Tonna v Mendonca

Tonna v Mendonca - [2019] NSWSC 1849 - NSWSC 2019 case summary — Zoe

[4]

CONTRACTS - Formation - Agreement - Uncertainty and incompleteness - whether there was a binding residential tenancy agreement in existence - where unclear whether the document was complete when signed or which version of the cover page (there being two in evidence) formed part of the document when signed - held no binding residential tenancy agreement. Legislation Cited: Civil Liability Act 2002 (NSW) Competition and Consumer Act 2010 (Cth), Sch 2 - Australian Consumer Law, ss 3, 18, 60, 61, 236, 237, 267 Conveyancing Act 1919 (NSW), s 23C Corporations Act 2001 (Cth) Cases Cited: Adler v Australia Securities and Investments Commission; Williams v Australian Securities and Investments Commission [2003] NSWCA 131 Ainsworth v Hanrahan (1991) 25 NSWLR 155 Allen v Snyder [1977] 2 NSWLR 685 Amit Laundry Pty Ltd v Jain [2017] NSWSC 1495 Anderson v McPherson (No 2) [2012] WASC 19 Australian Securities and Investments Commission (ASIC) v Adler [2002] NSWSC 171; (2002) 168 FLR 253 Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345; [2012] HCA 17 Azzopardi v The Queen (2001) 205 CLR 50; [2001] HCA 25 Bannister v Bannister [1948] 2 All ER 133 Bennet v Bennet (1879) 10 Ch D 474 Birtchnell v The Equity Trustees, Executors and Agency Company Limited (1929) 42 CLR 384; [1929] HCA 24 Black Uhlans Incorporated v New South Wales Crime Commission [2002] NSWSC 1060 Bloch v Bloch (1981) 180 CLR 390; [1981] HCA 56 BM Sydney Building Materials Pty Ltd v AWT Building Group (Aust) Pty Ltd; BM Sydney Building Materials Pty Ltd v AWT Building Pty Ltd; Harpro Group Pty Ltd v BM Sydney Building Materials Pty Ltd [2019] NSWSC 421 Boardman v Phipps [1967] 2 AC 46; [1966] 3 All ER 721 Bonette v Woolworths Ltd (1937) 37 SR (NSW) 142 Bourns Inc v Raychem Corp [1999] 3 All ER 154 Boyle v Wiseman (1855) 10 Ex 647; (1855) 156 ER 98 Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61 Buffrey v Buffrey [2006] NSWSC 1349 Busby v Walker (1956) 84 So 2d 304 Calverley v Green (1984) 155 CLR 242; [1984] HCA 81 Caxton Street Agencies Pty Ltd v Korkidas [2002] QSC 210 Central Newbury Car Auctions Ltd v Unity Finance Ltd [1957] 1 QB 371 Chan v Zacharia (1984) 154 CLR 178; [1984] HCA 36 Chong v CC Containers Pty Ltd (2015) 49 VR 402; [2015] VSCA 137 Ciavarella v Polimeni [2008] NSWSC 234 Comptroller-General of Customs v Stephen Edward Parker [2006] NSWSC 390; (2006) 200 FLR 44 Cook v Fountain (1818) 36 ER 984 Cowcher v Cowcher [1972] 1 All ER 943; [1972] 1 WLR 425 Currie v Hamilton [1984] 1 NSWLR 687 David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353; [1992] HCA 48 Dilosa v Latec Finance Pty Ltd (1966) 84 WN (Pt 1) (NSW) 557 Drever v Drever [1936] ALR 446 Dyer v Dyer (1788) 2 Cox Eq Cas 92; (1788) 30 ER 42 Eade v Vogiazopoulos (No 2) [1999] 3 VR 889 Elddin v Hamed (No 2) [2015] NSWSC Equiticorp Finance (In Liq) v Bank of New Zealand (1993) 32 NSWLR 50 Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10; [1995] HCA 19 Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 Fowkes v Pascoe (1875) LR 10 Ch App 343 Freeman & Lockyer (a firm) v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480; [1964] 2 WLR 618 Garcia v National Australia Bank Ltd (1998) 194 CLR 395; [1998] HCA 48 Gemstone Corporation of Australia Ltd v Grasso (1994) 62 SASR 