a benefit to Ironbridge, as it enabled Ironbridge to build a sewer line which benefitted stages 1 to 5 and stage 6 of the Surf View Development.[59]
[59]However, this may have been a mistake, as stage 6B had already been under development for at least a year and a half when the transfer request was made, and the email request from his solicitor did not mention that Lot P was needed for the development of stage 6B.

It was only on 25 November 2015, more than eighteen months after construction works commenced, that Mrs O’Grady signed transfers of the land contained in stages 6B1 and 6B2 and Lot P to Ironbridge for a total consideration of $812,500. The transfer of the stage 6B1 land recorded the total consideration as $497,000 and the transfer of the stage 6B2 land recorded the total consideration as $315,000.[60] Mrs O’Grady submitted that Ironbridge made a profit of $5,800,000 on the sale of the stage 6B lots.[61]
[60]Wallace Statement (n 6) [99]-[100]; T 297; CB 1033, .
[61]Defendant’s Closing Submissions (23 August 2018), [179].

The temporary stormwater basin

In order for stage 5 to be constructed, a temporary stormwater basin was relocated from that stage on Ironbridge Land to stage 8 on O’Grady Land, as the existing basin on the Ironbridge Land was insufficient. It was constructed in November 2014 and is 3,200 square metres in area.

Both parties agreed that this temporary basin was a benefit to Ironbridge, given that it serviced the developed stages. Ms N Barich, an engineer who gave evidence for Ironbridge, said that the basin was intended for the retardation and treatment of flows generated from the development of stages 1 to 6. It captures the stormwater runoff from the developed land and controls the rate at which the runoff discharges into Spring Creek. This ensures that the developed stages do not permanently hold water and are free draining. Other witnesses gave similar evidence.

A permanent stormwater drain was to be constructed below stage 7, but has not been and the temporary stormwater basin is still on the O’Grady Land.

Stockpiling soil

The soil excavated in the construction of the temporary stormwater basin was piled into several large stockpiles that still lie on the O’Grady Land. Mr Wallace conceded that this stockpiling of soil on the O’Grady Land was a benefit to Ironbridge.[62] In around April 2014, Ironbridge also stockpiled soil in stage 8 below Beach Road, partly on the O’Grady Land and partly on the Ironbridge Land. Approximately 25,000 tons of soil remains on stage 8.[63] This was the basis for Mrs O’Grady’s trespass claim in her counterclaim, which is Issue 6 and is discussed below.
[62]CB 246.
[63]CB 2176.

Stage 7

Between November 2015 and February 2017, Ironbridge entered into contracts to sell the lots in stage 7 on the Ironbridge Land for a total price of $12,970,000. None of those contracts have settled, but all remain on foot Mr Shepard intends to recommend to the secured creditor that stage 7 and the permanent basin be constructed and the lots in stage 7 be settled or sold.

Legal issues
Principles applicable to claims of unjust enrichment

I next consider the legal issues raised by Ironbridge’s claims. I will commence with a general description of the basis of claims in unjust enrichment.

In order to succeed in a claim for remedies based on unjust enrichment, a plaintiff must establish that the defendant has been enriched at the plaintiff’s expense and that the enrichment is unjust. Defences are available to an unjust enrichment claim including that the defendant has irreversibly acted to its detriment because of the enrichment. A claim based on unjust enrichment must fit within the accepted categories in which the law allows recovery by one person of a benefit obtained by another,[64] one category being the total failure of consideration for the bargain made by the parties.
[64]Equuscorp Pty Ltd v Haxton (2012) 246 CLR 498 [30] (French CJ, Crennan and Kiefel JJ) (‘Equuscorp’).

Issue 1: What was the consideration, and did it totally fail?

The first issue for decision was whether there was a total failure of consideration justifying an order for restitution. As Mason CJ stated in Baltic Shipping Co v Dillon (‘Baltic Shipping’):[65]

it is the performance of the defendant’s promise, not the promise itself, which is the relevant consideration. In that context, the receipt and retention by the plaintiff of the bargained-for benefit will preclude recovery, unless the contract otherwise provides or the circumstances give rise to a fresh contract.

[65]Baltic Shipping Co Ltd v Dillon (1993) 176 CLR 344, 350-1 (Brennan and Toohey JJ agreed) (‘Baltic Shipping’).

In identifying the consideration in a bargain, the law ‘looks to the benefit bargained for by the plaintiff rather than any benefit which might have been received in fact’,[66] and so is directed only to those benefits bargained for under the contract. Where none of those benefits have been received by one party and there has been a complete failure of the agreed return which was the basis of a contract, a total failure of consideration has occurred. But when a party has received some of the benefits for which they bargained, there will be no total failure of consideration, unless those benefits received are only ‘incidental’ to the benefit that was to have been provided.
[66]David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353, 381-3 (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ) applying Baltic Shipping (n 65).

However, if the contract can be divided into severable parts, a total failure of consideration in one severable part may justify restitution of benefits received under that part, although the consideration for the other severable parts may not have failed.[67]
[67]Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516 (‘Roxborough’).

Ironbridge emphasised the importance of the High Court decision in McDonald v Dennys Lascelles Ltd (‘McDonald’)[68] for the determination of restitution cases involving the sale of land. In that case, the assignee from the vendors of a contract of sale of land made a claim for an unpaid instalment of the purchase price against the guarantor of the purchasers’ obligations as joint purchasers. The contract had been terminated at a point when that instalment was due. Dixon J held that the vendor, having elected to rescind the contract rather than sue for breach or specific performance, was not entitled to the unpaid instalment. He stated that:[69]

When a party to a simple contract, upon a breach by the other contracting party of a condition of the contract, elects to treat the contract as no longer binding upon him, the contract is not rescinded as from the beginning. Both parties are discharged from the further performance of the contract, but rights are not divested or discharged which have already been unconditionally acquired. … It does not, however, necessarily follow from these principles that when, under an executory contract for the sale of property, the price or part of it is paid or payable in advance, the seller may both retain what he has received, or recover overdue instalments, and at the same time treat himself as relieved from the obligation of transferring the property to the buyer. When a contract stipulates for payment of part of the purchase money in advance, the purchaser relying only on the vendor’s promise to give him a conveyance, the vendor is entitled to enforce payment before the time has arrived for conveying the land; yet his title to retain the money has been considered not to be absolute, but conditional upon the subsequent completion of the contract. ‘The very idea of payment falls to the ground when both have treated the bargain as at an end; and from that moment the vendor holds the money advanced to the use of the purchaser’ … It is now beyond question that instalments already paid may be recovered by a defaulting purchaser when the vendor elects to discharge the contract (Mayson v Clouet).

