Mendoca v Tonna

Supreme Court of NSW|2021-12-06|Before: Kunc J, Ward CJ, Darke J, Mr P, Ms J, Mr J

Summary

This application is another round in a long-running dispute between Mr and Mrs Tonna (the defendants, and applicants on the motion, to whom I shall refer without disrespect as the Tonnas) and Dr Mendonca (the plaintiff, and respondent to the motion) over the ownership of a property at Galston (the Property).
In an earlier judgment of this Court, Ward CJ in Eq determined that the beneficial interests in the Property were the Tonnas as to 28.87% and Dr Mendonca as to 71.13%.
On 4 June 2021, in these present proceedings in the Real Property List, Darke J made orders under s 66G of the Conveyancing Act 1919 (NSW) for the appointment of trustees for sale of the Property (the Trustees). His Honour also made orders about how the proceeds of any sale were to be applied, including that if one of the parties was the successful purchaser, "the successful purchaser may not apply the benefit of any asserted set-off entitlements or adjustments, against the purchase price". It is that term which is at the heart of the present dispute, which has been brought in the Duty List.
The auction of the Property on the instructions of the Trustees took place on 18 September 2021. The Tonnas were successful with a bid of $4 million, over-bidding Dr Mendonca. However, the Tonnas have only raised $3.5 million to make the purchase. The transaction is now subject to a notice to complete issued by the Trustees which called for the sale to be completed today. However, the Trustees have undertaken to take no action to terminate the contract for sale of the Property (the Contract) up to and including this Wednesday, 8 December 2021.
On 3 December 2021, the Tonnas filed the present notice of motion seeking to vary the orders of Darke J, the effect of which is that they would be entitled to complete the Contract by paying $3,056,596.79 to the Trustees.
For the reasons which follow, the Court will dismiss that motion, with the result that the orders made by Darke J are to remain in place in the form in which his Honour made them.