239; (1994) 13 ACSR 695 Grefeld v Grefeld [2012] FamCAFC 71; (2012) FLC 93-508 Hamed v Elddin [2016] NSWCA 9 Hanneybel v Uniflex (Australia) Pty Ltd [2002] WASCA 349 Harman v Secretary of State for the Home Department [1983] 1 AC 280 Hearne v Street (2008) 235 CLR 125; [2008] HCA 36 HIH Insurance Ltd (in prov liq) and HIH Casualty and General Insurance Ltd (in prov liq); Australian Securities and Investments Commission v Adler [2002] NSWSC 171; (2002) 41 ACSR 72 Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41; [1984] HCA 64 Hyhonie Holdings Pty Ltd v Leroy [2004] NSWCA 72 Jain v Amit Laundry Pty Ltd [2019] NSWCA 20 Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 Kauter v Hilton (1953) 90 CLR 86; [1953] HCA 95 Keech v Sandford (1726) Sel Cas Ch 61; (1726) 25 ER 223 Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11 Leybourne v Permanent Custodians Ltd [2010] NSWCA 78 Liberty Funding Pty Ltd v Phoenix Capital Ltd [2005] FCAFC 3; (2005) 218 ALR 283 Martech Energy Systems Pty Ltd (in liq) v Bell [2005] VSC 198 Masters v Cameron (1954) 91 CLR 353; [1954] HCA 72 Mehmet v Benson (1965) 113 CLR 295; [1965] HCA 18 Moage Ltd v Jagelman [2002] NSWSC 953 Murtagh v Murtagh [2013] NSWSC 926 Muschinski v Dodds (1985) 160 CLR 583; [1985] HCA 78 Nelson v Nelson (1995) 184 CLR 538; [1995] HCA 25 Ong v Lottwo Pty Ltd (in liq) (2013) 116 SASR 280; [2013] SASCFC 57 Petersen v Moloney (1951) 84 CLR 91; [1951] HCA 57 Picwoods Pty Ltd v Panagopoulos [2004] NSWSC 978 Pola v Commonwealth Bank of Australia (Federal Court, Sundberg J, 19 December 1997, unrep) Pole v Leask (1863) 8 LT 645 Re Kerrigan; Ex parte Jones (1946) 47 SR (NSW) 76 Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134; [1942] 1 All ER 378 RHG Mortgage Ltd v Rosario lanni [2015] NSWCA 56 Riddick v Thames Board Mills Ltd [1977] QB 881 Romeo v Papalia [2012] NSWCA 221 RPS v The Queen (2000) 199 CLR 620; [2000] HCA 3 Ryan v Dries [2002] NSWCA 3 Ryan v Ryan [2012] NSWSC 636 Sapphire (SA) Pty Ltd (trading as River City Grain) v Barry Smith Grains Pty Ltd (in liq) [2011] NSWSC 1451 Shepherd v Doolan [2005] NSWSC 42 Springfield Nominees Pty Ltd v Bridgelands Securities Ltd (1992) 38 FCR 217; 110 ALR 685 Taylor v Smith (1926) 38 CLR 48; [1926] HCA 16 Trajkovski v Simpson [2019] NSWCA 52 United Equipment Pty Ltd v Australian Portable Buildings Pty Ltd (No 2) [2017] WADC 73 Vanguard Financial Planners Pty Ltd v Ale [2018] NSWSC 314 Varma v Varma [2010] NSWSC 786 Vu v New South Wales Crime Commission [2013] NSWCA 282 Vukmirica v Betyounan [2008] NSWCA 16 Wallington v Kokotovich Constructions Pty Ltd (1993) 11 ACSR 759 Watson v Foxman (1995) 49 NSWLR 315 Weige v Cupton Pty Ltd [2012] NSWCA 414 White v Shortall (2006) 68 NSWLR 650; [2006] NSWSC 1379 Williams Group Australia Pty Ltd v Crocker [2015] NSWSC 1907 Williams Group Australia Pty Ltd v Crocker [2016] NSWCA 265 Texts Cited: G E Dal Pont (ed), Law of Agency (3rd ed, 2014, LexisNexis Butterworths) JD Heydon in Cross on evidence (11th ed, 2017, LexisNexis Australia) P Watts and FMB Reynolds, Bowstead and Reynolds on Agency (21st ed, 2017, Sweet & Maxwell) Category: Principal judgment Parties: 2016/00182075 Mark Julian Tonna (First Plaintiff) Lorraine Mary Tonna (Second Plaintiff) Renuka Maria Mendonca (First Defendant) Gerard Mendonca (Second Defendant) Business Services (NSW) Pty Ltd (Third Defendant)