[68](1933) 48 CLR 457 (‘McDonald’).
[69]Ibid 476-7 (Dixon J, Rich J agreeing at 467-8, McTiernan J agreeing at 486) (citations omitted).

Ironbridge’s submissions about Issue 1

Ironbridge argued that McDonald established that in the case of contracts for the sale of land, the consideration is the conveyance of title. As Ironbridge had not received conveyance of the title to any of the land other than stage 6 and Lot P, it was entitled to restitution of the amounts that it paid the O’Gradys other than the deposit and the amounts recorded in the transfers of land for stage 6 and Lot P (‘Transferred Land’).

Ironbridge argued that the consideration for the instalment payments of the purchase price was the conveyance of title to the land. It pointed to the expression ‘Settlement Date’ in the Contract, which stated that Ironbridge was to have ‘vacant possession’ of the land ‘upon acceptance of title and receipt by the Vendor under the terms of this contract of the sum of $3,250,000’. The benefits it received from the O’Gradys during the decade when the Contract was on foot were incidental and were not the consideration for the instalment payments, as the conveyance of title was. But, without that conveyance, the incidental benefits given by the O’Gradys were of no value.

The stage 6 land transferred by the O’Gradys and developed by Ironbridge was a severable part of the consideration and had been severed in the manner contemplated by special condition 7 of the Contract.

Mrs O’Grady’s submissions about Issue 1

Mrs O’Grady argued that Dixon J’s statement in McDonald was limited in application to cases where the conveyance of title was the only consideration and did not apply when there was additional consideration or were additional benefits agreed to be provided, as there had been in this case.

Mrs O’Grady submitted that the consideration under the Contract was not limited to the conveyance of land. This was not a straight forward agreement for the sale of land. The agreed return for the payments of principal and interest that Ironbridge made and for which it seeks restitution was title to some land, assistance from the O’Gradys in rezoning, subdividing and developing stages of the Development Land, including stages on the Ironbridge Land and loan finance from the O’Gradys.

Ironbridge had bargained for and received other important benefits from the O’Gradys, including:

(a) financial accommodation in the form of extended payment terms, forbearance of the obligation to pay the purchase price immediately upon default, and the withdrawal of Mrs O’Grady’s rescission notices;

(b) early possession of the stage 6 land, before settlement of its purchase, so that Ironbridge could facilitate its development and the construction for housing lots;

(c) the ability to sell lots in stage 6 and the proceeds of sale of lot 6. Ironbridge received the early transfer of the stage 6 land which was subdivided, developed, and sold to purchasers for a total amount of $12,942,500;

(d) the benefit of subdivisional works to stages 1 to 5 and 7 of the land, which Ironbridge owned;

(e) the benefit of being able to erect a temporary stormwater basin on stage 8, which was O’Grady land, which enabled Ironbridge to develop its adjoining stage 5 land and spared it the expense of constructing a permanent stormwater basin on its land;

(f) the early transfer of Lot P for a nominal amount;

(g) the benefit of being able to freely allocate the public open space required for the Surf View Development, including onto O’Grady Land rather than onto Ironbridge Land;

(h) the ability to pay other creditors in priority to the O’Gradys and to use settlement funds from the sale of 6B lots, which were assigned to Mrs O’Grady under the Sixth Deed, to pay other creditors before her; and

(i) the benefit of being allowed to stockpile soil from construction works on the O’Grady Land, rather than on Ironbridge Land.

Analysis of Issue 1: What was the consideration and did it totally fail?

The question is what was the agreed return or the benefit bargained for: the O’Gradys’ conveyance of their land to Ironbridge, or that conveyance and the benefits that Mrs O’Grady contended that she and Mr O’Grady provided to Ironbridge under the Contract.

In Mann v Paterson Constructions Pty Ltd (‘Mann’), Nettle, Gordon and Edelman JJ stated:[70]

The ‘qualifying or vitiating’ factor giving rise to a prima facie obligation on the part of the enriched party to make restitution is a total failure of consideration, or a total failure of a severable part of the consideration. In this context, consideration means the matter considered in forming the decision to do the act: ‘the state of affairs contemplated as the basis or reason for the payment’. In many cases the relevant basis will be the benefit that is bargained for. In those cases, ‘[t]he test is whether or not the party claiming total failure of consideration has in fact received any part of the benefit bargained for under the contract or purported contract’.

[70](2019) 373 ALR 1, [168] (‘Mann’) (citations omitted).

In the case of a contract purely for the sale of land, the authorities are clear that the conveyance of the title is the agreed consideration. A vendor who has been paid the purchase price or part of it cannot keep that amount and the land; as Parke B said in Laird v Pim,[71] a vendor cannot have the land and its value too.[72]
[71][1835-42] All ER Rep 67; (1841) 10 LJ Ex 259; (1841) 7 M & W 474; (1841) 151 ER 852, 854.
[72]McDonald (n 68) 470 (Starke J).

To repeat Dixon J’s statement in McDonald, a case in which the purchaser had been in possession of the land before the contract was rescinded:[73]

When a contract stipulates for payment of part of the purchase money in advance, the purchaser relying only on the vendor's promise to give him a conveyance, the vendor is entitled to enforce payment before the time has arrived for conveying the land; yet his title to retain the money has been considered not to be absolute but conditional upon the subsequent completion of the contract… It is now beyond question that instalments already paid may be recovered by a defaulting purchaser when the vendor elects to discharge the contract.

[73]Ibid 477-8 (citations omitted).

As Lowe J said in Real Estate Securities Ltd v Kew Golf Links Estate Pty Ltd (‘Real Estate Securities’):[74]

It must not, however, be thought that I lend any countenance to the suggestion that possession of the purchaser will defeat his claim at law to the return of the instalments, where such a claim is open to him. As Dixon J has pointed out, the consideration for the purchase money is the conveyance. Possession pending the time for completion is treated in the contract for sale, not as part of the consideration, but as merely incidental thereto.

