Mendonca v Tonna

[2020] NSWCA 196

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

Mendonca v Tonna [2020] NSWCA 196

Hearing dates:

13 August 2020

Decision date:

26 August 2020

Before:

Bell P at [1]
Meagher JA at [3]
Payne JA at [49]

Decision:

1. Appellant’s amended notice of motion filed 1 July 2020 dismissed.

2. Appeal dismissed.

3. Appellant pay respondents’ costs of the appeal.

Catchwords:

EQUITY — Trusts and trustees — Resulting trusts — Purchase money trusts — Where funds contributed to purchase of property — Whether primary judge erred in finding that presumption of resulting trust not rebutted

LANDLORD AND TENANT — Agreements for lease — Creation — Where final page of residential tenancy agreement signed — Where dispute as to whether signature genuine — Whether primary judge erred in not being satisfied that any agreement giving rise to residential tenancy

COSTS — Party/Party — Exercise of discretion — Whether discrete and separable issues justifying departure from order that costs follow event

Legislation Cited:

Supreme Court Act 1970 (NSW)

Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited:

Calverley v Green (1984) 155 CLR 242; [1984] HCA 81

Fox v Percy (2003) 214 CLR 118; [2003] HCA 22

Roache v News Group Newspapers Ltd [1998] EMLR 161

Searle v Commonwealth of Australia (2019) 100 NSWLR 55; [2019] NSWCA 127

Category:

Principal judgment

Parties:

Renuka Mendonca (appellant)
Mark Tonna (first respondent)
Lorraine Tonna (second respondent)

Representation:

Counsel:
Appellant (self-represented)
P Newton and J Gatland (first and second respondents)

Solicitors:
Appellant (self-represented)
Adams & Partners (first and second respondents)

File Number(s):

2020/13642

Publication restriction:

N/A

 Decision under appeal 

Court or tribunal:

Supreme Court of New South Wales

Jurisdiction:

Civil

Citation:

[2019] NSWSC 1849

[2020] NSWSC 306

Date of Decision:

20 December 2019

Before:

Ward CJ in Eq

File Number(s):

2016/00182075
2017/00292576

HEADNOTE

[This headnote is not to be read as part of the judgment]

The respondents made an offer to purchase a property at Galston in late 2013. That offer was accepted. They were unable to obtain finance to complete the purchase, and the completion date was extended to 31 January 2014. Ultimately the appellant agreed to purchase the Galston property from the respondents for the same price as they agreed with the vendor. The purchases were completed on 31 January 2014, with the property being transferred from the original owners to the respondents, and then to the appellant. At settlement the appellant contributed $1.08 million to the purchase of the property, which she obtained through a loan secured by first mortgage. The respondents contributed the deposit, the balance of the purchase price, and also paid stamp duty and solicitors’ fees. There was no written agreement recording the basis on which the appellant was to purchase and hold the property for the respondents.

The respondents claimed that the appellant had agreed to purchase the Galston property and hold it on trust for them until they were able to secure funds from the sale of their previous home to discharge the mortgage. Alternatively they claimed that the appellant held the Galston property on a resulting trust for herself and the respondents in shares proportionate to their contribution to the purchase price. The appellant claimed that the respondents thereafter occupied the property as tenants.

The primary judge declared that the appellant held the Galston property on a resulting trust, dismissed the appellant’s claim to damages in respect of the alleged tenancy agreement, and ordered the appellant to pay the respondents’ costs of the claims between them.

The issues in the appeal were:

(i) Whether the primary judge erred in holding that the property was held on resulting trust based on the contributions of the appellant and respondents to its purchase.

(ii) Whether the primary judge erred in not being satisfied that the respondents’ occupation of the property was governed by a residential tenancy agreement.

(iii) Whether the primary judge erred in ordering that the appellant pay the respondents’ costs of the claims between them on the ordinary basis.

Held, dismissing the appeal (per Meagher JA, Bell P and Payne JA agreeing)

As to issue (i)

1. The primary judge did not err in concluding that the property was held subject to a resulting trust. The evidentiary material that the appellant relied on did not demonstrate any error in the primary judge’s conclusion: at [31] (Meagher JA), [1] (Bell P agreeing), [49] (Payne JA agreeing).

Calverley v Green (1984) 155 CLR 242; [1984] HCA 81 referred to.