The facts

In Tonna v Mendonca (No 2) [2020] NSWSC 306, Ward CJ in Eq made orders including: "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. …"
By amended summons filed on 4 June 2021, Dr Mendonca sought orders in these proceedings: "1 An order that Stephen Wesley Hathway and Philip Raymond Hosking be appointed as trustees for the sale of the land situated at XXX, Galston NSW 2159 recorded in certificate of title folio identifier Lot X in Deposited Plan XXXXX (Trustees) (Property). 2 An order that the Property be vested in the Trustees subject to any incumbrances affecting the entirety of the lands but free from incumbrances (if any) affecting any undivided share or shares therein to be held by the Trustee upon statutory trust for sale under Division 6 of Part 4 of the Conveyancing Act 1919 (NSW). 3 An order that the Trustees be authorised to charge at their usual hourly professional rates and the total sum not exceeding $20,000 and the Trustees be authorised to deduct such expenses from the proceeds of sale. 4 An order appointing Unsworth Legal as the solicitor for the conveyance of the Property. 5 An order that upon the sale of the Property, the Trustees: a. Pay out of the proceeds of sale in the following order of priority: i. Any statutory duties or charges including any council rates, water rates and land tax; ii. Real estate agent's commission and charges; iii. Unsworth Legal's costs associated with the sale of the Property; iv. The amount required to secure discharge of mortgage AIXXXXX; v. The Trustees' fees in accordance with order 3. b. Hold the balance of the proceeds of sale on trust for the parties to be paid in portions reflecting their beneficial ownership of the Property (71.13% as to the plaintiff and 28.87% as to the defendants), less any set-offs to be made on account of amounts owed between the parties, with such set-off amounts to be determined either by agreement between the parties or failing agreement, by further order of the Court. 6 An order that either party may acquire the Property by bidding at auction (provided the Trustees are satisfied that the party's offer is the best offer in the circumstances). In the event a party's offer is successful, the following terms will apply: a. A deposit does not need to be paid; and b. The successful party may not apply the benefit of any set-off entitlements against the purchase price, noting that each parties' set-off entitlements will be applied and paid out from the sale proceeds after the sale of the Property. …"
In support of her application, by her affidavit of 26 April 2021, Dr Mendonca gave evidence and made submissions which included: "16 I would like the Property to be sold without delay because the current circumstances are causing me considerable financial disadvantage. 17 I have sought the Tonnas' consent to the sale of the Property. Annexed and marked "B" is correspondence with the Tonnas' solicitor about this. I note that the "master interest spreadsheet" referred to in the communication from Unsworth Legal to the Tonnas' solicitor has not been annexed to this affidavit due to size. 18 The Tonnas do not agree to the sale of the Property. As I understand it, they say the Property cannot be sold until various cost assessments have been determined. The cost assessments relate to various cost orders in the Tonna Proceedings and my appeal of the Tonna Proceedings (Tonna Cost Assessments). 19 I do not agree that the Tonna Cost Assessments are a barrier to the sale of the Property. I have proposed to the Tonnas that the Property be sold and the sale proceeds be held in trust, pending resolution of the Tonna Cost Assessments and any other set-off calculations, but the Tonnas do not agree to this proposal. 20 As I understand it (based on the correspondence at annexure B), this is because the Tonnas want to purchase my share of the Property, and they want to apply any amounts awarded to them in the Tonna Cost Assessments towards the purchase price. As explained later in this affidavit, I say that once the whole of the parties' entitlements, including all obligations arising from the Tonna Cost Assessments, are set off, there will be either be no moneys to be set off in the Tonnas' favour (because the Tonnas will owe me more that I owe them) or at the most the sum of $35,684.77 to be set off in the Tonna's favour. In either case the Tonna Costs Assessments shouldn't be a barrier to the sale of the Property."