[74][1935] VLR 114, 120 (‘Real Estate Securities’).

Lord Goff in the House of Lords decision in Stocznia Gdanska SA v Latvian Shipping Co, wrote that in cases for the sale of land or goods:[75]

it has been held that the buyer's remedy is contractual, the seller's title to retain the money being conditional upon his completing the contract: see, eg, Dies v British and International Mining and Finance Corporation Ltd (sale of goods), and the much-quoted judgment of Dixon J in McDonald v Dennys Lascelles Ltd ((sale of land).

[75][1998] 1 WLR 574, 589 (citations omitted).

Young CJ in Eq summarised these principles in Mulkearns v Chandos Developments Pty Ltd (No 3) in the following terms:[76]
[76][2005] NSWSC 504, [29]-[31] (citations omitted).

The matter was considered in great detail by McPherson J in Lexane Pty Ltd v Highfern Pty Ltd. That case involved a failed contract for a home unit building, Shangri-La in Surfers Paradise. The purchase price was $11.5 million with a deposit of $500,000 and a $4 million progress payment to be made in four equal instalments of $1 million each. The purchaser paid the $4.5 million, but defaulted in completion and the vendor terminated. McPherson J said:
The fundamental principle applicable to a vendor who rescinds for breach after receiving payment, wholly or in part, on account of the price is that 'he cannot have the land and its value too': Laird v Pim per Parke B. Hence money so paid by the purchaser is recoverable from the vendor. At law it is recoverable as money had and received upon a total failure of consideration.

…
When considering total failure of consideration, two aspects of the matter have to be taken into account. The first is that there was a view in the early 20th century that there cannot be a total failure of consideration if the plaintiff obtains even a slight benefit from the contract. Thus in Real Estate Securities Ltd v Kew Golf Links Estate Pty Ltd there is a suggestion (which was indeed rejected in that case) that a person who has been in possession under the contract cannot say that consideration has fully failed. However, whilst the matter is not completely clear, the better view in 2005 is that being in possession does not mean that there has not been a total failure of consideration. The current view of the term is that total failure of consideration is directed to the key and principal part of the contract. In cases of the present type this is to provide a conveyance; see Automatic Fire Sprinklers Pty Ltd v Watson and Voumard, Sale of Land 5th ed [12 280].

Early possession of the land prior to settlement as occurred in McDonald,[77] and Real Estate Securities,[78] is generally not regarded as separate consideration, but as incidental to the primary bargain for the conveyance of title. The view has not been universally adopted; for instance Fullagar J, when a judge of this Court, said in Hodder v Watters[79] that there was much to be said for the view that, strictly speaking, that where a benefit, such as possession of the property sold, has been given by the vendor and received by the purchaser under the contract before settlement, it was not correct to say that there had been a total failure of consideration for that payment.
[77]McDonald (n 68).
[78]Real Estate Securities (n 74), see also Shaw v Bell (1962) 63 SR(NSW) 910, 917 (Sugerman J).
[79][1946] VLR 222, 231.

Another category in which the transfer of title is seen as critical is in the sale of chattel cases. It is no answer to a purchaser’s claim for recovery of the purchase price when the vendor cannot give title that the purchaser has had the use of the chattel.[80]
[80]See Rover International Ltd v Cannon Films Sales Ltd (No 2) [1989] 1 WLR 912.

The balance of authority supports the conclusion that mere possession of land without transfer of title is not part of the agreed return in a contract for the sale of land, and enjoyment of that possession is not sufficient to answer an unjust enrichment claim based on a total failure of consideration. Therefore, the early possession of the O’Grady Land was an incidental benefit and not separate consideration.

Mason CJ adopted the same approach in Baltic Shipping in the following passage:[81]

A qualification to this general rule, more apparent than real, has been introduced in the case of contracts where a seller is bound to vest title to chattels or goods in a buyer and the buyer seeks to recover the price paid when it turns out that title has not been passed. Even if the buyer has had the use and enjoyment of chattels or goods purportedly supplied under the contract for a limited time, the use and enjoyment of the chattels or goods has been held not to amount to the receipt of part of the contractual consideration. Where the buyer is entitled under the contract to good title and lawful possession but receives only unlawful possession, he or she does not receive any part of what he or she bargained for. And thus, it is held, there is a total failure of consideration. As this Court stated in David Securities Pty Ltd v Commonwealth Bank of Australia: ‘the notion of total failure of consideration now looks to the benefit bargained for by the plaintiff rather than any benefit which might have been received in fact.’

[81]Baltic Shipping (n 65) 351 (citations omitted).

The first task is to identify the agreed return or the benefit bargained for under the Contract.

The judgment of Deane and Dawson JJ in Baltic Shipping provides guidance as to how to identify the consideration and the bargain. This case concerned a holiday cruise which ended prematurely when the cruise ship was wrecked. Deane and Dawson JJ explained that:[82]

There can be circumstances in which there is, for relevant purposes, a complete failure of consideration under a contract of transportation notwithstanding that the carrier has provided sustenance, entertainment and carriage of the passenger during part of the stipulated journey. For example, the consideration for which the fare is paid under a contract for the transportation of a passenger by air from Sydney to London would, at least prima facie, wholly fail if, after dinner and the inflight film, the aircraft were forced to turn back due to negligent maintenance on the part of the carrier and if the passenger were disembarked at the starting-point in Sydney and informed that no alternative transportation would be provided …
However, the promised consideration in the present case was not, as a matter of substance, the transportation of Mrs Dillon from Sydney to Sydney. As has been said, it was the provision of all that was involved in the promised pleasure cruise as a holiday experience. Even on the assumption that that promised consideration was entire and indivisible, it did not wholly fail. Baltic provided and Mrs Dillon accepted and enjoyed eight complete days of the cruise. It is true that Mrs Dillon would have been entitled to decline to board the ship or to accept only part of the promised consideration if it could have, and had, been known in advance that all that Baltic would in fact provide was eight days of cruising culminating in the sinking of the ship off New Zealand as a result of Baltic's breach of its contractual duty to take reasonable care. If, in that necessarily hypothetical situation, Mrs Dillon had wisely decided to stay at home, the consideration for the fare would have failed completely and, subject to any applicable provisions of the contract between herself and Baltic, she would have been entitled to succeed in an action in unjust enrichment for the recovery of the whole fare. In circumstances where Mrs Dillon accepted and enjoyed the major portion of the pleasure cruise, however, there was no complete failure of the consideration for which she paid the fare. The catastrophe of the shipwreck and its consequences undoubtedly outweighed the benefits of the first eight complete days. It did not, however, alter the fact that those benefits, which were of real value, had been provided, accepted and enjoyed.