As to issue (ii)

2. The primary judge’s conclusion that there was no binding tenancy agreement was based on inferences drawn from contemporaneous documents, the probabilities and the rejection of the appellant’s evidence. No error was established in relation to the primary judge’s fact finding: at [37]-[38] (Meagher JA), [1] (Bell P agreeing), [49] (Payne JA agreeing).

Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 referred to.

As to issue (iii)

3. The primary judge did not err in concluding that there were no discrete and separable issues at trial that would justify departing from the ordinary rule that costs follow the event. Furthermore, the factual material in support of the respondents’ principal claim significantly overlapped with that supporting the resulting trust claim on which they succeeded: at [40], [45]-[46] (Meagher JA), [1] (Bell P agreeing), [49] (Payne JA agreeing).

Roache v News Group Newspapers Ltd [1998] EMLR 161; House v The King (1936) 55 CLR 499; [1936] HCA 40 referred to.

Judgment

1. BELL P: I have had the benefit of reading in draft the reasons of Meagher JA with which I agree.

2. I should also add that, despite the number and prolixity of the grounds of appeal to which his Honour refers, in her oral submissions, Dr Mendonca brought far greater structure and focus to her case than was supplied by the written submissions and grounds of appeal. I am comfortably satisfied that the essential thrust of Dr Mendonca’s arguments has been thoroughly dealt with and considered in Meagher JA’s judgment.

3. MEAGHER JA: This is an appeal from declarations and orders made by the primary judge (Ward CJ in Eq) in two proceedings dealing with related claims and counterclaims made by the respondents, Mark and Lorraine Tonna, and the appellant, Dr Renuka Mendonca. In the first and principal judgment (Tonna v Mendonca [2019] NSWSC 1849) her Honour declared that a property at Galston of which the appellant was registered proprietor was held on a resulting trust for herself and the respondents. By the same judgment, the primary judge dismissed the appellant’s separate claim to damages for breach of a residential tenancy agreement in relation to that property which she alleged was entered into with Mr Tonna.

4. Her Honour’s second judgment (Tonna v Mendonca (No 2) [2020] NSWSC 306) declared the proportions in which the Galston property was held as between the appellant (71.13%) and respondents (28.87%) – reflecting their respective contributions to the purchase of the property – and made consequential orders. The appellant was also ordered to pay the respondents’ costs of the claims and counterclaims between them on the ordinary basis.

5. By her amended notice of appeal, Dr Mendonca appeals from the declarations and orders concerning the ownership of the Galston property, the order dismissing her claim for damages, and the order that she pay the respondents’ costs.

6. In the proceedings commenced by the respondents, the appellant’s husband, Mr Gerard Mendonca, and the company through which he operated an accounting business, Business Services (NSW) Pty Ltd, were also the subject of separate claims for damages for misleading or deceptive conduct, breaches of various statutory duties, negligence, and breaches of fiduciary duties. The primary judge dismissed those claims with costs. No appeal is brought from those orders.

The issues in the appeal

7. Although the appellant and her husband were separately represented in the proceedings at first instance, in the appeal the appellant has proceeded without legal assistance. Her amended notice of appeal contains 129 grounds, three of which have been abandoned. Fortunately it is not necessary to deal with each of the remaining grounds separately. The three issues in the appeal emerge from the appellant’s written submissions and were identified clearly during the course of her oral argument. They are:

1. Whether the primary judge erred in finding there was a resulting trust of the Galston property based on contributions of the appellant and respondents to its purchase;

2. Whether the primary judge erred in not being satisfied that the respondents’ occupation of the Galston property was governed by a residential tenancy agreement; and

3. Whether the primary judge erred in ordering that the appellant pay the respondents’ costs of the claims between them on the ordinary basis.

8. With respect to the 126 grounds of appeal which are pressed, it is sufficient to record that the great majority of them suffer from at least one of the following difficulties: they do not identify any error in the decision of the primary judge; they do not identify an error which is material to the primary judge’s reasoning on any question in issue in the appeal; they are incomprehensible; they misconceive the relevant principle relied on as applicable; they challenge a finding of fact based on undisputed evidence or which was not in question; they are based on an asserted failure to consider material which was not in evidence; or they raise, as involving errors, factual matters that were not argued or contended for at first instance.

