Mendonca v Tonna; Mendonca v Hathaway; The application of Hathaway and Hosking

Supreme Court of NSW|2024-08-15|Before: Kunc J, Ward CJ

Summary

Public policy favours the consensual resolution of litigation. Where that occurs before there has been a hearing on the merits and leaving only a dispute as to costs, generally the Court will make no order as to the parties' costs. However, a different outcome may follow where what is presented as a resolution or sensible approach by one side is in fact a capitulation.
This judgment deals with that distinction, where it is said that the plaintiff gradually capitulated during the course of a hearing before me of three proceedings which were the final iteration of a dispute about a property at Galston. The litigation has run for several years and occupied a number of judges of this Division and the Court of Appeal. In the originating dispute, the plaintiff is Dr Renuka Mendonca, and the defendants are Mr Mark Tonna and Mrs Lorraine Tonna (to whom I refer without disrespect as the Tonnas).
In Tonna v Mendonca [2019] NSWSC 1849, Ward CJ in Eq (as the President then was) determined that Dr Mendonca held the property on resulting trust for herself and the Tonnas. The Tonnas had alleged that Dr Mendonca had contravened an agreement reached by Mr Tonna and Dr Mendonca's husband (as agent for Dr Mendonca and also in his capacity as agent and accounting adviser to the Tonnas) whereby Dr Mendonca would purchase the property from the Tonnas and would hold the legal title on trust for their sole benefit until the sale of another property owned by the Tonnas at Schofields, with an obligation eventually to transfer the property to them. Dr Mendonca had denied that such agreement existed.

Trustee Remuneration Proceedings - procedural history

These proceedings were commenced by Dr Mendonca by summons filed on 26 April 2021. On 4 June 2021, Darke J made orders under s 66G of the Conveyancing Act 1919 (NSW) for the appointment of trustees for the sale of the property and as to how the proceeds of any sale were to be applied. Relevantly for present purposes, order 5 authorised the Trustees to "charge at their usual hourly professional rates subject to the total sum not exceeding $20,000" and also allowed them to "deduct such expenses from the proceeds of sale." Foreseeing further scope for argument between the parties, order 7 stipulated that the successful party to the auction could not apply the benefit of any asserted set-off entitlements or adjustments against the purchase price. These orders were substantially consistent with the orders sought by Dr Mendonca in her summons.
The auction of the property took place on 18 September 2021 with the Tonnas making the successful bid of $4 million. Initially, the Tonnas were only able to raise $3.5 million to make the purchase. The transaction was then subject to a notice to complete by the Trustees.
On 3 December 2021, the Tonnas filed a notice of motion seeking to vary the orders of Darke J, which would have enabled them to complete the purchase by only paying $3,056,597.79 to the Trustees and set off the remaining amount by relying on extant costs orders they had against Dr Mendonca. On 6 December 2021, sitting as Duty Judge, I dismissed the Tonna's notice of motion on the basis that it was inappropriate to vary the orders made by Darke J on the basis his Honour had expressly considered a set-off should not be allowed to avoid the parties prolonging their dispute: Mendonca v Tonna [2021] NSWSC 1627 (Kunc J judgment). On that occasion, the Trustees also foreshadowed their intention to apply to the Court to increase the amount to which they were entitled to charge above the $20,000 amount set out in Order 5 of Darke J's original orders.
On 16 May 2022, the Trustees filed a notice of motion for orders including: 1. That in addition to the remuneration referred to in order 5 of the orders made by the Court on 4 June 2021, the Court approves the Trustee's further remuneration in the sum of $132,108 plus GST or such other sum as the Court may determine, plus GST. 2. An order that the applicants' external expenses and disbursements incurred in their performance as trustees, be paid out of, or reimbursed from, the proceeds of the sale of the property situated at XXXX Galston NSW 2159. 3. An order that the applicants' costs of and incidental to this application be paid out of the proceeds of the sale of the land situated at XXXX, Galston NSW 2159 on an indemnity basis.
The Trustees' motion was ultimately listed for hearing before Hammerschlag CJ in Eq.
On 1 February 2023, his Honour determined that order 5 made by Darke J on 4 June 2021 did not finally limit to $20,000 the Trustees' entitlement to charge for their services and disbursements. His Honour also made directions for the Trustees to provide Dr Mendonca and the Tonnas any further documentation to enable them to determine their position in relation to the remuneration application. Registrar Walton then made further directions on 5 April 2023 for Dr Mendonca and the Tonnas to serve further evidence by 10 May 2023 and the Trustees to file and serve any affidavits in reply by 31 May 2023. That timetable was extended on 7 June 2023. On that occasion the matter was also referred to court annexed mediation, but the matter did not settle when the mediation took place on 28 July 2023.
On 14 August 2023, the matter was listed for hearing before me for three days commencing on 2 April 2024. On 28 September 2023 I commenced case-managing this proceeding, together with the other two proceedings. On that occasion, I granted leave to the Trustees to file in Court an amended notice of motion and, given Dr Mendonca's challenge to the Trustees' remuneration, noted that the parties would endeavour to agree upon a referee and the terms of that reference with the intention of submitting consent orders to the Court for the disposition of the issues in that proceeding.
The Trustees' amended notice of motion sought orders including: 1. That the Court approves the Trustees' remuneration: a. In the amount of $152,108.00 plus GST for the period between 4 June 2021 and 31 January 2022. b. In the amount of $38,618 plus GST for the period between 1 February 2022 to 9 March 2023; and c. In the amount of $30,957.00 plus GST for the period between 10 March 2023 and the date of these orders. d. Or such other sum as the Court may determine 2. An order that the applicants' external expenses and disbursements (including legal fees and disbursements) incurred in their performance as trustees be paid out of, or reimbursed from, the proceeds of the sale of the property situated at XXXX Galston NSW 22159 3. An order that the applicants' costs of and incidental to this application be paid out of the proceeds of the sale of the land situated at XXXX Galston NSW 2159 on an indemnity basis, such payment to be made prior to any payment being made from the proceeds to any other party to the proceedings.
On 24 October 2023, I made orders by consent appointing Mr Henry McKenna as the referee. Mr McKenna was required to answer the following questions: 1. Whether the amount of remuneration claimed by the Trustees in the amended notice of motion (being a total of $221,683 plus GST) for the period from 4 June 2021 to 10 March 2023 is fair and reasonable. 2. If the answer to 1 is no, what would be a fair and reasonable amount of remuneration for the Trustees for the period from 4 June 2021 to 10 March 2023. 3. Insofar as Dr Mendonca contends work undertaken by the Trustees was negligent or unnecessary or similar, what is the fair and reasonable amount of remuneration for the Trustees for such work without having regard to or deciding the correctness of Dr Mendonca's contentions.
Mr Mckenna completed his referee's report on 29 January 2024.
In response to question 1, Mr McKenna concluded that the Trustees' timesheet entries were mostly fair and reasonable although he believed that there should be some entries reduced or removed.
In response to question 2, Mr McKenna provided this table, being a reduction of 13.3% and which was accepted by the Trustees before me: Calculation of reasonable Trustees time costs (excluding GST) $ Trustees' time costs 24 June 2021 to 24 October 2023 $221,683.00 Less - reduction for excessive time charged for the tasks described $8,530.50 Less - reduction for time charged with inadequate narrative $3,652.00 Less - reduction for duplicate timesheet entries or tasks by others $1,261.50 Less - reduction for handover time $586.00 Less - Reduction for time incurred in applying for remuneration $15,479.50 Less - reduction for time allocated to the wrong job code $78.00 Reasonable remuneration for the Trustees $192,095. 50