[82]Ibid 378-9.

The receipt of benefits associated with a contract for the sale of land additional to a conveyance of the land does not prevent a total failure of consideration, if those benefits are properly characterised as incidental or collateral benefits.[83]
[83]K Mason, JW Carter and GJ Tolhurst, Mason & Carter’s Restitution Law in Australia (LexisNexis Butterworths, 3^rd ed, 2016) 436-7.

Ironbridge did benefit from having early access to the stage 6 and Lot P land and being able to commence construction works and to subdivide and sell the lots.[84] But that was done under the mechanism contained in special condition 7 of the Contract.
[84]T 215.

Many of the benefits Ironbridge received were required under the Contract, including under the implied term of co-operation, which Griffith CJ described in Butt v M’Donald as:[85]

… a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract.

[85](1896) 7 QLJ 68, 70-1.

This description was based upon the duty to co-operate as expressed by Lord Blackburn in Mackay v Dick:[86]

I think I may safely say, as a general rule, that where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect. What is the part of each must depend on circumstances.

[86](1881) 6 App Cas 251, 263.

The obligations imposed by special conditions 7 and 8 of the Contract are relevant in assessing the legal effect of the benefits provided to Ironbridge on which Mrs O’Grady relies. The Contract provided for the possibility that before the due date for the payment of the final instalment of the purchase price of $13,500,000, the Development Land may have been rezoned as residential and a plan of subdivision of the O’Grady Land approved by the Land Titles Office. If those events occurred, the O’Gradys agreed to transfer land at the ‘agreed rate’ of $250,000 per acre. The O’Gradys also agreed to execute any documentation to assist in the registration of a Plan of Subdivision of the land and its rezoning as residential (special condition 8). The benefit of being able to use the sale price of stage 6 lots to pay other creditors before Mrs O’Grady was the result of the operation of the special conditions and of the Third Deed which provided for the transfer of land at $250,000 per acre before Ironbridge had made the final payment under the Contract. It also provided for payment to the O’Gradys of $40,000 per lot sold.

The land to be rezoned and subdivided was both the O’Grady Land and the Ironbridge Land, and some of the subdivision works benefited all of that land, which formed the Surf View Estate. The allocation of public space in the development, involved consideration of the development as a whole, encompassing both the O’Grady Land and the Ironbridge Land.

The forbearance to sue and extension of time for payment of instalments of the purchase price in exchange for the payment of interest were not required by the Contract but are relied on by Mrs O’Grady in support of her claim for interest which she submits was the subject of separate agreements. That issue is discussed below as part of issue 5.

Then there was the benefit conferred by the temporary retarding basin, the construction of which allowed Ironbridge to develop the stage 5 land. By not objecting to its construction the O’Gradys conferred an additional benefit on Ironbridge not required by the Contract. The temporary basin must remain on O’Grady Land until the construction of a permanent basin that satisfies the Council’s requirements. As mentioned, in building the temporary basin on stage 8, Ironbridge was permitted to stockpile large amounts of soil on O’Grady Land.[87] I consider that in permitting the construction of the temporary basin, the O’Gradys went beyond their duty to co-operate under the Contract to achieve the subdivision of the land. However, I consider it to be an incidental or collateral benefit under the Contract. As I discuss later, I consider that it entitles Mrs O’Grady to a remedy in counter restitution to remediate the effects on her land of the temporary stormwater basin.
[87]T 244–6.

Mr Wallace said that the O’Gradys’ grant of permission to Ironbridge to commence construction of works on stages 6A and 6B before it paid for, and obtained title to, the stage 6 land, benefited both Ironbridge and the O’Gradys and was ‘[i]n accordance with the deed. We were just following what the deed allowed us to do’.[88] The O’Gradys later transferred to Ironbridge the stage 6 land to which it received early access. The early access was preparatory to that early transfer, which in turn occurred under special condition 7. Mr Wallace agreed that the ability to sell lots in stage 6 was a benefit to Ironbridge from the money it obtained from sale of stage 6 lots: $1,900,000 from the sale of stage 6A1 lots, $2,860,000 from the sale of stage 6A2 lots and $5,800,000 from the sale of stage 6B lots. But as I have noted, the grant of early possession of the land to be conveyed does not prevent a total failure of consideration.
[88]T 214.

[257](1964) 111 CLR 41.

[258]Ibid 56 (Taylor J agreeing at 58, Menzies J agreeing at 60).

Mrs O’Grady relied on two decisions of this Court in which vendors had successfully claimed interest as part of a damages claim after rescinding the contract following the purchaser’s breach: the decision of Kaye J in Portbury Developments Pty Ltd v Mackali[259] and the decision of Davies J in Pettiona v Whitbourne.[260] The terms of the contract in the first case provided that a party who breached the contract must pay to the other on demand:

Any interest due under [the] contract as a result of the breach.[261]

[259][2011] VSC 69 (‘Portbury Developments’).

[260][2013] VSC 205 (Pettiona’).

[261]Portbury Developments (n 259) [27]. The contractual term in Pettiona v Whitbourne (n 260) was not set out in the judgment.

Ironbridge submitted that these cases were damages claims and that Mrs O’Grady had decided not to make such a claim, but had sued in debt.

The parties also referred to two County Court judgments dealing with interest claims of relevance because of the arguments that were considered. In both, the contract contained a clause dealing with a party’s breach of the contract in similar terms to that in the O’Grady-Ironbridge Contract, namely:

Breach
7. A party who breaches this contract must pay to the other party on demand:
(a) compensation for any reasonably foreseeable loss to the other party resulting from the breach, and
(b) any interest due under this contract as a result of the breach.