I am informed by the parties that, at the end of the hearing on 4 June 2021, Darke J made these orders without opposition from the Tonnas (emphases added): "The Court: 1. Grants leave to the plaintiff to file an Amended Summons; 2. Directs that the plaintiff file and serve the Amended Summons by 4 June 2021; 3. Orders that Stephen Wesley Hathway and Philip Raymond Hosking, registered liquidators of Helm Advisory, Suite 2 Level 16/60 Carrington Street Sydney, be appointed as trustees for the sale of the land situated at XXXX, Galston NSW 2159 recorded in certificate of title folio identifier Lot X in Deposited Plan XXXXX (Trustees) (Property); 4. Orders that the Property be vested in the Trustees subject to any encumbrances affecting the entirety of the lands but free from encumbrances (if any) affecting any undivided share or shares therein to be held by the Trustees upon statutory trust for sale under Division 6 of Part 4 of the Conveyancing Act 1919 (NSW); 5. Orders that the Trustees be authorised to charge at their usual hourly professional rates subject to the total sum not exceeding $20,000, and the Trustees be authorised to deduct such expenses from the proceeds of sale; 6. Orders that upon the sale of the Property, the Trustees: a. pay out of the proceeds of sale in the following order of priority: i. any statutory duties or charges including any council rates, water rates and land tax; ii. real estate agent's commission and charges; iii. the legal costs associated with the sale of the Property; iv. the amount required to secure discharge of mortgage AIXXXXXX; v. the Trustees' fees in accordance with order 5. b. hold the balance of the proceeds of sale on trust for the parties to be paid in portions reflecting their beneficial ownership of the Property (71.13% as to the plaintiff and 28.87% as to the defendants), subject to any adjustments made to reflect the rights of the co-owners in their capacity as such. 7. Orders that either party may acquire the Property by bidding at auction (provided the Trustees are satisfied that the party's offer is the best offer in the circumstances). In the event a party's offer is successful, the following terms will apply: a. a deposit does not need to be paid; and b. the successful party may not apply the benefit of any asserted set-off entitlements or adjustments, against the purchase price. …"
As will become apparent, the argument between the parties today focussed on Order 7(b).
The Property went to auction on 18 September 2021. The Tonnas were successful, over-bidding Dr Mendonca with their final bid of $4 million. As is usual, the Contract was entered into between the Trustees and the Tonnas on the same day. The Contract specified a purchase price of $4 million and provided for completion on the 60th day after the date of the Contract (17 November 2021). It also included: "15. Date for completion The parties must complete by the date for completion and, if they do not, a party can serve a notice to complete if that party is otherwise entitled to do so. … 39. NOTICE TO COMPLETE (a) If a party is entitled to serve a notice to complete under clause 15 of this contract, 14 days is a reasonable period to allow for completion in that notice. (b) The notice must specify a time of day between 2:00PM and 3:30 PM as the time for completion. (c) A party may withdraw a notice to complete without prejudice to its continuing right to serve a further notice to complete. (d) In the event that the Vendor issues a Notice to Complete the Purchaser agrees to pay the sum of $330.00 (including GST) to the Vendor on completion to reimburse the Vendor for additional work to be done by the Vendor's Solicitor in relation to the issue of the Notice to Complete. Payment of this is [sic] sum is an essential term of this agreement. … 42. WARRANTY RE FINANCE (a) The purchaser expressly warrants to the vendor that the purchaser either does not require finance to complete this Contract, or, in the event that the purchaser requires finance, the purchaser holds a current loan approval in an amount and upon terms which the purchaser considers satisfactory and sufficient to enable completion of this Contract within the time stipulated and upon the terms and conditions set out in this Contract. (b) The purchaser acknowledges that the vendor relies upon the warranty in entering into this Contract and that the vendor may enter into further contractual obligations on or after the date of this contract in reliance upon this warranty. (c) The purchaser further acknowledges that the purchaser shall remain liable to the vendor for all damages arising from breach of this warranty notwithstanding any rights which the purchaser may have pursuant to the provisions of the Uniform Credit Code including Section 24 thereof."
On 19 October 2021, one of the Trustees wrote to the solicitors for the Tonnas giving an estimate of the likely final distribution between the parties on a high and low basis after taking the various steps in Darke J's orders. This was between $1,512,884 and $1,664,177 in favour of Dr Mendonca and between $614,044 and $675,450 in favour of the Tonnas.
