Tonna v Mendonca (No 2)

[2020] NSWSC 306

Supreme Court

New South Wales

Medium Neutral Citation:

Tonna v Mendonca (No 2) [2020] NSWSC 306

Hearing dates:

On the papers

Date of orders:

25 March 2020

Decision date:

25 March 2020

Jurisdiction:

Equity

Before:

Ward CJ in Eq

Decision:

1.   Declare that the first defendant holds the legal title to the property referred to in these proceedings as the Galston Property on a resulting trust for herself and the plaintiffs in the following proportions that reflect their respective contributions to the purchase price for the Galston Property: 28.87% as to the plaintiffs and 71.13% as to Dr Mendonca.
2.   Order the first defendant to execute and provide to the plaintiffs within 28 days of the date of these orders a transfer in registrable form in respect of the Galston Property to record the plaintiffs’ beneficial interest in the Galston Property as declared above.
3.   Declare that the plaintiffs’ proportionate share of the contributions paid by the first defendant in respect of the Galston Property and the first defendant’s proportionate share of the contributions paid by the plaintiffs be set off against each other.
4.   Subject to order 5 below, order that the amount payable after the set-off provided for in order 3 above, be paid, with interest at court rates, on completion of any sale of the Galston Property.
5.   In the event that agreement is not reached within 3 months between the plaintiffs and the first defendant for the sale of the Galston Property (to take place within six months or such other period as the parties may agree) then order that any amount payable after the set-off provided for in order 3 be paid on the expiration of 3 months from the date of these orders.
6.   Direct the parties to seek to reach agreement as to the manner in which account should be made by the first defendant to reflect the change to the mortgage repayments when the first defendant increased the loan facility in respect of the property and, failing such agreement within 3 months, order that the matter be referred to an independent accounting expert (at the parties’ joint cost) (to be agreed between the parties or otherwise nominated by the Court) for determination as to the amount of mortgage repayments referable to a loan in the lesser sum (i.e., without the increase in the facility) over the relevant period at the interest rate that was payable at the time of the original loan facility (with interest rate changes referable to the terms of that facility as if the facility amount had not increased), with a view to making orders for any adjustment of the amounts otherwise provided for under order 3 as a result of that determination.
7.   Liberty to the parties to apply on 3 business days’ notice for orders in relation to the implementation or working out of the above orders.
8.   Order that Dr Mendonca pay the costs of Mr and Mrs Tonna of the Tonna Proceedings and of the Mendonca Proceedings, on the ordinary basis.
9.   Order that Mr and Mrs Tonna pay the costs of Mr Mendonca and Business Services of the Tonna Proceedings, on the ordinary basis.

Catchwords:

COSTS — Exceptions to general rule that costs follow the event — Offers of compromise/Calderbank offers —Orders when proceedings involve multiple parties — Bullock and Sanderson orders

Legislation Cited:

Civil Procedure Act 2005 (NSW), ss 56, 98
Uniform Civil Procedure Rules 2005 (NSW), rr 20.26, 42.1, 42.13-42.17

Cases Cited:

Alltrans Express Ltd v CVA Holdings Ltd [1984] 1 WLR 394; 1 All ER 685
Amit Laundry Pty Ltd v Jain (No 2) [2017] NSWSC 1603
Amit Laundry Pty Ltd v Jain [2017] NSWSC 1495
Anderson Group Pty Ltd v Tynan Motors Pty Ltd (No 2) (2006) 67 NSWLR 706; [2006] NSWCA 120
Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited (No 2) [2009] NSWCA 12
Bennette v Cohen (No 2) [2009] NSWCA 162
Bostik Australia Pty Limited v Liddiard (No 2) [2009] NSWCA 304
Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107
Bullock v London General Omnibus Co [1907] 1 KB 264
Calderbank v Calderbank [1975] 3 WLR 586; 3 All ER 333
Commonwealth of Australia v Gretton [2008] NSWCA 117
Corbett Court Pty Limited v Quasar Constructions (NSW) Pty Limited [2008] NSWSC 1423
Council of the City of Liverpool v Turano (No 2) [2009] NSWCA 176
Cretazzo v Lombardi (1975) 13 SASR 4
Dodds Family Investments Pty Ltd (formerly Solar Tint Pty Ltd) v Lane Industries Pty Ltd (1993) 26 IPR 261
Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373
Fabre v Lui (No 2) [2015] NSWCA 312
Gerling Australia Insurance Co Ltd (Costs) [2005] NSWSC 1111
Gould v Vaggelas (1985) 157 CLR 215; [1985] HCA 75
Hancock v Arnold (No 2) [2009] NSWCA 19
Herning v GWS Machinery Pty Ltd (No 2) [2005] NSWCA 375
Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358
Hughes v Western Australian Cricket Association (1986) ATPR 40-748
Jamal v Secretary Department of Health (1988) 14 NSWLR 252
James v Surf Road Nominees Pty Limited (No 2) [2005] NSWCA 296
Johnson's Tyne Foundry Pty Ltd v Maffra Corp (1948) 77 CLR 544; [1948] HCA 46
Lackersteen v Jones (No 2) (1988) 93 FLR 442; [1988] NTSC 72
Lavender View v North Sydney Council (No 2) [1999] NSWSC 775
Leallee v The Commissioner of the NSW Department of Corrective Services [2009] NSWSC 518
Leichhardt Municipal Council v Green [2004] NSWCA 341
Milne v Attorney-General (Tas) (1956) 95 CLR 460
NRMA Ltd v Morgan (No 3) [1999] NSWSC 768
Oshlack v Richmond River Council (1998) 193 CLR 72
Pacific General Securities Ltd v Soliman & Sons Pty Ltd (Costs) [2006] NSWSC 724
Permanent Trustee Co Ltd v Keogh [1999] NSWSC 883
Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368
Roache v News Group Newspapers Ltd [1998] EMLR 161
Roads and Traffic Authority of NSW v Palmer (No 2) [2005] NSWCA 140
Robb Evans of Robb Evans & Associates v European Bank Ltd (No 2) [2009] NSWCA 170
Sabah Yazgi v Permanent Custodians Ltd (No 2) [2007] NSWCA 306
Sahab Holdings Pty Ltd v Registrar-General (No 3) [2010] NSWSC 403
Sanderson v Blyth Theatre Co [1903] 2 KB 533
Shellharbour City Council v Johnson (No 2) (2006) 67 NSWLR 308
Short v Crawley (No 40) [2008] NSWSC 1302
Shorten v David Hurst Constructions Pty Limited [2008] NSWSC 609
Stena Rederi Aktiebolag v Austal Ships Sales Pty Ltd [2007] FCA 1141
Stevedoring Industry Finance Committee v Gibson (2000) 20 NSWCCR 417; [2000] NSWCA 179
Sved v Council of the Municipality of Woollahra (1998) NSW Conv R 55-842
Tickell v Trifleska Pty Ltd (1990) 25 NSWLR 353
Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) [2011] NSWCA 256
Tonna v Mendonca [2019] NSWSC 1849
Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 3) (1979) 42 FLR 213
Uniline Australia Ltd v Sbriggs Pty Ltd (No 2) (2009) FCR 136; [2009] FCA 920
Uniting Church in Australia Property Trust (NSW) t/as Northhaven Retirement Village v Takacs (No 2) [2008] NSWCA 172
Waterman v Gerling Australia Insurance Co Ltd (Costs) [2005] NSWSC 1111
Waters v PC Henderson (Aust) Pty Ltd [1994] NSWCA 338
Willett v Thomas [2012] NSWCA 97
Windsurfing International Incorporated v Petit (1987) AIPC 90-441

Category:

Consequential orders (other than Costs)

Parties:

2016/00182075
Mark Julian Tonna (First Plaintiff)
Lorraine Mary Tonna (Second Plaintiff)
Renuka Maria Mendonca (First Defendant)
Gerard Mendonca (Second Defendant)
Business Services (NSW) Pty Ltd (Third Defendant)

  2017/00292576
Renuka Maria Mendonca (Plaintiff)
Mark Julian Tonna (First Defendant)
Lorraine Mary Tonna (Second Defendant)

Representation:

Counsel:
2016/00182075
P Newton with J Gatland (Plaintiffs)
SE Gray (First Defendant)
AC Harding (Second and Third Defendants)

 

2017/00292576
SE Gray (Plaintiff)
P Newton with J Gatland (Defendant)

  Solicitors:
2016/00182075
Adam & Partners (Plaintiffs)
TressCox Lawyers (First Defendant)
Wotton & Kearney (Second and Third Defendants)

File Number(s):

2016/00182075; 2017/00292576

Publication restriction:

Nil

Judgment

1. HER HONOUR: On 20 December 2019, I handed down judgment in two related matters involving disputes in relation to a parcel of land in Galston, New South Wales (the Galston Property) (see Tonna v Mendonca [2019] NSWSC 1849 (the December Judgment)).

2. The first set of proceedings (2016/00182075) (the Tonna Proceedings) was commenced by Mr Mark Tonna and his wife, Mrs Lorraine Tonna, in 2016 against Dr Renuka Mendonca, her husband (Mr Gerard Mendonca), and a company controlled by Mr Mendonca (Business Services (NSW) Pty Ltd, to which I will refer, as I did in the December Judgment, as Business Services), that being a company through which Mr Mendonca operated an accounting business. The second set of proceedings (2017/00292576) (the Mendonca Proceedings) was commenced by Dr Mendonca in 2017 (originally in the NSW Civil and Administrative Tribunal: RT 16/54987) against Mr and Mrs Tonna.

The claims made in the Tonna Proceedings

3. In the Tonna Proceedings, it was alleged by Mr and Mrs Tonna that an agreement was reached between Mr Tonna and Mr Mendonca (as the agent for Dr Mendonca and also in his capacity as agent and accounting adviser to Mr and Mrs Tonna) (the Agreement) that, among other things, Dr Mendonca would purchase the Galston Property (from Mr and Mrs Tonna, simultaneously with the completion by them of an earlier contract to purchase the property from a third party) and would hold the legal title on trust (the Trust) for their sole benefit until the sale of a property owned by Mr and Mrs Tonna at Schofields (the Schofields Property). The alleged Agreement included an obligation on the part of Dr Mendonca not further to encumber the Galston Property for Dr Mendonca’s own benefit or for the benefit of any person other than Mr and Mrs Tonna and, on direction by Mr and Mrs Tonna, to transfer the Galston Property to them (see the further amended statement of claim filed 23 May 2019 at [38]).

4. The substance of the complaints made in the Tonna Proceedings against Dr Mendonca was that she breached the Agreement, and her duties as trustee under the Trust, by, among other things, denying the existence of the Agreement and Trust and refusing to transfer the Galston Property to Mr and Mrs Tonna after the sale of the Schofields Property had been completed (see [71] of the further amended statement of claim). A claim was also made against Dr Mendonca for unjust enrichment (by reference to Dr Mendonca’s alleged breach of the Agreement (see [75] of the further amended statement of claim)) in that she had received the legal ownership of the Galston Property without paying various outgoings, as there particularised.

5. Dr Mendonca denied any obligation to transfer the Galston Property back to Mr and Mrs Tonna. Her position was that: there was no concluded and legally binding agreement for her to hold the Galston Property on trust for Mr and Mrs Tonna; to the extent that the Agreement and Trust relies on the conduct of Mr Mendonca, she was not privy to that conduct and Mr Mendonca was not authorised to make representations on her behalf; the contemporaneous documentary evidence in relation to the existence of that Agreement and the Trust is, at its highest, equivocal; and the conduct of the parties, both at the time of the alleged Agreement and afterwards, is inconsistent with the existence of a concluded and legally binding trust agreement. Dr Mendonca says that she bought the Galston Property from Mr and Mrs Tonna (as evidenced by the contract for sale and the payment of money from her to Mr and Mrs Tonna); and that, by so doing, she assisted them to avoid a substantial financial loss (as they were not in a position to complete the earlier sale contract).

6. As to the alternative unjust enrichment claim, Dr Mendonca’s position was that she had never resiled from her obligation to repay Mr and Mrs Tonna the “shortfall loaned to her to purchase the [Galston] Property” by Mr and Mrs Tonna. It was said that Dr Mendonca had previously offered to repay those funds and remained willing to do so; and that she had been “trying to work this issue out for some time”.

7. As against Mr Mendonca, and Business Services with some variation, the claims broadly were of a failure to provide the Services (as defined in the pleading) at an acceptable level of care, skill and diligence (and it was alleged that there has been a breach of fiduciary or statutory duties in Mr Mendonca preferring the interests of Dr Mendonca over those of Mr and Mrs Tonna, to whom it is alleged a duty of care was owed) (see [61]-[62] of the further amended statement of claim). There were also allegations of the making of representation(s) and of misleading or deceptive conduct by Mr Mendonca (see [61], [63]-[64] of the further amended statement of claim). The relief sought against Mr Mendonca and Business Services was a claim for damages for breach of a common law duty of care (see prayer 6 of the further amended statement of claim).

