Supreme Court New South Wales Medium Neutral Citation: Todd v Jingalong Pty Ltd [2014] NSWSC 362 Hearing dates: 25, 28 October, 1 November 2013 Decision date: 31 March 2014 Jurisdiction: Equity Division Before: Kunc J Decision: First Defendant holds land on constructive trust for Plaintiff Catchwords: TORRENS SYSTEM - Indefeasibility of title - Exceptions - Fraud - Personal equity - Real Property Act 1900 (NSW), s 42 CONTRACTS - Settlement agreement - Accord and satisfaction - Accord executory Legislation Cited: Conveyancing Act 1919 (NSW) Real Property Act 1900 (NSW) Cases Cited: Bahr v Nicolay (No 2) [1988] HCA 16; (1988) 164 CLR 604 Gerard Cassegrain & Co Pty Ltd (in liq) v Cassegrain [2013] NSWCA 453; (2013) 305 ALR 687; (2013) 97 ACSR 283 Gray v Sirtex Medical Ltd [2011] FCAFC 40; (2011) 193 FCR 1; (2011) 296 ALR 267 Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 McDermott v Black [1940] HCA 4; (1940) 63 CLR 161 The Presbyterian Church (NSW) Property Trust v Scots Church Development Ltd [2007] NSWSC 676; (2007) 64 ACSR 31; (2007) 13 BPR 24,969 Scaffidi v Perpetual Trustees Victoria Ltd [2011] WASCA 159 Category: Principal judgment Parties: Gregory George Todd (Plaintiff) Jingalong Pty Ltd (First Defendant) Brett Pernice (Second Defendant) Representation: Counsel: D. Brezniak (Plaintiff) A.J. Bulley (First Defendant) D.H. Nagle (Second Defendant) Solicitors: Johnston Tobin Solicitors (Plaintiff) Bradley Allen Love Lawyers (First Defendant) Hancock Alldis & Roskov (Second Defendant) File Number(s): 2012/344643 Publication restriction: No Judgment Summary 1The plaintiff ("Mr Todd") owned some land at Nowra. He wanted to sub-divide his land and sell it, but did not have the resources to complete the subdivision. In 2003 he made a verbal agreement to sell some of the land to the second defendant ("Mr Pernice") for $300,000 payable by instalments on demand. 2In 2005 Mr Todd sold his land to a Mr and Mrs Poulton upon terms which included a provision that when they had completed the subdivision, one of the lots ("Lot 1") would be sold back to him or his nominee by Mr and Mrs Poulton for $1.00. Lot 1 was the land Mr Todd had agreed to sell to Mr Pernice. 3Mr and Mrs Poulton were themselves unable to complete the subdivision of the land they had bought from Mr Todd. They entered into a joint venture agreement with the first defendant ("Jingalong"). The joint venture agreement expressly carved out Lot 1, acknowledging Mr and Mrs Poulton's obligation to transfer it back to Mr Todd. 4When Mr and Mrs Poulton fell into financial difficulties, Jingalong bought out Mr and Mrs Poulton from the joint venture and became the registered proprietor of the land, including Lot 1. Mr Todd had protected his interest in Lot 1 with a caveat, but Jingalong's director persuaded him to remove the caveat to enable the land to be transferred to Jingalong. Jingalong subsequently asserted that the indefeasibility provisions of the Real Property Act 1900 (NSW) (the "Act") meant that Mr Todd had no further entitlement to Lot 1. 5Before these proceedings were fixed for hearing, the parties reached a settlement at a mediation. Mr Todd never performed his obligations under the settlement. In addition to relying upon the Act, Jingalong resists Mr Todd's and Mr Pernice's claims to Lot 1 by relying on the settlement, as well as seeking damages from Mr Todd for its breach. 6Mr Todd is entitled to Lot 1 because Jingalong's acquisition of the land including Lot 1 was either tainted by fraud within the meaning of that term in s 42 of the Act or gave rise to a personal equity in Mr Todd against Jingalong in relation to Lot 1. The settlement was of a kind (an accord executory) which did not affect anybody's rights unless and until it was performed. Because it was never performed it gives Jingalong no rights in damages or of any other kind upon which it can rely in these proceedings. There is no dispute between Mr Todd and Mr Pernice that Mr Todd will honour his verbal agreement with Mr Pernice by directing that Lot 1 be transferred by Jingalong to Mr Pernice once the latter had paid the final instalment of the purchase price. The facts 7Mr Todd was the registered proprietor of a parcel of land located at Gannet's Road, Nowra (the "Land"). 8From approximately early 2000, Mr Todd was working on a planned subdivision of the Land. Included as part of the Land was an area which came to be identified as Lot 1 ("Lot 1"). (The registered identification of the Land and Lot 1 has changed over time. For ease of reference this judgment will maintain the description "Lot 1".) 9Mr Clyde Poulton had been known to Mr Todd for many years as a local real estate agent and had been retained as such from time to time by Mr Todd. In late 2002 or early 2003 Mr Pernice was introduced to Mr Todd by Mr Poulton. Mr Pernice was interested in buying land in the Nowra area and inspected the Land. 10Shortly after his inspection Mr Todd and Mr Pernice had a conversation: Mr Pernice: I've had a look around the Nowra Hill property. I understand that you are planning on subdividing it and I'm interested in purchasing a block of land. Mr Todd: Yes I will be subdividing it. How much land are you interested in purchasing? Mr Pernice: About 100 acres. I'm interested in the block in the top corner of the plateau, it's on the left as you go through the gate. Mr Todd: Yes I know that block. How much money do you have? Mr Pernice: About $300,000.00. Mr Todd: That will do. I need to get the subdivision through Council. Rather than have you pay up front, I'll get you to pay by instalments as and when I need the money to fund the subdivision. Then when the subdivision is complete we'll do the paperwork to transfer the block to you. Mr Pernice: Sounds good. Mr Todd: It might take a while so in the meantime you can have full access to and free use of the block to do as you please. Mr Pernice: So I'll pay $300,000 by way of instalments and I can access the land immediately? Mr Todd: Yes. Mr Pernice: How long do you think the subdivision will take? Mr Todd: About nine to twelve months. Mr Pernice: OK. Mr Todd: Let's make the first payment $50,000.00, can you do that? Mr Pernice: Yes, just give me a few months. Mr Todd: Alright. So that we can speed up the subdivision, Charlie, will you help me get the land ready, clearing and maintaining it etc? Mr Pernice: Yeah, I can do that. 11The land the subject of the conversation between Mr Todd and Mr Pernice was Lot 1. 12No written contract was ever entered into between Mr Todd and Mr Pernice in relation to Lot 1 and their agreement is prima face unenforceable for not being in writing (see s 54A Conveyancing Act 1919 (NSW)). However, between June 2003 and August 2007 Mr Pernice paid Mr Todd $280,000 by way of instalments towards the purchase price of $300,000 which they had agreed. Mr Pernice remains ready, willing and able to pay Mr Todd the remaining $20,000 for Lot 1. Furthermore, between 2003 to 2008 Mr Pernice undertook a number of improvements on the Land. Mr Todd wants Mr Pernice to have the benefit of their verbal agreement. 13In about 2003 Mr Todd began to talk to Mr Poulton about the Land. By that time Mr Todd had partially completed roadworks on the Land and plans had been drawn up for the upper portion (known as Lot 5) to be subdivided into five lots (one of which was Lot 1). 14Mr Todd became concerned that he would be unable to complete the subdivision of the Land. He discussed an arrangement with Mr Poulton whereby Mr Poulton would buy the Land from him (Mr Todd). When Mr Poulton had finished the subdivision (including with the benefit of the further contribution from Mr Todd of up to $150,000 towards the construction of roads within the subdivision), then Mr Todd or his nominee would get Lot 1 for $1.00. 15The discussions between Mr Todd and Mr Poulton culminated in a contract for the sale of the Land made on 22 December 2005 (the "Contract for Sale") whereby Mr Todd sold the Land to Mr Poulton and his wife (the "Poultons") for $1,400,000. That contract included these special conditions: 7. The vendor agrees to contribute up to $150,000 towards the construction of roadways within the subdivision to satisfy the Council's requirements for the further subdivision of these lots ... 9. The vendor shall cause applications to further subdivide the Land in accordance with the six lot plan exhibited to the parties to be submitted to the Shoalhaven City Council signing any necessary documents and providing any necessary further information reasonably requested by the purchaser for this purpose ... 11. On completion of the further subdivision of the lot the purchaser shall at the purchaser's expense transfer lot 1 in that plan back to the vendor or to a party nominated by the vendor for a consideration of $1.00. The purchaser must do all things and pay all fees necessary to cause the plan to be prepared and registered as a deposited plan. 16Clause 11 of the Contract for Sale created an equitable interest in Lot 1 in Mr Todd. 17Mr Poulton's efforts to subdivide the Land did not proceed as quickly as Mr Todd wished. Mr Todd carried out some of the roadworks himself. In addition to supplying materials and roadbase which he had previously stockpiled, he paid an extra $50,000 for roadbase and roadworks. Mr Todd also became aware that Mr Poulton was borrowing money against the Land for the purposes of another subdivision Mr Poulton was doing in the North Nowra area. Eventually Mr Poulton began to tell Mr Todd that his (Mr Poulton's) bank was threatening to take the Land. That bank was Westpac Banking Corporation ("Westpac"). 