The Tonnas have only been able to raise $3.5 million to complete the purchase, comprising $1,300,000 from a finance company, $1,300,000 by way of a personal loan from a long-standing friend, and $900,000 in funds currently deposited with the Tonnas' solicitors.
On 18 November 2021, being the day after the Contract was due to be completed, the Trustees gave a notice to complete to the Tonnas' solicitors including: "WHEREAS: A. By a Contract for Sale of Land dates 18 September 2021 ("the Contract") you agreed to purchase the property described in the schedule to this notice from the vendors for the price of $4,000,000.00, and subject to the conditions contained in the contract. B. The Contract required you to complete the purchase of the property on Wednesday 17 November 2021. C. The vendors are ready, willing and able to complete the Contract. D. You have not completed the purchase and are in default under the Contract. TAKE NOTICE: 1. The vendors require you to complete the Contract at Workspace ID: PEXAXXXXXXXXX by no later than 6 December 2021 and in this respect, time is of the essence. 2. If you fail to complete the Contract as required by this notice, the vendors will without further notice, terminate the Contract and will take such further action as is available under the Contract and at all."
On 30 November 2021, the Tonnas obtained a judgment in the District Court of New South Wales against Dr Mendonca for $505,382.64 (the Judgment). The Judgment was entered to give effect to a certificate of costs assessment for their costs of the proceedings before Ward CJ in Eq, this being only one of three separate costs orders which are extant between the parties.
On 2 December 2021, the Tonnas obtained a garnishee order against the Trustees to enforce the Judgment with interest in these terms: "Name of garnishee Steven Wesley Hathaway and Phillip [R]aymond Hosking as trustees for the sale of XXX Galston NSW Address of garnishee Helm Advisory Suite 2 Level 16 60 Carrington Street SYDNEY NSW 2000 Judgment debtor Renuka Maria Mendonca Address of judgment debtor XXXXX Avenue (if known) NORTHMEAD NSW 2152 1. It is ordered that all debts that are due or accruing from the garnishee to the judgment debtor at the time of service of this order are attached to the extent of $505382.64 together with interest in the sum of $13511.17 to answer a judgment in these proceedings. 2. You are ordered to pay any amount so attached to the judgment creditor within 14 days after the date on which the order is served on the garnishee or, if the debt attached is a debt that falls due after that date, within 14 days after the date on which the debt becomes due."
On 3 December 2021, the Tonnas filed the notice of motion the subject of these reasons seeking these orders: "1 Order declaring that the Notice to Complete from Stephen Wesley Hathaway and Philip Raymond Hosking to Mark Julian Tonna and Lorraine Mary Tonna and Adams & Partners Lawyers dated 18 November 2021 is invalid. 2 Order that order 7(b) of the judgment/orders made on 4 June 2021 be vacated. 3 Order that on completion of the contract for the sale and purchase of land between Stephen Wesley Hathaway and Philip Raymond Hosking, as vendors, and Mark Julian Tonna and Lorraine Mary Tonna, as purchasers, dated 18 September 2021 (Contract), the purchasers pay to the vendors the sum of $3,056,596.79 in accordance with Annexure A to this notice of motion. 4 Order that the provisional amounts identified at Annexure A to this Notice of Motion totalling $999,908 be held by the Trustees in accordance with Order 6(b) of the judgment/orders made on 4 June 2021 until further order. 5 Order that the vendor and purchasers to the Contract attend the PEXA Workspace ID PEXAXXXXXXX at 3pm on Wednesday, 8 December 2021 to complete the Contract. 6 In the event that order 1 is not made, order that the time for completion of the Contract be extended to 4pm on 10 December 2021."
Annexed to the notice of motion was a document which set out a series of calculations which Mr Newton SC characterised as being conservative against the interests of his clients and beneficial towards the interests of Dr Mendonca. The net result of the calculations in that annexure was this: Net proceeds after allowance for 6(a) and 6(b) amounts $1,854,343.19 Proportions reflecting beneficial interest in net sale proceeds Dr Mendonca - 71.13% $1,318,994.31 Mr and Mrs Tonna - 28.87% $535,348.88 Application of part of Mr and Mrs Tonna's net interest in sale proceeds Allow $450,000.00 Application of garnishee amount from Dr Mendonca's share Deduct $518,471.59 from Dr Mendonca's net share Amount to be paid by Mr and Mrs Tonna on settlement Purchase Price $4,025,068.38 Less $450,000 + $518,471.59 = $968,471.59 ($968,471.59) Total amount to be paid $3,056,596.79