8. Mr Mendonca and Business Services denied the allegations made against them. They maintained that there were fundamental problems with the claim in relation to issues of breach and causation (and said that, even if breach were to be established, Mr and Mrs Tonna were contributorily negligent and have failed to mitigate their loss).

The claims made in the Mendonca Proceedings

9. The Mendonca Proceedings were more confined and related to a residential tenancy agreement that Dr Mendonca alleged she had entered into with Mr Tonna on 31 January 2014, commencing on 17 February 2014 (the Tenancy Agreement), and later, a licence (the Licence) in respect of the Galston Property (see [3] and [43]-[45] of the points of claim filed 27 August 2018). Dr Mendonca sought “rental” arrears, vacant possession of the Galston Property, and damages with respect to alterations that Mr Tonna made to the Galston Property (contrary to the terms of the alleged Tenancy Agreement and without Dr Mendonca’s consent) (see [41] of the points of claim). Dr Mendonca also asserted that a party other than Mr and Mrs Tonna had occupied part of the Galston Property since September 2014 (see [19]-[22] of the points of claim).

10. The quantum of the damages claim in relation to the alterations in question (assuming liability therefor were to be established) was agreed between the parties during the course of the hearing as being: $64,771.93 in respect of the alterations referred to at [23(a)] and [23(b)] of the points of claim (installation of a large shed and concrete slab and demolition of an existing shed); and $7,529.66 (for demolition of a section of the boundary wall) (see T 365).

11. Mr Tonna’s defence to this claim was two-fold: he maintained that he and Mrs Tonna were the true owners of the Galston Property (for the reasons propounded in the Tonna Proceedings); and he denied that he was bound by the Tenancy Agreement by reason of not having entered into it ([3] of the points of defence). Mr Tonna’s evidence was that the signature that appears on the Tenancy Agreement is not his (T 335). There was also an issue as to the authenticity of the Tenancy Agreement in that it appeared that there were two different versions of the first page of the document. The evidence of the forensic expert called by Mr Tonna was that the first page of the document that was initially propounded as the Tenancy Agreement is not likely to have been the version initially stapled to the document (see the expert report of Stephen Dubedat).

12. Dr Mendonca accepted that if Mr and Mrs Tonna could establish their primary claim in the Tonna Proceedings, then the “practical reality” was that there would not be a need to address the Mendonca Proceedings (as Mr and Mrs Tonna would be the true owners of the Galston Property). To the extent that in that event there needed to be some adjustment for moneys not paid by Mr Tonna to Dr Mendonca in accordance with the alleged Agreement, it was noted that in Mr Tonna’s affidavit sworn 6 May 2019, Mr Tonna deposed to being ready, willing, and able to pay whatever amount he owes Dr Mendonca (he maintained that the payments owing were not rental payments, but some sort of mortgage payments he had to pay to Dr Mendonca under the arrangement propounded in the Tonna Proceedings).

13. However, Dr Mendonca’s position was that if Mr and Mrs Tonna were unsuccessful in the Tonna Proceedings, then the only remaining defence to her claim in the Mendonca Proceedings was the denial by Mr Tonna that he is bound by the Tenancy Agreement (and she maintained that the expert evidence establishes that it was signed by Mr Tonna). In that regard, it was said by Dr Mendonca that even if Mr Tonna was not bound by the Tenancy Agreement, there is no doubt that: Mr Tonna had occupied part of the Galston Property since February 2014; he had caused a third party (Mr Nielson) to occupy another part of the Galston Property (predominantly, the home on the Galston Property) since September 2014 and had collected money from Mr Nielson in return; he had not paid any money to Dr Mendonca since a payment made in May 2015, and had missed payments for March and April 2015; he had made alterations to the Galston Property without approval (in particular, he erected a large shed on the Galston Property which was used by Mr and Mrs Tonna to store various belongings); and that, in the absence of an agreement, he had no right to occupy the Galston Property.

My conclusions (see [564]-[574] of the December Judgment)

14. I found that there was an agreement in principle (albeit not a binding contract as a matter of law) between Mr and Mrs Tonna on the one hand and Dr Mendonca on the other (reached most likely at the 29 January 2014 meeting but certainly at the latest on 30 January 2014, when the parties took steps to implement that “in principle” agreement) to the effect of that contended for by Mr and Mrs Tonna; albeit that certain aspects of the “in principle” agreement were uncertain.

15. I found that, pursuant to that “in principle” agreement, Mr and Mrs Tonna made payments (until March 2015) directly to meet the mortgage repayments due in respect of the ANZ loan facility entered into by Dr Mendonca at the time of acquisition by her of the Galston Property; and that, as part of that “in principle” agreement, Mr and Mrs Tonna were to have the benefit of occupation of the Galston Property (their “new home”). Mr and Mrs Tonna did have the benefit of occupation of the Galston Property (albeit for some part of the time through a tenant, Mr Nielsen) after the completion of the sale transaction but, from May 2015, they had not paid the mortgage repayments (or rent, as Dr Mendonca says was required).

16. Up to the period when a request was made (with which Mr and Mrs Tonna were objectively able to proceed) for the transfer to Mr and Mrs Tonna of the Galston Property (which was not until December 2014), the payment by Mr and Mrs Tonna of amounts referable to the mortgage repayments was consistent with the “in principle” agreement. Thereafter, in circumstances where Dr Mendonca refused to recognise any beneficial interest of Mr and Mrs Tonna in the Galston Property and Mr and Mrs Tonna were in a position to proceed with the “in principle” agreement, I considered that it was appropriate that those repayments should be borne as between the parties in amounts proportionate to their beneficial interest in the Galston Property since the mortgage repayments (on the original loan facility amount; i.e., not including the increase in the borrowings that Dr Mendonca secured by that facility) would ultimately benefit both owners of the Galston Property.

17. Accordingly, I considered that Mr and Mrs Tonna should account to Dr Mendonca for their proportionate share of the repayments that were required to be made (and were paid by Dr Mendonca) for the original amount of the loan facility from the time that they ceased paying any such payments (in March 2015) and that Dr Mendonca should account for her proportionate share of the December 2014 to March 2015 mortgage repayments made by Mr and Mrs Tonna (thus, implicitly, that Dr Mendonca should be solely responsible for mortgage repayments referable to the increase in the borrowing).

14. Since it was contemplated at the relevant times that Mr and Mrs Tonna would have the benefit of occupation of the Galston Property after its acquisition by Dr Mendonca, I did not consider it appropriate to require Mr and Mrs Tonna to account for the rents obtained from Mr Nielsen during his occupation of part of the Galston Property. However, it was accepted by Mr and Mrs Tonna that (on the assumption that they succeeded in their principal claim) they ought to account for amounts paid by Dr Mendonca for items such as insurance premiums, Council rates and water rates in respect of the Galston Property.

15. As to the improvements or alterations effected by Mr and Mrs Tonna to the Galston Property, I considered the amount referable to the boundary fence to be nominal in the scheme of things. As to the new shed, although I accepted that this was erected without the consent of Dr Mendonca, I considered that it was by no means apparent that this was an alteration which was to the detriment of the Galston Property as a whole (in that it was by no means clear that DA approval could not retrospectively be obtained for the shed). Bearing in mind that Dr Mendonca was aware at some point of the requirement by the Council for DA approval, and chose to take no action in that regard, I considered that no adjustment should be made for that item.

16. As I indicated in the December Judgment, I considered that the appropriate time for the making of adjustments in relation to contributions made after the acquisition of the Galston Property (which did not count as part of the determination of the proportionate contributions to the purchase price) would be on any sale of the Galston Property (since I assumed that it was unlikely that the parties would wish to persist in co-ownership of this property). I invited submissions as to the appropriate way in which account should be made of those adjustments.

17. As to costs, I indicated that, on the usual “costs follow the event” basis, I would be inclined to order that Dr Mendonca pay Mr and Mrs Tonna’s costs of the Tonna Proceedings; and that Mr and Mrs Tonna pay the costs of Mr Mendonca and Business Services of those proceedings. However, I considered that it was possible that a special costs order might be sought by one or other of the parties (perhaps on the basis that there was a mixed outcome in the proceedings or, say, if it were to be argued that Dr Mendonca ought indemnify Mr and Mrs Tonna in respect of costs they would have to pay to Mr Mendonca and Business Services, given the role that Mr Mendonca played as Dr Mendonca’s agent in the arrangements that Dr Mendonca refused to honour and which led to these proceedings). Therefore, I reserved the question of costs of the Tonna Proceedings and made directions for the provision of brief written submissions with a view to dealing with this issue on the papers.

18. In relation to the costs of the Mendonca Proceedings, I was of the view that the costs of those proceedings (in which Dr Mendonca was unsuccessful) should be borne by Dr Mendonca.

19. Therefore, amongst other relief, I made a declaration that Dr Mendonca holds the legal title to the property referred to in these proceedings as the Galston Property on a resulting trust for herself and the plaintiffs in the proportions that reflect their respective contributions to the purchase price for the Galston Property (the precise proportions to be as specified in orders to be entered following determination of the legal costs referable to the conveyancing aspects of the contract for sale to the first defendant of the Galston Property); and orders for there to be an account as between the parties in respect of their proportionate shares of expenses in relation to the Galston Property. I made directions to enable those proportions to be agreed or determined.

20. On the publication of my reasons, a longer time was sought (and granted) for the taking of the steps contemplated in order to determine the precise proportions of the interests of the parties in the Galston Property and the relevant adjustments to be made. With some further time for reply submissions, the parties have now filed their submissions as to those matters (as relevantly summarised below) and hence orders can now be made finally disposing of the proceedings.

Issues as to proportionate interest in and contributions to Galston Property

25. I will deal first with the issues arising as to the calculation of the proportionate interests of the relevant parties in the Galston Property and as to the adjustments necessary to reflect the contributions made by each after the acquisition of the property, before turning to the issue of costs.

Mr and Mrs Tonna’s submissions as to the resulting trust/contribution orders

26. Mr and Mrs Tonna have calculated the parties’ proportionate contributions to the acquisition of the Galston Property as being 71% as to Dr Mendonca and 29% as to Mr and Mrs Tonna.

27. That calculation is on the basis that: the contribution by Dr Mendonca to the purchase price was $1.08 million (see [478] of the December Judgment); and the total of the contributions by Mr and Mrs Tonna to the acquisition of the Galston Property was $438,896. Mr and Mrs Tonna’s contribution comprises: first, the sums of $145,000 plus $225,000 (i.e., $370,000) (see at [478] of the December Judgment); second, the legal expenses relating to Dr Mendonca’s acquisition of the Galston Property (which Mr and Mrs Tonna calculate at $3,636) (see below); and, third, stamp duty in relation to the acquisition of the Galston Property by Dr Mendonca being $65,260 (but not the stamp duty and legal expenses in relation to the first contract of sale for the Galston Property that was entered into by Mr and Mrs Tonna as purchasers).

28. Of those calculations, the only substantive dispute is as to the second component (the legal expenses). (There is an arithmetical difference in the final calculations of the respective proportions but it arises because Mr and Mrs Tonna have rounded the fractions up or down, as the case may be, whereas Dr Mendonca has not.)

29. As to the legal expenses in question, there is no dispute that Matthews Folbigg acted for Mr and Mrs Tonna on the purchase of the Galston Property from Maha Budhi Company and acted for Dr Mendonca on the conveyance of the property to her, which was completed on 31 January 2014. Nor is there any dispute as to the fact that Mr and Mrs Tonna paid the costs of Matthew Folbigg for both conveyances. However, there is some difficulty in ascertaining precisely the quantum of costs referable to the conveyance of the Galston Property to Dr Mendonca separate from other legal costs.

30. Matthews Folbigg rendered a tax invoice dated 12 February 2014 to Mr and Mrs Tonna for work performed during the period from 31 December 2013 to 6 February 2014 for the total sum of $24,353.22 inclusive of GST. The work comprised by that tax invoice included the conveyance of the Galston Property to Dr Mendonca. However, the tax invoice is not itemised in a manner that enables the quantification of costs solely referable to the sale to Dr Mendonca. (It is not clear whether any attempt was made to clarify this with Matthews Folbigg.)

31. Mr and Mrs Tonna submit that a reliable indication of the costs solely referable to the work done on the conveyance of the Galston Property to Dr Mendonca can be found by reference to the costs charged by Matthews Folbigg for acting on the settlement of the sale of the Schofields Property, which was completed on 20 April 2015. On 20 April 2015, Matthews Folbigg rendered a tax invoice for their costs of acting in relation to that sale in the sum of $3,520 inclusive of GST plus disbursements of $116.00 plus GST (totalling $3,636 inclusive of GST).