The contracts in the County Court cases also included a clause stating:

DEFAULT
26. Interest
Interest at the rate of 2% per annum [increased to 5% by Special Condition cl10] plus the rate for the time being fixed by section 2 of the Penalty Interest Rates Act 1983 is payable on any money owing under the contract during the period of default, without affecting any other rights of the offended party.

A clause in substantially similar terms was included in the Contract because of the incorporation of Table A of the Seventh Schedule to the Transfer of Land Act 1958.

In Bill v Clarke,[262] the vendor, after rescinding the contract for breach, sued the purchaser in damages. The vendor claimed interest for the period between the date on which settlement should have taken place and the termination date – a period of about seven weeks. Judge Macnamara dismissed that claim, applying the decision of the New South Wales Court of Appeal in Carpenter v McGrath.[263]
[262][2015] VCC 1721.
[263]Carpenter v McGrath (n 247).

In Tymstock Pty Ltd v Patrick,[264] the vendor sued the defaulting purchaser to recover its losses on resale of the property, offset by the forfeited deposit. Judge Woodward decided not to follow the approach in Bill v Clarke and awarded interest on the unpaid purchase price from the extended Settlement Date until the contract of sale ended. His Honour considered that Carpenter v McGrath contained different approaches and dealt with a contract in different terms. He adopted the approach of Cole JA that the purpose of the provisions was to compensate the vendor for delay in settlement. His Honour stated:

Regardless, I consider that the approach taken by Cole JA in Carpenter (and by Kaye J in Portbury and Davies J in Pettiona) is to be preferred. In my view, the terms of the contract of sale discussed above create a liability for interest that is independent of any obligation to pay the purchase price. And as Cole JA found, the purpose of those provisions is to compensate the vendor for a delay in settlement.[265]
[264][2019] VCC 1092.
[265]Ibid [113].

Ironbridge’s submissions on interest

Ironbridge argued that, applying the reasoning in Carpenter v McGrath, the payment of interest was linked to the obligation to pay the purchase price for the Retained Land and as that was not recoverable because the consideration had totally failed, then the interest it paid was also recoverable as it was a ‘component of the purchase price’.

Ironbridge submitted that the obligation to pay interest on the unpaid purchase price was conditional upon the conveyance of the land. Interest was payable on the unpaid purchase price and therefore fell away with the obligation to pay the purchase price. This meant that there was no liability to pay interest after rescission. The authorities on which Mrs O’Grady relied were distinguishable because they concerned claim for loss of bargain damages where the courts were seeking to put the innocent party in the position they would have been in had the contract been performed. Carpenter v McGrath was the relevant authority about the availability of a claim for interest in the absence of a loss of bargain claim. As Mrs O’Grady had not made such a claim, but was suing in debt, the Court should not award her interest by construing the obligation as an unconditionally accrued right recoverable by an action in debt as that would result in a windfall to her.

Mrs O’Grady’s submissions on interest

Mrs O’Grady disputed Ironbridge’s claim for restitution of the interest that it had paid and claimed more interest, being the amounts that remained owing under the Contract as varied, but which Ironbridge had not paid. She argued that the interest payments under the deeds of variation were separate obligations from interest payments otherwise due under the Contract and were not in consideration for the conveyance of title. Rather, they were payable in exchange for her agreement to extend dates for the payment of purchase price instalments and for her forgiving past breaches of the Contract.

The interest payments were the agreed cost for Ironbridge’s late payments of amounts due under the Contract. They were in the nature of a loan to Ironbridge and its documents included references to the interest obligations as ‘loans’.

Mrs O’Grady relied on the two decisions of this Court previously referred to in which vendors had successfully claimed interest as part of a damages claim after rescinding the contract following the purchaser’s breach: Portbury Developments Pty Ltd v Mackali[266] and Pettiona v Whitbourne.[267]
[266]Portbury Developments (n 259) (Kaye J).
[267]Pettiona (n 260) (Davies J).

Analysis of issue 5

The issue is whether the O’Gradys’ extension of the dates for the payment of purchase price instalments was good consideration for the interest that Ironbridge agreed to pay under the deeds of variation or whether it was a component of the purchase price and conditional upon the conveyance of the Retained Land. This depends on the interpretation of Contract, the variation deeds and the variation letter.

In Mann, Kiefel CJ, Bell and Keane JJ referred to ‘the basal understanding in McDonald that accrued rights to payment under the contract are neither displaced or enhanced by termination in future’.[268] Gageler J said ‘the modern understanding, settled in McDonald,[269] [is] that termination of a contract on acceptance of repudiation operates only for the future’.[270] Nettle, Gordon and Edelman JJ stated that

[a]t least since the decision of Dixon J in McDonald, it has been accepted that, where a party to a contract elects to accept the other party’s repudiation of the contract, both parties are released from contractual obligations which are not yet due for performance, but existing rights and causes of action continue unaffected.[271]

[268]Mann (n 70) [29].

[269]McDonald (n 68).

[270]Mann (n 70) [72].

[271]Ibid [165].

I do not consider that Mrs O’Grady is prevented from suing in debt because she has no claim in damages. In my opinion, Mrs O’Grady is entitled to recover the interest as an accrued debt. She does not have to establish damages. Debt is a separate cause of action.

As Gageler J also stated in Mann:

The result of the Builder’s acceptance of the Owner’s repudiation is that the Builder still has in respect of that work the same accrued contractual right to payment under the Contract as the Builder had up until the time of termination of the Contract. The Builder can enforce that accrued contractual right in a common law action in debt.[272]
[272]Ibid [62] (citations omitted).

His Honour cited for the last stated proposition the decision of the High Court in Young v Queensland Trustees Ltd (‘Young’),[273] in which Dixon CJ, McTiernan and Taylor JJ stated:

The common law does not and never did conceive of indebtedness in a sum certain for an executed consideration as a mere breach of contract: it is rather the detention of a sum of money and that was so whether the creditor enforced his demand by an action of debt, or by indebitatus assumpsit.[274]

This principle was recently applied by the New South Wales Court of Appeal in Benson v Rational Entertainment Enterprises Ltd.[275]

[273](1956) 99 CLR 560, 567, 569.