In relation to question 3, Mr McKenna did not consider that any of the work undertaken by the Trustees was negligent or unnecessary.
On 2 February 2024, Dr Mendonca filed a notice of motion seeking the following orders: 1. Leave granted to the applicant to file and serve Notice of Motion seeking below orders. 2. An order that parties should bear the ordinary cost of the sale of the Property in the ratio of their sharing in the proceeds of sale being ratio of their beneficial interest. 3. An order that the difference between total, fair and reasonable and just costs determined by referee or Court in relation to question number 2 or 3 (whichever number is lower) and the ordinary costs of both trustees and their solicitor be borne solely by the Tonnas and be deducted out of the Tonnas share of the net proceeds of sale. 4. An order that the trustees bear their own costs (fees and legal costs) or in the alternative trustees fees and/or trustees legal representatives legal costs and applicant's legal costs as agreed or assessed in relation to 2021/115917 be deducted out of the Tonnas share of the net proceeds of sale.
On 14 February 2024, I made directions for the parties to file and serve submissions as to whether the referee's report should be adopted, file and serve submissions as to any adjustments which should be made to Dr Mendonca's Interest in the proceeds after deduction of the costs and expenses of the Trustees, and required the Trustees to file an application for assessment of the costs of their former solicitor, Mr John Breene of Breene & Breene. I also ordered that all three proceedings be heard together with evidence in one being evidence in the other.
On 16 March 2024, Dr Mendonca filed a further notice of motion seeking these orders: 1. An order to vary or set aside order 3 made on 14 February 2024 by Kunc J and/or grant permanent stay under s 67 of Civil Procedure Act 2005 of application for assessment of trustee solicitors costs filed on 29 January 2024 time barred by statute, if applicant's primary position served on 10 March 2024 pursuant to orders made by Kunc J is not accepted. 2. An order declaring trustee's duty towards beneficiaries is paramount and it must put the intent of beneficiaries first being it is not in the interest of Dr. Mendonca and/or Mark and Lorraine Tonna to seek an extension of time to pursue an application for assessment of trustee solicitors costs, if applicant's primary position served on 10 March 2024 pursuant to orders made by Kunc J is not accepted. 3. Costs be costs in the cause (costs in the trial).
On 27 March 2024, I stood this further motion over to be heard at the main hearing to commence on 2 April 2024. At the hearing, Dr Mendonca informed me that the gravamen of her complaint was that the Trustees were out of time in filing the application for the costs assessment. This breach of the limitation period was cured by a decision of the Manager, Cost Assessment of this Court dated 26 March 2024 who exercised their discretion to extend the time within which the application was brought. Dr Mendonca sought the stay because she said that the extension of time was not in her interests as a beneficiary of the trust because the trust estate (the Proceeds) would bear the costs of an assessment that was brought out of time and, to use her description, was 'statute-barred'.
I assumed for the purposes of the motion that Dr Mendonca had standing to bring the application, bearing in mind that a beneficiary generally only has a right to due administration of the trust estate. However, I dismissed the motion because Dr Mendonca failed to establish any basis upon which I could set aside the decision of the Manager, Costs Assessment. Furthermore, even if I could do so, I did not accept that it was not in her or the Tonnas' interests for the Trustees' solicitors' costs to be assessed. In my respectful view, it was plainly in the interests of all parties to ensure that only the amount which is properly payable to the solicitors in respect of their costs is levied against the proceeds.
In opening, Mr Phillips informed the Court that there were two issues left to address in these proceedings: 1. Whether the Court should adopt the referee's report to resolve the Trustees' request for the Court approve their remuneration. Mr Phillips conceded that the referee's report superseded the amounts sought in the Trustees' amended notice of motion filed in Court on 28 September 2023 (see [24] above). 2. For the Court to approve the amount of the Trustees' legal costs for which they could be reimbursed from the proceeds.
In relation to the second issue, all the parties accepted that the Court should make an order providing for those costs to be paid as assessed from the proceeds. Dr Mendonca was concerned to ensure that the Tonnas paid the portion of costs which related to their notice of motion filed on 3 December 2021 which I had dismissed in the Kunc J judgment (see [19] above). This position was already conceded by Mr Stewart in his written opening submissions. Therefore, I asked the parties to produce short minutes outlining that the Trustees would be entitled to have their assessed solicitors' costs out of the proceeds, with a notation that the Tonnas agreed they had to pay the Trustees' costs associated with their (the Tonnas') unsuccessful 3 December 2021 notice of motion.
The parties' positions in relation to the first issue were not unanimous. The Trustees and the Tonnas consented to the Court adopting the referee's report as the amount of remuneration to which the Trustees were entitled. However, Dr Mendonca challenged the referee's report on the basis that she submitted the referee had incorrectly determined that there were no negligent acts by the Trustees which would justify their remuneration being further reduced.
In both written and oral submissions, Dr Mendonca contended that the Trustees had breached what she considered was their duty at general law and an obligation pursuant to s 66H of the Conveyancing Act 1919 (NSW) to consult with her about matters relating to the sale. Dr Mendonca submitted that the Trustees should have consulted her when they realised on or about 19 July 2021 that they were going to exceed the remuneration estimate of $20,000. It was her contention that had she been consulted the Trustees would have been replaced by the existing solicitors and real estate agents and this would have reduced costs. Dr Mendonca submitted that the parties would have been saved $48,000 had the Trustees been replaced by the solicitors because the solicitors' fees were only $99,000 as at 20 July 2021 compared to the Trustees' fees of $147,000.
Dr Mendonca also relied on s 66H to argue that the Trustees should have consulted her at the point at which the Trustees issued a second notice to complete to the Tonnas on 8 December 2021. She says that if they had done so, she would have informed them that she had obtained a loan from a bank and was willing to pay $4.1 million for the property. Therefore, the parties were deprived of $100,000, being the extra amount that Dr Mendonca was willing to bid in excess of what the Tonnas actually paid.
Finally, Dr Mendonca also suggested that the Trustees were negligent in not charging the Tonnas an occupation fee from 4 June 2021 until 21 December 2021 and therefore the Trustees may be liable for damages of up to $18,000.
In summary, Dr Mendonca challenged the referee's report by contending that there should be a further reduction in the Trustees' remuneration of $166,000 for the reasons outlined at [38] to [40] above.
In response, Mr Phillips submitted that Dr Mendonca had failed to identify any error which the referee had made in how the report has been prepared. I invited the parties to consider whether they pressed for the answer to question 3 of the report to be adopted. Mr Stewart pressed for that outcome but accepted that the Court was not bound by the referee's conclusion that he would not reduce the amount of remuneration to which the Trustees were entitled because of a lack of evidence as to whether there was any negligence.
I concurred with Mr Stewart's submission that I was not bound by the referee's opinion that there was no negligence on behalf of the Trustees. I inquired of Dr Mendonca as to whether she would accept the report if I limited the response to question 3, namely that he "does not consider that work undertaken by the Trustees was negligent or unnecessary" as a matter of opinion and that the Court would still be required to determine if the Trustees' conduct had been negligent in the ways she alleged. On this basis, Dr Mendonca agreed that the Court should accept the report in its entirety (Tcpt, 2 April 2024, p 33 (25)).
After the morning tea break, Dr Mendonca informed the Court that she had decided that she would accept the referee's report in its entirety and only press her claim in relation to apportionment as to how costs were to be dealt with as between herself and the Tonnas (Tcpt, 2 April 2024, 35 (39-44)). To be clear, Dr Mendonca subsequently agreed that she did not dispute the referee's conclusion that the Trustees should be paid $192,000 for their fees (Tscpt, 2 April 2024, p. 39(44-47)).
There was also a dispute as to whether the Tonnas in fact owed Dr Mendonca rental income in proportion to their Interests for the period 19 December 2021 (the date of Ward CJ in Eq's judgment concerning the co-ownership status of the property) and the date that the Trustees were appointed on 4 June 2021. It was accepted that this amount should come from the Tonnas' share of the net proceeds.
At the conclusion of the hearing, I requested the parties to prepare short minutes which reflected the various concessions and agreements between them. On 3 April 2024, I made the following orders in relation to these proceedings: Proceedings 2021/115917 1 An order that the report of Henry McKenna (Referee) dated 29 January 2024 be adopted by the Court in its entirety. 2 An order that inclusive of the remuneration referred to in order 5 of the orders made by the Court on 4 June 2021, the Court approves the Trustees' total remuneration in the sum of $195,095.50 (excluding GST), being the calculation of reasonable remuneration for the Trustees made by the Referee in his report dated 29 January 2024. ….. Proceedings 2021/115917 [Orders 7 to 10 were overtaken by events and are not relevant] 11 Submissions as to costs are to be served and filed by email to the associate to Kunc J as follows: (a) By the trustees and the Tonnas on or before 10 April 2024. (b) By Dr Mendonca on or before 17 April 2024. (c) By any party in response on or before 24 April 2024. 12. Liberty to any party to apply on 2 days' notice by email to the associate to Kunc J .
On 5 April 2024, pursuant to the slip rule I amended Order 2 made on 3 April 2024 by deleting the sum of $195, 095.50 and replacing it with the sum of $192, 095.50.
On 10 April 2024, I then made these further orders and notations to give effect to the parties' further agreements as to the working out of the Court's orders: Proceedings 2021/115917 Notations A. The Court notes that the terms and references used below are the same as those used in the orders made by the Court on 3 April 2024. B. The Court notes that the amount of the proceeds of sale of the Property situated at XXX Galston NSW 2159 (Property) held by the Trustees as at the date of these orders is $2,426,051.32 (Current Trust Fund). Orders 1 An order that the fees of the Referee (being $14,394.60 including GST) be paid forthwith from the Current Trust Fund. 2 An order that the external expenses and disbursements which have been paid by the Trustees as recorded in the Schedule which is Exhibit 6D in the proceedings (and which total $14,608.73) be reimbursed from the Current Trust Fund to the Trustees forthwith. 3 An order that the sum of $191,305.05 inclusive of GST (being the amount of remuneration for the Trustees approved by the Court on 3 April 2024 of $211,305.50 inclusive of GST less the amount of $20,000.00 already paid to the Trustees for their remuneration), be paid forthwith to the Trustees from the Current Trust Fund. 4 An order that the Trustees' remuneration with respect to the Tonnas' Notice of Motion filed on 3 December 2021 (Kunc J Motion), agreed by the Tonnas to be $6,446 including GST, is to be paid by the Tonnas (as ordered by Kunc J on 6 December 2021) by deduction from the interim distribution by the Trustees referred to in Order 8 below. 5 An order that the fees of the solicitor who acted for the Trustees with respect to the sale of the Property, John Breene, be paid out of the Current Trust Fund in the amount as agreed by the parties or as assessed by the costs assessor in Costs Assessment number 2024/82688. 6 An order that an amount equal to Mr Breene's costs with respect to the Kunc J motion as assessed (or agreed by the Tonnas) are to be paid by the Tonnas (as ordered by Kunc J on 6 December 2021) by deduction from the final distribution by the Trustees referred to in Order 10 below. 7 Liberty is granted to any party (including the Trustees) to apply with respect to the working out of Orders 5 and 6. Interim distribution and further payments by the Trustees 8 An order that an interim distribution be made by the Trustees from the Current Trust Fund in the sum of $1,000,000, with such distribution to be made by payment on or before 17 April 2024 of the following amounts to the following parties: (a) $711,130 to Dr Mendonca; and (b) $288,700 to the Tonnas less the amount of $6,446 referred to in Order 4 above. 9 An order that the Trustees be authorised to pay any further external expenses and disbursements incurred in the discharge of their duties from the Current Trust Fund, provided that the total of such expenses and disbursements does not exceed $20,000 plus GST, or such further or other amount as the Court may order. Final distribution 10 Direct that: (a) the Trustees provide to the beneficiaries by 4pm on 24 April 2024, their calculation of the amount then held in the Current Trust Fund, setting out any and all allocations that have been made between the beneficiaries by the Trustees, receipts and deductions of money up to and including that date; (b) within 14 days of receipt of the determination in Costs Assessment number 2024/82688 or the making of orders with respect to the payment of the costs of these proceedings (whichever is the later), the Trustees are to provide to the other parties a Settlement Statement which sets out the Trustees' calculations as to how the remainder of the proceeds of sale of the Property should be distributed (Proposed Final Distribution); (c) within 14 days of receipt of the Proposed Final Distribution, Dr Mendonca and the Tonnas are to notify the Trustees in writing of any objections or corrections that they contend should be made with respect to the Proposed Final Distribution; and (d) within 7 days of receipt of any objections or corrections to the Proposed Final Distribution, the Trustees are to send to the Associate to Kunc J a document which recommends a final distribution of the remainder of the proceeds of sale of the Property for approval or listing of the matter by the Court for further argument. Proceedings 2021/115917; 2022/264829; 2022/7598 Amendment to timetable for costs submissions 11 Vary Order 11 made on 3 April 2024 such that submissions as to costs are to be served and filed by email to the associate to Kunc J as follows: (a) By the trustees and the Tonnas on or before 11 April 2024. (b) By Dr Mendonca on or before 22 April 2024. (c) By any party in response on or before 29 April 2024.