32. Mr and Mrs Tonna have thus sought, in effect, an allowance for their payment of the conveyancing costs charged by Matthews Folbigg referable to the conveyance of Galston Property to Dr Mendonca assessing those in the sum of $3,636, inclusive of GST, on the basis that this is comparable to the costs of the Schofields Property conveyance.

33. On the basis that the total contributions by the parties to the acquisition of the Galston Property were $1,518,896 (Dr Mendonca’s contribution being $1.08 million and Mr and Mrs Tonna’s contribution being $438,896), Mr and Mrs Tonna have rounded up (or down, as the case may be) the proportionate contributions to 71% / 29%.

34. As to the proposed accounting for the proportionate share of mortgage repayments, insurance premiums, council rates, and water rates paid in respect of the Galston Property (see [565]-[568] of the December Judgment), Mr and Mrs Tonna say the following.

35. First, as to the mortgage repayments made by Mr and Mrs Tonna, between 17 February 2014 and 18 May 2015, Mr and Mrs Tonna made mortgage repayments in the total amount of $67,976.74 and they calculate Dr Mendonca’s proportionate share of this contribution ($67,976.74 x 71%) as being $48,263.48 (the exact amount, arithmetically speaking, is $48,263.4854; query whether it should be rounded up but Mr and Mrs Tonna do not suggest this).

36. Second, as to the mortgage repayments made by Dr Mendonca, assuming Dr Mendonca has met all mortgage repayments since April 2015, the total amount of mortgage repayments Dr Mendonca met from April 2015 to February 2020 is $366,028 (70 payments of $5,228.98); and Mr and Mrs Tonna’s proportionate share of this contribution ($366,028 x 29%) is calculated to be $106,148.12.

37. Third, as to expenses such as insurance premiums, Council rates and water rates paid in respect of the Galston Property, Mr and Mrs Tonnna calculate that they paid $1,076.94 for insurance with respect to the Galston Property between February 2014 to July 2014 (Dr Mendonca’s proportionate share of which ($1,076.94 x 71%) would be $764.62); and that Dr Mendonca paid: $37,876.95 for land tax, $3,936.68 for water rates, $4,641.13 for Council rates and $2,959.10 for insurance premiums, totalling $49,413.86 (Mr and Mrs Tonna’s proportionate share of which ($49,413.86 x 29%) would be $14,330.01).

38. Thus, Mr and Mrs Tonna say that, as at 28 February 2020, the proportionate adjustment for contributions made by them and by Dr Mendonca, respectively, in relation to mortgage repayments, and expenses relating to the Galston Property (land tax, Council rates, water rates and insurance premiums) is as follows: Dr Mendonca’s proportionate share of the contributions paid by Mr and Mrs Tonna is $49,028.10 (i.e., $48,263.48 + $764.62); and Mr and Mrs Tonna’s proportionate share of the contributions paid by Dr Mendonca is $120,478.13 (i.e., $106,148.12 + $14,330.01).

Dr Mendonca’s submissions as to the resulting trust/contribution orders

39. As to the proportionate shares held by the parties in respect of the Galston Property, as noted above, the dispute between the parties (apart from the fractional differences – on Mr and Mrs Tonna’s calculations, 71% / 29%; on Dr Mendonca’s calculations, 71.18% / 28.82%) is as to the calculation of the conveyancing costs referable to the transaction.

40. Dr Mendonca says that Mr and Mrs Tonna have provided no evidence in support of this amount. Dr Mendonca contends that the figure should be approximately $2,000, noting that (in May 2014) a Guide to the Cost of Home Purchase identified that conveyancing costs figures are approximately $700 to $2,500.

41. As to the order proposed by Mr and Mrs Tonna for the payment of the adjustment for mortgage repayment contributions, there is a disagreement between the parties as to the characterisation of the relevant order and the evidence (see below).

42. As to the account to be made by Mr and Mrs Tonna to Dr Mendonca for their proportionate share of the mortgage repayments referrable to the original amount advanced under the loan facility from February 2015 (taking into account that an amount was in fact paid by Mr and Mrs Tonna in May 2015 towards the mortgage repayments), Dr Mendonca calculates that, since February 2015, there have been 265 weeks of approximately $1,026.69 per week ($5,228.98/month x 12 months / 52 weeks), amounting to $317,178. Deducting the monthly payment in May 2015, on Dr Mendonca’s calculations the total mortgage repayments referable to the original mortgage total $311,949.02 (i.e., not the $366,028 that Mr and Mrs Tonna’s calculation allows) (and hence the figures put forward by Mr and Mrs Tonna’s calculations would incorrectly favour Dr Mendonca), of which it is said that a 28.82% share amounts to $90,097.12.

43. Pausing here, there does not seem to be any dispute as to the initial sum payable for the mortgage repayments (of $5,228.98 per month). If so, the average weekly repayment amount would seem to work out at $1,206.69 (not $1,026.69). If so, then the calculation by Dr Mendonca of $311,949.02 would seem to be wrong. In other words, 265 weeks at $1,206.69 per week would be $319,772.65; after deduction of the monthly May 2015 payment this would be $314,543.67 (of which a 71.18% share would be $223,892.18 on my calculations). It is not clear to me the reason for any such discrepancy.

44. As to the amount payable in respect of the adjustment for expenses in relation to the Galston Property, it appears that (apart from Mr and Mrs Tonna’s complaint that the amounts have not been verified – though I note that in reply submissions documents were provided to substantiate Dr Mendonca’s assertions as to the expense payments) the dispute between the parties is as to the fact that, since the hearing, Dr Mendonca has continued to meet these obligations.

45. Dr Mendonca says that, since the service of evidence (and since the conclusion of the hearing) she has incurred further costs in relation to the Galston Property. Dr Mendonca seeks an accounting and adjustment in relation to those payments. In particular, Dr Mendonca says that she has paid the following amounts: $16,127.32 for water; $16,578.34 for council rates; $84,053.59 in land tax; and $14,394.80 for insurance. Dr Mendonca has calculated Mr and Mrs Tonna’s share of those amounts (at 28.82%) and included those figures in her proposed expense order.

46. Further, Dr Mendonca says that from the amount for insurance there needs to be deducted from Mr and Mrs Tonna’s share what they have paid already for insurance with respect to the Galston Property. Dr Mendonca does not dispute that Mr and Mrs Tonna have paid $1,076.94 (of which she accepts that $766.56 is her share). Accordingly, it is said that the amount for insurance is further reduced to $3,382.02.

47. In Dr Mendonca’s reply submissions, on the issue of the conveyancing costs in respect of the contract of sale to her, complaint is made that the invoice dated 4 May 2015 in respect of the “costs of acting on your behalf in relation to your sale” of the Schofields property (to which Mr and Mrs Tonna refer in support of their argument as to the quantum of the conveyancing costs) is for an amount considerably higher than the “usual” costs of conveyancing and that, other than that description in the invoice, Mr and Mrs Tonna “reveal nothing about the legal services covered by that invoice”.

48. Dr Mendonca says that what is known about the sale of that property is that it involved a more complicated structure than the conveyance from Mr and Mrs Tonna to Dr Mendonca; noting, by way of example, that it involved the parties entering into a Deed of Call Option dated 4 March 2013 (see at [20] of the December Judgment), the removal of a caveat (see at [177] of the December Judgment), and the contract for sale. Dr Mendonca also points out that Mr and Mrs Tonna have not put forward any evidence that the “costs of acting on your behalf in relation to your sale” are limited to the conveyance and do not include services from Matthews Folbigg in respect of other matters.

49. As to the contribution sought by Mr and Mrs Tonna from Dr Mendonca towards all of the payments that they made, it is said that this is contrary to [566] and [567] of the December Judgment and order (3) at [574] of the December Judgment. Dr Mendonca says that the December Judgment (at [567]) makes plain that Dr Mendonca was to account for her contribution only to the payments made between December 2014 up to the final payment in February (i.e., Dr Mendonca says, contributing 71.18% of 3 payments of $5,228.98, being $11,165.96).

50. Dr Mendonca has attached to her submissions current bank statements in respect of the loan that it is said demonstrate that she has made all payments and that she has paid a total of $420,910.75 up until December 2019. It is said that it can be inferred that a further two payments were due, and were paid, in January and February 2020.

51. Dr Mendonca points out that the interest rate is variable and has changed over time. It is said that a total of $298,407.96 has been paid on the borrowed sum of $1.08 million for the period 17 February 2015 (the date after Mr and Mrs Tonna made the penultimate payment) to 28 February 2020 (and calculations of this by way of excel spreadsheets were provided). Dr Mendonca says that, of this amount, Mr and Mrs Tonna should contribute 28.82% (being $86,001.17 less $5,228.98, reflecting the payment they made in May 2015), i.e., $80,772.19. Further, it is submitted that the orders should reflect what was said at [567] of the December Judgment, namely that:

567.   Accordingly, I consider that Mr and Mrs Tonna should account to Dr Mendonca for their proportionate share of the repayments that were required to be made (and were paid by Dr Mendonca) for the original amount of the loan facility from the time that they ceased paying any such payments (which was in March 2015 when Mr Tonna’s evidence is that he was concerned that in light of the freezing orders that he understood had been obtained if he continued to make the repayments they would not “go to the property” – see T 348.19) and that Dr Mendonca should account for her proportionate share of the December 2014 – March 2015 mortgage repayments made by Mr and Mrs Tonna.

52. Dr Mendonca says that Mr and Mrs Tonna’s calculations contain an arithmetical error (that Dr Mendonca accepts is favourable to her) in the calculation of the number of months that have passed since April 2015, namely that (rather than 70 months) there have been 58 months and 27 days; and that this will impact on Mr and Mrs Tonna’s subsequent calculations (“[a]s will the fact that, as addressed in the attached, the loan changed to a variable rate and the parties were able to enjoy a lower interest rate”).

53. As to the suggestion that the contributions of Dr Mendonca should be capped at the documents that are in evidence, Dr Mendonca says that there is no reason to prevent the making of an order that reflects all outgoings that have been paid (amounting to $101,986.04, of which it is said that Mr and Mrs Tonna should contribute 28.82%).

54. Dr Mendonca says that, as at 28 February 2020, Dr Mendonca’s contribution is $298,407.96 for the mortgage less $5,228.98 being the payment Mr and Mrs Tonna made in May 2015 plus $101,986.04 for the payment of outgoings (namely, $400,394).

55. There is dispute between the parties as to whether (having regard to what I said at [570] of the December Judgment) there has been a determination (as such) that the appropriate time for the making of adjustments in relation to contributions made after the acquisition of the Galston Property will be on any sale of the Galston Property. Dr Mendonca accepts that if there has been such a determination then the court should not make the proposed Mortgage Order and Expense Order as propounded in her initial submissions at [4(b)] and [4(c)].

56. However, it is submitted that this does not affect the question of interest. It is submitted that there is no reason for Dr Mendonca to be out of pocket such a significant sum without interest (on Dr Mendonca’s case of approximately $77,000). It is said that at the time of any sale, an account should be had in respect of interest on the amounts spent by each party.

52. Assuming that Mr and Mrs Tonna are correct in reading the reasons as requiring that adjustments to contributions made after acquisition should occur on the (future) sale of the property, then Dr Mendonca says that the following declarations should be made in respect of the parties’ contributions:

1. Declare that as at 28 February 2020, the contribution paid by the plaintiffs in respect of mortgage repayments on the loan to acquire the Galston Property and insurance is in the total amount of $69,053.68.

2. Declare that as at 28 February 2020, the first defendant’s proportionate share of the contributions paid by the plaintiffs in respect of the Galston Property is $11,165.96.

3. Declare that as at 28 February 2020, the contribution paid by the first defendant in respect of mortgage repayments on the loan to acquire the Galston Property, tax, insurance premiums, Council rates and water rates, is in the total amount of $400,394.

4. Declare that as at 28 February 2020, the plaintiffs’ proportionate share of the contributions paid by the first defendant in respect of the Galston Property is $115,393.55.

5. Declare that the plaintiffs’ proportionate share of the contributions paid by the first defendant in respect of the Galston Property plus interest and the first defendant’s proportionate share of the contributions paid by the plaintiffs plus interest be set off against each other, without interest, and the difference paid on completion of any sale of the Galston Property.

Mr and Mrs Tonna’s reply submissions

58. As to the difference between the parties in relation to the contribution to be allowed in respect of conveyancing costs for the conveyance of the Galston Property to Dr Mendonca ($2,000 on Dr Mendonca’s figures, as against $3,636 claimed by Mr and Mrs Tonna), Mr and Mrs Tonna say that the evidence establishes that this was no ordinary conveyance and submits that the allowance and proportional calculation claimed by Mr and Mrs Tonna ought to be preferred.