[274]Ibid 567.

[275](2018) 97 NSWLR 798, 811 [67] (Leeming JA, Beazley P agreeing at 801, Emmett AJA agreeing at 830).

I consider that Mrs O’Grady’s claim to interest succeeds, as it was a debt independent of any obligation to convey title and was not contingent on completion of the Contract. The interest was compensation to her for Ironbridge’s delay in making payments that were due and for her and Mr O’Grady’s forbearance. Those circumstances can give to an agreement for interest which is independent from any obligation to convey title. That category of agreement for interest was recognised by Cole JA in his dissenting judgment on this issue in Carpenter v McGrath[276] and by Powell J in Taylor v Raglan Developments.[277] I do not read the judgments of Clarke JA and Sheller JA in Carpenter v McGrath[278] to deny that such an agreement could be made. In my opinion, that decision does not require me to dismiss Mrs O’Grady’s claim. Each of the three judgments approaches the issues differently. Clarke JA dealt with the claim as for damages and considered that under the terms of the particular contract interest was only payable upon completion. Sheller JA treated interest as part of the purchase price that was only payable upon completion and Cole JA decided that the interest was recoverable even though the contract had not been completed.
[276]Carpenter v McGrath (n 247).
[277]Taylor v Raglan Developments (n 253).
[278]Carpenter v McGrath (n 247).

The facts leading to Ironbridge’s agreement to pay interest are very different from that case or indeed any other to which I was referred. The deeds of variation and the variation letter treat the interest as a debt owed to Mrs O’Grady independently of any obligation to convey title. It was an accrued liability at the time that the Contract was rescinded. It was recognized as a separate debt by the terms of the deeds of variation and existed independently of the purchase price and the obligation to convey title. It was compensation for the effect of the delay that Ironbridge’s breaches caused the O’Gradys as a result of which their land was tied up by the Contract with Ironbridge. The O’Gradys were delayed in receiving instalments of the purchase price much longer than had been agreed. It is true that the deeds under which the interest was payable were variations of the original Contract and did vary its terms. But they also created an independent obligation to pay interest while Ironbridge’s development continued on its delayed course. The interest was calculated as a percentage of the arrears of purchase price owing, but that does not mean that it formed part of the purchase price. It means only that the outstanding arrears of purchase price were a convenient measure with which to calculate interest.

As mentioned, the deeds of variation acknowledged that interest was owed as a debt at the time they made without any dependence on the requirement to convey title. Thus the Second Deed acknowledged that Ironbridge was in default in failing to pay interest agreed to in the First Deed on four dates and made provision for payment of interest of $73,125.00 on or before 30 April 2009 and interest of $146,250.00 on or before 12 May 2009 being interest for the period 12 March 2009 until 12 September 2009 on the overdue payments. The Fourth Deed provided that Ironbridge would pay interest on the balance of purchase price at the rate of 20% calculated as at 18 May 2013 and payable as to 1/12th monthly thereafter. The Fifth Deed provided for the variation of the Settlement Date to 14 November 2014 and provided that Ironbridge would pay interest on the principal sum of $12,700,000 or such amount as was owing from time to time at the rate of 20% calculated daily from 1 July 2014. The arrears of interest were agreed at $1,154,771.80 as at 30 June 2014.

Ironbridge argued that the conclusion that I have reached that Mrs O’Grady is entitled to recover interest under the deeds, would lead to her receiving a windfall, whereby she would keep the Retained Land, which had increased in value and receive a very large sum of interest. On Ironbridge’s calculations, the value of the Retained Land was such that if Mrs O’Grady also received the interest she claimed, she would obtain an ‘extraordinary windfall’ from interest payments which were calculated at 6 July 2016 to be $7,703,581.93 and which now would be much more. Windfall arguments were put in David Securities[279] and Roxborough[280] but were not decisive in the outcome of those cases.
[279]David Securities (n 66) 384.
[280]Roxborough (n 67) 522.

However, I do not consider that the interest provided for in the variation deeds continued to accrue as a debt after the rescission of the Contract, which occurred on 12 July 2017 or 2 October 2017. From that point Mrs O’Grady became entitled to deal with the Retained land free of any contractual entitlement to convey it to Ironbridge. The inconvenience caused to the O’Gradys and their forbearance were no longer reasons for awarding interest. The interest provided for in the deeds of variation was to compensate the O’Gradys for the delay and their forbearance in the payment of instalments of purchase price, while their land was bound by contractual obligations to Ironbridge. It was calculated primarily by reference to the outstanding balance of the purchase price. It had no such role to play by way of compensation once the Contract was rescinded. That conclusion does not mean that the interest was only payable as part of the purchase price. To the contrary, it was payable to the O’Gradys as a separate obligation and provided them compensation while their land was subject to the Contract.

Unless good cause to the contrary is shown, Mrs O’Grady is entitled to interest on the interest debt in accordance with the Supreme Court Act 1986. I will hear the parties about the amount of the interest debt at the date when the Contract was rescinded as well as the amount of the interest on that debt that should be awarded.

Issue 6: The soil stockpile trespass claim

Mrs O’Grady made a claim in trespass to land against Ironbridge because of the soil stockpile which remained despite her demands that Ironbridge remove it.

The parties reached agreement that the Ironbridge would remove the stockpiles of soil from the O’Grady’s Land at its expense. That agreement is contained in correspondence between the parties of 17 and 18 August 2019. That agreement removes the need for the Court to consider the making of orders to require the removal of the soil.

Subsequent to the making of that agreement, Mrs O’Grady’s lawyers were informed on 20 August 2019 that Ironbridge had instructed Draper’s to bury material under or at the area of the largest stockpile on the O’Grady Land. Mrs O’Grady contended that the agreement reached included the removal of any material buried by Ironbridge.

At the hearing, the parties did not suggest that the Court determine whether the Ironbridge parties had removed any buried matter.