Trustee Remuneration Proceedings - the Tonnas' submissions as to costs

The Tonnas' primary position is that Dr Mendonca should be solely liable for the Trustee's remuneration and legal costs in these proceedings. In the alternative, they seek an order that Dr Mendonca bear 90% of the costs of the Trustees' remuneration and legal costs and the Tonnas be liable for 10%. This 10% is put on the basis that the Tonnas did initially oppose the quantum of the remuneration and legal costs sought by the Trustees.
The costs order sought against Dr Mendonca was said to be justified on the basis that she unreasonably sought to challenge the Trustees' remuneration, only to then accept the referee's report and the (to be assessed) costs of the Trustees' solicitors.
The Tonnas relied on Darke J's observations in Stibbard-Leaver v Leaver [2021] NSWSC 65: [5] I observe at this point that in litigation of this type under s 66G of the Conveyancing Act, it is usual to order that the costs of the proceedings be paid out of the proceeds of sale. The rationale for this approach is that the costs of such an application are an incident of joint ownership (see Kardos v Sarbutt (No 2) [2006] NSWCA 206 at [28]). It remains the case of course that unreasonable conduct by a party may be a basis to conclude that some other order is appropriate in a s 66G case. Lewin v Lewin [2019] NSWSC 380 is an example. In that case, it was held that certain unreasonable conduct led to an unnecessary incurring of costs. However, as I noted in that case (at [41]), a co-owner is ordinarily under no obligation to seek to avoid a need to bring a s 66G application (see also Chow v Chow (No 2) [2015] NSWSC 1348 at [12] where it was stated by Young AJA that co-owners have no obligation to negotiate their dissolution).
Whilst this is not expressly an application under s 66G of the Conveyancing Act 1919 (NSW), the principles outlined by Darke J are said to apply in this case by analogy.
The Tonnas advanced five reasons why the position of Dr Mendonca was unreasonable.
First, Dr Mendonca was the only party that pressed that the work undertaken by the Trustees was negligent, unnecessary or similar. For example, she requested the referee to consider what would be the fair or reasonable amount of remuneration for the Trustees if they assumed she was correct that work undertaken by the Trustees was negligent, unnecessary or similar; she pressed during the hearing that the Trustees were negligent; her claims went beyond negligence and overlapped with her claims in the Negligence Proceedings; and, she had argued against the adoption of the referee's report because it did not account for her allegations without ever identifying how there was any error in the report.
Second, it was submitted that Dr Mendonca had a prior opportunity to ventilate her concerns to the referee and did so through her document called 'Brief Statement of Findings of Fact and Law' and therefore it was incorrect for her to say she needed to press her allegations at the hearing because she had no prior opportunity to do so.
Third, there was no basis for Dr Mendonca to refuse to accept the referee's report because it was obvious the referee had been fair and independent of all parties.
Fourth, even if the Court found that Dr Mendonca had properly identified an error in the report because it did not take into account her allegations of the Trustees' negligence, those allegations had been shown to be unmeritorious by the dismissal of the Negligence Proceedings.
Fifth, Dr Mendonca had refused to accept that the costs of Breene & Breene should be paid at all, as was demonstrated by her notice of motion filed on 16 March 2024 and amended notice of motion filed on 2 April 2024 which sought orders that my order of 14 February 2024 be set aside or stayed, and sought an order that the application of the Trustees for an assessment of Breene & Breene's costs filed on 24 February 2024 was incompetent because it was time barred. It was submitted that Dr Mendonca was unreasonable to press this application when she had received a letter from Registrar Bellach that granted an extension of time for the assessment to take place, and then sought to challenge the Registrar's decision on various grounds including unreasonableness and jurisdictional error.
Given Dr Mendonca then no longer sought to challenge the referee's report, the Tonnas rely on Lewin v Lewin [2019] NSWSC 380, in which Darke J said: [43] I have considered the defendant's conduct in relation to the proceedings. I have come to the conclusion that it was unreasonable of the defendant, having made serious allegations against the plaintiff, to continue to resist the application for about 12 months before essentially capitulating. There is force in the submission that the defendant's assertions to the effect that the plaintiff was not a co-owner of the Unit, were unfounded. The assertions were contrary to clear acknowledgements previously made by the defendant. It is clear that a considerable portion of the plaintiff's costs of the proceedings would have been incurred as a result of the defendant's continued resistance to the application.
The Tonnas also emphasise that they were not involved in the challenge to the referee's report, save as to a query how a remuneration estimate for $20,000 increased to $130,0000 and how a legal bill of $90,000 was levied against the trust estate. Mr Stewart's submission noted that the Tonnas agreed to an order that they pay $6,446.00 inclusive of GST from their part of the interim distribution, pursuant to order 4 of the 10 April 2024 orders, and agreed to the same order with respect to legal costs pursuant to order 6 of the 10 April 2024 orders.
If the Court were not minded to order Dr Mendonca pay the Trustees' costs, the Tonnas submitted that a reduction of 20% should be made to the costs sought by the Trustees. Two submissions were put forward in support of this proposition. First, it was said that the Trustees' remuneration after it was considered by the referee was reduced by approximately 13% meaning the beneficiaries had had a nominal success in the proceedings. Second, it was submitted that the Trustees unjustifiably delayed the cost assessment process in circumstances where the parties were disputing their legal costs and their subsequent delay caused a dispute as to whether the assessment process was out of time. Had the Trustees acted promptly, the Tonnas contended that the subsequent disputes would have fallen away.
In reply, the Trustees provided four reasons as to why a reduction of 20% should not be made: 1. It would be inimical to the Trustees' rights to recoup everything expended by them in their capacity as trustees. 2. The remuneration sought by the Trustees has already been subject to a 13% reduction by the Referee. Therefore, it would be inconsistent for a further reduction of costs to be made. 3. There is no proper basis articulated by the Tonnas as to why there should be any reduction applied to the Trustees' costs. None of the costs which the Trustees say were properly and fully quantified in their affidavit evidence were challenged as being excessive, unreasonable or likely to be rejected if made the subject of an assessment. 4. There is no proper basis for any further reduction, let alone a deduction in the magnitude of 20%. The Trustees said they were willing to accept a 1.8% discount on their costs to reflect the usual position that a discount is normally applied to costs which are assessed on a gross sum basis.
The Trustees also submitted that any costs they bear in these proceedings should be paid by Dr Mendonca. They submitted that a Sanderson order should be made because Dr Mendonca was the true defendant in this case given her persistent challenges to the Trustees' remuneration and costs and as such, she should be held responsible for all of the costs incurred.
The Tonnas reject that Dr Mendonca achieved any of the relief she sought in these proceedings or that her conduct was not unreasonable. They submitted that their initial opposition to the Trustees' remuneration resulted in the referee being appointed and after that appointment they did not oppose the relief sought by the Trustees.
The Tonnas also reject that they adopted a false position on the costs that were due and payable by reason of my 6 December 2021 orders. Mr Stewart submitted that his clients always accepted that they were liable to pay $6, 446.00 inclusive of GST. This amount is vastly different to the amount Dr Mendonca sought to have the Tonnas pay, being $63,037.00.
The Tonnas further suggested that Dr Mendonca's written submissions seek to reagitate a number of the issues she conceded during the hearing including: (a) the provenance of an excel spreadsheet from September; b) her loss of a valuable opportunity to remove the Trustees and their solicitors; (c) the extraneous costs assessments, costs orders, costs certificates, costs judgments and costs reviews; (d) the out of time costs assessment; (e) the large shed; (f) the tenancy agreement; (g) the notice to complete; (h) her damages and losses; (i) a failure to relist; and, f) the assertion she had made offers.

Trustee Remuneration Proceedings - the Trustees' submissions as to costs

The Trustees contended that the Court should make these costs orders: 1. the Trustees' costs, as assessed (to the extent necessary) on the indemnity basis, should be paid out of the fund held by the Trustees, before any apportionment or adjustments are made with respect to that fund; 2. in lieu of assessment, a gross sum costs order should be made in favour of the Trustees in the sum of $205,000, to be apportioned as between the three proceedings as follows: 1. Proceedings 2021/115917: $82,000 2. Proceedings 2022/264829: $112,750 3. Proceedings 2022/7598: $10,250.00
In support of this position, the Trustees relied on a trustee's right to recoup all expenses properly incurred in execution of the trustee's powers pursuant to ss 59(4) and 93 of the Trustee Act 1925 No 14 (NSW) and r 42.25 of the Uniform Civil Procedure Rules 2005 (NSW).
Section 59(4) of the Trustee Act provides that "a trustee may reimburse himself or herself, or pay or discharge out of the trust property all expenses incurred in or about execution of the trustee's trusts or powers". Section 93(3) relevantly provides that "In any proceedings with respect to the management or administration of any property subject to a trust or forming part of the estate of a testator or intestate, or with respect to the interpretation of the trust instrument, the Court may, if it thinks fit, order any costs to be paid out of such part of the property as in the opinion of the Court is the real subject matter of the proceedings."
UCPR r 42.25(1) empowers the Court to indemnify trustees for any costs incurred in similar terms to that outlined in s 93 of the Trustee Act: 42.25 Costs of trustee or mortgagee (1) Subject to subrule (2), a person who is or has been a party to any proceedings in the capacity of trustee or mortgagee is entitled to be paid his or her costs in the proceedings, in so far as they are not paid by any other person, out of the fund held by the trustee or out of the mortgaged property, as the case may be. (2) The court may order that the person's costs not be so paid if - (a) the trustee or mortgagee has acted unreasonably, or (b) in the case of a trustee, the trustee has in substance acted for his or her own benefit rather than for the benefit of the fund
The Trustees also drew to attention that the general law also provides them with a similar entitlement to their costs. As Leeming JA said in Perpetual Trustee Co Ltd v Attorney General [2018] NSWSC 1456: [125] In all likelihood, the solicitors are entitled, as a matter of contract, to recover their costs, on a solicitor/client basis, from the trustee, ultimately (in the event of any dispute) through a process of assessment. To the extent that those costs have been properly incurred, the trustee is entitled to an indemnity from the assets of the trust. Indeed, the Court of Appeal (Sir George Jessel MR, Cotton and Lindley LJJ) observed in Turner v Hancock (1882) 20 Ch D 303 that a trustee's costs (like those of a mortgagee) being a matter of contract, they were not in the discretion of the Court, unless (as Cotton LJ put it at 306) "something has occurred to deprive the trustee of his right to take them out of the fund". [126] It follows that without any order, in an application such as this which was properly made by the trustee, the trustee is entitled to recover all of its properly incurred costs in the exercise of its rights of exoneration or recoupment out of trust assets. Starke J in National Trustees Executors and Agency Company of Australasia Ltd v Barnes (1941) 64 CLR 268 at 274; [1941] HCA 3 referred to the "rule acted upon by the Court of Chancery that an executor or trustee is entitled as of right to be recouped everything that he has expended properly in his character as executor or trustee". [127] There has been a deal of statutory intervention in this area. As Payne JA pointed out in Free Serbian Orthodox Church Diocese for Australia and New Zealand Property Trust v Bishop Irinej Dobrijevic (No 3) [2017] NSWCA 109 at [28] there are three statutory sources of power to order that the trustee be indemnified from trust assets in addition to the general law principle: s 59(4) of the Trustee Act, s 93 of the Trustee Act and UCPR r 42.25. Section 59(4) enacts the position at general law. The history of its Victorian and English counterparts is summarised in National Trustees Executors and Agency Company of Australasia Ltd v Barnes at 277. Subsection 93(2) and r 42.25 go further and confer a power upon the Court to make an order for costs, and the latter expressly confers a power to order that the trustee's costs not be paid. Thus, contrary to what had been held in Turner v Hancock, it is clear that the Court's power extends to the circumstances when a trustee enjoys a right of indemnity.
Relying on the matters set out in the immediately preceding paragraphs, the Trustees submit that unless either party is able to demonstrate that the Trustees have acted improperly or unreasonably, the Trustees are entitled to have paid from the proceeds all of their costs incurred with respect to the proceedings while acting as trustees with respect to the sale and the proceeds.
More specifically, the Trustees submit that pursuant to UCPR r 42.25 the Trustees should be paid out of the proceeds without any apportionment as between the beneficiaries. This is justified on the basis that they were in substance the successful moving party in these proceedings given that their remuneration, costs and other disbursements and expenses incurred in their capacity as trustees were approved by the Court.
In support of their gross sum costs order application, the Trustees rely on the affidavit of their solicitor Ms Wendy Jacobs dated 11 April 2024. Ms Jacobs' affidavit outlines that the Trustees will have incurred $208,821.78 in costs. The Trustees submit that a 1.8% discount should be applied to those costs, such that the total amount of the gross sum costs order in the Trustees' favour should be $205,000.
Ms Jacobs' affidavit also provides a basis for the Trustees' costs to be apportioned across the three proceedings with 40% of the costs order being apportioned to the Trustee Remuneration Proceedings, 55% to the Negligence Proceedings and 5% to the Interpleader Proceedings. So apportioned, the total gross sum costs order which the Trustees submit should be made is: 1. Proceedings 2021/115917: $82,000.00 2. Proceedings 2022/264829: $112,750.00 1. Proceedings 2022/7598: $10,250.00
In addition to the gross sum costs order, the Trustees also seek an order for the payment of interest on the costs incurred by the Trustees with respect to the proceedings from the date such costs were incurred. Whilst it is not necessary for the Court to be aware of the dates on which costs were incurred before making such an order (see Drummond v Rosen [2009] NSWCA 331 at [3]) the Trustees provide evidence for when such costs were incurred in Ms Jacobs' affidavit. In support of their application, the Trustees rely on s 101(4)-(5) of the Civil Procedure Act: S 101 Interest after judgment … (4) Unless the court orders otherwise, interest is payable on an amount payable under an order for the payment of costs. (5) Interest on an amount payable under an order for the payment of costs is to be calculated, at the prescribed rate or at any other rate that the court orders, as from the date the order was made or any other date that the court orders.
An order for the payment of interest to be paid is said to be consistent with the Trustees' entitlement to be indemnified by the fund.