59. As to the dispute as to when the difference between Mr and Mrs Tonna’s proportionate share of the mortgage contributions paid by Dr Mendonca up to and including February 2020 and Dr Mendonca’s proportionate share of the mortgage contributions paid by Mr and Mrs Tonna should now be paid (Dr Mendonca says this ought to be paid within 28 days), Mr and Mrs Tonna say that such an order ought not to be made having regard to the finding that the appropriate time for making adjustments in relation to contributions made after the acquisition of the Galston Property is likely to be on the sale of the Galston Property (see at [570] of the December Judgment).

60. Mr and Mrs Tonna note that the parties have not reached agreement as to the amount owing as at 28 February 2020 in respect of the mortgage repayments. In this regard it is said that: there is no dispute that the total amount of principal and interest mortgage repayments made by Mr and Mrs Tonna was $67,976.14; nor that as at 28 February 2020, Dr Mendonca has made 258 weeks of mortgage repayments (March 2015, April 2015, 17 May 2015 to 28 February 2020).

61. However, it is said that the verification and calculation of the mortgage repayments made by Dr Mendonca has been “complicated” by the fact that when Dr Mendonca borrowed a further $129,000 from ANZ Bank (in or about March 2015) the interest rate component of the new facility was variable as opposed to the previous fixed interest rate. Consequently, the interest component of repayments has changed according to variations in the interest rate. Mr and Mrs Tonna also note that it is contended by Dr Mendonca that the monthly principal and interest repayments made by her on the new facility have been above the minimum monthly repayments. Mr and Mrs Tonna say that, as a consequence, when calculating the principal and interest repayments made by Dr Mendonca referable to the original amount advanced for the acquisition of the Galston Property, it will be necessary to make adjustments for the variable interest rate and the principal and interest repayments made by Dr Mendonca referable to the $129,000 advanced to Dr Mendonca in or about March 2015.

62. For these reasons and having regard to the finding at [570] of the December Judgment, Mr and Mrs Tonna say that the order sought by Dr Mendonca for payment of the amount owing as at February 2020 in respect of mortgage repayments ought not to be made and they do not press the declarations they had sought in paragraphs 3 to 6 of the short minutes of order attached to their initial submissions on orders and costs. Rather, Mr and Mrs Tonna now seek a declaration to the effect set out in paragraph 7 of the short minutes of order attached to their initial submissions on orders and costs.

63. Insofar as Dr Mendonca claims an “Expense Order”, Mr and Mrs Tonna say that this is unnecessary having regard to the finding at [570] of the December Judgment. It is noted that the parties are required to make adjustments for water rates, Council rates, land tax and insurance paid in relation to the Galston Property and that these adjustments will be calculated on the finding of the parties’ proportionate contribution to the acquisition of the Galston Property.

64. As to the submission by Dr Mendonca to the effect that the plaintiffs’ success was based on a resulting trust claim that was expressly or implicitly abandoned, Mr and Mrs Tonna refer to their opening submissions filed 10 May 2019 (at [101]-[102]) and final submissions dated 3 June 2019 (at [147]-[152]) which they say advanced the claim of a resulting trust.

Determination

65. As this appears to have occasioned no little debate in the working out of the final orders between the parties, it is relevant here to reproduce what I said at [570] of the December Judgment:

570.   The appropriate time for the making of adjustments in relation to contributions made after the acquisition of the Galston Property (which do not count as part of the determination of the proportionate contributions to the purchase price) is likely to be on any sale of the Galston Property (since I assume that it is unlikely that the parties will wish to persist in co-ownership of this property). Therefore, I will make no order in that regard but will invite submissions as to the appropriate way in which account should be made of those adjustments.

66. I accept that, regrettably, there may have been some confusion occasioned by the way in which I expressed my views in the above paragraph of the December Judgment. I was not there making a finding as to the time at which such adjustments were to be made. Rather, I was expressing my view as to what was likely to be the appropriate time but inviting submissions in relation to the way in which account should be made of those adjustments, which to my mind would have included the time at which those adjustments should be made. In particular, I was aware that it was no more than an assumption on my part that the parties would not wish to persist in co-ownership of the Galston Property – that assumption deriving in part from the obvious breakdown in the relationship between Mr and Mrs Tonna and Mr Mendonca on the one hand (they no longer being his clients) and the impression I had gained of the intractability of Dr Mendonca in terms of accommodating the wishes of Mr and Mrs Tonna in relation to the property (and in declining to honour the agreement in principle that I found had been reached between the parties).

67. Since it is by no means clear what the parties intend in this regard, my view is that if there were to be a regime agreed between the parties for the sale of the Galston Property within a reasonable time frame (say within the next three to six months) then I would be minded to provide for the adjustment as between the parties of their post-acquisition contributions to the property to take place on the settlement of the sale of the property (but with an allowance for interest on those contributions to the date of the settlement of the sale of the property). However, if there is no agreed regime for the sale of the Galston Property within that time frame, then I see no reason why there should not be an adjustment now (by payment of the relevant adjustment amounts within 3 months). (It was precisely for the reason that I was not clear as to the course the parties would now wish to take in relation to the Galston Property that I did not make orders at the time in this regard.) Therefore, since the regime for submissions as to the appropriate way that adjustments should be made has proved to be unsuccessful in producing anything like the just, quick and cheap resolution of those issues, I will make orders expressed in the alternative to cater for the possible options.

68. As to whether the fractions should be rounded up or down in calculation of the parties’ proportionate interest, my view is that the fractions should be included (albeit only to two decimal points). A purchase price resulting trust is determined by reference to the proportionate contributions to the purchase price. I see no reason why it should be not as precisely calculated as possible. Therefore, I will make the declaration including fractional interests to two decimal points.

69. As to the vexed question of the difference (of the princely sum of around $1,673.00) in the amount to be allowed by way of the contribution by Mr and Mrs Tonna to the acquisition of the Galston Property in respect of the conveyancing costs (which on my calculations affects the overall proportionate interest calculations by somewhere in the order of .07% on the competing estimates), an issue that I would have thought could readily have been resolved by reference to the solicitors who carried out the conveyancing work, the difficulty I have is that it is by no means apparent that the conveyancing costs of the Schofields conveyance would be commensurate with those for the Galston Property conveyance. If the matter were to be determined on a question of onus I would not be satisfied that it has been established on the balance of probabilities how much was paid by Mr and Mrs Tonna for the conveyancing costs. It is clear, however, that Mr and Mrs Tonna paid whatever costs it was that were incurred in relation to that conveyance.

70. One solution to the problem would be to refer the Matthews Folbigg invoice to a costs assessor to determine what portion was referable to the conveyance as such. That, however, is likely to cost more than the disputed amount (even accepting that the significance of the disputed amount lies in the ultimate proportionate interest held by the respective parties in the Galston Property).

71. I have therefore concluded that the fairest way of dealing with this aspect in all the circumstances is to assess this component of the contributions by Mr and Mrs Tonna at $3,000, on the basis that the conveyance was not necessarily uncomplicated (not least because of the time that seems to have been spent in determining whether there could be a transfer by direction as opposed to a simultaneous on-sale) but that the Schofields Property conveyancing costs (while a useful guide) are not determinative. I will make such an order but if either party wishes to oppose such a course then I will vary the orders so that that issue will be referred to a costs assessor to report on the fees in fact referable to the Galston Property conveyance to Dr Mendonca (the costs of that costs assessor to be borne by the parties in a proportion to reflect the outcome of that determination); and for there to be a consequential variation in the other orders as required to reflect the change (if any) to the proportionate holdings in the property.

72. Taking $3,000 as the amount referable to the legal expenses for the conveyance to Dr Mendonca, the overall contribution of Mr and Mrs Tonna to the purchase would then be calculated at $438,260 (being $370,000 plus $65,260 plus $3,000), which is 28.8659% of the overall purchase cost. I will therefore declare the fractional interests as being 71.13% as to Dr Mendonca and 28.87% as to Mr and Mrs Tonna.

73. As to the manner in which account should be made for the complication that the mortgage repayments changed when Dr Mendonca increased the borrowing (an increase that was to her benefit alone but which it is said resulted in a change in the interest rates), in the absence of agreement between the parties as to how that is to be worked out I will refer this matter to an accounting expert for determination as to the amount of mortgage repayments referable to a loan in the lesser sum (i.e., without the increase in the facility) over the relevant period at the interest rate that was payable at the time of the original loan facility (with interest rate changes referable to the terms of that facility as if the facility amount had not increased). I would not make any adjustment for the benefit or otherwise from payment down of the principal more quickly than might have been required under the terms of the original facility (ultimately the position taken by Dr Mendonca in that regard was without consultation with Mr and Mrs Tonna and without acknowledging their interest in the property). I will frame the orders so as to permit the parties a final opportunity to sort out their differences in a sensible fashion before the costs of such an accounting expert are incurred by reason of such a referral.

74. As to the land tax, water rates, Council rates and insurance premiums, the documents provided with Dr Mendonca’s reply submissions would seem to substantiate her claim to have paid those amounts. In any event, Mr and Mrs Tonna no longer press for declarations as to those amounts.

Costs

75. Turning then to the costs of the respective proceedings, the parties’ submissions are as follows.

Mr and Mrs Tonna’s submissions as to costs

76. As to the Tonna Proceedings, Mr and Mrs Tonna seek costs orders that reflect my preliminary view (see at [571] of the December Judgment), namely that Dr Mendonca should pay their costs of the Tonna Proceedings. In relation to Mr Mendonca and his company, against whom Mr and Mrs Tonna were unsuccessful in the proceedings, Mr and Mrs Tonna seek either an order that Dr Mendonca pay Mr Mendonca’s costs (known as a Sanderson order), or an order that they (Mr and Mrs Tonna) pay the costs of Mr Mendonca and his company and that Dr Mendonca pay Mr and Mrs Tonna’s costs including the costs that Mr and Mrs Tonna are ordered to pay to Mr Mendonca and his company (known as a Bullock order).

77. As to costs generally, it is noted (and the defendants do not dispute this) that the usual order is that costs follow the event and that ordinarily costs of the proceedings will be awarded to a successful party without attempting to differentiate between the issues on which the party succeeded and any issues on which the party failed (referring to Waters v PC Henderson (Aust) Pty Ltd [1994] NSWCA 338 (Waters v PC Henderson) at 2-3; Alltrans Express Ltd v CVA Holdings Ltd [1984] 1 WLR 394; 1 All ER 685 at 690-2; and Sabah Yazgi v Permanent Custodians Ltd (No 2) [2007] NSWCA 306 (Yazgi) at [25]).

78. Mr and Mrs Tonna say that, although there were multiple issues in the present case, none of the claims they made was inappropriately brought and there was no issue that unnecessarily protracted the trial.

79. In relation to the claims against Dr Mendonca, Mr and Mrs Tonna say that the issues that arose were all issues that were related, reasonably arguable, and did not unnecessarily protract the trial. These issues were summarised as being: whether there was an agency relationship; whether there was a binding trust agreement and, if so, whether it was capable of being specifically performed; whether the Galston Property was held on a resulting trust; whether Dr Mendonca was in breach of a fiduciary duty owed by her; and what relief should be granted.

80. Mr and Mrs Tonna say that most of the time at the trial was spent on the cross examination of themselves and of Dr Mendonca. It is submitted that, as resulting trusts are “intent enforcing”, cross examination of those parties would not have been materially altered if the relief claimed had been confined to seeking a declaration of a resulting trust arising from the parties’ proportionate contribution to the acquisition of the Galston Property.

81. Mr and Mrs Tonna accept that separate costs orders may be made in relation to issues that a party unreasonably pursued (see Oshlack v Richmond River Council (1998) 193 CLR 72 (Oshlack) at 122, per Kirby J), or where a party behaved improperly in the conduct of the proceedings (see Jamal v Secretary Department of Health (1988) 14 NSWLR 252 at 271, per Mahoney JA). However, (as noted above) they say that in the present case no issue was unreasonably pursued and that they properly conducted their case and have at all times acted reasonably.

82. Reliance is placed by Mr and Mrs Tonna on the making of various offers of settlement by Mr and Mrs Tonna (by letters dated 20 May 2016, 27 July 2018, and 9 September 2016), each of which was rejected; their reliance on those offers not being in support of any indemnity costs application (say, arising from the failure to accept the offers under the principle in Calderbank v Calderbank [1975] 3 WLR 586; 3 All ER 333 (Calderbank v Calderbank)) but because they say that the reasonableness of the offers and failure of Dr Mendonca to accept those offers is relevant to the discretion in relation to the cost order sought by Mr and Mrs Tonna against Dr Mendonca (and the Sanderson or Bullock order sought in relation to the costs of Mr Mendonca and his company, as to which see below).