18Around the time Mr Poulton started to tell Mr Todd about the threats being made by Westpac to repossess the Land, Mr Todd began to talk about the Land to Mr William Cameron ("Mr Cameron"). Mr Cameron was an old family friend of Mr Todd's. 19Between December 2008 and 2010 Mr Todd, at Mr Poulton's request, paid approximately $183,000 into Mr Poulton's bank account, apparently to enable Mr Poulton to meet his mortgage repayments to Westpac. Notwithstanding those payments, Mr Poulton continued to tell Mr Todd that he (Mr Poulton) was unable to keep up with the mortgage payments and that there was a real threat that Westpac would repossess the Land. 20In mid-2010 Mr Todd became aware that Mr Poulton was having contracts prepared to sell the Land to meet his debts. Mr Todd consulted his solicitor. On 23 June 2010 Mr Todd lodged a caveat over the Land (the "Caveat") to protect his interest in Lot 1. The Caveat (correctly) claimed an equitable interest in the Land by virtue of the provisions of the Contract for Sale on the basis of these facts: The Caveator claims an equitable interest created pursuant to the above instrument wherein the property was sold to the Registered Proprietors for the purpose of a subdivision of the Land with a portion thereafter to be retained by and transferred back to the Caveator. 21Later in 2010 Mr Todd continued to be concerned about Mr Poulton's capacity to complete the subdivision of the Land. Mr Todd thought that Mr Cameron would be able to contribute sufficient funds to complete the subdivision. They had a conversation in which Mr Todd said to Mr Poulton "I've got a deal with the Poultons that I will build the road to get the subdivision through and then I will get back Lot 1." 22In October 2010 Mr Todd introduced Mr Cameron to Mr Poulton. The three of them discussed an arrangement to the effect that Mr Cameron would contribute funds that would be used largely to pay off Westpac and then provide additional money to complete the subdivision. Mr Todd's entitlement to Lot 1 was discussed at the meeting. See paragraph [62] below in relation to this finding. 23In late November 2010 the Poultons entered into a joint venture agreement (the "JVA") with Mr Cameron's corporate vehicle, Jingalong. Mr Cameron was a director and the controlling mind of Jingalong so his knowledge and views are to be attributed to Jingalong. 24The JVA included these provisions: 1. DEFINITIONS AND INTERPRETATION 1.1 Defined terms The following words have these meanings in this deed unless the contrary intention appears. ... 'Joint Project Expenses' means all the costs and expenses authorised by the Participants in connection with the Project incurred or accrued from the Commencement Date, including the reductions in Mortgage principal from the WBC Security but does not include: a) the Pre-Venture Debts; b) the WBC Advance; c) the Todd Caveatable Interest; d) the Todd Debt; or e) the Cost of Civil Works up to a limit of $150,000, above which the costs shall be Joint Venture Expenses. 'Land' means Lots 6 and 7 in Deposited Plan 1111395, at Barnarang, Shoalhaven in the Parish of Nowra, County St Vincent, NSW. 'Subdivision' means the subdivision of the land substantively in accordance with the Subdivision Consent. 'Subdivision Consent' means Subdivision Consent SF9904 as annexed and marked "A". 'Todd Caveatable Interest' means the obligations owed to Gregory George Todd by the Poultons to deliver a Block 5 in the draft Plan of Subdivision pursuant to the terms by which the Poultons acquired the Land, as better described in Schedule Two, but does not include any obligation to pay stamp duty on that transfer, nor any obligation to pay the Todd Debt. 'Todd Debt' means the sum of $100,000 and any interest accrued on that sum owing by the Poultons to Gregory George Todd pursuant to the terms by which the Poultons acquired the Land. 'Venture Costs' mean: a) The Pre-Venture Debts; b) All principal secured by the Mortgage; c) The WBC Advance and WBC Security. d) the Joint Project Expenses; e) All costs and expenses comprising the sums advanced as "Other Works Funding"; and f) The Todd Caveatable Interest; But does not include: g) The Cost of Civil Works up to a limit of $150,000 (above which the costs shall be Joint Project Expenses); h) The Todd Debt; or i) Any stamp duty liability on the transfer of the Todd Caveatable Interest. ... 3 OBJECTIVES 3.1 General objectives The objective of this Joint Venture is to proceed subject to and in accordance with the provisions of this Joint Venture Agreement to efficiently develop the Land in order to secure the registration of the Subdivision and, in an orderly and profitable manner, to maximise the financial benefits to all Joint Venturers through the sale of all of the resulting blocks, excluding that part secured as the Todd Caveatable Interest. ... 5 CONTRIBUTIONS AND EXPENSES OF THE JOINT VENTURE 5.1 Contributions by Poultons As at the Commencement Date, the Poultons represent and Cameron accepts that the Poultons contribute the following: a) The Land and the Holding Costs as encumbered by the following Venture Costs: (i) The Mortgages; (ii) The Todd Caveatable Interest; and (iii) The Pre-Venture Debts; ... ... 8 VENTURE COSTS AND PROFITS 8.1 Separate Liabilities of Poultons Without limiting the operation of clause 8.5, the Poultons shall remain separately liable for and shall indemnify (except to the extent that this Joint Venture Agreement otherwise provides) Cameron from the following liabilities of the Joint venture: ... f) The Todd Caveatable Interest; and g) The Todd Debt. 8.2 Warranty by Poulton The Poultons jointly and severally warrant to Cameron that: ... b) Apart from: (i) The Pre-Venture Debts; (ii) Liabilities secured by the Mortgage; and (iii) The Todd Caveatable Interest; There are no Claims or Liabilities which form part of the Venture Costs, except for the rights and interests of Cameron. ... SCHEDULE TWO - TODD CAVEATABLE INTEREST Assignment of Block 5 on the Draft Subdivision. 25At the time Jingalong entered the JVA, Mr Cameron knew that Lot 1 was a more valuable lot than the others which comprised the Land. He also knew that one of the purposes of the JVA was to protect Mr Todd's interest in Lot 1 and that by being party to the JVA Jingalong acknowledged Mr Todd's interest in the Land. See paragraph [64] below in relation to these findings. 26After its execution Mr Todd was given a copy of the JVA by Mr Poulton and Mr Todd read it. As far as Mr Todd was aware, once the JVA had been signed work continued on the subdivision. On 18 February 2011 the first stage of the subdivision was registered. The Land became Lot 5 (including the Lot 1 intended for Mr Todd) and Lot 6 in a new deposited plan. 27Mr Todd, Mr Cameron and Mr Poulton discussed the JVA from time to time. While not in terms a party to the JVA, Mr Todd remained involved in the development. For example, the evidence included a quotation for clearing and roadworks on the Land in July 2011 expressed to be a quote to Messrs Cameron, Todd and Poulton and signed by each of them as principals. In June and July Mr Todd, through his company Bworpah Pty Ltd, purchased roadbase to the value of $43,653.48 for use on the Land. See paragraph [65] below in relation to this finding. 28On 17 October 2011 Mr Cameron attended a meeting with Mr Poulton at the Sydney offices of Westpac's solicitors. Westpac was threatening to take possession of the Land. Mr Cameron put a proposal that would result in him purchasing the Land. 29Shortly after 17 October 2011 Mr Poulton met with Mr Todd and said: I've done a deal with Willo [Mr Cameron's nickname]. I'm selling the land to him but I need to get the caveat off. I can't finish the subdivision. Willo's going to do that, it'll just go on as before, but I'm out of the deal ... You and Willo will be finishing the job and I'm going to keep the land down the bottom. 30At around the same time Mr Todd and Mr Cameron had a telephone conversation: Mr Cameron: Yes, I've done a deal with the bank, I'm to take all the top section over. Greg, Poulton owes me a lot of money. I need to recover some of that. Mr Todd: What's the deal? How is it all going to work, is there a contract? Mr Cameron: Poulton can't do it. I'll be finishing it off. Mr Todd: Where's the contract, when is all this happening? Mr Cameron: It's all still to be sorted out. Mr Todd: OK, so if you're buying the land we'll just continue on will we? Mr Cameron: Yes, we'll just continue on. 31See paragraph [66] below in relation to the finding in the preceding paragraph. 32A day or two later Mr Todd and Mr Cameron had a further telephone conversation: Mr Cameron: The bank won't do it unless your caveat is taken off, we've got to get Poulton off the title, this is the only way it will work. Mr Todd: OK, if you want the caveat lifted that's OK. We're still going along as before aren't we? Mr Cameron: Yeah, we're all good. Mr Todd: Well, I can only trust you Willo. 33The conversation referred to in the following paragraph also included Mr Cameron saying to Mr Todd: Can you remove the caveat so that the sale from Poulton to me can proceed? You should keep the caveat over Lot 6 so that you can go after Poulton for the money. I'm putting a caveat over Lot 6 as well to protect the money owed to me by the Poultons. 34See paragraph [70] below in relation to the finding in the previous two paragraphs. 35On 20 October 2011 Mr Cameron told his solicitor (Ms Coonan) that he was faxing a withdrawal of caveat to Mr Todd for him to sign. Mr Cameron had earlier agreed with Mr Todd to fax it to the Bodalla Post Office. Later that day, Mr Todd left a message for Ms Coonan saying that he wished to withdraw a caveat and discuss the title as soon as possible. He left his mobile number. Ms Coonan returned Mr Todd's call. Mr Todd told her that he had signed the withdrawal of caveat and faxed it to her. Ms Coonan located the fax and they then had a conversation: Ms Coonan: The withdrawal of caveat looks fine, but I might post you a clean copy so it doesn't have the faxed notations. Mr Todd: My postal address is ... I just want to confirm that this form is for Lot 5 and does not remove the caveat over Lot 6. Ms Coonan: Yes this form only withdraws the caveat over Lot 5 but you should talk to your lawyer about this. I am acting for Willo, so I can't give you legal advice. Mr Todd: My solicitor is too busy to look at it, but I want it to go ahead and signed it anyway. I'll put the original in the post to you. 36See paragraph [73] below as to the findings in the preceding paragraph. 