Mrs O’Grady wished to ensure that the implementation of the agreement would not estop her from making later claims in respect of anything that may have been buried in the O’Grady Land. This was a concern arising from the possible application of an Anshun estoppel.[281] I informed the parties that I would make clear, as I now do, that the question of any cause of action that Mrs O’Grady may have in respect of anything buried under the soil has not been litigated or decided in this proceeding and, in my opinion, because of the late point at which Mrs O’Grady became aware of this issue, she had no opportunity to litigate any claim she may have in respect of the burial of such matter.
[281]Port of Melbourne Authority v Anshun Pty Ltd (No 2) (1980) 147 CLR 589.

Liability of the Guarantors

Mrs O’Grady counterclaimed against Mr and Mrs Wallace and I Wallace & Associates Pty Ltd as guarantors.

Mrs O’Grady was, with her late husband, the grantor named in the Option Deed and the vendor named in the Sale Contract.

The second and third defendants by counterclaim, Ian Wallace and his wife Carolyn Margaret Defreyne Wallace, are directors of Ironbridge and of I Wallace & Associates Pty Ltd which is the fourth defendant by counterclaim. Mr and Mrs Wallace were guarantors of Ironbridge’s obligations under the Contract. They were parties to, the First to Fifth Deeds. Further, they were parties to the Sixth Deed and guaranteed Ironbridge’s obligation under the deed. Finally, they were parties to the variation letter of 18 July 2016.

By the Fifth Deed, I Wallace & Associates Pty Ltd, the fourth defendant by counterclaim, also joined as guarantors to guarantee the due performance by Ironbridge under this deed and the Contract.

By the creation of the Sixth Deed, Mr and Mrs Wallace and I Wallace & Associates Pty Ltd (‘Purchaser Guarantors’) became ‘jointly and severally’ bound as guarantors under the Sixth Deed and the Contract.[282] Ironbridge and the Purchase Guarantors acknowledged that:
[282]Sixth Deed of variation cl 1.3; CB 267.

(a) the outstanding principal amount due was $12,700,00;

(b) the outstanding interest owing as at 31 July 2015 was $4,481,336.07; and

(c) interest was accruing daily at the rate of 20% per annum, that it was compounded at the end of each month and is payable on demand by Mrs O’Grady.[283]

[283]Ibid cl 2.2, 11; CB 268, 276.

Clause 8 of the Sixth Deed specifically related to the guarantee agreement, and required the Purchase Guarantors to ‘unconditionally and irrevocably’ guarantee Mrs O’Grady the ‘due and punctual performance’ of Ironbridge’s obligations. Further, it indemnified Mrs O’Grady against any loss suffered if Ironbridge failed to perform its obligations and agreed that this was a continuing obligation. Upon demand, Ironbridge was required to indemnify Mrs O’Grady within three business days against any cost, expense, loss or liability incurred by Mrs O’Grady as a result or in connection with any breach of the Sixth Deed or Contract.[284] Ironbridge and the Purchase Guarantors were also obliged to pay Mrs O’Grady the fees, costs and expenses incurred in relation to the enforcement of breaches pertaining to the Sixth Deed or Contract.[285]
[284]Ibid cl 9; CB 275-6.
[285]Ibid cl 12; CB 276.

In support of her claim against the guarantors, Mrs O’Grady argued that cl 9 of the Sixth Deed required the Wallaces and I Wallace & Associates Pty Ltd indemnify her against any ‘cost, expense, loss or liability (including legal fees) incurred by her as a result of or in connection with the occurrence of any breach or default under the Contract or the Sixth Deed’. Further, Mrs O’Grady says the Wallaces and I Wallace & Associates had a similar obligation to pay her within three days of demand, all costs and expenses incurred in connection with the enforcement of the Contract and the Sixth Deed.

As a result of a variation letter, Ironbridge and the Purchase Guarantors irrevocably acknowledged and accepted that $8,406,915.35 of the purchase price remained due and owing and that $7,703,581.93 in interest was due under the Contract, which continued to accrue at 20% per annum. The letter also noted that the due payment for all outstanding amounts was extended to 5 September 2016. However, Ironbridge failed to pay the outstanding amounts owing under the Contract by that date.

The guarantors, in their defence to counterclaim, admitted the guarantees on which Mrs O’Grady relied and did not raise any positive defence. Although their position on this issue was not developed in detail, their position appeared to be that there was no liability to which the guarantees or indemnities might attach.

Due to Ironbridge’s failure to pay the outstanding interest, Mrs O’Grady contended that the Ironbridge, Mr and Mrs Wallace and I Wallace & Associates were liable to pay interest, with interest accruing in accordance with cl 11(b) of the Sixth Deed, in the following amounts.[286] .In addition, Mrs O’Grady claimed that the Defendants by Counterclaim were liable to pay the costs and expenses incurred by her in relation to the enforcement of these breaches under the Sixth Deed and Contract.
[286]Ibid cl 11(b); CB 276.

Conclusion

I consider that the wording of the Contract, of the several variation deeds and the variation letter establishes that the Wallaces and I Wallace & Associates Pty Ltd are guarantors for the purposes of the Contract and the Sixth Deed. In view of the conclusion, I will hear any further submissions from counsel as to the orders that should be made against them.

Answers to the issues raised by the parties
Issue 1: What was the consideration, and did it totally fail?

The consideration for the Contract dated 18 May 2006 was the conveyance of title to the O’Grady Land. The Contract was severable and the Transferred Land of stage 6 and Lot P was severed. The consideration for the Contract in respect of the remaining O’Grady Land, being the Retained Land, totally failed.

Issue 2: Does Mrs O’Grady have a defence or defences to any restitutionary claim for failure of consideration?

No, Mrs O’Grady does not have a defence to Ironbridge’s restitutionary claim for failure of consideration. However, she is entitled to counter restitution for the remediation and rehabilitation of the temporary stormwater basin land. That counter restitution is fixed in the sum of $315,467.00 plus GST.

Issue 3: In what amount, if any, should Mrs O’Grady make restitution? Is Ironbridge entitled to interest on any amount recovered?

Subject to hearing from counsel about the precise figure, I consider that Mrs O’Grady must make restitution to Ironbridge of the sum of $10,156,005.90. Ironbridge is entitled to interest on that sum under the Supreme Court Act 1986.

Issue 4: Is Ironbridge entitled to an equitable lien?

Issue 5: In what amount, if any, should the Ironbridge parties be required to pay Mrs O’Grady interest?