83. As to a Sanderson order (so-called by reference to the orders made in Sanderson v Blyth Theatre Co [1903] 2 KB 533 at 542-543, per Stirling LJ, Vaughan Williams LJ agreeing), namely an order that Dr Mendonca pay Mr Mendonca’s costs, it is noted by Mr and Mrs Tonna that such an order may be made where more than one defendant is sued but the plaintiff is unsuccessful against one or more of those defendants. In those circumstances an order may be made that that the unsuccessful defendant(s) directly pay to the successful defendant(s) its or their costs. As to a Bullock order (so-called by reference to the orders made in Bullock v London General Omnibus Co [1907] 1 KB 264 at 269, per Collins MR, Cozens-Hardy and Farwell LLJ agreeing at 272, 273 respectively), namely an order requiring the unsuccessful defendant(s) to pay to the plaintiff the costs the plaintiff is ordered to pay to the successful defendant(s), similar considerations arise.

84. Mr and Mrs Tonna accept that the overriding consideration for the exercise of the discretion to make either a Sanderson or Bullock order is whether, as between the contending parties, it is proper or fair to order the particular unsuccessful party to pay the costs involved (reference being made to Johnson’s Tyne Foundry Pty Ltd v Maffra Corp (1948) 77 CLR 544 at 572 per Williams J (Johnson’s v Maffra); [1948] HCA 46; Permanent Trustee Co Ltd v Keogh [1999] NSWSC 883 at [11], per Davies AJ; and Sved v Council of the Municipality of Woollahra (1998) NSW Conv R 55-842 (Sved) at 56-605, per Giles CJ Comm Div); and that, in determining whether it is fair to make such an order, two issues arise.

85. First, it must have been reasonable for the plaintiff to have brought the proceedings against the successful defendant (citing Gould v Vaggelas (1985) 157 CLR 215 (Gould v Vaggelas) at 230, per Gibbs CJ; at 260, per Brennan J; [1985] HCA 75; Lackersteen v Jones (No 2) (1988) 93 FLR 442 (Lackersteen v Jones) at 449, per Asche CJ; [1988] NTSC 72; Stevedoring Industry Finance Committee v Gibson (2000) 20 NSWCCR 417; [2000] NSWCA 179 (Stevedoring Industry v Gibson) at [128], per Mason P (Stein JA and Heydon JA, as his Honour then was, agreeing)). Second, there must be some conduct on the part of the unsuccessful defendant which would make it fair to impose liability on it for the costs of the successful defendant(s) (see Gould v Vaggelas at 230, per Gibbs CJ; at 247, per Wilson J (Murphy J agreeing)).

76. As to the first of those considerations, Mr and Mrs Tonna argue that it was reasonable for them to bring proceedings against Mr Mendonca and his company, noting that Mr Mendonca wholly controlled and provided services through his company; that Mr Mendonca was the agent for both Dr Mendonca and Mr and Mrs Tonna; and that Mr Mendonca introduced Dr Mendonca to the property, arranged finance, instructed the solicitors, and was instrumental in effecting the contributions by the parties towards the acquisition of the Galston Property and completion of the conveyances.

77. As to the second of those considerations, Mr and Mrs Tonna note that Dr Mendonca denied that her husband had acted as her agent; that Dr Mendonca pleaded that if her husband engaged in the conduct alleged, he did so without her instructions or authority (see Dr Mendonca’s amended defence filed 24 May 2019 at [38](a)(viii), [42](a), [43](d), [49](a), [50](b), [54](b)); that Dr Mendonca denied Mr and Mrs Tonna made any contributions to the Galston Property; that Dr Mendonca alleged the payments made by Mr and Mrs Tonna were for rent; and that Dr Mendonca encumbered the property with further borrowings unrelated to the acquisition of the Galston Property. Further, it is said that Dr Mendonca was not candid in her evidence about the fact that she had borrowed further moneys (unconnected with the acquisition, maintenance and preservation of the property) which were secured by the mortgage, as she did not disclose that she had borrowed further moneys secured by the mortgage and Dr Mendonca gave the following evidence in her affidavit affirmed 19 March 2018 under the heading “Change of Repayments” in relation to the increased liability under the mortgage (at [77]-[79]):

77.   In or about late 2014, I decided to increase my repayments on the ANZ loan for Property.

78.   On or about 11 December 2014, I received approval and notice of change to repayments from ANZ Bank. A copy of this letter is at pages 208-217 of Exhibit ‘RMM1’. From that date onwards, I made increased mortgage payments in relation to the loan on the Property.

79.   The rent that Mark and Lorraine were paying in relation to the Property did not change after my mortgage repayments increased.

88. Mr and Mrs Tonna say that this evidence was misleading because Dr Mendonca did not disclose that the reason the mortgage repayments increased was because she borrowed further moneys from ANZ Bank.

89. Mr and Mrs Tonna say as follows as to the considerations recognised as relevant to the exercise of the discretion to make such an order (see Stevedoring Industry v Gibson, where Mason P (Stein JA and Heydon JA, as his Honour then was, agreeing) at [128] adopted those set out by Asche CJ in Lackersteen v Jones), namely:

1.   It must be seen to have been reasonable and proper for the plaintiff to have sued the successful defendant.

2.   The causes of action against two or more defendants need not be the same but they must be substantially connected or dependent the one on the other.

3.   While it is essential to find that the plaintiff has acted reasonably and properly that alone is not sufficient. The court must find something in the conduct of the unsuccessful defendant which makes it a proper exercise of discretion.

4.   Finally, in considering whether to make such an order, the court should, in the exercise of its discretion balance overall two considerations of policy: the first, that an unnecessary multiplicity of actions should not be forced on litigants, so that a plaintiff who acts reasonably in joining two or more defendants should not be penalised or lose the fruits of his victory in costs on the basis that he should have either elected or taken separate actions; secondly, that an unsuccessful defendant should not have to pay more than one set of costs merely because he is unsuccessful.

90. As to the first, that in the circumstances of this case it was reasonable and proper for Mr and Mr Tonna to have sued Mr Mendonca and his company in circumstances where: Mr Mendonca had proposed the agreement whereby Dr Mendonca would hold the legal title on trust for Mr and Mrs Tonna and re-convey the property when they had completed the sale of their Schofields Property; an “in principle” agreement was reached; and Mr and Mrs Tonna then invested considerable money towards the acquisition and development of the Galston Property, including making payments in accordance with the “in principle” agreement (only for them to be denied any interest in the property and for Mr Mendonca to deny that he had acted as their agent).

91. As to the second, Mr and Mrs Tonna say that the causes of action against Dr Mendonca and Mr Mendonca and his company were substantially connected. As to the third, Mr and Mrs Tonna say that the conduct of Dr Mendonca, including denying the agency of her husband, makes it proper to exercise the discretion.

92. As to the fourth, it is said that it would be unreasonable to have expected Mr and Mrs Tonna to await the outcome of this litigation to determine if they ought to bring a claim against Mr Mendonca and his company, particularly in circumstances where Dr Mendonca and Mr Mendonca are married, living together, and denied an agency relationship. In this context it is noted that, in Sved, Giles CJ Comm Div, as his Honour then was, said (at 56,605-56,606):

... reasonableness as between the plaintiff and the unsuccessful defendant will normally be demonstrated by some conduct of the unsuccessful defendant which made it proper that the successful defendant be joined or that the unsuccessful defendant should bear the costs of the successful defendant. Such conduct was found in Lackersteen v Jones (No 2) in the unsuccessful defendant denying the authority of its agent whereby the plaintiff joined the agent who became the successful defendant, and more widely has been found in the unsuccessful defendant telling the plaintiff in one way or another that it should look to the successful defendant for its remedy. [Citations omitted]

93. It is said that Dr Mendonca, through her intransigence in maintaining her denial of her husband’s role and contributions made by Mr and Mrs Tonna towards the acquisition of the Galston Property, gave Mr and Mrs Tonna cause to join Mr Mendonca and his company to the proceedings (referring to Milne v Attorney-General (Tas) (1956) 95 CLR 460 (Milne)).

94. Mr and Mrs Tonna say that the overriding consideration for the exercise of the discretion to make either a Bullock or a Sanderson order is whether, as between the contending parties, it is proper to order the particular unsuccessful party to pay the costs involved. They maintain, for the reasons set out above, that the joinder of the successful defendants (i.e., Mr Mendonca and his company) in the present case was reasonable, and that the conduct of unsuccessful defendant (Dr Mendonca) contributed to the joinder of the successful defendant (referring to Gould v Vaggelas at 229, per Gibbs CJ; at 247, per Wilson J). Hence Mr and Mrs Tonna seek a Sanderson or Bullock order as set out in their proposed short minutes of order.

95. Mr and Mrs Tonna resist the application by Mr Mendonca and Business Services for their costs to be paid on an indemnity basis based on the non-acceptance by Mr and Mrs Tonna of various offers of compromise (see at [105] below).

96. Mr and Mrs Tonna note that the basic purpose of the offer of compromise rules (rr 20.26, 42.13-42.17 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR)) is to encourage compromise of proceedings; and that, consistent with this purpose, both under the present rules and under the general law, any offer ought to involve an actual compromise and a “real and genuine element of compromise” (referring to Hancock v Arnold (No 2) [2009] NSWCA 19 (Hancock v Arnold) at [23]-[24], per Ipp, McColl, and Basten JJA; Fabre v Lui (No 2) [2015] NSWCA 312 (Fabre v Lui) at [6], per Basten, Macfarlan, and Meagher JJA). It is noted that a defendant’s offer to contribute only a trivial proportion of the claim, or to bear its own costs, may lack the element of compromise necessary to comply with r 20.26 of the UCPR (referring to Leichhardt Municipal Council v Green [2004] NSWCA 341 (Leichhardt Municipal Council) at [31]-[39], per Santow JA; Herning v GWS Machinery Pty Ltd (No 2) [2005] NSWCA 375 (Herning) at [4]-[5], per Handley, Beazley, and Basten JJA). Reference is made to Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 (Regency Media) in this regard (at [25], per Spigelman CJ, Beazley and McColl JJA) as to the considerable body of authority that an offer of compromise under r 20.26 of the UCPR must be a real and genuine offer, if an order for indemnity costs is to be made pursuant to rr 42.14, 42.15 or 42.15A of the UCPR. Reference is also made to Anderson Group Pty Ltd v Tynan Motors Pty Ltd (No 2) (2006) 67 NSWLR 706; [2006] NSWCA 120 (Anderson Group v Tynan Motors) at [8], per Basten JA, with Santow JA and Young CJ in Eq agreeing, and the authorities referred to therein.

97. Mr and Mrs Tonna point out that an offer that is almost a mere invitation for the offeree to surrender may involve a sufficient element of compromise but that it is unlikely to do so unless the claim is particularly lacking in merit (citing Regency Media at [31], per Spigelman CJ, Beazley, and McColl JJA). It is submitted that (as Basten JA suggested in Robb Evans of Robb Evans & Associates v European Bank Ltd (No 2) [2009] NSWCA 170 (Robb Evans) at [20]), the claim or defence would have to approach something of the character of being frivolous or vexatious for that to be the case (reference also being made in that context to Hancock v Arnold at [17], per Ipp, McColl, and Basten JJA). It is submitted that, if it were otherwise, the public policy rationale to encourage settlement would rarely be served in an “all or nothing” case.

98. Mr and Mrs Tonna submit that the present proceedings were not of an “all or nothing” character; and that the claims made against Mr Mendonca and his company were narrow and reasonably arguable. It is noted that Mr Mendonca pleaded that he did not act as the agent for Mr and Mrs Tonna at any time “in relation to the purchase and/or finance of the Galston Property”, and that “he merely acted as a liaison or ‘spokesperson’ between the Plaintiffs, specifically Mark Tonna, and other third parties, in relation to the Galston Property” (see Mr Mendonca’s amended defence filed 18 September 2018, at [8]). Mr Mendonca also denied that he owed a duty of care to Mr and Mrs Tonna other than in relation to the preparation of personal income tax returns and business activity statements for Mr Tonna’s business (see Mr Mendonca’s amended defence filed 18 September 2018 at [16]). In the December Judgment, I concluded otherwise on each of those matters.

99. It is submitted by Mr and Mrs Tonna that the factors relevant to determining whether the rejection of an offer was “unreasonable” are wider than mere satisfaction that the final judgment is more favourable than the proffered settlement, noting that relevant additional factors include the stage of the proceedings at the time the offer was made (citing Ritchie's Uniform Civil Procedure NSW at [42.13.27]). Mr and Mrs Tonna point out that the first offer of compromise dated 18 April 2017 was served before Mr Mendonca and his company had filed and served their defence (which was not filed until 11 July 2017); and that it was served before Mr Mendonca had served his affidavit made 8 March 2018 (which was not ultimately read). Accordingly, it is said that at the time of the first offer of compromise, Mr and Mrs Tonna’s claim had not been contradicted in pleadings or evidence. In those circumstances, it is said that it cannot have been unreasonable not to accept the first offer of compromise and that no order for costs ought to be made based on the non-acceptance of this offer.