37Also on 20 October 2011 Mr Todd wrote a cheque to Network Geotechnics for an account Mr Poulton had failed to pay in respect of the Land. 38Mr Todd understood at the time he withdrew the Caveat that the withdrawal extended to Lot 1. He subsequently obtained legal advice as suggested by Ms Coonan. However, there is no evidence as to when he obtained that advice or what he was advised. See paragraph [74] below as to the finding in this paragraph. 39Mr Todd never saw a copy of the agreement between the Poultons and Jingalong in relation to the Land. The first time a copy was produced was at the hearing before me. The details of that agreement are set out in the next paragraph. 40On 25 October 2011 Jingalong and the Poultons entered into a Deed of Settlement (the "Deed") and a contract for the sale of the Land by the Poultons to Jingalong (which included Lot 1). The Deed included these provisions: RECITALS: A. Cameron and the Poultons entered into a Joint Venture agreement on or around 22 November 2011 ('the Venture ') for the development and subdivision in two stages of Lots 6 and 7 in DP 1111395, at Bamarang, Shoalhaven in the Parish of Nowra, County St Vincent NSW ('the Land'). The first stage of the subdivision has been registered, and the Land is now known as Lots 5 and 6 of DP 1161782. The Land is encumbered by various dealings, including but not limited to a mortgage in favour of the Westpac Banking Corporation ('the Mortgage'), and a caveat in favour of Gregory George Todd ('the Caveat'). The second stage of the subdivision has not yet been registered. The Westpac Banking Corporation is entitled to enter possession of the property, but had agreed to forbear until 17 October 2011. Westpac Banking Corporation has further orally agreed to forbear until 24 October 2011 to allow the parties to come to a settlement. The Poultons have agreed to pay for their share of the Joint Venture Expenses to Cameron, but have requested that payment of those expenses be deferred until early next year. To secure the funds outstanding the Poultons have agreed to grant security to the Camerons over Lot 6 of the Land, and over their personal residence being Lot 7 DP 1032680, known as 34 Condie Crescent Nowra NSW. The Parties have further agreed that the Poultons will sell Lot 5 of the Land to Cameron, and that the Venture will be terminated in accordance with the terms and conditions of this Deed. ... 2 SALE OF LOT 5 OF THE LAND 2.1 Sale Contract Simultaneously with this Deed the Poultons and Cameron shall enter into a contract for the sale of Lot 5 of the Land from the Poultons to Cameron on the following terms: (a) A purchase price of $500,000; (b) Payment of $100,000 deposit ("Lot 5 Deposit"); and (c) Completion to occur on or before Thursday 17 November 2011. 2.2 Release of the Deposit Cameron authorises the release of the Lot 5 Deposit on exchange of the Sale Contract, to Westpac Banking Corporation on account of the loan secured by the Mortgage. 2.3 Attribution of the Settlement Funds The parties agree that the net proceeds of the Sale (being the purchase price as adjusted pursuant to the Sale Contract) shall be directed to Westpac Banking Corporation on account of the loan secured by the Mortgage. 3 THE TODD CAVEAT Cameron agrees that it will be responsible to secure the withdrawal of the Caveat so far as it pertains to Lot 5 of the Land. The Parties agree that Cameron is not [sic] be responsible for, nor does Cameron make any guarantee, warranty or undertaking as to the settlement of any dispute between Poulton and Mr Gregory Todd, or as to the removal of the caveat over Lot 6 of the [sic] Land. 41At the time Jingalong took the transfer of the Land from the Poultons pursuant to the Deed, Mr Cameron understood that Jingalong was taking, as part of that transfer, Lot 1 which was never part of the joint venture between the Poultons and Jingalong as set out in the JVA. Mr Cameron never told Mr Todd the terms of the Deed before asking Mr Todd to withdraw the Caveat or before Jingalong took the transfer of the Land. Nor did Mr Cameron tell Mr Todd what was going to happen to the latter's interest in Lot 1 by reason of the transfer of the Land to Jingalong. See paragraph [64] below in relation to these findings. 42In having Jingalong take the transfer of the Land, Mr Cameron never intended that Jingalong would give effect to Mr Todd's entitlement under the Contract for Sale to repurchase Lot 1 for $1.00. See paragraph [64] below in relation to this finding. 43Mr Todd would not have withdrawn the Caveat if he had known that Jingalong was not going to recognise Mr Todd's right under the Contract for Sale to repurchase Lot 1 for $1.00. 44On 30 November 2011 Jingalong became the registered proprietor of the Land. On the same day Mr Todd presented his invoices for $55,000 for roadbase to Mr Cameron. Mr Cameron made it clear to Mr Todd that the latter would have to look to Mr Poulton for redress in relation to any money. In the same conversation or one that occurred in early 2012 Mr Cameron told Mr Todd that Lot 1 was also a matter between Mr Todd and Mr Poulton. 45On 22 August 2012 Mr Todd lodged a further caveat over the land, claiming an equitable interest. The claim was made by reference to the contract for the sale of the Land between the Poultons and Jingalong and relied upon these facts: Registered Proprietor purchased the property with knowledge that the Vendors had purchased the property from the Caveator on terms which included that on completion of the subdivision the Vendor was to transfer a Lot in the subdivision back to the Caveator. 46On 22 October 2012 a lapsing notice was issued in respect of Mr Todd's further caveat. 47Mr Todd commenced these proceedings on 16 November 2012. The parties ultimately came to an arrangement in relation to a further caveat being filed by Mr Todd over his interest in the Land, limited to Lot 1 in an approved but not yet registered subdivision of the Land. The parties agreed this represented the Lot 1 that was the subject of Mr Todd's rights under the Contract for Sale. 48On 12 March 2013 these proceedings were the subject of a mediation which resulted in this agreement (the "Settlement Agreement"): 1) It is hereby agreed by the parties that by 13 May, 2013 Pernice will purchase Lot 1 DP[........] from Jingalong P/Ltd for the amount of $350,000 - 2) That by 13 May, 2013 Todd will pay William Cameron the amount of $30,000 - in repayment of the loan between them. 3) Todd agrees that if the $30,000 - is not paid by 13 May, 2013 Jingalong P/L shall be entitled to enter Judgement against Todd. 4) The basis upon which the $30,000 is paid by Todd is the express representation by Jingalong of Cameron the amount was loaned to Todd on or about 6 July, 2010 and that remains due & payable. 5) That in relation to the payment to Jingalong in clause 1) above the (sic) Todd and Pernice agree their respective contributions will be, i) as to Todd - $206,000 - ii) as to Pernice - $144,000 - and that they are not jointly and severally liable to Jingalong P/L for the full amount. 6) The parties agree that William Cameron is a party to this agreement. 7) The parties agree that upon payment of the amounts referred to in 1) & 2) above they will execute consent minutes in proceedings No. 2012/344643, including the first cross claim be dismissed with no orders as to costs. 8) These heads of agreement have effect unless any later deed is entered into by the parties. 49Upon reflection Mr Todd thought better of his entry into the Settlement Agreement. He decided he did not wish to comply with it. 50On 10 May 2013 Jingalong's solicitors wrote to Mr Todd's solicitors proposing that completion of the Settlement Agreement should occur at 4.00pm at the former's offices on 13 May 2013. 51Nothing happened on 13 May 2013. 52On 14 May 2013 Jingalong's solicitors sent a notice to complete to Mr Todd's solicitors and Mr Pernice's solicitors which, after reciting, amongst other things, that both Mr Pernice and Jingalong were ready, willing and able to complete their obligations under the Settlement Agreement, gave notice to Mr Todd that: 1. At the offices of Bradley Allen Love Lawyers, Level 8, 28 University Avenue Canberra City at 3pm on Tuesday 28 May 2013 (in respect of which time is of the essence), you are required to: a. pay $206,000 to Jingalong; b. provide a withdrawal of caveat for caveat number AH415168; and c. provide executed consent minutes providing that the Proceedings be dismissed with no order as to costs. 2. You are required to immediately pay the amount of $30,000 to William Cameron. 3. If you fail to comply with this Notice Jingalong may by notice in writing to you terminate the Heads of Agreement and thereafter sue you for breach of contract, including for all damages which may flow from your breach (including but not limited to damage which may flow because of the Proceedings). 4. Jingalong reserves all rights to pursuant [sic] any remedy or action available to it with respect to the Heads of Agreement, and your breach of the same and the Proceedings. Particularly (but in no way limited to the above), Jingalong reserves its rights to take any action with respect to; a. seeking damages for your breach of contract including for all damages which may flow from your breach (including but not limited to damage which may flow because of the Proceedings); b.caveat number AH415168; c. any further or other action with respect to the enforcement of the Heads of Agreement, and the conduct of the proceedings. 5. This Notice is given pursuant to clause 1 and 5 of the Heads of Agreement which require completion by 13 May 2013. 