The three proceedings - Dr Mendonca's submissions

In support of her position as to the costs of the proceedings, Dr Mendonca filed a 106-page affidavit on 22 April 2024. Her submissions formed Annexure Z to that affidavit (pp. 81-103). They were, with respect, not always easy to follow and I accept the Tonna's general criticisms of her submissions set out at [66] above. As will be apparent from what follows, she submitted the three proceedings should be seen as one and framed her submissions accordingly. It is therefore more straightforward to include all of her submissions under this heading.
Dr Mendonca's primary position is that because all three matters were heard together and 'ultimately consolidated into a single proceeding' by me on 14 February 2024, there is no need to apportion the amount of costs in each proceeding. She contends that the Trustees' legal costs should be discounted by 20% and then otherwise the beneficiary parties pay their own costs.
In the alternative, she contends that the Tonnas should pay her legal costs on the indemnity or ordinary basis due to their 'unreasonable conduct and unlawful conduct'. Dr Mendonca submits that the Tonnas' capitulated in relation to the payment of rent to her between 20 December 2019 and 4 June 2021 as well as in relation to the land tax and mortgage issues.
In support of her contention that the Tonnas and Trustees acted unreasonably during the course of the hearing, Dr Mendonca submits that it was only after her cross-examination when I clarified that the Trustees' costs in relation to the proceedings before me on 6 December 2021 are to be completely attributed to the Tonnas, that the Tonnas made concessions in relation to which of the Trustees' costs they would pay. She submitted that the Trustees expressly or impliedly adopted the Tonnas' position that the Trustees' costs in relation to the 6 December 2021 hearing be apportioned in proportion to beneficial ownership and as such invited litigation on the quantum of costs orders which unnecessarily protracted the proceedings. She also posits that the $63,037 she received from the Tonnas to make up for lost rent was the most significant issue in the Negligence Proceedings and, on this basis, she was content to drop her other claims. Dr Mendonca also claims that the delays the Trustees took in getting their solicitors' costs assessed created unnecessary delays.
In reply to the Tonnas' submissions, Dr Mendonca sought to traverse all costs orders which she had in her favour against the Tonnas and all of the times that the parties had been before the court and had failed to file and serve evidence on time.
With respect to the Trustee Remuneration Proceedings, Dr Mendonca submits that she helped to narrow the issues in dispute by accepting the referee's report in totality after it was clarified that the Court would treat the referee's response to Question 3 that there was no negligence by the Trustees as an opinion of the referee. She contends that after that it became unnecessary to determine the merits of this issue.
Dr Mendonca submits that had the Trustees properly quantified their fees incurred in defence of the Tonnas' 3 December 2021 motion determined by me in the Kunc J judgment, she would have made similar concessions as she did during the hearing, namely being to not have other apportionment issues dealt with on the merits.
Dr Mendonca also rejects the Tonnas' submissions that she unreasonably sought to challenge the Trustee's remuneration and solicitors' fees. Dr Mendonca said that she accepted the first two sections of the referee's report and that it was not unreasonable for her to challenge the third section of the report as the referee had allegedly contravened my direction to him that he should not consider the merits of whether there was any negligence by the Trustee (as opposed to quantifying what Dr Mendonca alleged was negligent). Dr Mendonca says that once it was clarified that I would determine the merits of any negligence claim and assume the amount the referee would deduct would be nil, she says she reasonably accepted the report.
Dr Mendonca also argues that she reasonably accepted the Trustees' solicitors costs after an offer by the solicitors which she accepted. She also says it was not unreasonable for her to draw attention to the cost assessment being brought out of time.
Dr Mendonca further alleges that the conduct of the Tonnas caused the proceedings to continue into a second day. As outlined below, Dr Mendonca relies on a number of costs orders and agreements allegedly entered into between the parties and claims the Tonnas misrepresented my orders on 6 December 2021 to avoid having to pay the Trustees' fees: My reasonable conduct to accept at the start of trial the referee report in its entirety and not require a determination of all issues in relation to trustees in 2021/115917 and 2022/264829 would have enabled trial to conclude on Day 1 but instead unreasonably prolonged into Day 2 predominantly due to unreasonable conduct of Tonna parties as follows: 1.To continue since 25 March 2020 misinterpreting and breaching until trial (with the benefit of legal advice and legal representation from Adams lawyers) the clear orders made by Justice Ward without seeking an extension of time to comply with Ward J orders and without availing of the opportunity provided by Her Honour in order 7 to relist the matter because, properly advised, Tonna parties knew or ought to know (being legally represented by Adams solicitors and Blackbay lawyers) that their (Tonna parties) objections to mortgage payments and insurance payments and land tax payments were unreasonable. 2. To continue since 4 June 2021 breaching until trial on 2 April 2024 their (Tonna parties) agreements before Justice Darke (a) in relation to set off against purchase price which resulted in judgment by Kunc J on 6 December 2021 and (b) in relation to broader accounting regime which resulted in 2nd garnishee order:
As I have already noted (see [78] above), Dr Mendonca's submissions also attempt to relitigate some of the concerns that she conceded she no longer pressed during the hearings. For example, she disputes that her conduct was unreasonable in relation to challenging the Trustees' costs by pressing that the Tonnas had acted unreasonably by disputing whether the shed on the property was a fixture and by preventing her and the Trustees from inspecting the property. She also contends that various pieces of evidence demonstrate that the Tonnas also challenged aspects of the Trustees' remuneration. Finally, Dr Mendonca contends that had the Tonnas accepted they were required to pay the Trustees' costs of attending the 6 December 2021 hearing before me, that would have resolved all of the matters because that considerably reduced the amount of the Trustees' costs that were in dispute.
Dr Mendonca also rejects that she was the only party that contended that the work undertaken by the Trustees was negligent or similar. She extracted in her submissions a number of times in the affidavit evidence where the Tonnas also sought to challenge the Trustees' remuneration: I was not the only party that contended that the work undertaken by the trustees was negligent, unnecessary or similar. The evidence below/as follows establishes that Tonna parties also joined in this contention and contended until start of trial on 2 April 2024 that the work undertaken by the trustees was negligent, unnecessary or similar: 2. "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" {CB 660 at [1]) 3. "I oppose the remuneration sought by the Trustees with respect to their costs and their legal costs on the basis that it is excessive"(CB 2675 at [13] affidavit of Mark Tonna 7 July 2023). 4. "The remuneration sought was more than five times what had been authorised. I did not think that the amount sought by the Trustees with respect to their remuneration was reasonable. "duplicative or otherwise not necessary" (CB 2675 at [16-18], 2676) 5. "I do note that the Trustee's costs with respect to the motion have not been assessed. I also consider that some of these costs may not be reasonable or may be excessive" CCB 2684) at [54]. 6. See Tonnas submissions at hearing before Justice Hammerschlag on 1 Feb. 2023 (exhibit V to my affidavit sworn on 22 April 2024).
Dr Mendonca then submitted that the remaining apportionment issues did not require consideration because the costs dispute concerning my orders on 6 December 2021 was the largest issue to be considered in the proceedings. On this premise, Dr Mendonca suggested that had the Tonnas' concession on who should pay the Trustees' costs of attending the 6 December 2021 hearing been given earlier, Day 2 of the proceedings may have become unnecessary.
Dr Mendonca seeks to characterise the positions she adopted throughout the proceedings as concessions and not a capitulation. She describes her conduct as reasonable and an approach which resulted in significant costs savings for all parties. Dr Mendonca instead claims that the Tonnas capitulated in relation to the issues of land tax, insurance and mortgage rent payments. In contrast, she contends that she was successful in the proceedings as, pursuant to prayer 4 of her summons, she had achieved a significant reduction in the costs she owed to the Trustees by virtue of the Tonnas being required to pay their costs of the 6 December 2021 proceedings. Dr Mendonca contends all of her other claims which were abandoned in the Negligence Proceedings were claims for which she had evidence, but about which she made reasonable concessions. As a result of there being no hearing on the merits of these claims, Dr Mendonca submitted that the principles in Re Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 applied so that there should be no order as to costs.
Dr Mendonca also submits that she should not have to pay the Trustees' costs of the various proceedings on the indemnity basis because the Tonnas also challenged the Trustees' remuneration. Dr Mendonca claims that otherwise there was no determination on the merits of any of the proceedings and that as a result there should be no order as to costs, consistent with Lai Qin. She also rejects that none of her claims were without merit. She submits that she did have evidence to support her claims, but they were simply not heard on the merits.
Finally, Dr Mendonca also rejects the Trustees' request for a gross sum costs order by stating that such an order would be unjust or unreasonable, albeit the basis for this contention is not clear from her submissions. She instead submits that there should be a 20% discount applied to the costs the Trustees seek. She also disagrees with the apportionment suggested by the Trustees (see [75] above) because she submits it is inconsistent with the order that all of the proceedings were to be heard together.