9. There is one preliminary matter to be considered.

Application to adduce further evidence on appeal

10. By an amended notice of motion filed on 1 July 2020, the appellant sought to tender further evidence in the appeal, being email communications, handwritten diary notes, an affidavit of Mrs Tonna, correspondence, bank account statements and a deposit slip. Except for one matter, it is not controversial that all of these documents were in existence at the time of the hearing. With respect to the appellant’s apparently contemporaneous diary notes, there is a question as to their authenticity. It follows that before this Court could receive that evidence in the appeal, it had to be satisfied that there were “special grounds” justifying it in doing so: Supreme Court Act 1970 (NSW), s 75A(8); as to which see Bell P’s recent consideration of the authorities dealing with this provision in Searle v Commonwealth of Australia (2019) 100 NSWLR 55 at [169]-[175]; [2019] NSWCA 127.

11. That requirement could not be satisfied in relation to any of the proposed further evidence. It was not established that any of that evidence was not available or could not have been obtained with reasonable diligence for use at the trial. Nor was it apparent that any of the evidence could rebut the presumption of resulting trust arising from the respondents’ contributions to the purchase of the property; or affect the correctness of the findings made in relation to the alleged tenancy agreement. Thus there was no real prospect that the evidence could lead to a different outcome so as to justify its admission. For these reasons the Court stated early in the course of the oral argument that this application would be dismissed.

The background facts and claims and counterclaims of the parties

12. A sufficient understanding of the matters in issue is provided by a summary of the subject matter of the dispute and the circumstances in which it arose. It will be necessary to return to some aspects of those circumstances in more detail when disposing of the first and second of those issues.

13. The respondents owned a property at Schofields. On 4 March 2013 they granted a property developer an option to purchase that property for $5 million. That option was to be exercised within 21 months, and accordingly by 4 December 2014. In or around October 2013, the respondents made an offer to purchase the property at Galston. That offer was accepted and contracts were exchanged, specifying a completion date of 23 December 2013. The respondents retained the assistance of Mr Mendonca to help them to obtain finance. Their attempts to do so were unsuccessful. At the last minute, and after service by the vendor of a notice requiring them to complete on 24 January 2014, followed by an agreement to extend the completion date to 31 January 2014, the appellant agreed to purchase the Galston property from the respondents for the same price as was agreed with their vendor.

14. On 31 January 2014 those purchases were completed, the property being transferred from the original owner to the respondents and then to the appellant. There was no written agreement signed which recorded as between the appellant and respondents the basis on which she was to purchase and hold the property. A proposed put and call option was drafted, but never finalised and executed. The appellant borrowed $1.08 million from the ANZ bank, secured by first mortgage, and at settlement contributed that amount, the respondents’ contributions being the deposit ($145,000) and the balance of the purchase price ($238,792). The respondents also paid the stamp duty on the two transfers and associated solicitors’ fees (Judgment (1) [175]). Adopting neutral language at this point, they were assisted in relation to the funding of their contributions to the balance of the purchase price by moneys received from Mr Tonna’s daughter, Belinda ($40,000), and Mrs Tonna’s mother ($193,000) (Judgment (1) [202]).

15. The claims and counterclaims arising out of these circumstances which remained relevant to the issues in the appeal were as follows.

16. First, the respondents’ principal claim was that the appellant agreed that she would purchase the Galston property and hold it on trust for the respondents until the sale of their property at Schofields. That agreement was said to have been made between Mr Tonna and Mr Mendonca, the latter as agent for his wife. Alternatively the respondents claimed that the appellant held the Galston property on a resulting trust for herself and them in shares proportionate to their respective contributions to the cost of acquiring it (Judgment (1) [327], [344]-[345], [453]-[458]).

17. Secondly, the appellant claimed that on 31 January 2014, she made a tenancy agreement with Mr Tonna which was evidenced by a residential tenancy agreement signed by them and dated 17 February 2014. The appellant claimed that agreement was terminated in June or July 2016 and sought outstanding rent, vacant possession of the property and damages with respect to alterations undertaken without her consent. Those damages totalled $72,300 (Judgment (1) [10]-[11]).

Issue 1: Finding of resulting trust

18. The primary judge rejected the respondents’ principal claim. Whilst her Honour was satisfied that Mr Mendonca acted as Dr Mendonca’s agent in negotiating with the respondents, her Honour was not satisfied that there was a concluded agreement in sufficiently certain terms to be enforceable; or that the parties’ common intention was that they should be bound to such an agreement in the absence of it being recorded in writing and acknowledged by execution (Judgment (1) [435]-[439]).