100. Furthermore, it is said that the three offers of compromise required Mr and Mrs Tonna to “walk away” and did not represent a genuine compromise on the specific facts and circumstances of this case. Reference is made to Regency Media at [28]-[30] (per Spigelman CJ, Beazley JA, as Her Excellency then was, and McColl JA) where it was said that where an element of compromise is absent the offer will be considered “an invitation to surrender, rather than any form of commercial compromise”, and that “[t]he offer can be accurately described as derisory”. Mr and Mrs Tonna say that the offers of compromise served in this case contained no real element of compromise; that, by implication, they were designed to trigger the costs sanctions; and that they ought not to be treated as valid offers of compromise (citing Leichhardt Municipal Council).

101. In the circumstances, it is submitted that there should be no order for indemnity costs in favour of Mr Mendonca and his company.

Mr Mendonca and Business Services’ submissions on costs

102. Mr Mendonca and Business Services seek orders in their favour as to the costs in the proceedings to which they were joined as defendants; namely, that Mr and Mrs Tonna pay their costs, to be assessed on the ordinary basis up to and including 17 April 2017 (or alternatively 3 August 2018, or alternatively 19 September 2018), and thereafter on the indemnity basis. The making of a Bullock order (as foreshadowed at [572] of the December Judgment) or a Sanderson order is opposed by Mr Mendonca and Business Services.

103. Mr Mendonca and Business Services point to the usual rule that costs follow the event unless it appears to the court that some other order should be made (r 42.1 of the UCPR) and say that by far the most important factor guiding the exercise of the costs discretion is the result of the litigation (citing Oshlack at 96, per McHugh J).

104. Mr Mendonca and Business Services emphasise that they were “completely successful” in this litigation and that the claims against each of them were dismissed in their entirety. It is submitted that the usual rule should be applied and that there are no special circumstances justifying any other result.

105. However, they go further (as adverted to above) and contend that the costs order should be for (or include) costs on an indemnity basis, relying on the service of the following offers of compromise: a joint offer of compromise (dated 18 April 2017) on terms that there be a verdict for Mr Mendonca and Business Services and that the parties bear their own costs; separate offers of compromise served on 3 August 2018 by each of Mr Mendonca and Business Services on terms that there be judgment for each (as applicable), with no order as to costs; and separate offers of compromise served on 19 September 2018 by each of Mr Mendonca and Business Services, again in identical terms, that there be judgment for the said defendant with no order as to costs.

106. It is submitted that each of the above offers of compromise complied with the requirements of r 20.26 of the UCPR; in that each offer: stated that it related to the whole of the plaintiffs’ claim (see r 20.26(2)(a)(i) of the UCPR); identified the proposed orders for disposal of the claim (see r 20.26(2)(a)(ii) of the UCPR); proposed that there be judgment for Mr Mendonca and/or Business Services with no order as to costs (r 20.26(3)(a) of the UCPR); stated that it was made under the UCPR (r 20.26(2)(d) of the UCPR); and specified the period of time within which the offer was open for acceptance (r 20.26(2)(f) of the UCPR), that period being 28 days from the date on which the offer was made (see r 20.26(5)(a) of the UCPR).

107. It is not disputed that Mr and Mrs Tonna did not accept any of the offers; nor that, in the result, each of Mr Mendonca and Business Services ultimately obtained orders that the claims against them be dismissed that were no less favourable to them than the terms of each offer. Accordingly, it is submitted by Mr Mendonca and Business Services that r 42.15A of the UCPR is engaged, such that, in accordance with that rule Mr Mendonca and Business Services are entitled to an order against Mr and Mrs Tonna for their costs in respect of the claim, to be assessed on the ordinary basis up to the day on which the offer was made, and that Mr Mendonca and Business Services are entitled to an order against Mr and Mrs Tonna for their costs in respect of the claim, assessed on an indemnity basis, as from the beginning of the day following the day on which the offer was made. Mr Mendonca and Business Services say that there are no reasons why the Court should “otherwise order”.

108. Insofar as I raised the possibility (at [572] of the December Judgment) of a Bullock order being made in Mr and Mrs Tonna’s favour, an order which it is conceded by Mr Mendonca and Business Services is one that would most directly affect Dr Mendonca, the position of Mr Mendonca and Business Services is nevertheless that they would oppose the making of any such order for the following reasons.

109. First, it is said that, as successful defendants, Mr Mendonca and Business Services are entitled to have their costs paid by the unsuccessful plaintiffs unless it appears to the court that some other order should be made as to the whole or part of those costs (citing r 42.1 of the UCPR and Willett v Thomas [2012] NSWCA 97 (Willett) at [208], per Macfarlan JA).

110. Second, referring to the principles which govern whether a Bullock or Sanderson order should be made as articulated in Gould v Vagellas at 229-230 (per Gibbs CJ) (summarised in Council of the City of Liverpool v Turano (No 2) [2009] NSWCA 176 (Turano) at [16], per Beazley, Hodgson, and McColl JJA; and as reiterated in Willett at [210]-[212], per Macfarlan JA), Mr Mendonca and Business Services argue that the conduct of the unsuccessful defendant (in this case, Dr Mendonca) cannot comprise the conduct of the unsuccessful defendant that gives rise to the unsuccessful defendant’s liability. It is said that, as Macfarlan JA identified in Willett at [210], if that were the case, then a Bullock or Sanderson order would be made in most, if not all, cases in which a plaintiff had acted reasonably (although unsuccessfully) in suing another defendant.

111. Reference is made to the observation of Gibbs CJ in Gould v Vagellas at 229 (cited with approval in Willett at [211]), that “if nothing that the unsuccessful defendant has said or done has led the plaintiff to sue the other defendant, who ultimately was held not to be liable, it is difficult to see any reason why the unsuccessful defendant should be required to pay for the plaintiff’s error or over-caution”.

112. Mr Mendonca and Business Services submit that something more is required (than simply that the unsuccessful defendant’s conduct that gives rise to the liability), such as a defendant telling a plaintiff that it is suing the wrong party and giving reasons why the plaintiffs should sue another party (referring to the example given in Willett at [212]), or a defendant creating circumstances of uncertainty as to who was the proper defendant (referring to Roads and Traffic Authority of NSW v Palmer (No 2) [2005] NSWCA 140 (Roads and Traffic Authority v Palmer) at [35], per Giles JA, Spigelman CJ and Handley JA agreeing).

113. Mr Mendonca and Business Services submit that, in the present case, neither of the two requirements for a Bullock or Sanderson order is satisfied.

114. In respect of the first requirement, it is submitted that there are fundamental reasons why it was neither reasonable nor necessary for Mr and Mrs Tonna to have joined Mr Mendonca and Business Services to the proceedings; those reasons including the following.

115. First, that joining Mr Mendonca and Business Services was not necessary for the prosecution of Mr and Mrs Tonna’s claims in respect of the alleged agreement to hold property on trust. It is noted that Mr Mendonca was never alleged to have been a party to that agreement; rather, he was said to have been the agent for both parties in its formation (see the further amended statement of claim at [38]). It is said that, although Dr Mendonca denied that Mr Mendonca was her agent, Mr Mendonca was not sued on the basis that if that contention were correct, then he was liable to Mr and Mrs Tonna for misrepresenting his authority (cf Johnson’s v Maffra at 572-573, per Williams J, and the cases there cited, where alternative claims against the agent for damages for breach of warranty of authority were the basis for making a Bullock order). It is said that in this case the claims against Mr Mendonca and Business Services were predicated on the existence of Mr Mendonca acting as the agent for both parties, so placing himself in a position of conflict by preferring the interests of his wife (Dr Mendonca) over the interests of Mr and Mrs Tonna (referring to [343], [508] of the December Judgment).

128. It is said that the reason for Mr and Mrs Tonna bringing those claims have nothing to do with Dr Mendonca; and that those claims failed for reasons entirely unconnected to Dr Mendonca (it being the case that Mr and Mrs Tonna received advice from both their lawyers and from Mr Mendonca which they ignored – see [545], [548] of the December Judgment).

129. It is noted that a third basis for the alleged breach of duty was advanced by Mr and Mrs Tonna against Mr Mendonca and Business Services, namely that Mr Mendonca did not direct Dr Mendonca to “re-transfer the Galston Property” in accordance with the express agreement pleaded at [38] in the amended statement of claim filed 31 March 2017 (see [3] of the December Judgment), but that there was no need to join Mr Mendonca and Business Services in order for Mr and Mrs Tonna to be successful on that issue as against Dr Mendonca (on the basis that either there was, or was not, an agreement that had been breached by Dr Mendonca), noting that the ultimate finding was that there was no such binding and enforceable agreement (see [435] of the December Judgment).

130. In response to the reliance by Mr and Mrs Tonna in their submissions on offers that Mr and Mrs Tonna had made during the course of the proceedings, Dr Mendonca says that these offers show that Mr and Mrs Tonna’s claim was for complete (100%) ownership of the Galston Property. It is noted that had Dr Mendonca accepted the offers she would have been far worse off than the outcome in the proceedings (and, it is said, even worse off than the outcome foreshadowed in the express agreement pleaded by Mr and Mrs Tonna, which envisaged them making all payments associated with the Galston Property).

131. As to the first of those offers (dated 4 May 2016), Dr Mendonca notes that it identified the basis of Mr and Mrs Tonna’s claim as one of an “express” trust, and contended that the assertion that Dr Mendonca was the beneficial owner is “simply untrue” and that Mr and Mrs Tonna “are beneficial owners”. It is noted that the first offer also referred to Mr and Mrs Tonna having paid “the amounts required for repayment under the facility granted by ANZ” and “all monies associated with the purchase”, whereas findings to that effect have not been made. Dr Mendonca points out that, at the time of this first offer, Dr Mendonca had met all of the mortgage payments for just under a year on the $1.08 million loan as well as approximately $18,000 in various other outgoings that had not been paid by Mr and Mrs Tonna. Dr Mendonca also points out that the only benefit she was to receive in the first offer was a payment of $10,000 “in recognition of the assistance you provided in securing the Galston property on their behalf at a time when they were unable to obtain appropriate finance”.

132. As to the second of those offers (dated 9 September 2016), Dr Mendonca notes that this also puts forward a payment of $10,000 in return for the transfer of the Galston Property; and that at that time she had paid all the mortgage payments on the $1.08 million loan for over a year as well as $23,800 for various other outgoings. It is noted that Mr and Mrs Tonna made no offer in this letter to meet these payments.

133. As to the third of those offers (dated 27 July 2018), this was for a payment to Dr Mendonca of $1.33 million in return for a transfer of the property and to remove the mortgage. Mr and Mrs Tonna notes that the mortgage came into existence to secure the loan to the first defendant of $1.08 million; and that at the time of the third offer the mortgage payments that had been made by Dr Mendonca amounted to about $150,000 and that she had paid outgoings of approximately $59,000. Dr Mendonca says that Mr and Mrs Tonna knew that they had not been meeting these payments and that it can safely be inferred that they knew such expenses, like mortgage payments, Council rates and water rates were being met. Dr Mendonca says that if she had accepted this offer she would have recovered her expenses but little more and would have held no interest in the Galston Property (which shortly later was valued by Mr and Mrs Tonna’s expert (referring to Exhibit AF) at $2.3 million (71% of which is $1.633 million).

134. Dr Mendonca says that none of the offers put forward by Mr and Mrs Tonna can be said to reflect an acknowledgement of a resulting trust, or that Dr Mendonca had any interest in the property based on contributions by her. Dr Mendonca points out that the first two offers did not reflect Mr and Mrs Tonna’s own argument as to an express trust under which, on their case, they were to meet all payments.

135. It is submitted that at all times, Mr and Mrs Tonna “wanted the complete transfer to them of the entire property and they wanted [Dr Mendonca] to meet the majority of the expenses as well”.

136. As to the submissions made by Mr and Mrs Tonna in support of a Sanderson or Bullock order, Dr Mendonca says that a proper basis for the making of such an order has not been identified.

137. In particular, Dr Mendonca points to the requirement for the making of such an order that “the conduct of the unsuccessful defendant must have contributed to the joinder of the successful defendant” (Gould v Vagellas at 229, 247). Insofar as the matters relied upon by Mr and Mrs Tonna in their submissions occurred after Mr and Mrs Tonna had joined Mr Mendonca and Business Services to the proceedings, it is said that none of those matters could be said to have contributed to the joinder of Mr Mendonca and Business Services.

138. Further, Dr Mendonca says the following. First (as is not and cannot be disputed), that Mr and Mrs Tonna’s case against Mr Mendonca and Business Services was substantially narrowed in the course of the hearing (see [541] of the December Judgment). Dr Mendonca says that there is no explanation as to why she should pay the costs incurred by Mr Mendonca and Business Services to meet the claims abandoned by Mr and Mrs Tonna. Second, that Mr and Mrs Tonna’s case against Mr Mendonca and Business Services was not entirely dependent upon a relationship of agency between the defendants, but a relationship of agency between Mr and Mrs Tonna and Mr Mendonca and Business Services (which was admitted by Mr Mendonca and Business Services). In this regard, it is noted that Mr Mendonca and Business Services were sued by reason of failing properly to advise Mr and Mrs Tonna at the time they entered into an unconditional contract (see [545] of the December Judgment) and that Mr and Mrs Tonna did not assert that there was a relevant relationship of agency between the defendants at this time.