Negligence Proceedings - procedural history

These proceedings were commenced by Dr Mendonca initially against the Trustees by summons filed on 5 September 2022. On 11 October 2022, Dr Mendonca then filed a notice of motion seeking the following relief, which was to substantially the same effect as her summons: 1. A declaration that any costs and disbursements of the defendant before and after 18 September 2021 are to be exclusively paid by Mark and Lorraine Tonna. 2. A declaration that the defendant breached their obligations under s 66H of the Conveyancing Act 1919 and breached trust and breached other duties including but not limited to their duty of impartiality, duty to act in the interest of all not some beneficiaries and caused some loss of opportunity to Dr Mendonca and damages to trust estate under first notice to complete. 3. A declaration that Dr Mendonca was denied procedural fairness and lost opportunity to replace the defendant with cheaper trustees and trust estate suffered loss and damages. 4. A declaration that Dr Mendonca is the true winner of the first auction of $3,545,000 or $4,000,000 or $4,100,000 and buyer under contract cl 42(b) or declaration for 2nd auction. 5. A declaration (a) 2nd Notice to Complete dated 9 December 2021 served by the defendant granting 14 days extension of time from 9 December 2021 is invalid being in contempt of order made by Kunc J that denied extension of time until 10 December 2021 and/or in breach of defendant's obligations under s 66H and in breach of the defendant's duty of impartiality and procedural fairness (b) settlement invalid using illegal proceeds under invalid 2nd notice to complete; and (C) contract dated 18 September 2021 repudiated and contract cl 42(a) breached by Mark and Lorraine Tonna by 5pm on 8 December 2021. 6. An order that 2021/115917 and 2022/7598 be heard and determined together on the same date and time at the same hearing. An order that 2021/115917 be adjourned or stayed or its decision deferred until 2022/7598 is heard. 7. An order for set off. A declaration that 5pm 8 December 2021 was agreed time for completion in orders made by Justice Darke by consent on 3 December 2021 notwithstanding and in substitution for time for completion in contract clause 39(b). 8. An order dispensing with rules under s 14 of the Civil Procedure Act 2005. 9. An order for pre and post judgment interest. Order for costs and interest on costs. 10. Any other order the Court sees fit as applicant is self-represented. 11. An order for John Bartos, Costs Assessor, be appointed as referee under UCPR r 20.14 to assess the fees and disbursements of Solicitor John Breene on expedited basis. 12. An order for copies of all original invoices for fees and disbursements (including fees and disbursements of John Breene) claimed by trustees in their excel spreadsheet to be served upon applicant to enable applicant to verify its correctness.
The motion was heard by Hammerschalg CJ in Eq on 1 February 2023 who stood the proceedings over to the Registrar to 5 April 2023. On that occasion, Registrar Walton required Dr Mendonca to file and serve a statement of claim joining Mr & Mrs Tonna as defendants in addition to the Trustees. On 20 April 2023, Dr Mendonca filed her statement of claim joining the Tonnas as the second defendants. The statement of claim sought this relief, being a revised form of the initial summons and notice of motion: 1. Order that this statement of claim be in substitution for the summons and notice of motion filed and fee be waived for statement of claim as fee was paid for summons and motion. 2. Declaration that trustees breached their obligations under s 66H of the Conveyancing Act 1919 from the start and breached their fiduciary duties by preferring interests of Tonnas. 3. Declaration that Renuka Maria Mendonca was denied impartiality and denied procedural fairness (hearing rule and bias rule) by trustees and lost opportunities and suffered loss. 4. Declaration that substantial trustees' fees and disbursements be reduced from trustees fees and disbursements or be borne wholly by Tonnas or shared by trustees & Tonnas. 5. Declaration that repudiation occurred by 5pm on 8 December 2021 and trustees obligated to give proper consideration and discussion under s 66H of Conveyancing Act prior to acceptance or rejection of repudiation that ought to have been accepted. 6. Declaration or order under s 7 and/or section 8 and/or section 9 and/or section 12 and /or section 20 and set off under sch 1B of Contracts Review Act 1980. 7. Interest to the date of judgment is entered, calculated pursuant to s 100 of the Civil Procedure Act 2005 (NSW) and from the judgment calculated pursuant to s 101 of the Civil Procedure Act 2005 (NSW). 8. 2021/115917 and 2022/264829 and 2022/7598 be fixed for directions and heard and determined together by same Judge in single judgment. 9. Order to dispense with rules under s 14 Civil Procedure Act 2005 (NSW) where necessary in the interest of justice. 10. Declaration under s 66G(6) of the Conveyancing Act 1919 and declaration that title be transferred to Renuka Maria Mendonca upon payment of $4,100,000 less money payable and receivable by her, within 30 days of Mark and Lorraine Tonna vacating the Property within 30 days from date of judgment. 11. Damages and also costs in 2021/115917 and 2022/ 264829 and 2022/7598 as damages. 12. Costs of, and incidental to, these proceedings and such further orders as Court sees fit.
On 29 May 2023, the Trustees filed their defence. Paragraph 19 of that defence denied that Dr Mendonca was entitled to any of the relief claimed, or any other relief as against the Trustees. On 7 June 2023, Registrar Walton made orders extending the time for the Tonnas to file their defence and ordered that the parties attend a court-annexed mediation. On 15 June 2023, the Tonnas filed their defence denying the allegations against them, including that their conduct caused the costs of the sale process to increase and denied that they were unable or unwilling to complete. They also denied that the loan they received to be able to complete was invalid or void at law. The parties attended a court-annexed mediation on 28 July 2023 but were unable to settle the matter.
These proceedings then came before me on 28 September 2023 for pre-trial directions after being set down for hearing for three days from 2 April 2024 by Registrar Walton on 14 August 2023. On that occasion I directed Dr Mendonca to serve and file by email to my Associate a full outline of submissions in support of her case including identifying what affidavits and other materials she proposed to rely upon at hearing in support of her case. Further directions relating to the filing and serving of evidence were made on 24 October 2023.
On 29 January 2024, Dr Mendonca filed a notice of motion seeking leave to file and serve an amended statement of claim as well as an amended notice of motion. I gave Dr Mendonca leave to file and serve an amended statement of claim in the form which was Annexure A to her affidavit sworn on 27 January 2024 and to pay the other parties' costs thrown away by the amendment. I also precluded Dr Mendonca from seeking to rely on any further evidence served after 12 February 2024 without leave of the Court. The defendants were to file any defences to the amended statement of claim by 15 March 2024. Dr Mendonca's and the Tonnas' expert accountants were also to attend a conclave and produce a joint expert's report by 15 March 2024.
Dr Mendonca filed her amended statement of claim (ASC) on 19 February 2024. The only substantial differences in the relief sought between the ASC and the original pleading were to paragraphs 6 and 9 (amendments underlined). [6] Declaration or order making findings under s133 NCCP Act 2009 and section 7 and/or section 8 and/or section 9 and /or section 12 and/or section 20 and set off under sch 1B of Contracts Review Act 1980 in relation to the loan contract and/or contract of sale. …. [9] Order to dispense with rules under Section 14 of the Civil Procedure Act 2005 (NSW) where necessary in the interest of justice. Order that trustees to pay trust estate damages sustained from 4 July 2021 to 21 December 2021 as a result of failure of the trustees to demand from the Tonnas an occupation fee or equitable compensation of $900 each week for the Tonnas to live and do business and $300 each week for use of the large shed to be deduced from Tonnas share of sale proceeds. In the alternative, order Tonnas to pay occupation fee or rent or mesne profits or equitable compensation of $900 each week to live and do business in the Property and $300 each week for use of the large shed as a deduction from Tonnas share of sale proceeds, in equity.
Those allegations were particularised at [O] and [P] of the Amended Statement of Claim O. From 4 June 2021 until at least 21 December 2021 losses and damages to the trust estate was sustained as a result of failure of the trustees to comply with their duty to consult and give due consideration to whether Tonnas should continue in occupation and, if so, on what terms and in the discharge of that duty find that that it was in the general interest of the trust to follow my wishes (if consulted) that following their appointment, Tonnas had no right of occupation, and thus it was open to them to demand possession from Tonnas or demand an occupation fee of $900 each week to live in and do business on property and $300 per week for use of large shed to be deducted from Tonnas share of sale proceeds (without further notice) if Tonnas did not make their decision to give vacant possession (excluding tenant) and the trustees and in permitting Tonnas to continue in occupation free of charge, in excluding or restricting me from enjoying access to the property and shed and garage breached their duty of impartiality. In the alternative, occupation fee or rent or mesne profits or equitable compensation of $900 each week to live in and do business on property and $300 each week for use of large shed be deducted from Tonnas share of sale proceeds in equity, Tonnas having had the benefit of legal advice. P. From about 19 July 2021, losses and damages to the trust estate were sustained as a result of trustees failing to give instructions to employees to inform trustees when $20,000 was incurred, to avoid being replaced and by failing to give instructions to employees to comply with duties under section 66H of Conveyancing Act 1919 and general law at all times. Trustees failed to comply with their duty to give due consideration to whether $20,000 has been incurred and, if so. whether to seek consent of Tonnas and myself and leave of court about 19 July 2021 and in the discharge of that duty find that consent of Tonnas and myself and leave of court must be sought or in its absence voluntarily resign or being removed and replaced by cheaper fixed fees solicitor and fixed fees real estate agent as trustees to comply with duty to save substantial costs of trust.
The Trustees filed their defence to the ASC on 15 March 2024 (the Tonnas defence was filed in Court on the first day of the hearing). In relation to the new allegations the Trustees denied that they owed a duty as set out in paragraphs [O] and [P] of the ASC, denied that they excluded or restricted Dr Mendonca from enjoying access to the property, denied having any information which suggested that the Tonnas lived on the property and otherwise denied the further allegations.
On 22 March 2024, Mr Saliba, who provided the Tonnas with the loan which enabled them to complete the purchase of the property and which loan Dr Mendonca alleged was void, filed a notice of motion. He sought orders to set aside subpoenas issued by Dr Mendonca to him both for documents and that he give evidence.
I dealt with Mr Saliba's motion on the first day of the hearing on 2 April 2024. Mr J Brook of Counsel appeared for Mr Saliba. Mr Brook informed the Court that the only document caught by the subpoena, being the Mortgage Loan Agreement dated 21 December 2021 entered into between Mr Saliba and the Tonnas, had been produced. It became clear that Dr Mendonca issued the subpoena to Mr Saliba because she wanted to call him in support of her claim that the loan agreement between Mr Saliba and the Tonnas was void on the grounds of illegality by reference to provisions of the Contracts Review Act 1980 (NSW) and the National Consumer Credit Protection Act 2009 (Cth). Whilst she initially wanted to cross-examine Mr Saliba, after it was explained that he would be her witness, she said she would call him in her case in chief.
After hearing argument, I set aside the subpoena requiring Mr Saliba to attend to give evidence filed on 20 February 2024, and a further subpoena filed on 4 March 2024 insofar as it also required Mr Saliba to attend to give evidence. The reason for the order was Dr Mendonca's lack of standing to seek relief in relation to a loan agreement to which she was not a party. The Trustees, who were charged with the sale of the Property pursuant to orders of this Court, had accepted the highest bid, which came from the Tonnas. The transaction had settled. The funds which were to be paid under the loan agreement had been paid and Mr Saliba now held a registered mortgage over the property. The persons with standing to make any complaints about those arrangements were the Tonnas not Dr Mendonca. I therefore concluded that the subpoenas lacked a legitimate forensic purpose.
At the start of the hearing I also asked Dr Mendonca to specify what evidence she was relying on in these proceedings. The following exchange took place in which Dr Mendonca confirmed that she only pressed prayer 4 of the ASC which sought a "declaration that substantial trustees fees and disbursements be reduced from trustees fees and disbursements or be borne wholly by Tonnas or shared by trustees and Tonnas" (Tscpt 2 April 2024, pp 38(25)-39(15)): PLAINTIFF: Your Honour, I'm only wishing for ‑ in the point number 4, that the substantial trustee fees and disbursements be reduced from trustees' fees and disbursements be fully borne by the Tonnas, so the apportionment issue, your Honour. HIS HONOUR: So that is the only relief that you are seeking in this document ‑ from this document now; is that correct? Because this includes a claim for the trustees to pay moneys out and all sorts of things, so I just want to be very clear. I'm looking at p 214. PLAINTIFF: Yes, your Honour. HIS HONOUR: So the only claim ‑ just tell me if I'm right or wrong ‑ the only claim that you now press in this amended statement of claim is what we're referring to as the apportionment issue, which is set out, you say, in para 4; is that correct? PLAINTIFF: I say that the substantial trustee fees and disbursements be reduced ‑ be ‑ sorry, be borne wholly by the Tonnas, or ‑ that ‑ yes, the substantial trustee fees and disbursements be borne wholly by the Tonnas. HIS HONOUR: All right. PLAINTIFF: I'm not wishing it for‑‑ HIS HONOUR: The trustees? PLAINTIFF: Yeah. HIS HONOUR: So, to be clear, what we have been referring to as the negligence claim, you are no longer pressing? That is, you are not seeking these amounts of 48,000, 100,000 that you were telling me about this morning, to be set off from what the trustees are entitled to? PLAINTIFF: Yes, your Honour. HIS HONOUR: Again, just to make sure I'm following what you're saying, Dr Mendonca, the only issue that you want me to decide in your amended statement of claim is whether or not there should be some apportionment between you and the Tonnas, in effect, that it goes to the Tonnas of the fees that we now agree should be paid to the trustees? PLAINTIFF: Yes, your Honour. HIS HONOUR: All right
Once again, for the avoidance of doubt, Dr Mendonca accepted that she no longer disputed that the Trustees were entitled to $192,000 for their fees. The dispute only concerned the proportions in which that amount should be paid between Dr Mendonca and the Tonnas (Tscpt, 2 April 2024, p.39(44-47).
The position adopted by Dr Mendonca differed from the relief sought in prayer 4 of her ASC. Dr Mendonca now contended that the Tonnas should not pay the entirety of the $192,000 owed to the Trustees. Instead, she submitted that each party should pay the initial estimate of Trustees fees referred to in Darke J's orders, being $20,000, in the proportions of their Interests. She contended that the remaining $172,000 should be borne entirely by the Tonnas (Tscpt, 2 April 2024, p. 40 (15-26). I asked Dr Mendonca to go through the referee's report during an extended luncheon adjournment and specify which costs she said should be borne by the Tonnas and why. She did so.
In light of Dr Mendonca only pressing prayer 4 of her ASC, there was no substantive relief sought against the Trustees. I therefore dismissed the claim as against the Trustees subject to reserving their right to seek their costs of these proceedings against Dr Mendonca. It also became clear that Dr Mendonca's 11 October 2022 notice of motion (see [94] above), had yet to be formally dealt with. To avoid confusion with her ASC I dismissed that motion on 2 April 2024 and ordered that the parties' costs of that notice of motion be their costs in the Negligence Proceedings.
The outstanding issue between Dr Mendonca and the Tonnas in these proceedings concerned which fees and costs should be borne by the Tonnas personally and which costs should be borne by the beneficiaries in proportion to their Interests.
The first fees in dispute were the costs the Trustees incurred obtaining expert reports to determine whether a large shed on the property, which the Tonnas were using to run their business, was a fixture (as contended by Dr Mendonca) or a chattel as contended by the Tonnas. Dr Mendonca submitted that cost should be borne by the Tonnas as they were the protagonists in this dispute and had eventually conceded the shed was a fixture.
The second disputed payment was whether the Tonnas should pay the costs the Trustees incurred with respect to engaging with the tenants occupying the property prior to it going to auction. Dr Mendonca said that she wanted the tenants to vacate the property as soon as possible but the Tonnas had indicated that they were willing to allow the tenants to stay in the property until some time until 2022.
The third disputed payment related to some of the costs the Trustees incurred by engaging LJ Hooker as the selling agent for the property. Dr Mendonca contended that some of the costs incurred in relation to allowing potential purchasers to enter and view the property should be borne by the Tonnas because they did not allow Dr Mendonca to view the Property. How liability for that should be apportioned was not made clear in her submissions or during the course of the hearing.
The fourth disputed payment was whether Dr Mendonca should be required to pay the costs the Trustees charged in relation to their personal attendance at the hearing before me on 6 December 2021 concerning the Tonnas' unsuccessful motion. Dr Mendonca claimed she should not be visited with that cost given that motion was unsuccessfully brought by the Tonnas and those costs would otherwise not have been incurred.
The fifth disputed cost is the costs the Trustees incurred having to address a garnishee order obtained by the Tonnas (the garnished amount being the subject of the Interpleader Proceedings). Dr Mendonca submitted it was unreasonable for the Tonnas to seek the garnishee order because there was no money available at the time, therefore the order was premature and the application should not have been made.
The final dispute concerned whether there should be a set off from what Dr Mendonca owed to the Trustees of rent repayments which were received by the Tonnas and which Dr Mendonca said should have gone to her. Dr Mendonca submitted that between the judgment of Ward CJ in Eq on 19 December 2019, which stated that Dr Mendonca was a co-owner of the property, to the point that the Trustees were appointed on 4 June 2021, she was entitled to rent in the proportion of her Interest. Dr Mendonca pressed for the payment of that rent to her by the Tonnas by effectively setting-off that amount from the amount she owed the Trustees.
On the second day of the hearing, Mr Stewart cross-examined Dr Mendonca about the payments which were still in dispute, and which I have listed in the preceding paragraphs. After the luncheon adjournment on the second day, Mr Stewart indicated that the Tonnas accepted they were required to pay Dr Mendonca $63,000 for rental payments, and that they accepted that amounts in a particular accountant's report were accurate (Tscpt, 3 April 2024, p. 114(26)-115(4)).
Late in the afternoon on the second day, having abandoned her claim in the Interpleader Proceedings (see [140] below), Dr Mendonca said that she would be content with all of the disputed payments being paid in accordance with the parties' Interests on the basis of the indications Mr Stewart had given on behalf of the Tonnas recorded in the preceding paragraph (see Tscpt, 3 April 2024, p. 128(10)-130(14)). This meant that the remaining set off issues fell away. The parties therefore agreed that Dr Mendonca's ASC should be dismissed.
It was accepted by the Tonnas that they were required to pay $17,000 pursuant to a costs order I made on 6 December 2021, in relation to their unsuccessful motion filed on 3 December 2021. Subject to the Tonnas accepting they were required to pay this amount, Dr Mendonca and the Tonnas reached the position that they should be responsible for the assessed legal fees of the Trustees in accordance with their Interests.
The end result was that on 3 April 2024, at the conclusion of the hearing, I made the following orders in relation to these proceedings: 3. An order that the Notice of Motion filed by Dr Mendonca on 11 October 2022 be dismissed, with the parties' costs of that motion to be their costs of Proceedings 2022/264829. 4. An order that the Amended Statement of Claim filed by Dr Mendonca on 19 January 2024 (ASOC), be dismissed.