19. However her Honour was satisfied and found that there was agreement “in principle” (having non-binding consequences) in the following broad terms (Judgment (1) [436]):

… that Dr Mendonca would purchase the Galston Property from Mr and Mrs Tonna (in a settlement to occur simultaneously with the settlement of the purchase by Mr and Mrs Tonna of the Galston Property under their first contract of sale); that the deposit paid by Mr and Mrs Tonna would be in effect applied towards Dr Mendonca’s purchase of the Galston Property from Mr and Mrs Tonna (but was not intended as a gift to Dr Mendonca); that Mr Tonna would pay all the expenses associated with the purchase by Dr Mendonca of the Galston Property and in relation to the Galston Property (including mortgage repayments); and that when the sale of the Schofields Property completed or Mr and Mrs Tonna were otherwise able to secure funds, the Galston Property would be transferred back to them or bought back by them.

20. The primary judge then addressed the respondents’ claim to a resulting trust arising from their contributions to the purchase price. There is no challenge to her Honour’s summary of the relevant principles (Judgment (1) [463]-[472]). A presumption of resulting trust will arise where “two or more persons advance the purchase price of property in different shares”: Calverley v Green (1984) 155 CLR 242 at 266 (Deane J); [1984] HCA 81. Her Honour found that the direct contributions of the parties were $1.08 million in the case of the appellant, and $370,000 “plus the legal expenses and stamp duty in relation to the acquisition” in the case of the respondents (Judgment (1) [478]). Those findings are not challenged, other than by the appellant’s arguments dealt with below. Her Honour then considered whether the presumption “that the person or persons to whom the legal title is transferred holds or hold the property upon resulting trust in favour of those who provided the purchase price in the shares in which they provided it” had been rebutted (per Deane J in Calverley at 266-267).

21. At this point her Honour’s finding as to the “in principle” agreement reached in late January 2014 assumed significance. Whilst the appellant challenged the primary judge’s finding that Mr Mendonca was her agent in negotiating with the respondents about the acquisition of the Galston property, her Honour’s conclusion in that respect was plainly correct. The analysis at Judgment (1) [380]-[382], [402], [404] and [408] shows that at the meetings held on 29 and 30 January 2014 between the appellant, Mr Mendonca, the respondents and their solicitor, Mr Gough, the “in principle” terms on which the property was to be acquired, as negotiated by Mr Mendonca, were discussed. The appellant agreed to participate in the transaction on that basis and did not suggest that her husband was not and had not been representing her in the negotiation of those arrangements.

22. In support of her conclusion that it was not intended the appellant have an immediate unconditional interest in the Galston property upon being registered as legal owner (Judgment (1) [474]), her Honour reasoned (Judgment (1) [475]-[476]):

It was not the case that Mr and Mrs Tonna were here intending to make a gift of the deposit moneys to Dr Mendonca, nor were they gifting to her the other moneys contributed by their own family members to the acquisition of the Galston Property (the so-called “shortfall”). Nor can they be seen to have been agreeing to pay all expenses in relation to the Galston Property out of some form of altruism or charity to Dr Mendonca. To my mind, to find such an intention existed between the parties would defy logic and is inconsistent with the contemporaneous documents in evidence. Why the Tonnas would be assisting Dr Mendonca, a medical practitioner, who (according to the email sent by Mr Mendonca on 7 January 2014 referred to at [48] above) makes $150,000 a year, has no debt, and already owns two investment properties, acquire another property, makes no sense and is highly improbable.

Further, I am not satisfied that this was simply a loan arrangement (whereby the amount so contributed could be recovered on demand or otherwise from Dr Mendonca). The very fact that no demand was made for those amounts reinforces that Mr and Mrs Tonna understood that they were in effect making a contribution to the purchase price of the Galston Property in which they were to have an interest (in fact, they understood it would be their property); and it is telling that Dr Mendonca herself made no effort to repay those moneys (although professing that she was always willing to do so). Moreover, there is real doubt as to what amount Dr Mendonca would have been the subject of the so-called loan agreement (or at least as to how it could be determined in advance).