53Mr Todd failed to complete the Settlement Agreement on 28 May 2013 and has not sought to tender performance under it since that date. 54On 30 May 2013 the Court entered judgment in favour of Jingalong against Mr Todd in accordance with Clause 3 of the Settlement Agreement. Contested facts - credit 55Specific reference to credit is only required for the two central protagonists, Mr Todd and Mr Cameron. Given the deeply entrenched interests which each had to protect, I approached their evidence on the basis that where their evidence conflicted either with each other or another witness, that conflict should be resolved by giving particular weight to any contemporaneous records (of which there were none, with the exception of Ms Coonan's file notes), any reliable corroboration, the inherent probabilities or where a statement was made against interest. 56I approached Mr Todd's evidence in the way I have described, notwithstanding my general impression that he was doing his best to tell the truth as he recalled it. While I applied the same general approach to Mr Cameron's evidence, there were two matters which caused me to assess Mr Cameron's evidence with slightly greater scepticism than I applied to Mr Todd's. 57The first matter arose in the following way. At one point in his cross- examination Mr Cameron was asked whether he told Mr Todd what was going to happen, the context of the question being what was going to happen to Mr Todd's interest in Lot 1 as a result of Jingalong taking the transfer of the Land. Mr Cameron replied "No, not at the time". That struck me as an honest answer, quite apart from the fact that it was against Mr Cameron's interest. 58Later in his cross-examination the following exchange occurred: Q: You didn't want Todd to know that his interest had gone. A: He knew. Q: How did he know? A: Because I told him when I asked him to withdraw the caveat. Q: Where does that appear in your affidavit? A: I don't know. Q: You've never told the Court that have you? A: I just did. 59There was nothing to that effect in Mr Cameron's affidavit evidence. At the time the answer struck me as false and I maintain that view. It indicated to me that Mr Cameron was willing, if he thought it was in his interest to do so, to lie. I therefore approached his evidence with the increased caution that observation engenders. 60The second matter related to Mr Cameron's adherence to the proposition that Mr Poulton could compensate Mr Todd for his loss of Lot 1. This culminated in Mr Cameron's evidence that at the time Jingalong took the transfer of the Land he was under the impression that Mr Poulton would "look after" Mr Todd's interest in Lot 1. Knowing, as Mr Cameron did, the Poultons' parlous financial state at the time, Mr Cameron's evidence on this point struck me as being, at best, disingenuous. Contested facts - the absence of Mr Poulton 61None of the parties called evidence from Mr Poulton. Each submitted in respect of various pieces of evidence that, by reason of the other party's failure to call Mr Poulton, an inference in accordance with Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 should be drawn against that other party. As it happened, there was no fact which I was required to find or inference which it was necessary for me to draw upon which Mr Poulton's evidence could have had a rational influence. He was not present at any of the critical exchanges between Mr Todd and Mr Cameron. Mr Poulton's absence from the witness box was ultimately of no forensic significance for the proceedings. Contested facts - findings 62[Paragraph 22 above] Mr Todd's evidence about his first meeting with Mr Cameron and Mr Poulton was that he remembered saying to Mr Cameron words to the effect of "Once I get my lot back you can sell the rest", to which Mr Cameron replied "That sounds fine". Mr Cameron denied saying "That sounds fine". His recollection was that Mr Todd had said to Mr Poulton, "The deal (referring to whatever arrangement was reached about Mr Cameron becoming involved in the project) should allow for our deal regarding Lot 1", to which Mr Poulton replied "That should be fine". 63The resolution of this question puts Mr Todd's word against Mr Cameron's. There are no contemporaneous notes of the conversation. In the circumstances of an initial meeting to discuss Mr Cameron's involvement, each version seems to me as inherently likely as the other. In those circumstances I am unable to make a finding as to precisely what was said. However, I have no doubt that Mr Todd's entitlement to Lot 1 under the contract for sale was discussed. In any event, a more detailed finding is unnecessary given the terms of the JVA (see paragraph [24] above) which "carved out" Lot 1 and expressly acknowledged the Poultons' obligations to Mr Todd in relation to it. 64The findings in paragraphs [25] and [41] above are all matters admitted by Mr Cameron in the course of cross-examination. The finding in paragraph [42] above is an inference drawn from the facts found in paragraph [41] above. 65[Paragraph [27] above] Each party gave evidence about the interactions between Messrs Todd, Cameron and Poulton between the time the JVA was entered into and when Mr Cameron purchased the Land. Mr Todd, for example, said Mr Cameron said to him "You'll be right Greg, you'll get your land". Mr Cameron denies this and said their conversations were about how Mr Todd could get his money from Mr Poulton. Similarly, Mr Todd said there were meetings every few weeks to discuss the joint venture. Mr Cameron's evidence was that there were only two or three such meetings. It is not necessary to resolve these differences for two reasons. First (and Mr Cameron did not dispute this), at all material times Mr Cameron was on notice of Mr Todd's interest in the Land under the Contract for Sale. Second, insofar as anything Mr Cameron said to Mr Todd about the latter's interest is concerned, it only becomes relevant to the issues in this case from the point Mr Cameron agreed to purchase the Land from the Poultons. 66[Paragraph 30 above] There was a fundamental difference between Mr Todd and Mr Cameron about this conversation. 67Mr Todd's evidence of this conversation set out in paragraphs 37 and 38 of his affidavit sworn 2 November 2012 was: I then rang Willo to see what was happening and told him that I just spoke to Poulton. I recall Willo saying to me words to the effect of "Yes, I've done a deal with the bank, I'm about to take all the top section over." He also said "Greg, Poulton owes me a lot of money I need to recover some of that." I said to Willo "What's the deal, how's it all going to work, is there a Contract?" and he said to me "Poulton can't do it I'll be finishing it off." I also said to him "Where's the Contract, when is all this happening?" Willo replied "It's all still to be sorted out." I then said to Willo words to the effect "OK so if you're buying the land we'll just continue on will we?" I remember Willo replying with words to the effect, "Yes, we'll just continue on." 68Mr Cameron's affidavit evidence in relation to this conversation was: After my proposed arrangement was agreed in principal with WBC and the Poultons, I rang Greg to tell him what had happened. The conversation was generally in accordance with the conversation described at paragraph 37 of Greg's Affidavit. I remember saying words to the effect that "I've done a deal with the bank" and "Poulton owes me a lot of money that I need to recover". I do not recall Greg asking me about the contract. I do recall that in this conversation lot 1 was never mentioned. I recall telling Greg in this conversation words to the effect that "I have put in $1.3m already" and he was already aware that it would cost a further $300,000 to finish the subdivision as a result of our discussion at the Albion Café referred to in paragraphs 58-64 above. I never said to Greg that we would "continue on" as described at paragraph 38 of Greg's Affidavit. 69I accept Mr Todd's version of the conversation, substantially agreed to by Mr Cameron. However, I also accept, over Mr Cameron's denial, that Mr Cameron did say words to the effect of "Yes, we'll just continue on." I am satisfied on the balance of probabilities that Mr Todd would have made an inquiry to the effect he says he did. It is inherently likely that he would have done so because Mr Todd knew that his rights in relation to Lot 1 had been preserved in the JVA. I therefore find it entirely credible that Mr Todd would have asked about whatever new contract was going to be entered into, no doubt in the expectation that such a contract would make a similar provision in his favour in relation to Lot 1. As part of wanting to ascertain that, it is also to be expected that he would have inquired about how Mr Cameron proposed that they (Mr Cameron and Mr Todd) would continue to relate to each other in relation to the Land. 70[Paragraph [32] above] Again, there was a dispute between Mr Todd and Mr Cameron about this conversation. The version I have accepted is Mr Todd's. Mr Cameron gave evidence of a telephone conversation to the following effect on or about 19 October 2011: Mr Cameron: Can you remove the caveat, so that the sale from Poulton to me can proceed? You should keep the caveat over Lot 6 so that you can go after Poulton for the money, I am putting a caveat over Lot 6 as well to protect the money owed to me by the Poultons. Mr Todd: Yes sure, how are we going to do it, I don't have a fax machine? Mr Cameron: I can fax it to Vanessa. [Mr Todd's daughter] Mr Todd: No, I don't want it to go there. Fax it to the Bodalla Post Office. 71Furthermore, Mr Cameron gave this affidavit evidence about Mr Todd's version of events: Regarding paragraph 41 I never said that the "bank won't do it". Jingalong was buying the Land with funds drawn from the liquidation of assets from my superannuation fund. There was no bank involved from my end of things. Greg never said to me "We're still going along as before aren't we" and I did not reply "Yeah we're all good". 