The parties' submissions

The Court acknowledges that it had the benefit of concise but nonetheless comprehensive written outlines of submissions from the parties, as supplemented by the oral submissions of counsel. The essential propositions advanced may, without disrespect to those arguments, be summarised as follows.
Mr Newton SC's first proposition was that the process which was proposed in the notice of motion that would result in his clients being able to pay approximately $3 million so as to satisfy their obligations under the Contract did not involve a set-off, or adjustments, for the purposes of Order 7(b) made by Darke J on 4 June 2021. As the submission was beguilingly put, what his clients sought was not a set-off, or adjustments, but simply to be "relieved" of paying certain amounts that would have to be paid back to them in any event, having regard to the working out of the various obligations between the parties. At the forefront of the amounts of which his clients sought to be relieved were the Judgment and the Trustees' obligation under the garnishee order to pay approximately $500,000 in costs to the Tonnas.
In the alternative, if the Court was against him on that point, Mr Newton SC submitted that this was an appropriate case in which the Court should exercise its discretion to the extent necessary to vary the orders made by Darke J. This was because what was proposed in the notice of motion would cause no real prejudice to Dr Mendonca and was occasioned by two new developments or developments that were not reasonably capable of being known at the time of the orders made by Darke J.
Those developments were, first, the fact that the Tonnas have now only been able to raise $3.5 million, and second, that they now have the benefit of the Judgment and garnishee order. The amounts of which they sought to be relieved, Mr Newton SC submitted, were plainly amounts to which the Tonnas were entitled. In fact the calculations, so it was said, had been undertaken on the basis that the Tonnas would receive even less than they might be entitled to pending the final adjustments to be made by the Trustees in accordance with the orders of Darke J.
For Dr Mendonca, Mr Robertson submitted that what was being proposed was plainly a set-off, or adjustments, of the purchase price under the Contract within the meaning of Order 7(b). He submitted that the relief sought by the Tonnas could not possibly fall within the description of the working out of the orders made by Darke J, not least because if what was being sought was in fact a set-off, or adjustments, it would require, as the notice of motion presciently sought, the vacation of Order 7(b).
On the question of what was meant by "working out", the parties drew attention to the analysis of McPherson SPJ in Fylas Pty Ltd v Vynal Pty Ltd [1992] 2 Qd R 593 at 598: "… a judgment or order that expressly reserves to parties a leave or liberty to apply can be varied on an application pursuant to such leave only so far as may be necessary for the purpose of working out the actual terms of the order so as to make it more efficacious in matters of detail. What is meant in this context by "working out" the terms of an order is considered in some of the cases on the point. In Cristel v Cristel [1951] 2 K.B. 727, 728, Somervell LJ said it "involves matters on which it may be necessary to obtain the decision of the court. Prima facie, certainly, it does not entitle people to come and ask that the order itself shall be varied". A simple judgment for a money sum requires no "working out" in any sense, so that liberty to apply is quite inappropriate in such a case. On the other hand, there are many orders, particularly on the equity side, as to which the process of carrying the primary judgment into effect may require supervision, with the consequence that further or supplementary orders or directions may be needed to enable it to achieve its purpose. An example commonly encountered in practice is specific performance, where, because the consent or approval of some person or instrumentality may be needed to authorise a preliminary step, the judgment sometimes takes the form only of a declaration that the contract be specifically performed, together with subsidiary orders compelling particular acts to be done. See Egan v Ross (1928) 29 SR (NSW) 382, 388; Hasham v Zenab [1960] AC 316; Brown v Heffer (1967) 116 CLR 344, 350. The primary order may then need to be supplemented by further orders from time to time before the stage is reached at which the defendant can finally be ordered to perform specifically what he contracted to do in the way of transfer or payment as the case may be: Brown v Heffer (1967) 116 CLR 344, 350."
Furthermore, Campbell JA In Australian Hardboards Ltd v Hudson Investment Group Ltd (2007) 70 NSWLR 201; [2007] NSWCA 104 at [54] endorsed the above analysis of McPherson SPJ and further held at [56] that "what can be done under a reservation of liberty to apply depends on what needs to be done, in the particular case, to work out the particular orders that have been made" and at [58], there "is no difficulty about exercising a liberty to apply for the purpose of dealing with facts that have arisen only since the original order was made."
If, contrary to his submissions, the Court was persuaded that what was being sought was not a set-off or adjustments, Mr Robertson submitted that, in the exercise of its discretion the Court would not vary the orders made by Darke J, even if the Court otherwise had jurisdiction to do so. At the forefront of his argument was the submission that the Court has found to be determinative: that to accede to the Tonnas' application would work a serious injustice on Dr Mendonca.
That injustice was that Dr Mendonca had participated in the auction of the Property on the basis that the rules for that auction were that, by reason of Order 7(b), insofar as it was a competition between Dr Mendonca and the Tonnas, they would each have to be in a position to pay the full purchase price. She had attended the auction and bid by reference to what she would be able to pay. As Mr Robertson put it, the Tonnas were now seeking to change the ground rules in a way that would significantly advantage them, and significantly disadvantage Dr Mendonca, who had been over-bid in circumstances where she understood that the level playing field meant that the protagonists each had to be, putting the matter in a colloquial way, fully cashed up and ready to pay the amount which they were ultimately successful in bidding for the Property.
Finally, Mr Robertson put that, contrary to Mr Newton SC's analysis of the annexure to the notice of motion, there were a number of disputed amounts. Because of the view to which the Court has ultimately come, it is unnecessary for me to deal with the detail of the calculations in the annexure to the notice of motion and the disagreement about some of them.
Mr Breene, for the Trustees, took an essentially neutral position as between the protagonists. He did submit that, notwithstanding these were interlocutory proceedings, the Tonnas' notice of motion appeared to seek a final declaration that the notice to complete was invalid. He submitted that was not an issue that was ripe for determination today because the Trustees had said that they would not be taking any action up to and including this Wednesday.
Furthermore, it was possible that the Trustees would issue a fresh notice to complete. Whatever might happen in two days' time, Mr Breene's submission was that the Court did not have to, and that it would be inappropriate for the Court as a matter of discretion to, pass upon the validity of the notice to complete in an urgent interlocutory hearing in the Duty List.