23. The “contemporaneous documents” to which her Honour referred include email communications in late January 2014 between Mr Mendonca, Mr Tonna and the solicitors from the firm Matthews Folbigg acting for the respondents, and later also the appellant, in relation to the acquisition of the Galston property, namely Mr Gough, Mr Leo and Mr Doust. Those exchanges include the email from Mr Mendonca to Mr Gough and Mr Tonna dated 23 January 2014, extracted at Judgment (1) [65], when the prospect of the appellant being “used” as purchaser was first raised. Mr Mendonca noted “When Mark gets his A$5 million, Renuka shall transfer the property to Mark and Mark shall bear the stamp duty”. In the email exchanges which followed both Mr Mendonca and Mr Gough separately urged Mr Tonna to formalise the arrangements protecting what were described as the respondents’ “interests in the property and your money payments” (Judgment (1) [76], [90], [105], [118]).

24. Lest it be thought that at some time later the parties changed their minds, after the call option over the Schofields property was exercised and sale completed on 17 April 2015, the respondents received the net proceeds of that sale which exceeded $3.8 million. On 20 April 2015 Mr Gough sent an email to Mr Mendonca and Mr Tonna referring to that settlement and inquiring “whether you wish to proceed with transferring the Galston property from Renuka to Mark yet?” (Judgment (1), [231]-[232]).

25. Before the primary judge, the appellant contended that the moneys provided to fund her acquisition were advanced by the respondents by way of loan. The appellant’s evidence was that an oral agreement to that effect was made with Mr Tonna on the morning of 30 January 2014. Mr Tonna denied he had ever spoken to the appellant about any moneys being paid by way of loan. The cross-examination of the appellant directed to this conversation made plain that at the time this agreement was alleged to have been made the appellant did not know how much the ANZ bank was advancing. Accordingly she was not in a position to have a conversation with Mr Tonna about how much she might need to borrow from him, and at what interest rate. Ultimately the primary judge did not accept the appellant’s evidence, observing at Judgment (1) [316] that the “suggestion that there was a loan arrangement for the shortfall of the purchase price at a time when Dr Mendonca could have had no real idea (on the limited information available to her) what that shortfall might be” strained credulity. That conclusion did not turn on any preference of Mr Tonna’s evidence over that of the appellant. It was based on the probabilities taking account of the circumstances in which the alleged agreement was made.

26. In her argument to this Court the appellant also relied on relatively contemporaneous materials which she submitted were consistent with the position being that the respondents’ contributions were loans, or which otherwise showed that the parties’ intention was that she have an immediate and unconditional interest in the Galston property. The primary judge rejected that being the position.

27. First, the appellant pointed to documents relating to District Court litigation brought against Mr Tonna by Prime Capital in relation to a loan agreement allegedly made in December 2013 (Judgment (1) [38]). A file note of his solicitors, Macedone Legal, dated 28 April 2014 recorded Mr Tonna as saying with respect to the “Renuka arrangement” that “she took the property off their hands. The repayment of deposit is to be worked out”; and in an affidavit sworn in those proceedings on 21 September 2014 Mr Tonna said that as he and his wife sold the property to the appellant “we lost the deposit ($145,000) and the stamp duty ($65,240) we paid”. That note and the affidavit were the subject of cross-examination directed to Mr Tonna’s understanding of the basis on which the appellant had been given the benefit of the deposit paid by the respondents.

28. Mr Tonna denied that there was “any talk about a deposit to be repaid back to me, that was the deposit for the property”. The primary judge dealt with this cross-examination and Mr Tonna’s credibility at Judgment (1) [289]-[294], concluding:

Troubling as the exchanges in relation to statements contained in his earlier affidavit are (and to be fair to Mr Tonna he said the affidavit was drafted following a short conference with his then legal representatives, and the reasoning underlying the statements to which he there deposed was not fully explained), overall I do not consider that any adverse credit finding in relation to Mr Tonna is warranted although (as with all the witnesses) I place more weight on the contemporaneous documents than on his present recollection of past events.

29. Secondly, reference was made to the contract for sale of the Galston property signed by the respondents as vendors and to a draft of the put and call option deed between the appellant and respondents which was never finalised or executed. The latter stated by recital A that the appellant “is the legal and beneficial owner of the property”. Neither of these documents is inconsistent with her Honour’s conclusion at Judgment (1) [474]. The former says nothing as to beneficial ownership and the latter was not executed or otherwise acknowledged as recording a common position of the parties.