72Other than accepting that at some time Mr Todd and Mr Cameron arranged for the withdrawal of caveat to be faxed to the Bodalla Post Office and that (as Mr Todd conceded in cross-examination) Mr Cameron did talk about the caveat over Lot 6, I prefer Mr Todd's version of events for these reasons: (1)I do not accept Mr Cameron's explanation concerning the reference to the "bank won't do it". In the context of what had been agreed between the Poultons, Mr Cameron and Westpac, the reference to "the bank" cannot be to an incoming financier of Mr Cameron's. Rather, it is clear that it is a reference to Westpac not permitting the sale of the land to Mr Cameron (getting the Poultons off the title) unless Mr Todd's caveat was withdrawn to enable the transfer. (2)The Court has no doubt that Mr Todd understood that, in a practical and legal sense, the only way he had of maintaining his right to a transfer of Lot 1 was through maintaining the Caveat. His conduct up until this point had been to make sure that all those involved in dealing with the Land knew of his interest. It is highly improbable that Mr Todd would have so readily agreed to withdraw the Caveat in the absence of some assurance from Mr Cameron that the arrangements in relation to the ultimate transfer of Lot 1 would be honoured. Putting it the other way, the inherent probability strongly supports the conclusion that Mr Todd would have sought an assurance of the kind he says he obtained from Mr Cameron. (3)While I accept that Mr Todd also relied on assurances he received from Mr Poulton about being paid money that might be owed to him, it is again contrary to the probabilities that Mr Todd would have put all his financial eggs, as it were, in the Poulton basket. This is because Mr Todd well knew from his own experience that Mr Poulton was in acute financial difficulty. The JVA recognised both the "Todd Caveatable Interest" (being Mr Todd's interest in Lot 1) and the "Todd Debt". Mr Todd sought to preserve his rights in relation to the Todd Debt against Mr Poulton by maintaining his caveat over Lot 6. However, I do not think it likely that Mr Todd would have foregone his interest, such as it was, in the Land so as to rely solely on the possibility of obtaining some financial redress from the Poultons. While Mr Todd may have been trusting in his relationship both with Mr Cameron and Mr Poulton, from his demeanour in the witness box I did not form the impression that Mr Todd was someone who was innocent to the point of invincible naivety. (4)In circumstances where he had received the majority of the purchase price, I am not prepared to impute to Mr Todd that he would have sought no assurance from Mr Cameron when, in the absence of such assurance, what was happening to the Land would put it out of Mr Todd's power to honour his arrangement with Mr Pernice. Again, I did not perceive Mr Todd to be someone who was sharp or dishonest. (5)The credibility of Mr Todd's version is strengthened by the fact that on the same day he signed the withdrawal of the Caveat (20 October 2011), he paid a bill of Mr Poulton's in respect of the Land (see paragraph [37] above). It makes no sense for him to have done so if he had not received some assurance from Mr Cameron that his (Mr Todd's) interest in Lot 1 would be maintained. (6)In reaching this conclusion I have taken into account Jingalong's submission that when Mr Todd lodged his further caveat over Lot 5 (see paragraph [45] above) it made no reference to any representation by Mr Cameron that he or Jingalong would honour the Poultons' obligation to transfer Lot 1. I do not find that decisive. This area of the law is not straightforward and there is no evidence of what Mr Todd told his then solicitor beyond that he gave the solicitor the information to lodge the further caveat. On the other hand, from their outset (less than three months after the further caveat was lodged) these proceedings have alleged a promise or representation that Jingalong would honour the Poultons' obligation to transfer Lot 1 to Mr Todd. 73[Paragraph [35] above] Mr Todd's version of his interactions with Mr Cameron's solicitor was slightly, but not materially, different to the finding I have made above. That finding is based on Ms Coonan's contemporaneous file note, which I prefer over Mr Todd's unaided recollection. Furthermore, Mr Todd accepted in cross-examination that Ms Coonan had suggested he obtain legal advice. 74However, on the basis of that acceptance Jingalong submitted that Mr Todd had obtained legal advice about withdrawing the Caveat and therefore he did not "blindly sign over" the Caveat. That submission misunderstands Mr Todd's evidence. The evidence can only be understood as Mr Todd having obtained legal advice some time after he sent the executed withdrawal of the Caveat. Ms Coonan's own note of what Mr Todd told her makes it clear that he had not received legal advice at the time he faxed her the withdrawal of the Caveat. 75Finally in relation to the execution of the withdrawal of the Caveat, I should also record that Mr Todd gave evidence about signing an earlier version of the withdrawal of caveat at Mr Poulton's behest. Mr Todd said he had a very clear recollection of this occurring. However, Mr Poulton was not called to give evidence and no one else involved in the events ever saw the withdrawal of caveat which Mr Todd says he signed with Mr Poulton. Mr Todd was clearly convinced that this had occurred, but it is unnecessary for me to make any finding about it because even if an earlier withdrawal of the Caveat was executed, it was ultimately of no practical or legal significance in the events which happened. The issues to be determined 76The issues that ultimately fell for determination are: (1)Has there been an accord and satisfaction? (2)Is Jingalong's title to Lot 1 indefeasible? (3)Is Jingalong entitled to damages for breach of the Settlement Agreement? Has there been an accord and satisfaction? 77As against Mr Todd, Jingalong submitted that Mr Todd was not entitled to maintain these proceedings because the Settlement Agreement (see paragraph [48] above) constituted an accord and satisfaction. Jingalong referred to the classic statement of the law in this area in McDermott v Black [1940] HCA 4; (1940) 63 CLR 161. Mr Todd submitted that, in the absence of performance of the Settlement Agreement, Jingalong had no entitlement to a judgment against him arising from the Settlement Agreement. Having regard to the relevant legal principles (set out in the next paragraph), I understood this to be a submission that the Settlement Agreement was an accord executory. Mr Pernice submitted that where, as both Mr Todd and Mr Pernice contended, Jingalong (through Mr Cameron) had committed a fraud in the manner in which it had acquired title to the Land, Jingalong should not be allowed to rely upon the Settlement Agreement. In any event, Mr Pernice submitted that the Settlement Agreement did not apply because it made no express provision for what was to occur if its terms were not fulfilled and no term to deal with that contingency could be implied. It was submitted that the effect of the Settlement Agreement was that if its terms were not complied with, the proceedings just went on. 78While the foundational principles in relation to accord and satisfaction are undoubtedly set out by the High Court in McDermott v Black, I respectfully adopt as a correct statement of the current law the decision of the Supreme Court of Western Australia Court of Appeal (comprising Newnes JA, Murphy JA and Mazza J) in Scaffidi v Perpetual Trustees Victoria Ltd [2011] WASCA 159 ("Scaffidi"): Accord executory, accord and satisfaction, and accord and conditional satisfaction 26 Dixon J in McDermott v Black (183 - 185), said: The essence of accord and satisfaction is the acceptance by the plaintiff of something in place of his cause of action. What he takes is a matter depending on his own consent or agreement. It may be a promise or contract or it may be the act or thing promised. But, whatever it is, until it is provided and accepted the cause of action remains alive and unimpaired. The accord is the agreement or consent to accept the satisfaction. Until the satisfaction is given the accord remains executory and cannot bar the claim. The distinction between an accord executory and an accord and satisfaction remains as valid and as important as ever. An accord executory neither extinguishes the old cause of action nor affords a new one. ... The distinction depends on what exactly is agreed to be taken in place of the existing cause of action or claim. An executory promise or series of promises given in consideration of the abandonment of the claim may be accepted in substitution or satisfaction of the existing liability. Or, on the other hand, promises may be given by the party liable that he will satisfy the claim by doing an act, making over a thing or paying an ascertained sum of money and the other party may agree to accept, not the promise, but the act, thing or money in satisfaction of his claim. If the agreement is to accept the promise in satisfaction, the discharge of the liability is immediate; if the performance, then there is no discharge unless and until the promise is performed. 27 As Keane J observed, however, in Blue Moon Grill Pty Ltd v Yorkey's Knob Boating Club Inc [2006] QCA 253 [20], what is important is to focus on what the parties have agreed, rather than the categorisation of their agreement as either an accord and satisfaction or an accord executory. The classification of agreements itself depends on a true appreciation of the effect of the terms agreed between the parties and the binary classification of agreements is not always adequate. 