The Negligence Proceedings - the Tonna's submissions as to costs

The Tonnas submit that Dr Mendonca should pay their costs on the indemnity basis. They submit that her ASC and notice of motion dated 11 October 2022, both being dismissed on 3 April 2024 with an order that the costs of the motion were to be the parties' costs in the proceedings, means that Dr Mendonca is the unsuccessful party in these proceedings. As costs follow the event, Dr Mendonca should be required to pay the Tonnas' costs.
In support of the proposition that costs should be paid on the indemnity basis, the Tonnas submit that Dr Mendonca effectively abandoned all but prayer 4 of her ASC which sought that the Trustees' substantial fees and disbursements be wholly borne by the Tonnas.
This meant that [A] to [J] and the first ten and a half lines of [K], [L]. [M], [N] and [P] of her ASC were all abandoned. The Tonnas sought to highlight the severity of the matters which had been dismissed. [A]-[D] of her ASC raised alleged breaches of duty based on the premise that the Trustees were required to consult Dr Mendonca pursuant to s 66H on various matters related to the sale, and had they done so she would have 'got a better deal' on solicitor and real estate agents costs. [E]-[N] alleged that the loan the Tonnas obtained to complete the contract was void for illegality and that the Trustees incurred unnecessary costs by extending the opportunity the Trustees had to complete the contract using 'crime loan proceeds'. Mr Stewart also noted that Dr Mendonca even sought to subpoena Mr Saliba to establish whether the contract for sale was void for illegality. [O] challenged whether the Tonnas had a right to occupy the property at the time of sale and whether that occupation caused unnecessary costs to the Trustees.
Finally, [P] contended that the Trustees 'failed to comply with their duty to give due consideration to whether $20,000 has been incurred'. This was said to be unreasonable in light of the ruling by Hammerschlag CJ Eq at [22] above, that the effect of Darke J's orders on 4 June 2021 was not to cap the costs the Trustees could incur to $20,000.
It was submitted that the unreasonableness of her conduct was exacerbated in circumstances where Dr Mendonca was apparently baselessly challenging the indefeasible title of the Tonnas to the property from 21 December 2021, yet concurrently was content to otherwise receive 71.13% of the proceeds.
In summary, it was said that Dr Mendonca had abandoned serious allegations that the Trustees had preferred the Tonnas' interests over Dr Mendonca's interests, that Dr Mendonca was denied procedural fairness, allegations as to illegal loans and "crime loan" proceeds being used by the Tonnas to purchase the property and breaches of various legislative provisions.
As a result of the concessions made by Dr Mendonca, the only issue remaining in dispute related to prayer 4 of the relief which sought a 'declaration that trustees fees and disbursements or be borne wholly by Tonnas or shared by Trustees & Tonnas.'
Insofar as Dr Mendonca maintained prayer 4 of the ASC, Mr Stewart's submissions outlined the precise amounts of costs which Dr Mendonca sought for the Tonnas to bear personally: By the middle of Day 2, it was only the amended Prayer 4 declaration that was sought by Dr Mendonca and the allegations she still persisted with were as follows: a. Paragraph [K] of the ASOC as to Mark and Lorraine Tonna causing the Trustees' remuneration to be increased in relation to: i. a large shed - she sought the Tonnas to solely pay, on their calculation, the sum of $12,283.00; ii. the 'void' tenancy agreement - LJ Hooker - as to 50/50 so $28,884 to be paid by the Tonnas and Dr Mendonca each; so a 'dollar' change from the co-owner proportions for the Tonnas, on their calculation, of an additional sum of $12,205.94; iii. the property entry issues - an unspecified amount; iv. what were described as set off issues before Kunc J - Dr Mendonca sought that the Tonnas pay $63,037.00; and/or v. garnishee issues, although she was not able to articulate what this meant in dollar terms because it was a part of (iv) above. b. The monetary claims by Dr Mendonca vis a vis the Trustees' legal costs (Breene & Breene) for each of these was: i. The Shed- that the Tonnas pay $3,720.00; ii. Set off "dispute determined by Kunc J" - that the Tonnas pay $21,667.00; iii. Conveyancing, tenancy and deposit issues as to 50/50 so: $17,263.00 payable by the Tonnas and then they also pay 28.87% of $17,263; so an additional $4,983.83. iv. Garnishee order - that the Tonnas pay the sum of $2,755.00.
It was submitted that the size of Dr Mendonca's claim was minimal relative to the size of the claims which regularly appear before this Court. It was also said to be incommensurate with the extent of costs and time which had been incurred to prepare an 8 volume court book, have scheduled a three-day hearing and required Dr Mendonca to undergo a lengthy cross-examination. The unreasonableness of the costs and time incurred only became more stark when Dr Mendonca dropped all of her claims in these proceedings after her cross-examination.