The Ironbridge parties, including subject to any further submissions of counsel the guarantors, are required to pay Mrs O’Grady interest, being the amount of interest owing under the deeds of variation as at the date of the rescission, which was either 12 July 2017 or 2 October 2017. I will hear the parties as to the date that should be adopted and the amount of interest owing as that date. Mrs O’Grady is also entitled to interest under the Supreme Court Act 1986 on that sum to the date of rescission.

Issue 6: Has Ironbridge committed a trespass? And, if so, what relief should be ordered?

Not necessary to answer.

ANNEXURE A

ANNEXURE B

The table below includes payments collated from three sources: (1) Mr Ian Wallace’s witness statement dated 21 June 2019; (2) Annexure A to third further amended statement of claim, filed on behalf Ironbridge, dated 29 August 2019; and (3) a document handed up by senior counsel on behalf of Ironbridge as an aid to the Court, titled ‘Annexure A Review – Identity of Payer’.[287] In some cases the amounts paid on a given date vary between the three sources, in which case, the source of the figure will be included by reference to the numbers referred to earlier in this paragraph.
[287]T 249.

Date Amount ($) For

21 March 2006 20,000.00 Option fee (Purchase price)

8 May 2006 1,980,000.00 Remaining Deposit (Purchase price)

20 June 2006 1,250,000.00 Instalment

1 November 2008 (1)

17 November 2008 (2, 3)
105,000.00 Instalment

10 November 2008 27,246.54 Interest

11 November 2008 395,000.00 Instalment

28 November 2008 500,000.00 Instalment

1 May 2009 50,000.00 Interest

21 May 2009 23,125.00 Interest

25 May 2009 40,000.00 Interest

29 July 2009 20,000.00 Interest

Before 4 September 2009 20,000.00 Interest

10 September 2009 66,250.00 Interest

10 September 2009 2,150.00 Legal costs

8 October 2009 (1)

9 October 2009 (2, 3)
2,250,000.00 Instalment

8 October 2009 (1)

9 October 2009 (2, 3)
19,972.60 Interest

8 October 2009 550.00 Legal costs

22 May 2013 280,000.00 Instalment

22 May 2013 112,500.00 Interest

23 May 2013 40,000.00 Instalment and/or Interest

20 June 2013 80,000.00 Instalment

25 July 2013 (1 only) 600,000.00 Transfer of 6A2 Lots

15 August 2013 280,000.00 Instalment

15 August 2013 442,096.65 Interest

19 August 2013 40,000.00 Instalment

25 September 2013 40,000.00 Instalment

25 September 2013 174,521.19 Interest

27 September 2013 40,000.00 Instalment

27 September 2013 172,634.36 Interest

30 September 2013 40,000.00 Instalment

30 September 2013 188,028.11 Interest

15 November 2013 212,425.93 Instalment and/or Interest

20 January 2014 149,135.30 Instalment

6 February 2014 212,339.53 Instalment

6 February 2014 211,930.74 Instalment

6 February 2014 5,800.00 Interest

20 October 2015
165,672.90 (2)

165,693.86 (3)
Instalment

20 October 55,532.44 Interest

4 March 2016
1,552,411.81 (1)

1,608,066.96 (2)
Instalment

7 March 2016
1,965,080.11 (1)

1,909,425.97 (2)
Instalment

9 March 2016 15,050.00 Interest

15 March 2016 194,656.24 Instalment

16 March 2016 6,692.00 Interest

22 March 2016 109,938.88 Instalment

12 April 2016 232,058.98 Instalment

10 May 2016 238,938.65 Instalment

Total purchase price and interest paid	$13,968,505.90
Less agreed amount paid for land transferred	($ 1,812,500.00)
Less deposit	($ 2,000,000.00)
$10,156,005.90

Date	Amount ($)	For
21 March 2006	20,000.00	Option fee (Purchase price)
8 May 2006	1,980,000.00	Remaining Deposit (Purchase price)
20 June 2006	1,250,000.00	Instalment
1 November 2008 (1) 17 November 2008 (2, 3)	105,000.00	Instalment
10 November 2008	27,246.54	Interest
11 November 2008	395,000.00	Instalment
28 November 2008	500,000.00	Instalment
1 May 2009	50,000.00	Interest
21 May 2009	23,125.00	Interest
25 May 2009	40,000.00	Interest
29 July 2009	20,000.00	Interest
Before 4 September 2009	20,000.00	Interest
10 September 2009	66,250.00	Interest
10 September 2009	2,150.00	Legal costs
8 October 2009 (1) 9 October 2009 (2, 3)	2,250,000.00	Instalment
8 October 2009 (1) 9 October 2009 (2, 3)	19,972.60	Interest
8 October 2009	550.00	Legal costs
22 May 2013	280,000.00	Instalment
22 May 2013	112,500.00	Interest
23 May 2013	40,000.00	Instalment and/or Interest
20 June 2013	80,000.00	Instalment
25 July 2013 (1 only)	600,000.00	Transfer of 6A2 Lots
15 August 2013	280,000.00	Instalment
15 August 2013	442,096.65	Interest
19 August 2013	40,000.00	Instalment
25 September 2013	40,000.00	Instalment
25 September 2013	174,521.19	Interest
27 September 2013	40,000.00	Instalment
27 September 2013	172,634.36	Interest
30 September 2013	40,000.00	Instalment
30 September 2013	188,028.11	Interest
15 November 2013	212,425.93	Instalment and/or Interest
20 January 2014	149,135.30	Instalment
6 February 2014	212,339.53	Instalment
6 February 2014	211,930.74	Instalment
6 February 2014	5,800.00	Interest
20 October 2015	165,672.90 (2) 165,693.86 (3)	Instalment
20 October	55,532.44	Interest
4 March 2016	1,552,411.81 (1) 1,608,066.96 (2)	Instalment
7 March 2016	1,965,080.11 (1) 1,909,425.97 (2)	Instalment
9 March 2016	15,050.00	Interest
15 March 2016	194,656.24	Instalment
16 March 2016	6,692.00	Interest
22 March 2016	109,938.88	Instalment
12 April 2016	232,058.98	Instalment
10 May 2016	238,938.65	Instalment

[2020] VSC 344

11 June 2020 First revision 30 September 2020