28 An accord executory, whereby a promisor promises to abandon a claim or cause of action in exchange for some active performance by the promisee is a type of unilateral contract: see the discussion in Sneddon M C and Ellingham M P, Cheshire and Fifoot's Law of Contract (9th Aust ed [4.24]). 29 The inadequacy of the binary classification into accord executory and accord satisfaction was referred to by Fullagar J in Scott v English [1947] VicLawRp 67; [1947] VLR 445.453: The essence of the matter may be said to be that a mere 'accord' is not a contract at all. But, if we find in any particular case that there is a contract - a promise accepted in 'satisfaction' against a promise - our problem is not necessarily at an end. We have still, I think, in some cases to construe the contract to see whether its effect is to discharge the original cause of action absolutely, so that the plaintiff can never thereafter sue on it but can only sue on the new contract, or whether it effects only a conditional discharge, merely suspending the original cause of action, so that, if it is not performed by the defendant according to its tenor, the plaintiff may still maintain that original cause of action ... The question is likely to arise wherever a time is fixed for performance of the defendant's promise. In the present case, where a time is so fixed, if the compromise is a mere accord, the plaintiff could sue on the original cause of action at any time before acceptance of performance; he would not be bound to accept performance. If, on the other hand, the compromise is a new contract, he cannot sue on the original cause of action unless the time for performance has passed and there is no performance. But, if the time for performance by the defendant has passed and there is no performance, can he sue only on the new contract, the original cause of action being absolutely discharged by the new contract, or can he, at his option sue for breach of the new contract, or, rescinding the new contract, proceed on his original cause of action? The question, I think, is to be decided as a matter of construction of the new contract. 30 Fullagar J's observations were approved and applied in Nissho Iwai (Australia) Ltd v Shrian Oskar [1984] WAR 53. See also Tallerman & Co Pty Ltd v Nathan's Merchandise (Victoria) Pty Ltd [1957] HCA 10; (1957) 98 CLR 93, 114 (Dixon CJ & Fullagar J), 150 (Taylor J). 31 Fullagar J's reasoning was summarised by Phillips JA in Osborn v McDermott (1998) 3 VR 1, 10, who said that: [H]is Honour contemplated a case in which the accord amounted to an immediately enforceable agreement (which suggests that there was accord and satisfaction), but that the 'satisfaction' (the discharge of existing obligations) was itself only conditional, suspending the original cause of action, but not extinguishing it, unless and until performance by the defendant according to the tenor of the agreement. 32 Phillips JA described the three categories of compromises in the following way (10 - 11): Thus, there are three possibilities, not two. First, there is the mere accord executory which, on the authorities, does not constitute a contract and which is altogether unenforceable, giving rise to no new rights and obligations pending performance and under which, when there is performance (but only when there is performance), the plaintiff's existing cause of action is discharged. Secondly, at the other end of the scale is the accord and satisfaction, under which there is an immediate and enforceable agreement once the compromise is agreed upon, the parties agreeing that the plaintiff takes in satisfaction of his existing claim against the defendant the new promise by the defendant in substitution for any existing obligation. Somewhere between the two, there is the accord and conditional satisfaction, which exists where the compromise amounts to an existing and enforceable agreement between the parties for performance according to its tenor but which does not operate to discharge any existing cause of action unless and until there has been performance. Where there is a mere accord executory, no suit can be maintained upon the compromise unless and until there has been performance, and then suit is ordinarily unnecessary. Upon default in performance, the plaintiff's existing cause of action continues unaffected. With accord and satisfaction, either party may sue upon the compromise, but only on the compromise and for nothing else: the original cause of action has gone. Where there is accord and conditional satisfaction, the plaintiff is bound to await performance and accept it if tendered, but if there be no performance, then the plaintiff may proceed according to general principles called into play when any agreement is repudiated: the plaintiff may either treat the agreement (the accord) as at an end and proceed on his original cause of action; or he may, at his option, sue on the compromise agreement, in place of the original cause of action. (emphasis added) 33 In Nissho Iwai v Shrian Oskar Brinsden J referred in similar terms to the position of a plaintiff under a compromise agreement involving, in effect, an accord and conditional satisfaction (58): I am of the opinion that [the compromise] was no mere accord executory but a contract intended to create new antecedent obligations, but effected no absolute discharge of the cause of action but only if the defendant performed his promise. The defendant in this case failed to perform his promise and so that left the plaintiff in the position that it could sue on the new contract or rescind the new contract and proceed on the original cause of action. See also Buseska v Sergio (1990) 102 FLR 157, 159. 79In approaching this question, I particularly adopt the observation of Keane J (then sitting as a judge of the Queensland Court of Appeal) referred to in Scaffidi that it is always important to focus on what the parties have in fact agreed and that to fit the agreement into a binary (or ternary) classification of agreements is not the primary task. 80In construing the Settlement Agreement in accordance with the usual principles of objective contractual construction, these features are significant: (1)As is apparent from many cases considering the application of the principles in Masters v Cameron (1954) 91 CLR 353, the description "Heads of Agreement" is, at best, not determinative and, at worst, merely ambiguous on the question of whether a document so described evinces an intention on the part of the parties to be immediately legally bound. Any doubt in this case is not resolved by Clause 8 of the Settlement Agreement ("These heads of agreement have effect unless any later deed is entered into by the parties") because, in the context, I am not satisfied "effect" can be automatically construed as "legal effect". However, I will assume the Settlement Agreement was intended to have legal effect because the ultimate result is the same whatever view is taken on this point. (2)Clauses 2,3 and 4 of the Settlement Agreement, relating to Mr Todd's debt of $30,000 to Mr Cameron, do not assist in objectively determining what the parties' intention was in relation to the various causes of action asserted in these proceedings. This is because Mr Cameron was not a party to the proceedings and there was no claim in the proceedings in relation to the $30,000. There may have been a question about the enforceability of clauses 2, 3 and 4 of the Settlement Agreement for want of consideration, but as judgment was entered against Mr Todd in reliance on those clauses (see paragraph [54] above) in his absence (although he was undoubtedly on notice of the occasion), he was not there to take the point. (3)The Settlement Agreement nowhere refers in terms to the release of rights or a promise not to sue upon any cause of action the subject of these proceedings. (4)Clause 7 of the Settlement Agreement provided: The parties agree that upon payment of the amounts referred to in 1 [the purchase price for Lot 1] and 2 [the $30,000 from Mr Todd to Mr Cameron] above they will execute consent minutes in proceedings No 2012/344643, including the first cross claim be dismissed with no orders as to costs. That provision is not entirely clear. Beyond referring to what was to happen to the First Cross-Claim (Mr Pernice's cross-claim against Jingalong and Mr Todd) it did not specify the balance of the terms of the "consent minutes". I will assume, without deciding, that the parties intended for consent minutes to be entered into dismissing the proceedings in all their aspects with no order as to costs. Nevertheless, what is clear is that the obligation to execute consent minutes did not arise until payment of both of the sums referred to. Neither of those sums was in fact paid. (5)While the Settlement Agreement made express provision for what was to occur if Mr Todd did not pay Mr Cameron the $30,000 (the entry of judgment), it made no express provision as to what was to occur if the purchase of Lot 1 did not occur. No party suggested that any term could be implied to deal with that eventuality. They were correct not to make such a submission. 81Taking all those matters into account, especially the absence of both any language of release or forebearance to sue and any provision as to what was to occur if any of the payments for Lot 1 were not made, on its proper construction the Settlement Agreement was no more than an agreement to the effect that if the payments were made, the parties would dispose of the proceedings in the (albeit less than clear) manner specified in Clause 7 of the Settlement Agreement. There is nothing in the language of the Settlement Agreement to support the conclusion that immediately upon its execution the parties intended to extinguish whatever causes of action existed between them and replace them with their rights under the Settlement Agreement. On the contrary, it expressly provided that the extinction of their rights would only occur upon performance of the payment obligations in the Settlement Agreement, that extinction to occur by the execution of the "consent minutes" referred to in Clause 7. I accept Mr Pernice's submission that, given the Settlement Agreement has nothing to say about what was to occur to the proceedings if the requisite payments were not made, then the parties' causes of actions remained intact and, as in fact occurred, the proceedings had to continue to hearing. 