139. Third, that the two aspects of Mr and Mrs Tonna’s case against Mr Mendonca and Business Services that did involve a relationship of agency between the defendants (namely the conflict of interest claim and the claim as to the failure to direct Dr Mendonca to transfer the Galston Property to Mr and Mrs Tonna) failed for reasons “that must have been abundantly clear” to Mr and Mrs Tonna before they even commenced proceedings (referring to [546]-[547] of the December Judgment).

140. Fourth, that Mr and Mrs Tonna’s success against Dr Mendonca in respect of agency led nowhere because of the finding that there was not an express agreement. It is noted that the case that Mr and Mrs Tonna succeeded on, being a resulting trust, was based on contributions they made to the purchase price of the Galston Property.

141. Dr Mendonca notes that she did not deny that Mr and Mrs Tonna had paid money; rather, what she denied was that the money was a contribution to the purchase price as distinct from a loan from them to her which she was willing to repay. It is accepted that the argument of a loan was rejected by me (see [476] of the December Judgment). Dr Mendonca says that it was Mr and Mrs Tonna’s position that it was only they that made any contribution towards the purchase price, a position that was rejected (referring to the amended statement of claim at [40]-[42] and [40] of the plaintiffs’ outline of submissions filed 10 May 2019).

142. Finally, it is said that Mr and Mrs Tonna’s submission as to the manner in which Dr Mendonca gave evidence is irrelevant; since the basis for making costs orders is not as a form of punishment.

143. Dr Mendonca says that Milne does not stand for the proposition contended for in Mr and Mrs Tonna’s submissions dated 28 February 2020 at [42]. Dr Mendonca says that Milne is not a case concerned with a Bullock or Sanderson order; rather it is a case in which the High Court overturned a decision made in the Supreme Court of Tasmania which had refused a successful defendant its costs in a piece of litigation in which the plaintiff had failed (that refusal being on the basis that the defendant had relied upon two defences on which it did not succeed). It is said that there is no evidence to support the fact asserted by Mr and Mrs Tonna in their submissions at [42] and that it is contrary to the case pleaded against Mr Mendonca and Business Services, which included claims relating to the provision of financial services by Mr Mendonca and Business Services entirely unrelated to whether Mr Mendonca was the agent of Dr Mendonca.

144. As to the question of whether it was reasonable for Mr and Mrs Tonna to await the outcome of the proceedings against Dr Mendonca before suing Mr Mendonca and Business Services, Dr Mendonca says this is of no consequence because Mr and Mrs Tonna did not fail in their case against Mr Mendonca and Business Services because they were “successful” in their case against Dr Mendonca; they failed for unrelated reasons (referring to [541]-[548] of the December Judgment).

Determination

166. As to costs, the relevant principles relating to the exercise of the costs discretion under s 98 of the Civil Procedure Act are well-known and have been summarised in numerous authorities (including those referred to in the parties’ submissions in the present case). They do not need here to be restated in any length. The discretion is of course to be exercised judicially and with regard to the overriding statutory mandate in respect of the conduct of litigation in this Court (see s 56 of the Civil Procedure Act) for the just, quick and cheap resolution of the real issues in dispute. The underlying principle in the making of any costs order is that of fairness (see Gretton at [85], per Beazley JA as Her Excellency then was; [121], per Hodgson JA; Mason P agreeing with both at [1]).

167. There is no dispute that, in the ordinary course, costs would follow the event (see r 42.1 of the UCPR). That would mean that, in the Tonna Proceedings, Mr and Mrs Tonna would have a costs order in their favour against Dr Mendonca on the one hand, and on the other hand, Mr and Mrs Tonna would be subject to an adverse costs order in favour of Mr Mendonca and Business Services in relation to Mr Mendonca and Business Services’ costs. In the Mendonca Proceedings, where Dr Mendonca was also unsuccessful, the claim would be dismissed with costs against Dr Mendonca.

168. The first question that here arises, however, is whether (as Dr Mendonca contends), as between herself and Mr and Mrs Tonna, each party should pay their own costs in the Tonna Proceedings. In essence, as I understand the submissions, this is put on the basis that there were multiple issues in the proceedings, on a number of which Mr and Mrs Tonna were not successful; and that the outcome obtained by Mr and Mrs Tonna was substantially less than that which they had sought (and hence that Dr Mendonca fared comparatively better) in terms of the beneficial ownership of the Galston Property.

169. There is, in the authorities, a tension between the accepted general principle that a successful party should have the whole costs of the proceeding (including the costs of an issue on which it has failed) (as noted in Windsurfing International Incorporated v Petit (1987) AIPC 90-441 (Windsurfing)) and the recognition that in an appropriate case a costs order may be formulated to reflect the degree of success on distinct issues (see, eg, Lavender View v North Sydney Council (No 2) [1999] NSWSC 775 at [37]-[38], per Rolfe J; Uniline Australia Ltdv Sbriggs Pty Ltd(No 2) (2009) FCR 136; [2009] FCA 920 per Greenwood J; Leallee v The Commissioner of the NSW Department of Corrective Services [2009] NSWSC 518 at [17]-[29] per Price J; Sahab Holdings Pty Ltd v Registrar-General (No 3) [2010] NSWSC 403 at [36]-[40], per Slattery J). There are certainly cases where it is considered appropriate to apportion costs as between particular issues in proceedings, where a party has succeeded on some, but not others, of multiple issues.

170. The rationale underlying the general principle is reflected in the observation made by Jacobs J in Cretazzo at 16 that:

… trials occur daily in which the party, who in the end is wholly or substantially successful, nevertheless fails along the way on particular issues of fact or law. The ultimate ends of justice may not be served if a party is dissuaded by the risk of costs from canvassing all issues, however doubtful, which might be material to the decision of the case. There are, of course, many factors affecting the exercise of the discretion as to costs in each case, including in particular, the severability of the issues, and no two cases are alike. I wish merely to lend no encouragement to any suggestion that a party against whom the judgment goes ought nevertheless to anticipate a favourable exercise of the judicial discretion as to costs in respect of issues upon which he may have succeeded, based merely on his success in those particular issues.

171. The rationale underlying a departure from the ordinary costs rule appears to be that, where there are multiple issues, the application of the general rule may involve hardship where a party succeeds on some issues but not others (see James v Surf Road Nominees Pty Limited (No 2) [2005] NSWCA 296 (James v Surf Road Nominees) at [32], per Beazley JA, as Her Excellency then was, Tobias, and McColl JJA).

172. However, it has been said more than once that the discretion to apportion costs is one to be exercised only in the most exceptional of circumstances (see for example Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 3) (1979) 42 FLR 213 at 220, per Fisher J; Stena Rederi Aktiebolag v Austal Ships Sales Pty Ltd [2007] FCA 1141 at [12], per Tamberlin J).

173. A helpful summary of the principles in this area can be found in Corbett Court Pty Limited v Quasar Constructions (NSW) Pty Limited [2008] NSWSC 1423, where Hammerschlag J (referring to the relevant authorities collated by White J in Short v Crawley (No 40) [2008] NSWSC 1302, at [25]-[32]) said the following as to the question when the general rule may be displaced (at [31]):

(a)   a costs order in favour of a successful party can be modified to reflect its failure on particular issues even if the successful party did not act unreasonably in raising those issues: Permanent Trustee Australia Ltd v FAI General Insurance Co Ltd; (Supreme Court of New South Wales, Hodgson CJ in Eq, 3 June 1998, unreported, BC9802305 at 10–11);

(b)   if a party unreasonably pursues or persists with points which have no merit, such conduct will constitute a consideration relevant to the ordering of costs even in circumstances where that party is generally successful: Oshlack v Richmond River Council (1998) 193 CLR 72 at 122;

(c)   conduct in relation to the matter may be discreditable to an extent warranting a party being deprived of costs: Jamal v Secretary Department of Health (1988) 14 NSWLR 252 at 271;

(d)   where a litigant has succeeded only upon a portion of his claim, the circumstances may make it reasonable that he bear the expense of litigating that portion upon which he has failed: Hughes v Western Australian Cricket Association (Inc) (1986) 8 ATPR 40-748 at 48,136;

(e)   where the proceedings involve multiple issues departure from the general rule may be warranted particularly where the losing party has succeeded on issues which occupied significant time. Nevertheless the application of the general rule may involve hardship where a party succeeds on some issues but fails on others particularly where the losing party succeeds on some issues. However unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed: Ritchie’s Uniform Civil Procedure NSW at [42.1.15]; Waters v PC Henderson (Australia) Pty Ltd (New South Wales Court of Appeal, 6 July 1994, unreported, BC9404952 at 5); Short v Crawley (No 40) at [27]–[28];

(f)   a successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other party’s costs of them: Hughes v Western Australian Cricket Association (Inc) at 48,136.

174. Thus the circumstances in which apportionment of costs as between different issues may be appropriate include: where, in respect of one or more issues, the successful party has “unfairly, improperly, or unnecessarily increased the costs” (Waddell J, as his Honour then was, in Windsurfing); where the bulk of the time has been taken on an issue on which the unsuccessful party had succeeded (see, eg, Waters v PC Henderson at 3, per Mahoney JA; Hughes v Western Australian Cricket Association (1986) ATPR 40-748 (Hughes) per Toohey J); or where a particular issue or group of issues is clearly dominant or separable (see, eg, Waters v PC Henderson at 3, per Mahoney JA; Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373 at [6], per Beazley JA (as Her Excellency was then) McColl, and Basten JJA).

175. In Pacific General Securities Ltd v Soliman & Sons Pty Ltd (Costs) [2006] NSWSC 724, Brereton J (at [10]) cited with approval Waterman v Gerling Australia Insurance Co Ltd (Costs) [2005] NSWSC 1111, in which it was held (at [10]) that it might be appropriate to award costs of a separate issue where a clearly defined and separate issue (on which the otherwise successful party failed) had occupied a significant part of the trial. Similarly, in Yazgi at [24], it was said that it may be appropriate to deprive a successful party of costs or a portion of costs if the matters upon which that party was unsuccessful took up a significant part of the trial either by way of evidence or argument.

176. Ultimately, as Finkelstein and Gordon JJ observed in Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 (at [5]):

Costs are in the court’s discretion. Fairness should dictate how that discretion is to be exercised. So, if an issue by issue approach will produce a result that is fairer than the traditional rule, it should be applied.

177. In the present case, it is true that Mr and Mrs Tonna had claimed an entitlement (on various bases) to the entire legal and beneficial ownership of the Galston Property (and were only successful in establishing a beneficial interest of close to 30%); but, conversely, Dr Mendonca denied that they had any beneficial entitlement to a proprietary interest at all. Particularly having regard to the well-recognised special nature or unique character of real property (as opposed to an entitlement to a monetary amount in repayment of their contributions to the acquisition of the property, for example), it is significant that Mr and Mrs Tonna here succeeded in establishing a proprietary interest in the Galston Property (against Dr Mendonca’s denial of such an interest), albeit in a lesser proportionate share than they had claimed.

178. The English Court of Appeal in Roache v News Group Newspapers Ltd [1998] EMLR 161 at 168-169 per Bingham MR, has succinctly posed the issue as being as to “[w]ho, as a matter of substance and reality, has won? Had the plaintiff won anything of value or anything he could not have won without fighting the action through to a finish? Had the defendant substantially denied the plaintiff the prize which the plaintiff fought the action to win?” When so viewed, there can be no doubt that Mr and Mrs Tonna succeeded in establishing their claim (albeit, not to a full 100% interest) to a beneficial interest in the Galston Property.

177. Dr Mendonca has invoked the reasoning that was deployed in Amit Laundry (No 2) on the costs issues. There, I considered that, to use a sporting analogy, the outcome might be considered a draw (see at [23] Amit Laundry (No 2)). The practical outcome of that litigation was that the plaintiff (Amit Laundry) failed in establishing its claimed 100% beneficial interest in the property; the defendant/cross-claimant (Rajil) failed in asserting his claimed 100% beneficial interest in the property; and Amit Laundry succeeded (and Rajil failed on this issue) in establishing that Rajil was not entitled to demand vacant possession of the property at the time that Rajil had issued a notice to quit (see at [22] Amit Laundry (No 2)). Rajil’s older brother, Amit, was successful in the recognition of a roughly one-third interest he held in the property, but he was not a party to the proceedings.

178. The present case seems to me not aptly so described. Instead, it seems to me that Mr and Mrs Tonna have succeeded in the “event”, albeit that they have had less success than they would have wished (not unlike a plaintiff who succeeds in establishing liability but does not establish damages in the quantum for which it had contended but in some lesser sum).