Determination

I will next set out the Court's reasons for dismissing the Tonnas' notice of motion.
To begin, I am unable to see how it can sensibly be said that what is being proposed is an application in relation to the working out of the orders made by Darke J. With all due respect to the arguments put by Mr Newton SC, and his candid acknowledgement that the distinction for which he was contending was a fine one, it seems to me that on any view what is being sought to be done here is to give effect to asserted rights of set-off, or adjustments, against the purchase price.
In those circumstances, the relief sought in the notice of motion could not be effected without vacating Order 7(b). That cannot be a working out of the order within the meaning of that expression as set out in the authorities to which I have referred above. That it is plainly a set-off, or adjustments, appears from the annexure to the notice of motion itself. What I have quoted from the annexure in [20] above makes clear that the effect of the notice of motion is to enable the Tonnas to pay less than the contracted purchase price by allowing for certain amounts which they say they are undoubtedly entitled to be paid as part of the ultimate adjustments between the parties contemplated by the orders made by Darke J or otherwise.
Moreover, insofar as what has been sought in the notice of motion relies on the Judgment, it is not a new development. This is because the question of costs entitlements had been raised in evidence before Darke J. If there be any issue about the proper construction of Order 7(b) that requires the Court to go beyond its plain words, then in accordance with the principles relating to the construction of judgments, the Court would first look to any judgment, and then to any circumstances that were before the Court at the time if there was no judgment.
In this case there is no judgment, however the Court does have the amended summons (see, especially, proposed order 6(b)) and the evidence that was put before Darke J. I have quoted in [10] above from Dr Mendonca's affidavit that was before his Honour. Mr Robertson put, and I accept, that the question of how and when adjustments would be effected was a hotly contested issue between these parties as to whether or not an order under s 66G should be made. As appears from Dr Mendonca's affidavit, it was the Tonnas who contended that there could be no such order until, among other things, the various costs assessments had been resolved. By the end of the hearing before Darke J, the Tonnas seem to have resiled from that position by not opposing the making of the s 66G orders. If that is correct, then the Tonnas must be taken to have at least implicitly recognised that all questions of adjustment arising from, among other things, the costs assessments would all be resolved at the end of the process in the way clearly contemplated by the orders made by Darke J.
Accepting that this cannot be an application under the liberty to apply reserved by Darke J to work out the orders, Mr Newton SC's alternative solution was that the Court should vary the order to enable the relief sought in the notice of motion to be given. There was no dispute between the parties that even a final order can be varied (and no one suggested Darke J's orders were only interlocutory), although the circumstances in which that can be done under the rules or in the inherent jurisdiction are very limited because of the importance of the principle of finality. The usual course is not to vary, but to appeal.
The argument proceeded, correctly in my respectful view, that circumstances which may warrant the exercise of the Court's discretion to vary a final order include when something completely new has happened since the order was made that has a relevant effect on the justice of the order as between the parties, or that something fundamental has emerged which could not have been discovered with reasonable diligence before the order was made.
Mr Newton SC's submission turned, as I have recorded above, on two possibilities. The first was the so-called "new development" of the Tonnas being only able to raise $3.5 million. I cannot see how that is a development that would warrant varying the orders. The orders plainly contemplated that the successful party would pay the purchase price bid at the auction. That was given contractual recognition in cl 42 of the Contract (see [13] above). The fact that the Tonnas have not been able to raise the purchase price is not a circumstance that renders the orders unjust as between the parties. Rather, it is a circumstance that is outside the scope of the orders because they expressly require the purchase price to be paid without adjustment or set off. The Tonnas' present financial incapacity is not a just basis on which to vary those orders today.
Insofar as reliance upon the Judgment and the garnishee order is concerned, I have already recorded that the question of the possibility of set-offs and adjustments for costs orders was before Darke J and, in my respectful view, obviously informed the approach that his Honour took in making the orders which he did. All that has happened since then is that what was a possibility has been crystallised by the entry of the Judgment. It does not meet the description of a new or unforeseeable event warranting a variation in the orders when it is a development of a kind that was within the Court's contemplation, albeit perhaps inchoate insofar as the costs assessment had not been completed when the order was made.
Finally, even if there were both power and circumstances suggesting that Darke J's orders should be varied, the Court would not do so in the exercise of its discretion. This is because I accept the force of Mr Robertson's submission that Dr Mendonca participated in the auction and was over-bid on the basis that, insofar as the auction was a contest between the parties, the competition between them had to be on the level playing field of each of them being able to pay the full purchase price without adjustment or set-off. I again refer to cl 42(a) of the Contract as evidence of that.
Having heard the parties' arguments, and considered the evidence that has been filed by the parties today, it seems to me clear beyond doubt that Darke J understood that the question of set-offs and adjustments was going to be productive of more dispute and delay, continuing a regrettable pattern of implacable argument over the Property that has characterised the various phases of this litigation. In those circumstances, his Honour decided that what had to happen was that if the parties were bidding against each other for the Property, the successful bidder had to be in a position to pay the full purchase price, with all questions of adjustments and set-offs between them deferred until the end: in other words, "complete first, argue later".
Nothing that I have heard today persuades me that the Court ought to interfere with what appears to me, with respect, to have been an entirely sensible solution to the problem with which his Honour was confronted. Furthermore, insofar as it is necessary for me to express my respectful view on that solution, I consider it was entirely in accordance with the just, quick and cheap resolution of what has been a long and difficult dispute between the parties.
Because of the result to which the Court has come, it is not necessary for me to deal with the notice of motion insofar as it seeks a declaration in relation to the notice to complete. As I discussed with Mr Breene during the course of argument, it will be a matter for the Trustees to decide what they will do when their undertaking expires on Wednesday. However I record, for the avoidance of doubt, that if they decide not to issue a fresh notice to complete, and wish to maintain their rights by reference to the present notice, the Court would be strongly inclined, if the Tonnas were to make application to this effect, to restrain any further action in reliance on the current notice to complete until the determination of its validity at what I expect would be a short hearing before me in the Duty List in the next few days.