82To the extent that there is any utility in categorising the Settlement Agreement in accordance with the jurisprudence set out in paragraph [78] above, it is an example of a mere accord executory. To paraphrase Phillips JA, the Settlement Agreement does not constitute a contract and is unenforceable, giving rise to no new rights and obligations pending performance and under which, when there is performance (but only when there is performance), the parties' existing causes of action are discharged. As Philips JA goes on to observe, "Where there is a mere accord executory, no suit can be maintained upon the compromise unless and until there has been performance, and then suit is ordinarily unnecessary. Upon default in performance, the plaintiff's existing cause of action continues unaffected". The matter may be explained in this way. It is clear upon the proper construction of the Settlement Agreement that if the payments referred to in Clause 7 were tendered on or before 13 May 2013 (and not until that occurred), then Mr Pernice would have been able to compel Jingalong to transfer Lot 1 to him. Any of the parties could also then have compelled the other parties to execute the "consent minutes" (assuming there was sufficient clarity as a matter of construction about what those "consent minutes" should contain). 83For these reasons the Settlement Agreement does not prevent Mr Todd from maintaining these proceedings against Jingalong, nor does it otherwise afford any other defence to Jingalong against Mr Todd's claim. The question of whether Jingalong is entitled to damages for Mr Todd's breach of the Settlement Agreement is dealt with in paragraphs [97] and following below. Is Jingalong's title to Lot 1 indefeasible? 84Jingalong could not and did not dispute that it was on notice of Mr Todd's interest in Lot 1 created by the Contract for Sale. However, it submitted (correctly) that if all that Mr Todd or Mr Pernice could establish was the fact that Jingalong took the transfer of the Land with notice of Mr Todd's interest, that did not constitute fraud or create a personal equity to defeat Jingalong's otherwise indefeasible title to the Land conferred by s 42 of the Act. 85Mr Todd and Mr Pernice submitted that there was fraud or a personal equity for two reasons, which may be summarised as: (1)Mr Cameron's statements set out in paragraphs [30] and [32] (the "Assurances") above were sufficient acknowledgement or agreement that Jingalong took the Land subject to Mr Todd's interest in Lot 1; and (2)Even if those statements had not been made, Jingalong's fraud was taking a transfer of the Land where under the JVA Jingalong acknowledged Mr Todd's interest in Lot 1 by agreeing to exclude it from the joint venture. 86A recent authoritative summary of the relevant legal principles, which I respectfully adopt, is set out by Beazley JA (with whom Macfarlan JA agreed) in Gerard Cassegrain & Co Pty Ltd v Cassegrain [2013] NSWCA 453; (2013) 305 ALR 687; (2013) 97 ACSR 283: 11. Section 42 provides: "Notwithstanding the existence in any other person of any estate or interest which but for this Act might be held to be paramount or to have priority, the registered proprietor for the time being of any estate or interest in land recorded in a folio of the Register shall, except in case of fraud, hold the same, subject to such other estates and interests and such entries, if any, as are recorded in that folio, but absolutely free from all other estates and interests that are not so recorded ..." (emphasis added) 12. The first matter to be recognised is that the Torrens system is a system of title by registration: Mayer v Coe [1968] 2 NSWR 747; Breskvar v Wall [1971] HCA 70; 126 CLR 376; Castle Constructions Pty Ltd v Sahab Holdings Pty Ltd [2013] HCA 11; 247 CLR 149 at [20] and cases cited therein. The rights of the registered proprietor thus derive from "the fact of registration and not from an event antecedent thereto": Mayer v Coe at 754. By virtue of s 42, upon registration, the title of the registered proprietor is immediately indefeasible: Frazer v Walker [1967] AC 569 at 580-581; Breskvar v Wall at 385. This, of course, is subject to the exceptions for which the Act provides. The relevant exception is fraud within the meaning of s 42. 13. Barrett J noted, at [168], that fraud for the purposes of s 42 meant "something in the nature of personal dishonesty or moral turpitude": see Stuart v Kingston [1923] HCA 17; 32 CLR 309 at 329 per Knox CJ; or "[d]ishonesty on the part of the registered proprietor in securing ... registration as proprietor": Bahr v Nicolay (No 2) [1988] HCA 16; 164 CLR 604 at 614. The requirement that there be "actual fraud, moral turpitude" was again confirmed in Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; 230 CLR 89 at [192]. 14. The fraud "must be brought home to the person whose registered title is impeached or to his agents": Assets Co Ltd v Mere Roihi [1905] AC 176 at 210. See also Frazer v Walker. In other words, the fraud must be "fraud for which the person becoming registered is responsible": Registrar of Titles (WA) v Franzon [1975] HCA 41; 132 CLR 611 at 618 per Mason J (Barwick CJ and Jacobs J agreeing). Imputed fraud or dishonesty does not fall within fraud for the purposes of s 42, unless the perpetrator of the fraud was an agent for the person taking title: Butler v Fairclough [1917] HCA 9; 23 CLR 78. There must be something more than the disregard of another's rights of which the person had notice: Wicks v Bennett [1921] HCA 57; 30 CLR 80 at 91. For the purposes of the Act, the fraud must have been practised against the person seeking to set aside the title of the registered proprietor: Munro v Stuart [1924] NSWStRp 54; (1924) 41 SR (NSW) 203 at 206. 15. Although imputed fraud is not sufficient for the purposes of s 42, "wilful blindness", for example, when a person's suspicions are aroused and the person then abstains from enquiry for fear of learning the truth, is sufficient, as being tantamount to actual fraud: Assets Co Ltd v Mere Roihi at 210. However, a lack of diligence is not sufficient: Grgic v Australian and New Zealand Banking Group Ltd (1994) 33 NSWLR 202 at 221-222. 16. The place of equitable fraud in the statutory scheme is uncertain, although there are statements that equitable fraud may suffice. In Bahr v Nicolay (No 2), Mason CJ and Dawson J, at 614, considered that not all species of equitable fraud stood outside s 42. In Bank of South Australia Limited v Ferguson [1998] HCA 12; 192 CLR 248, at [10], the High Court said "[n]ot all species of fraud which attract equitable remedies will amount to fraud in the statutory sense", thus arguably leaving scope for the operation of equitable fraud for the purposes of s 42. An example of equitable fraud within the terms of s 42 may be found in Latec Investments Ltd v Hotel Terrigal Pty Ltd (In Liq) [1965] HCA 17; 113 CLR 265 at 273-274 where there was a collusive sale by a mortgagee to a subsidiary in breach of the mortgagee's duty in the exercise of its power of sale. See also Davis v Williams [2003] NSWCA 371; 11 BPR 21,313 at [226] per Gzell J; Grgic v Australian and New Zealand Banking Group at 221-222. However, there was no evidence of any collusive conduct on the part of Felicity in this case. 17. The indefeasibility conferred on a registered proprietor "in no way denies the right of a plaintiff to bring ... a claim in personam, founded in law or in equity, for such relief as a court acting in personam may grant": Frazer v Walker at 385. This is so notwithstanding the fact that an in personam claim is not an exception contained in s 42 of the Real Property Act: see Farah Constructions v Say-Dee at [193] ff and Castle Constructions Pty Ltd v Sahab Holdings Pty Ltd [2013] HCA 11; 247 CLR 149 at [31]. In this case, however, GC & Co is not pursuing an in personam claim. In essence, it seeks the return of the property. 87In identifying the relevant legal principles I have also taken into account, but need not set out, the summary in the judgment of Young CJ in Eq (as his Honour then was) in The Presbyterian Church (NSW) Property Trust v Scots Church Development Ltd [2007] NSWSC 676; (2007) 64 ACSR 31; (2007) 13 BPR 24,969 at [80]-[97]. 88Applying the principles I have identified in the preceding paragraphs, it is clear that the law treats Jingalong's conduct in taking a transfer of the Land with notice of Mr Todd's unregistered interest without more as morally and, therefore, legally neutral. The critical question is whether the facts disclose some additional feature or features in the conduct of Jingalong towards or in respect of Mr Todd that converts Jingalong's otherwise morally and legally neutral conduct into an act of dishonesty or moral turpitude. Thus, for example, in Bahr v Nicolay (No 2) [1988] HCA 16; 164 CLR 60 the additional feature was that the contract for sale of the land from the first to the second defendants contained an acknowledgment by the second defendants of the prior agreement for reconveyance of the land from the first defendant to the plaintiffs. 