179. Nor do I consider that it is appropriate (even using the broad brush approach that is recognised is appropriate where apportionment of costs amongst the various issues is to be entertained) to attempt the exercise of apportioning costs between the respective issues. I accept that in Dodds Family Investments Pty Ltd (formerly Solar Tint Pty Ltd) v Lane Industries Pty Ltd (1993) 26 IPR 261 (cited by the Court of Appeal in James v Surf Road Nominees at [36], per Beazley JA, as Her Excellency then was, Tobias JA, and McColl JA; and again in Bostik Australia Pty Limited v Liddiard (No 2) [2009] NSWCA 304 at [38], per Beazley JA, as Her Excellency then was, Ipp JA, and Basten JA), Gummow, French and Hill JJ said (at 272):

Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion for the trial judge. Mathematical precision is illusory and the exercise of the discretion will often depend upon matters of impression and evaluation.

Further, in NRMA Ltd v Morgan (No 3) [1999] NSWSC 768 (NRMA v Morgan), Giles J (as his Honour then was) stated (at [25]):

If an order reflecting success or failure on issues is made, it is appropriate to have regard to the time referable to the issues, although necessarily without mathematical precision (Lenning v Alexander Proudfood Company World Headquarters (NSWCA, 22 April 1991, unreported)). It is not necessary that the issue or issues on which the party failed was or were raised by him unreasonably (Rosniak v Government Insurance Office (1997) 41 NSWLR 608, at 615).

182. However, I am not persuaded that in the present case there is such a clear line between the issues as to make such an approach appropriate bearing in mind “the ebb and flow of litigation” (to use the expression adopted in NRMA v Morgan at [28]). Nor am I persuaded that there is a clear demarcation in the time referable to the separate issues to make that an appropriate outcome.

183. I will therefore order that Dr Mendonca pay the costs of Mr and Mrs Tonna of the Tonna Proceedings without apportionment by reference to particular issues on which they did not succeed in their case.

184. The next issues that arise relate to the costs of Mr Mendonca and Business Services.

185. First, there is the question as to whether those costs should be ordered on the indemnity basis, having regard to the costs offers that were made (as referred to above).

186. As already noted, in order to warrant the making of a special (indemnity) costs order, it is clear that the offer (be it a Calderbank offer or a formal offer of compromise) must involve “a real and genuine element of compromise” (see Herning at [5], per Handley, Basten JJA, and Beazley JA, as Her Excellency then was; Anderson Group v Tynan Motors at [8], per Santow, Basten JJA, and Young CJ in Eq; Leichhardt Municipal Council at [23], per Santow JA, Bryson JJA and Stein AJA agreeing); and where the offer is a Calderbank offer, it must be shown that it was unreasonable to reject it.

187. Here, the difficulty with the first of the offers is that it was inclusive of costs and it was made at a very early stage when Mr and Mrs Tonna were not on notice of any difficulties for their case arising out of the evidence as it was subsequently filed.

188. As to each of the costs offers, the only element of compromise at all was the proposal that there be no order as to costs. Thus at best there was in effect a “walkaway offer” (made at or shortly after the commencement of the proceedings); albeit that the position with the making of such an offer was better for Mr and Mrs Tonna than would have been the case under the rules relating to offers of compromise as they had previously applied.

189. As has been noted by Mr and Mrs Tonna, where an offer is in substance a demand for payment of the full amount claimed, or a formal offer “designed simply to trigger the entitlement to indemnity costs”, or requires dismissal of the claim, then the necessary element of compromise may be found to be lacking (see Tickell v Trifleska Pty Ltd (1990) 25 NSWLR 353 at 355, Rogers CJ Comm Div; Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358 at 368, per Giles J; Shorten v David Hurst Constructions Pty Limited [2008] NSWSC 609 at [6], per Einstein J; Bennette v Cohen (No 2) [2009] NSWCA 162 (Bennette v Cohen) at [40]-[41], per Tobias JA, Ipp and Campbell JJA agreeing).

190. The decisions in Uniting Church v Takacs at [30]-[33] (per Basten JA), and Bennette v Cohen at [40]-[41] (per Tobias JA, Ipp and Campbell JJA agreeing) indicate that, absent an element of compromise, the offer may not be held to be a genuine offer of compromise. In Leichhardt Municipal Council Santow JA said at [21] (Bryson JA and Stein AJA agreeing):

21.   There is little appreciable difference between saying that an offer should not in the court’s discretion attract costs sanctions in the circumstances and saying that an offer is not a genuine offer of compromise in the circumstances. Both depend upon a value judgment of the offer and the conduct of the parties in the circumstances of the claim.

191. What must be considered is whether the offer represented or formed part of a genuine attempt to reach a negotiated settlement (Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited (No 2) [2009] NSWCA 12 at [19], per Allsop P, Campbell JA and Beazley JA, as Her Excellency then was, agreeing). In Regency Media, to which Mr and Mrs Tonna have referred, an offer of compromise was served by the defendants offering to settle a claim in the order of $600,000 by payment of the sum of $10,000. The offer was made at an early stage of the proceedings. At [31]-[33], Spigelman CJ, Beazley JA as Her Excellency then was, and McColl JA said:

An offer which is in substance an invitation to surrender can result in the successful triggering of the indemnity costs mechanisms under the rules. (See r 20.26(2); Leichhardt Municipal Council supra at [36]-[37], [40].) However, as Basten JA suggests in Robb Evans supra at [20], the claim or defence would have to approach something of the character of being frivolous or vexatious for that to be the case. (See also Hancock v Arnold supra at [17].) If it were otherwise, the public policy to encourage settlement would rarely be served, in an all or nothing case. These proceedings were not of that character, as indicated by the success which the respondent had at first instance.

The normal order for costs, even in a clear case, is that each party bears its own costs without full indemnity. If a derisory offer, of the kind made in these proceedings, could result in an order for indemnity costs, then it is likely that many, perhaps most, contract interpretation disputes would result in an indemnity costs order, if the formality of an offer in accordance with the rules had been made at an early stage. If the appellant were to succeed in the present case, it is quite likely that such an offer would accompany most statements of claim as a matter of commercial practice. The purpose of the special order - to encourage settlement - would no longer be served. An order for indemnity costs could, in our opinion, become the normal order in many commercial disputes.

It is often the case that the result of an interpretation issue appears quite clear in retrospect. However, an offer of compromise must be assessed, in large part, at the time it was made. (See most recently Hancock v Arnold supra at [23].) Whether what was offered was a relevant compromise, and whether its rejection was reasonable should not be assessed with the benefit of 20:20 hindsight.

192. Earlier (at [29]) their Honours had said:

As is usually the case in proceedings turning on an issue of contractual interpretation, this was an all or nothing case. The claims did not involve a process of evaluation or assessment in which the end result could vary over a range. Either one party or the other party was correct. Whilst a marginal difference between the offer and the result may constitute a real and genuine offer of compromise in a personal injury context, that is not generally true in an all or nothing case. (See Anderson Group supra at [9]; Robb Evans supra at [18].)

193. In Robb Evans, to which reference was made in Regency Media, the offer made by the defendant was to pay $2,000 plus costs in respect of a claim for in excess of $800,000; an offer which was considered to be derisory. What amounts to a derisory offer as opposed to being a sufficient element of compromise must be to a large extent a matter of impression. In Anderson Group v Tynan Motors, a 20% discount on the sum claimed (taking into account the total claim including interest) was considered by Basten JA (Santow JA, and Young CJ in Eq agreeing) to be sufficient to amount to a genuine compromise, his Honour describing this (at [9]) as a “significant element of compromise”.

194. In Regency Media, Spigelman CJ, Beazley JA as Her Excellency then was, and McColl JA, adopted the statement of Basten JA in Robb Evans at [22] that (at [23]):

Whether or not the offer involved a genuine compromise must be assessed by reference to the rule pursuant to which the offer was made. That rule refers to an offer to compromise a claim in proceedings on specified terms. Subject to an exception in the case of judgment for the defendant on the basis that each party bear its own costs, the offer must be exclusive of costs: r 20.26(2). Consistently with that approach, the costs consequences are measured by reference to the order or judgment “on the claim concerned”: r 42.15(1). The fact that a party which failed to accept an offer incurs costs in pursuing litigation to a result which is less favourable to it than the offer, is not a factor which is material to determining whether the offer itself was a genuine offer of compromise for the purposes of r 20.26.

195. In the present case, I consider that the costs offers that were made by Mr Mendonca and Business Services were little more than invitations to capitulate and in that sense did not carry with them the necessary element of compromise. I do not consider that they warrant the making of special costs orders.

196. Second, there is the issue as to whether a Sanderson or Bullock order should be made. I have found this issue to be more problematic. The difficulty arises because it seems to me that Dr Mendonca’s failure to take any steps to disabuse Mr and Mrs Tonna of the (not unreasonable) perception that Mr Mendonca was her agent (particularly having regard to the evidence of what occurred in the 29-30 January meetings) and that Mr Mendonca was able to commit her to the arrangements there discussed and in principle agreed, played a not insignificant role in the course of events that followed. In that sense it seems to me that Dr Mendonca’s conduct did unreasonably precipitate the events that culminated in the present proceedings.

197. However, the claims made against Mr Mendonca and his company went beyond claims referable to the agency relationship between Dr Mendonca and her husband. Ultimately, the claims that were pressed against Mr Mendonca and his company were for breach of a common law duty of care (as noted earlier); and those claims failed for reasons including the fundamental causation problems that were faced by Mr and Mrs Tonna. It seems to me that those claims were pursued independently of the matters for which complaint as to Dr Mendonca’s conduct would appropriately have led to a Sanderson or Bullock order (either because it led to the joinder of Mr Mendonca and Business Services or because of the proposition that a plaintiff who acts reasonably in joining two or more defendants should not be penalised in bearing costs on the basis that the plaintiff should have elected or taken separate actions – see Stevedoring Industry v Gibson, as referred to earlier). So, for example, there may well have been claims arising out of a misrepresentation as to Mr Mendonca’s authority to bind Dr Mendonca in relation to the transaction (or some kind of breach of implied warranty of authority claim) but none was pleaded (and claims of that kind may still have suffered from causation problems and the like of the kind that bedevilled the claims that were in fact made against Mr Mendonca and Business Services).

198. Therefore, though not without some hesitation, I have concluded that it is not an appropriate case for the making of a Sanderson or Bullock order and that Mr and Mrs Tonna must bear the costs consequences of their forensic decision to pursue the unsuccessful claims against Mr Mendonca and Business Services.

Orders

199. For the above reasons I make the following orders:

1. Declare that the first defendant holds the legal title to the property referred to in these proceedings as the Galston Property on a resulting trust for herself and the plaintiffs in the following proportions that reflect their respective contributions to the purchase price for the Galston Property: 28.87% as to the plaintiffs and 71.13% as to Dr Mendonca.

2. Order the first defendant to execute and provide to the plaintiffs within 28 days of the date of these orders a transfer in registrable form in respect of the Galston Property to record the plaintiffs’ beneficial interest in the Galston Property as declared above.

3. Declare that the plaintiffs’ proportionate share of the contributions paid by the first defendant in respect of the Galston Property and the first defendant’s proportionate share of the contributions paid by the plaintiffs be set off against each other.

4. Subject to order 5 below, order that the amount payable after the set-off provided for in order 3 above, be paid, with interest at court rates, on completion of any sale of the Galston Property.

5. In the event that agreement is not reached within 3 months between the plaintiffs and the first defendant for the sale of the Galston Property (to take place within six months or such other period as the parties may agree) then order that any amount payable after the set-off provided for in order 3 be paid on the expiration of 3 months from the date of these orders.

6. Direct the parties to seek to reach agreement as to the manner in which account should be made by the first defendant to reflect the change to the mortgage repayments when the first defendant increased the loan facility in respect of the property and, failing such agreement within 3 months, order that the matter be referred to an independent accounting expert (at the parties’ joint cost) (to be agreed between the parties or otherwise nominated by the Court) for determination as to the amount of mortgage repayments referable to a loan in the lesser sum (i.e., without the increase in the facility) over the relevant period at the interest rate that was payable at the time of the original loan facility (with interest rate changes referable to the terms of that facility as if the facility amount had not increased), with a view to making orders for any adjustment of the amounts otherwise provided for under order 3 as a result of that determination.

7. Liberty to the parties to apply on 3 business days’ notice for orders in relation to the implementation or working out of the above orders.

8. Order that Dr Mendonca pay the costs of Mr and Mrs Tonna of the Tonna Proceedings and of the Mendonca Proceedings, on the ordinary basis.

9. Order that Mr and Mrs Tonna pay the costs of Mr Mendonca and Business Services of the Tonna Proceedings, on the ordinary basis.

**********

Decision last updated: 27 March 2020