30. Finally, in this Court, but not before the primary judge, the appellant contended that as the contributions which the respondents made to the purchase price included moneys provided by family members, any presumption of advancement should operate in their favour rather than in favour of the respondents. The short answer to this submission is Mr Tonna’s evidence that the moneys provided by the family members – his daughter, and Mrs Tonna’s mother – were “borrowed”. Accordingly, as the contemporaneous settlement instructions show, to the extent that any of these funds were made available on settlement in the form of bank cheques in favour of the National Australia Bank, they were contributions made by the respondents.

31. The primary judge did not err in concluding that the Galston property was held by the appellant subject to a resulting trust in favour of the respondents.

Issue 2: Finding that no binding residential tenancy agreement

32. The appellant’s case was that she entered into this agreement on 31 January 2014, the tenancy to commence on 17 February 2014. In support of that claim an 11 page standard form residential tenancy agreement was tendered (becoming exhibit 9). The final page of this document bore a signature purporting to be that of Mr Tonna, above the date 17 February 2014. That page was also signed by the appellant. Mr Tonna denied entering into such an agreement and specifically maintained that he had not signed the last page of that document. Whether or not the signature was his then became the subject of expert evidence which concluded that the signature on page 11 was that of Mr Tonna. However, that evidence also established that the paper stock of the first page of this document showed different ultraviolet and infrared qualities to the paper stock of the remaining pages of the document, justifying the conclusion that it did not originally form part of the document. The appellant later produced a further first page (which became exhibit 10). Further expert forensic examination of this page showed that at some earlier time it was “almost certainly” attached as the first page of the other document.

33. The appellant’s evidence was that Mr Mendonca prepared a first version of the rental agreement, that after he did so a second version was prepared with her home rather than mobile telephone number on the front page, that the last page of that second version was signed by Mr Tonna, that a photocopy of that signed second version was made and provided to Mr Tonna, and that the original of that signed second version and the unsigned first version were then placed in a storage cabinet in her garage. Her explanation as to how the document took the form which became exhibit 9 was that at some stage the “first page [of the second version] got mixed up when I opened the staple later on to make a copy of that tenancy agreement and I did open the staple later a couple of – on a couple of occasions and I, when I put it together, I’ve probably mixed it up again”.

34. Although her Honour found that Mr Tonna had signed the final page of a tenancy agreement, the primary judge was not satisfied either that at the time he did so the document was complete, or that there was any common intention at that time that he would occupy the premises as tenant under such agreement. Her Honour observed that the parties “seem to have been willing on at least one other occasion to sign an execution page without agreement as to the terms of the document itself (which was the case in relation to the draft put and call option deed)” (Judgment (1) [561]).

35. Ultimately her Honour was not satisfied that the parties’ intention as at mid February 2014 was that Mr Tonna was to be taken by the act of signing such an execution page to be thereby bound to occupy the Galston property as a tenant under a residential tenancy agreement. In arriving at that position the primary judge did not accept the appellant’s explanation as to how and why the front page of the complete document had been “switched”, principally because it did not “logically explain how the subsequent version of the cover page came to be attached after the document was signed or how (on the contrary scenario) an earlier (and on her account superseded) version came to be the one subsequently attached and then copied on those multiple occasions” (Judgment (1) [560]).

36. In not being so satisfied the primary judge also had regard to Mr Mendonca’s email of 5 February 2014 to Mr Tonna that he should give his bank a “standing” direction to transfer the monthly mortgage repayment amount ($5228.98) to the ANZ bank (Judgment (1) [186], [562]). That instruction was consistent with the parties’ “in principle” agreement that Mr Tonna and his wife pay all expenses associated with the purchase, including mortgage repayments, and occupy the property as beneficial owners (see [21]-[22] above). It was also inconsistent with there being a rental agreement for the payment of rent in that amount.

37. The primary judge’s conclusion in relation to this issue also depended in part on the rejection of the appellant’s evidence. In doing so her Honour had regard to (1) the context in which that version of events was said to have occurred as revealed by the contemporaneous communications between the persons directly involved in the acquisition of the Galston property – especially Mr Mendonca, Mr Gough and Mr Tonna – and (2) the improbability of her version of events in the face of those communications and its failure to explain satisfactorily how the document said to have been signed came to have a front page which could not have been part of it when it was first executed. In these circumstances it is not apparent or demonstrated that her Honour’s conclusion involved any error or that her rejection of the appellant’s evidence was contrary to the probabilities or compelling inferences available from the contemporaneous communications of the parties and their advisors: cf Fox v Percy (2003) 214 CLR 118 at [28]-[29] (Gleeson CJ, Gummow and Kirby JJ); [2003] HCA 22.