89Both of the bases identified by Mr Todd and Mr Pernice (set out in paragraph [85] above) are sufficient to establish fraud under s 42 of the Act or (in the case of the first basis) to raise a personal equity as between Jingalong and Mr Todd. 90Dealing first with the Assurances, Jingalong submitted that even if (as the Court has done) it is found that the Assurances were given, they did not respond to any question which referred to Lot 1 or Mr Todd's rights in relation to Lot 1. Similarly, the Assurances themselves did not refer to Lot 1 or Mr Todd's rights in relation to it. It was submitted that they were an example of phatic speech (speech which forms part of social engagement but which does not convey any particular meaning) or, if they did convey any meaning, it was ambiguous. For example, it was suggested that it could have referred to ongoing work in relation to the road on the Land. 91I do not accept Jingalong's submission. In circumstances where Mr Todd had been at pains to ensure that the JVA made provision for his interest and it did in fact do so, looking at the matter objectively the Assurances can only be understood as being intended to convey to Mr Todd that notwithstanding the removal of the Poultons from the development by the sale of the Land to Jingalong, Mr Todd's entitlement to Lot 1 would continue unaffected. 92The circumstance of the Assurances when combined with Jingalong's subsequent indication to Mr Todd that Jingalong did not regard itself as having any obligation to Mr Todd in relation to Lot 1 is sufficient to give Jingalong's conduct the necessary character of dishonesty or moral turpitude so as to engage the fraud exception in s 42 of the Act and to create a personal equity as between Jingalong and Mr Todd. That conclusion is only fortified by reference to the additional facts found in paragraphs [25] and [41] above. 93Alternatively, even if the Assurances had never been given or if the conclusions I have reached in paragraphs [90] to [92] above are wrong, the Court accepts the second basis for defeasibility advanced by Mr Todd and Mr Pernice. It is apparent from the various provisions of the JVA extracted in paragraph [24] above that the JVA carved out the "Todd Caveatable Interest" which was defined by reference to what had originally been Lot 1 in the Contract for Sale. Most importantly, Clause 3.1 of the JVA, which set out the general objectives of the joint venture, made it clear that what was to be sold as part of the joint venture expressly excluded so much of the Land as was the subject of Mr Todd's interest. Jingalong's assent in the JVA to that statement of the objectives of the Joint Venture is a clear acknowledgment of Mr Todd's interest and of the fact that neither of the joint venturers was entitled to the benefit of Lot 1. 94Again, that acknowledgment when combined with Jingalong's conduct in taking a transfer of the entirety of the Land including Lot 1 and subsequently declining to acknowledge Mr Todd's rights in Lot 1 displays the requisite dishonesty or moral turpitude. In other words, Jingalong took something to which it knew it was never entitled or intended to be entitled. That is sufficient to engage the fraud exception under s 42 of the Act. Whether it is sufficient to give rise to a personal equity is less obvious and it is not necessary for me to make a finding to that effect. I decline to do so. 95Again, while the matters I have identified in the preceding paragraph are sufficient to engage s 42 of the Act, that conclusion is only fortified by the facts which I have found in paragraphs [25] and [41] above. Jingalong had invested a great deal of money into the joint venture which it was trying to save by paying out Westpac and taking over the development itself. However, that cannot justify Mr Cameron's undoubted intention to enlarge the amount of land to which Jingalong could have recourse to recoup its investment by including Lot 1, to which he well knew Jingalong never was to have an entitlement under the JVA. It is immaterial that under the JVA it was the Poultons who had the obligation to convey Lot 1 to Mr Todd. Jingalong's purchase of the Land would obviously put it out of the Poulton's power to perform that obligation. It displays the requisite dishonesty or moral turpitude for Jingalong to have done so while never intending to preserve Mr Todd's rights to Lot 1 without telling him that that was in fact what was happening. Honesty would have required all of that to be made clear to Mr Todd when he was asked by Mr Cameron to withdraw the Caveat. Mr Cameron did not do so because he correctly expected that in that event Mr Todd would not have withdrawn the Caveat without ensuring the preservation of his rights to Lot 1. 96In accordance with the decision of the majority in Bahr v Nicolay (No 2) [1988] HCA 16; 164 CLR 60, on either of the bases contended for by Mr Todd and Mr Pernice the Court finds that because of Mr Todd's prior equitable interest, Jingalong holds Lot 1 on constructive trust for Mr Todd with a right to a transfer of it on the tender of $1.00 to Jingalong. Furthermore, the Court finds that, by reference to the Assurances, Mr Todd also has a right in personam against Jingalong entitling him to a transfer of Lot 1 on the tender of $1.00 to Jingalong. Is Jingalong entitled to damages for breach of the Settlement Agreement? 97Among the several ways in which Jingalong sought to rely on the Settlement Agreement was a claim for damages against Mr Todd for its breach. Since the Court has found (see paragraph [82] above), that the Settlement Agreement is an accord executory with the consequence that no enforceable rights arise until the proposed satisfaction has been performed, it follows that no right to damages has arisen for breach of the Settlement Agreement because neither of the payments referred to in Clause 7 were made. 98Even if an enforceable right to damages had arisen (and accepting for the sake of the argument that the service of Jingalong's cross-claim for damages constituted Jingalong's acceptance of Mr Todd's repudiatory conduct), there are at least three reasons why Jingalong's claim for damages must fail. The damages sought were generally for Jingalong's costs of the mediation and its costs of the continued prosecution of these proceedings. No claim was made for any alleged difference between the purchase price for Lot 1 and its current value. 99First, although not adverted to by any party, Jingalong's claim fails by application of the general principle that a successful plaintiff cannot recover its costs of the proceedings from the defendant as damages, even though the defendant's wrongful act caused the plaintiff to incur those costs. This principle extends to preventing a successful plaintiff or defendant from recovering the difference between the legal costs awarded in its favour in one proceeding and the legal costs it actually incurred in that proceeding, as damages in a subsequent civil action against the same opponent. For a full discussion of the principle see the decision of the Full Court of the Federal Court of Australia in Gray v Sirtex Medical Ltd [2011] FCAFC 40; (2011) 193 FCR 1; (2011) 296 ALR 267. 100Second, the same result may be arrived at by applying the principles of causation in relation to contractual damages. The Settlement Agreement made no provision for what was to occur if any of the payments referred to in Clause 7 of the Settlement Agreement were not made. Jingalong's costs of the mediation, were, necessarily, incurred before the Settlement Agreement. There can be no causal connection between any breach of the Settlement Agreement and the incurring of those costs. In relation to Jingalong's ongoing costs of the proceedings, given that the Settlement Agreement was silent on the consequences of non-compliance with Clause 7 and the parties' existing causes of action remained alive in the event of such non-compliance, the proceedings would have had to go on to hearing in any event. Any breach by Mr Todd did not cause Jingalong to incur those further costs. 101Third, irrespective of the legal analysis, Jingalong made no attempt to prove the costs which it said it incurred consequent upon Mr Todd's breach. Other issues 102Mr Todd's Amended Statement of Claim also sought to vindicate his rights in relation to Lot 1 by reference to various alleged contracts and estoppels. These were (correctly) only faintly argued at the hearing and it is not necessary for me to decide them. The real issues between Mr Todd and Jingalong were the applicability of s 42 of the Act and any consequences of the Settlement Agreement. 103Mr Pernice filed a cross-claim against Jingalong and Mr Todd. However, that cross-claim made it clear that it was not pressed if the Court came to the conclusion (which, in effect, it has) that Mr Todd was entitled to a transfer of Lot 1 from Jingalong either to himself or his nominee. There was no dispute between Mr Todd and Mr Pernice that the nominee will be Mr Pernice. Given the conclusions which it has reached, the Court is not required to adjudicate upon the matters raised in Mr Pernice's cross-claim. 104Jingalong filed a cross-claim against Mr Todd and Mr Pernice relying upon rights which Jingalong asserted under the Settlement Agreement, including an action for damages. I have dealt specifically with Jingalong's alleged entitlement to damages for breach of the Settlement Agreement in paragraphs [97] to [101] above. Because the Court has found that the Settlement Agreement is an accord executory which gives rise to no legal rights unless and until it is performed, it follows that Jingalong has none of the rights asserted in its cross-claim because the Settlement Agreement was never performed. Conclusion 105Mr Todd is entitled to a declaration that Jingalong holds Lot 1 for Mr Todd. There should also be an order that upon the payment of $1.00 Jingalong should transfer Lot 1 to Mr Todd or his nominee. There is no issue between Mr Todd and Mr Pernice that if Mr Pernice pays the remaining $20,000 instalment, Mr Todd will nominate Mr Pernice as the transferee of Lot 1. Both cross-claims should be dismissed. 106I will stand the matter over to a convenient date to enable the parties to consider: (1)The form of orders to give effect to these reasons; and (2)Costs, including any special applications. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 31 March 2014