Costs

The Court has now heard the parties' argument in relation to the question of costs. There is no doubt that the Trustees, as such, should have their costs on the indemnity basis. Those costs should be paid by the Tonnas on the indemnity basis.
Insofar as the costs between the Tonnas and Dr Mendonca are concerned, Mr Robertson has submitted that those costs should also be paid on the indemnity basis. However, I accept Mr Newton SC's submission that there is nothing about this application that would engage the Court's discretion to order costs between the real protagonists on the indemnity basis.
Although it has failed, this was not an application which in the Court's view was one that, properly advised, the Tonnas should never have brought. The position advanced by the Tonnas was arguable, albeit unsuccessful in the final outcome. Costs should follow the event in the usual way so that the Court will order that the costs of Dr Mendonca should be paid by the Tonnas on the ordinary basis.
Two other considerations were raised related to costs.
First, Mr Robertson submitted that insofar as the Trustees had incurred professional (as opposed to legal) costs in dealing with the motion, those costs should not be visited on Dr Mendonca when the parties' respective contributions to the professional costs of the Trustees were calculated. I agree. However, the order that I will make to give effect to that conclusion is not under the costs jurisdiction because it relates the Trustees' professional costs. In my respectful view, such an order can be made as part of the working out of Darke J's orders under s 66G. The Court will order that insofar as the Trustees have incurred professional costs in dealing with this notice of motion, those costs should be paid entirely by the Tonnas.
Finally, because the Trustees intend to apply to the Court to increase the amount for which they are entitled to charge above that set out in Order 5 made by Darke J, I will make clear that today's orders are intended to apply in respect of whatever amount the Court ultimately determines the Trustees are entitled to deduct from the proceeds of sale for their professional fees.

Conclusion

The orders of the Court are: 1. The defendants' Notice of Motion filed 3 December 2021 is dismissed. 2. The defendants are to pay the costs of the trustees for sale, being Stephen Wesley Hathway and Philip Raymond Hosking, on the indemnity basis. 3. The defendants are to pay the plaintiff's costs of the motion. 4. Insofar as the trustees for sale are authorised by the orders made by Darke J to deduct their expenses form the proceeds of sale, then insofar as the trustees deduct their expenses incurred in dealing with the defendants' notice of motion filed 3 December 2021, those costs are to be deducted from the share of the proceeds of sale that would otherwise be ultimately payable to the defendants. 5. Note that the trustees intend to apply to the court to increase the amount to which they are entitled to charge above that set out in order 5 made by Darke J on 4 June 2021, and order 4 above is intended to apply in respect of whatever amount the court ultimately determines the trustees are entitled to deduct from the proceeds of sale.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 13 December 2021

At a glance

Court

Decision date

Before

Source

Judgment (7 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (4)

Cited By (1)