The Negligence Proceedings - the Trustees' submissions as to costs

The Trustees primarily contend that they should obtain their costs on the indemnity basis from Dr Mendonca and that they obtain these costs on a gross sum basis in the proportions set out at [75] above. It is submitted that Dr Mendonca capitulated in light of the Court dismissing the proceedings after Dr Mendonca informed the Court that she did not press her claims against the Trustees including allegations of breach of statutory duty and fiduciary obligations. The Trustees contend that the costs should follow the event, being the dismissal of the proceedings after Dr Mendonca's concessions. They seek their costs on the indemnity basis on the premise that Dr Mendonca's claims were unmeritorious and lacked any evidentiary basis.
The same submissions in support of their application for a gross sum costs order (see [74]-[75]) are applicable to their application in these proceedings.

The Negligence Proceedings - Dr Mendonca's submissions as to costs

These are set out in [78] to [93] above.

The Interpleader Proceedings - procedural history

These proceedings were commenced by summons filed by the Trustees on 10 January 2022. The Trustees sought an order directing payment into Court of the principal sum of $505,382.64 together with interest thereon of $15,284.51 in answer to a garnishee order issued in favour of the Tonnas in the District Court.
The next development came on 20 March 2023, when Dr Mendonca filed a notice of motion for these orders: 1. An order to join Renuka Maria Mendonca as first defendant and Mark Julian Tonna as second defendant and Lorraine Mary Tonna as third defendant in 2022/7598. 2. An order that out of money paid into court to applicant, Renuka Maria Mendonca, be paid pursuant to orders made on 20 December 2019 and 25 March 2020 by Ward J and orders made on 15 August 2016 by Darke J and orders made on 6 December 2021 by Kunc J in her favour or set off as sought in [4-5] below. 3. An order or declaration that out of money paid into court applicant, Renuka Maria Mendonca, be paid by first respondent (trustees) or by second and third respondent (Tonnas), as co-owner or as equitable compensation, an amount equal to 71.13% of the total rent received from tenants of XXXX in Galston, plus interest on this amount of rent found to be due from 20 December 2019 out of Tonnas' share of their net sale proceeds or by way of set off as sought in [4-5] below. 4. An order be granted for set off and final payment by Renuka Maria Mendonca under Schedule 1 of the Contracts Review Act 1980 for orders sought under section 8 and/or section 7 and/or section 9 [including 9(2)(d)] and/or section 12 and section 20 of the Contracts Review Act 1980 after 5pm on 8 December 2021 for invalid and void and unenforceable and unjust 2nd notice to complete and/or contract for sale and/or loan contract and/or settlement and/or an order for set off under s 21 Civil Procedure Act or inherent powers or equitable set off and/or an order under s 66G(6) of Conveyancing Act 1919 including an order that Mark and Lorraine Tonna must vacate the Property under contract clause 18.6 within 30 days from the date of judgment and to grant legal and beneficial title of XXXX, Galston to Renuka Maria Mendonca upon final net amount to be determined by Court and paid by her within 30 days from date Tonnas vacate the Property. 5. An order or declaration that trustees be discharged only upon 2nd notice to complete and/or contract for sale after 5pm on 8 December 2021 and/or loan contract and/or settlement being declared to be invalid and/or void and/or unenforceable and unjust and Renuka Maria Mendonca to receive legal and beneficial ownership title of XXXX, Property upon payment of $3, 545, 000 or $4,000,000 or $4,100,000 less any and all adjustments receivable by and/or payable by Renuka Maria Mendonca or an order for final distribution. 6. An order for valuation expert to enter XXXX and do what is necessary. 7. An order that 2022/7598 be run for directions and heard and determined with 2021/115917 and 2022/264829. An order that evidence in 2021/115917 and 2022/264829 be evidence in 2022/7598 and vice versa. 8. An order dispensing with rules under s 14 of Civil Procedure Act 2005, where required to be dispensed with in the interests of justice. 9. An order for pre-judgment interest and for post-judgment interest and costs. 10. Any order the Court sees fit as applicant has no legal experience/is self-represented
On 7 June 2023, Registrar Walton ordered any motions or amended applications and any evidence in support to be filed by 19 June 2023 and referred the matter to a court-annexed mediation. That mediation occurred on 28 July 2023, but the proceedings did not settle.
On 20 June 2023, Dr Mendonca filed an amended notice of motion for these orders: 1. An order to join Renuka Maria Mendonca as first defendant and Mark Julian Tonna as second defendant and Lorraine Mary Tonna as third defendant in 2022/7598 or leave to serve Mark and Lorraine Tonna with subpoena to attend final hearing. 2. An order for Renuka Maria Mendonca to be granted leave to serve a subpoena to attend hearing and/or produce upon independent accountants, Judge Accountants, for their working calculations and working documents in relation to their expert report with annexures which contain their incorrect total numbers calculated. 3. An order declaring that out of money paid into court, the applicant, Renuka Maria Mendonca, be paid pursuant to orders made on 20 December 2019 and 25 March 2020 by Ward J and orders made on 15 August 2016 by Darke J and orders made on 6 December 2021 by Kunc J in her favour or set off in [5] below plus interest. 4. An order declaring that out of money paid into court applicant, Renuka Maria Mendonca, be paid by second and third respondent (Mark and Lorraine Tonna), as co-owner or as equitable compensation, an amount equal to 71.13% of the total rent received from tenants of XXXX in Galston, plus interest on this amount of rent found to be due from 20 December 2019 out of Tonnas share of their net sale proceeds or by way of set off as ought in [5] below. 5. An order be granted for set off under Schedule 1 of Contracts Review Act 1980 and/or under Section 21 of Civil Procedure Act 2005 or inherent powers or equitable set off of money payable by Renuka Maria Mendonca to Mark and Lorraine Tonna with money receivable by Renuka Maria Mendonca from Mark and Lorraine Tonna. 6. An order that 2022/7598 be run for directions and heard and determined with 2021/115917 and 2022/264829. An order that evidence in 2021/115917 and 2022/264829 be evidence in 2022/7598 and vice versa. 7. An order for pre-judgment interest and for post-judgment interest and costs. 8. Any order Court sees fit as applicant has no legal experience/is self-represented.
On 27 June 2023, the Tonnas filed a Notice of Motion seeking the following orders: 1. Pursuant to r 55.11 of the Uniform Civil Procedure Rules 2005, that the sum of $520, 667.15 paid into Court by the First Respondent on or about 10 January 2022, plus any interest accruing in relation to that amount, be paid to the Second and Third Respondents. 2. Costs
After the unsuccessful mediation on 28 July 2023, the matter was set down before me for hearing from 2 April 2024 by Registrar Walton on 14 August 2023, I also commenced case managing these proceedings. On 28 September 2023, I made directions for Dr Mendonca and the Tonnas to serve and file by email to my Associate a document setting out the details of the matters in the report of Mr David Rosenthal (see [138] below) with which that party agreed and the matters with which that party disagreed. On 14 February 2024, I ordered that Dr Mendonca's and the Tonnas' experts attend a conclave and produce a joint expert's report which identified the areas on which the experts agreed and disagreed, and the reasons for any disagreement, with such report to be circulated to the parties and to be filed by the Trustees by 22 March 2024.
Mr Rosenthal (whose report the parties referred to as the Judge Accountants Report) was an independent accountant retained by the parties to calculate the set-offs to which they were entitled in relation to the proceeds of sale of the property. Mr Rosenthal's report was intended to facilitate the parties complying with the judgment of Ward CJ in Eq of 25 March 2020 that the parties proportionate shares of contributions paid towards the property be set-off against each other. The payments the subject of the set-off include mortgage, rent and insurance payments made by the parties.
Despite her notice of motion initially suggesting she was disputing the conclusions of the Judge Accountants Report, at the hearing Dr Mendonca said that what she pressed from her motion was for the Tonnas to be paid the difference between $520,000 and whatever the report suggested she was owed (Tscpt, 2 April 2024, p. 53(25)-(30)).
Given her concession that the Judge Accountants Report was accurate, and the concessions given in the related proceedings, Dr Mendonca agreed that her amended notice of motion filed 20 June 2023 was redundant (Tscpt, 2 April 2024, p. 55(6)-(14)). The parties agreed that all they were arguing about was how the funds should be divided, which in substance was the dispute enlivened by the Tonnas' notice of motion filed 27 June 2023 (see [136] above). Against that background, I dismissed Dr Mendonca's amended notice of motion with the parties' costs of that amended notice of motion being their costs in the proceedings.
Mr Stewart informed me that in relation to the Tonna motion, the only question remaining for me to determine was what should the final figures from the Judge Accountants Report actually reflect? Mr Stewart foreshadowed that he had some new evidence which he would seek to put on in relation to that report.
During the course of the hearing it became clear that Dr Mendonca's concern was not with the amount of money that may be paid out and to whom, but rather that she submitted she was owed money by the Tonnas in respect of least one costs judgment in her favour, if not also other amounts, which she said should be satisfied from the funds (Tscpt, 2 April 2024, p. 124 (15)).
I delivered an ex-tempore judgment during the course of the hearing explaining why the Court would not accede to Dr Mendonca's application. In that judgment I noted that Mr Stewart had drawn my attention to the fact that an even larger debt is owed by Dr Mendonca to the Tonnas, arising from costs orders made in the proceedings heard by Ward CJ in Eq. It became apparent that that there are a number of what I called extraneous debts extant between the Tonnas and Dr Mendonca (in her own right or with her husband). I used the word "extraneous" to make the point that those debts are unrelated to the sale or the proceeds now held by the Trustees on the statutory trusts. In my respectful view, it was not open to the Court to order adjustments or set offs unrelated to the property, the proceeds or the three matters which the Court was hearing.
I was firmly of the view that the funds were properly funds to which the Tonnas were entitled pursuant to the garnishee orders. I was not satisfied that anything Dr Mendonca had said or drawn to my attention would justify disrupting the ordinary course, namely that those funds should be paid out to the Tonnas.
Therefore, at the conclusion of the hearing I made the following orders in relation to these proceedings: … Proceedings 2022/7598 5 An order that the Amended Notice of Motion filed by Dr Mendonca on 20 June 2023 be dismissed, with the parties' costs of that motion to be their costs in proceedings 2022/7598. 6 An order that pursuant to UCPR r 55.11 the sum of $520,667.15 paid into Court by the trustee parties on or about 20 January 2022 together with any accrued interest be paid to MJ and LM Tonna forthwith. 6A These orders be entered forthwith.

The Interpleader Proceedings - the Tonnas' submissions as to costs

In the Interpleader Proceedings, the Tonnas submit that Dr Mendonca should pay their costs on the ordinary basis. The Tonnas contend that they were ultimately the successful party on the motion which sought that the funds be paid to them. Therefore, costs should follow the event and Dr Mendonca should pay the Tonnas' costs on the ordinary basis.