38. The challenge to the conclusion that there was no tenancy agreement must also be rejected.

Issue 3 – Order as to costs

39. The appellant argued that there should be no order as to costs between her and the respondents. Their claims and counterclaims are summarised in [16] and [17] above. The respondents failed on their principal case, but succeeded on their claim to a resulting trust. In disposing of that claim the primary judge found that there was agreement “in principle” between them that the respondents “were contributing to the purchase price with the understanding that they would have an entitlement to acquire the Galston property in due course” so that the appellant’s legal title was “not to be unconditional to that extent” (Judgment (1), [440], [473]).

40. That finding, made by reference to the same circumstances as were relied on by the respondents in support of their principal case, was, as her Honour noted at Judgment (1) [440], critical to their alternative claim to a resulting trust. It answered and required the rejection of the appellant’s argument that any presumption arising from the respondents’ contributions to her purchase was rebutted by their intention being that the appellant have an immediate and unconditional interest in the property (Judgment (1) [474], [477]).

41. In the ordinary course costs follow the event (Uniform Civil Procedure Rules 2005 (NSW), r 42.1). It is recognised however that in an appropriate case, and with a view to achieving fairness by the exercise of the costs discretion, a different costs order may be made. The circumstances which might justify such a departure include where the losing party has succeeded on an issue or group of issues which is separable or discrete and has occupied a significant part of the hearing, making it unfair in the circumstances for that party to have to bear those costs. Several cases applying these principles are referred to by the primary judge at Judgment (2) [169]-[182].

42. The appellant’s argument to the primary judge was in essence that because the respondents had failed on their principal case and succeeded on a separate claim which was only fully formulated in closing argument, each party should pay its own costs in relation to those claims. That argument emphasised with respect to the ultimate outcome that whilst the respondents claimed a 100% beneficial interest in the property, they only achieved an interest of about 29%.

43. The primary judge rejected this argument, concluding that “as a matter of substance and reality” (Roache v News Group Newspapers Ltd [1998] EMLR 161 at 168-169 (Bingham MR)) the respondents succeeded in the overall “event” and that this was not a case where there were separate issues between which it was appropriate to apportion costs (Judgment (2) [180]-[181]). In the result the primary judge ordered the appellant to pay the costs of the respondents’ claims against her, as well as of her claim against them, there being no contest about the latter.

44. In her appeal from the costs order the appellant must establish error in the House v The King (1936) 55 CLR 499; [1936] HCA 40 sense, in other words that her Honour acted on a wrong principle, took into account irrelevant matters, did not take into account a material consideration, mistook the facts or produced an outcome which on its face was unreasonable or plainly unjust.

45. None of these errors is made out. On the contrary, her Honour’s exercise of the costs discretion was wholly justified in the circumstances. The ultimate result of the respondents’ claims was not to be measured by reference to the percentage beneficial interest they were declared to have. If the principal claim had succeeded their 100% beneficial interest would have been subject to them discharging the ANZ bank mortgage of $1.08 million and paying any other costs necessarily incurred by the appellant in acquiring and holding the property for them, whereas their alternative claim to a 29% beneficial interest took into account and arose from their actual contributions to the purchase of the property.

46. In financial terms the difference between the two outcomes was to be measured by the percentage of the capital appreciation in the value of the property to be received by the respondents – 100% on their principal claim and 29% on the resulting trust claim upheld by the primary judge. In response to those claims, as the primary judge noted at Judgment (2) [177], the appellant denied the respondents were entitled to any beneficial interest. They ultimately succeeded, albeit not in the percentage claimed, and the factual material on which the success of that claim depended significantly overlapped with that supporting the principal claim. From an evidentiary perspective the claims were not separable and it was not the position that any significant part of the hearing was spent dealing with matters relating solely to the principal claim.

47. The appeal against the costs order should be dismissed.

Conclusion

48. In the result, the following orders should be made:

1. Appellant’s amended notice of motion filed 1 July 2020 be dismissed.

2. Appeal dismissed.

3. Appellant pay respondents’ costs of the appeal.

49. PAYNE JA: I agree with Meagher JA.

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Decision last updated: 26 August 2020