The Interpleader Proceedings - the Trustees' submissions as to costs

Consistent with their position in the Negligence Proceedings, the Trustees submit their costs should be paid on the indemnity basis by Dr Mendonca and for a gross sum costs order (see [75] above).
As to their primary position that Dr Mendonca should pay their costs of the Interpleader Proceedings on the indemnity basis, the Trustees submit that in substance Dr Mendonca was the unsuccessful party in these proceedings. Whilst the Trustees were the respondents to a notice of motion in these proceedings without any specific relief sought against them, the Trustees submit that Dr Mendonca effectively duplicated the relief sought in the Negligence Proceedings and sought that the motion be heard together with the other proceedings. Therefore, the Trustees submit that Dr Mendonca was also unsuccessful in these proceedings and should be required to pay the Trustees' costs in these proceedings as well.
While the Tonnas filed a motion in the Interpleader Proceedings on 27 June 2023 to be paid the funds, the Trustees submit that the costs incurred in these proceedings were all incurred in response to Dr Mendonca's motion rather than to the Tonnas, because the Trustees did not oppose the funds being paid out to the Tonnas. Therefore, it is Dr Mendonca and not the Tonnas or the proceeds which should be visited with the costs of these proceedings.

The Interpleader Proceedings - Dr Mendonca's submissions as to costs

Dr Mendonca rejects that she should have to pay the Trustees' costs. She contends that the Trustees should have accepted the offer made by her solicitors at the time, Unsworth Legal, to use the liberty to apply to Darke J to resolve issues concerning the money sought in the garnishee order, rather than commence these proceedings. Therefore, she contends that there should be no order as to costs.
In response to the Tonnas, Dr Mendonca alleges that the Tonnas breached the orders of Darke J made on 4 June 2021 by seeking a garnishee order against the Trustees for payment into Court of $505,284.52 instead of allowing the money to be held on trust until there was agreement as to the amounts to be distributed to the beneficiaries. Dr Mendonca says this conduct was especially unreasonable given the other costs orders that had been made in her favour.
Finally, I record that the Trustees did not provide a formal response to Dr Mendonca's submissions, choosing instead to rely on their initial submissions as to costs. The Trustees noted that Dr Mendonca had not sought to engage or respond directly with the Trustees' submissions regarding the costs of these proceedings.

Consideration

While for the sake of clarity, and to record Dr Mendonca's conduct of the proceedings, I have set out above a detailed history of what occurred by reference to each of the three proceedings, the fact remains that they were case managed and heard together. Having regard to the Court's broad discretion as to costs (as to which see further below), that fact is why the Court accepts Dr Mendonca's submission that the question of costs should be resolved by looking at the three sets of proceedings as a whole. However, whether it is viewed that way, or by reference to each proceeding, the result is the same and not favourable to Dr Mendonca for the reasons which follow.
It is useful to begin with some general propositions: 1. The Court has a broad discretion as to costs, confined only by the requirements that it be exercised judicially and for the purpose it was conferred (Oshlack v Richmond River Council (1998) 193 CLR 72, 96 (McHugh J); [1998] HCA 11). 2. Generally, costs will follow the event: UCPR Pt 42 r 42.1. 3. Where the court has not made a determination as to the merits of the dispute, or in other words there is no event for which costs will follow, the general rule is that there be no order as to costs. However, costs can be awarded if a judge is confident that one party was almost certain to succeed or that another party acted so unreasonably that the other party should be able to obtain their costs: Re Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin (1997) 186 CLR 622, 624-625(McHugh J); [1997] HCA 6. 4. Costs may be awarded on the indemnity basis where a party has commenced or continued proceedings when, properly advised, they should have known they had no chance of success: Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd (1988) 81 ALR 397, 401 (Woodward J); [1998] FCA 364. 5. A trustee is entitled to a complete indemnity from the trust estate for all costs and expenses properly incurred with the execution and administration of the trust: Trustee Act 1925 (NSW) ss 59(4) and 93. 6. The indemnity must be given effect to in such a way as to make the burden fall upon the beneficiaries equitably having regard to the circumstances under which the costs, charges and expenses were incurred: National Trustees Executors and Agency Co of Australasia Ltd v Barnes (1941) 64 CLR 268, 279 (Williams J); [1941] HCA 3.
Turning to the three cases at bar, the Court's conclusions set out below rest on two basic considerations.
First, the Court accepts that the Trustees have not engaged in any conduct which would displace the outcome referred to in [154(5)] above.
Second, the lengthy history recounted over the preceding pages warrants the conclusion, which the Court readily draws, that three days of Court time were set aside and a court book of 8 volumes was produced to deal with what were complaints and challenges pressed by Dr Mendonca. However Dr Mendonca may attempt to characterise what occurred, the events as they unfolded before me at the hearing were a gradual capitulation and abandonment by Dr Mendonca of each of her substantive complaints and challenges. In particular, I do not accept that the resolution of any debate about the Tonnas' costs obligations under the Kunc J judgment was the decisive watershed that Dr Mendonca contends. During the course of the hearing, as it became necessary for her to identify the evidence and specific arguments in support of her particular contentions, she chose not to press them. By the end, it was a complete capitulation.
Both by reason of that capitulation and the nature of the matters she had sought to raise, the Court concludes that her various contentions and objections had been unreasonably maintained by her. The Court also accepts the Tonnas' specific submissions at [53] to [59] and [121] to [128] above as to Dr Mendonca's unreasonable prosecution of the proceedings. As to the matters she sought to advance, the Court also concludes that, properly advised, Dr Mendonca should have known that her various contentions and objections had no chance of success. In reaching that conclusion, I have not overlooked the reduction of the Trustee's remuneration determined by the referee's report, but on any view Dr Mendonca was pressing for a far greater reduction than 13.3%. By reason of the conclusions set out in this paragraph, the Court does not accept Dr Mendonca's submissions set out above at [78] and following and [150] to [151] including her reliance on Lai Qin for the proposition that there should, to any extent, be no order as to costs.
Before turning to specific orders in each proceeding, it is convenient to deal first with the issue of who should bear the burden of the Trustees' remuneration and expenses other than legal costs and the application of the principle set out in [154(6)] above. For example, the Tonnas submit that the Trustees' remuneration and expenses of the Remuneration Proceedings should be borne by Dr Mendonca. The Trustees submit these should be deducted from the Proceeds without apportionment. This would mean in practical terms that they would be borne by Dr Mendonca and the Tonnas in their respective Interests.
Because of Dr Mendonca's conduct referred to in [157] and [158] above, in my respectful opinion that is not a just outcome, whether in relation to the Remuneration Proceedings or more generally. It must be recognised that some of the Trustees' remuneration and expenses would have been incurred even without Dr Mendonca's interventions, and the Court is not in a position to perform any kind of precise dissection of what they might be. Nevertheless, that does not mean the Court should not do the best it can to achieve a fair result, especially in the interests of bringing finality to the parties.
To that end, I have concluded that the relevant starting point for any adjustment should be after the unsuccessful mediation on 28 July 2023. This resulted in the proceedings being fixed before me for management and hearing. As to the division between Dr Mendonca and the Tonnas, my impression derived from my involvement is that requiring Dr Mendonca to meet half the remuneration and non-legal expenses of the Trustees after that date would be both fair and conservative, given that the various controversies were essentially driven by her.
Accordingly, the Court will direct that the Trustees' approved remuneration and expenses (other than legal costs) incurred in all three matters and generally are to be paid as follows: 1. Incurred for the period up to and including 28 July 2023 from the proceeds without apportionment between Dr Mendonca and the Tonnas; 2. Incurred for the period on and from 28 July 2023 up to and including 3 April 2024 from the proceeds as to 50% without apportionment between Dr Mendonca and the Tonnas; 3. Incurred for the period on and from 28 July 2023 up to and including 3 April 2024 from the proceeds as to the other 50% to be paid out of what would otherwise be Dr Mendonca's net share of the proceeds.
I will next turn to the legal costs in each of the three proceedings.
In relation to the Trustee Remuneration Proceedings: 1. Subject to the next sub-paragraph, there should be an order in terms of that sought by the Trustees in [67] above. Given the history of disputation between the parties, this should include the gross sum costs order for $82,000 sought by the Trustees, which the Court is satisfied on the evidence is appropriate both as to quantum and the apportionment between the respective proceedings. Consistently with their right of complete indemnification, the Trustees should also have an order for interest on the costs incurred by them. 2. In a more usual case, the costs referred to in the preceding paragraph would be paid to the Trustees before any apportionment to the beneficiaries, such that in effect they would be borne by the beneficiaries in their respective ultimate shares. However, the Court accepts in part the Tonnas' submission that they should not be visited with the Trustees' costs. I say in part because that result should apply insofar as those costs may be attributed to Dr Mendonca's unreasonable conduct. Accordingly, and consistently with the approach I have taken in [161] above, the Trustees' costs for the period on and from 28 July 2023 up to and including 3 April 2024 which are referred to in the preceding sub-paragraph should be charged on what would otherwise be Dr Mendonca's net share of the proceeds. 3. For the reasons advanced by the Tonnas in [49] to [66] above, Dr Mendonca should pay the Tonnas' costs of the Trustee Remuneration Proceedings. This should be on the ordinary basis up to and including 28 July 2023 and thereafter on the indemnity basis by reason of Dr Mendonca's conduct as found in [157] and [158] above, applying the principle in [154(4)] above. They should be charged on what would otherwise be Dr Mendonca's net share of the proceeds but ranking after the Trustees.
As to the Negligence Proceedings, by reason of the conclusions set out in [157] and [158] above: 1. And accepting the Trustees' submissions in [129] to [130] above, Dr Mendonca should pay the Trustees' costs of the Negligence Proceedings on the indemnity basis assessed in the gross sum of $112,750.00 together with interest on costs incurred. Conformably with my decision in relation to the Trustee Remuneration Proceedings, the Tonnas should bear no part of the Trustees' costs insofar as the Trustees' right of indemnity is concerned and the costs should be charged on what would otherwise be Dr Mendonca's net share of the proceeds. 2. And accepting the Tonna's submissions in [120] to [128] above, Dr Mendonca should pay the Tonna's costs of the Negligence Proceedings on the indemnity basis, those costs to be charged on what would otherwise be Dr Mendonca's net share of the proceeds but ranking after the Trustees.
As to the Interpleader Proceedings: 1. And accepting the Trustees' submissions in [147] to [149] above, Dr Mendonca should pay the Trustees' costs of the Interpleader Proceedings on the indemnity basis assessed in the gross sum of $10, 250.00 together with interest on costs incurred. Conformably with my decision in relation to the Trustee Remuneration Proceedings, the Tonnas should bear no part of the Trustees' costs insofar as the Trustees' right of indemnity is concerned and the costs should be charged on what would otherwise be Dr Mendonca's net share of the proceeds. 2. And accepting the Tonna's submissions in [146] above, Dr Mendonca should pay the Tonna's costs of the Interpleader Proceedings on the ordinary basis, those costs to be charged on what would otherwise be Dr Mendonca's net share of the proceeds but ranking after the Trustees.

CONCLUSION

The Court will make directions for the parties to bring in short minutes to give effect to these reasons, with the Trustees to prepare a first draft for the consideration of the other parties.

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: 15 August 2024

Trustee Act 1925(NSW)ss 59(4)

At a glance

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Before

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Judgment (17 paragraphs)

Legislation Cited (6)

Cases Cited (19)

Cited By (1)