[8]

INDEX JUDGMENT - WARD JA [1] The respective proceedings [2] Tonna Proceedings [3] Mendonca Proceedings [10] Parties [15] Chronology of relevant events [18] Deed of Call Option regarding the Schofields Property [20] Galston Property [21] Exchange of contracts for the Galston Property - 9 December 2013 [27] Attempts to secure finance after exchange of contracts for the Galston Property [32] Initial date for completion - 23 December 2013 [39] Request for extension of time to complete [44] Notice to complete specifying completion date as 24 January 2014 [45] Bank of Queensland applications [47] Wednesday, 22 January 2014 [55] Thursday, 23 January 2014 [57] Friday, 24 January 2014 [70] Alleged meeting between Mr and Mrs Tonna and Dr and Mr Mendonca with Mr Gough on 24 January 2014 [81] Position as at 24 January 2014 [86] Saturday, 25 January 2014 [90] Sunday, 26 January 2014 [92] Monday, 27 January 2014 [99] Tuesday, 28 January 2014 [103] Wednesday, 29 January 2014 [116] • Email communications [116] • The meeting with Mr Gough [125] Mr Gough's evidence [134] Thursday, 30 January 2014 [153] Friday, 31 January 2014 [175] Saturday, 1 February 2014 - Thursday, 6 February 2014 [184] 17 February 2014 - residential tenancy agreement [188] Subsequent conduct [194] Draft Put and Call Deed in relation to the Galston Property [198] Commencement of proceedings in District Court by Prime Capital [210] March-September 2014 - the proposed call option [211] Improvements to the Galston Property [216] Exercise of call option over Schofields Property - December 2014 [217] Increase in loan facility [224] January 2015 [225] Further evidence secured on Galston Property - March/April 2015 [230] Completion of sale of the Schofields Property [231] Events in the late 2015/2016 [236] Summary of the issues in both proceedings [242] Evidence of the lay witnesses [246] Evidence of the expert witnesses [252] Jones v Dunkel inference [257] Determination re Jones v Dunkel inference [267] Credibility of the witnesses [280] Mark Tonna [281] Lorraine Tonna [295] Sandra Ward [296] Mary Mackman [297] Phillip Mackman [304] Stewart Gough [306] Dr Mendonca [313] Harman Undertaking issue [318] The Tonna Proceedings [325] Summary of Issues in the Tonna Proceedings [344] Determinations in the Tonna Proceedings [353] (i) Was there an agency relationship between Mr Mendonca (and/or his company) and, Dr Mendonca in relation to the conveyance of the Galston Property from Mr and Mrs Tonna to Dr Mendonca? [353] Mr and Mrs Tonna's submissions [353] Dr Mendonca's submissions [366] Determination [375] (ii)(a) Was there a binding trust agreement giving rise to an express (or constructive) trust? [411] Mr and Mrs Tonna's submissions [411] Dr Mendonca's submissions [417] Mr Mendonca's submissions [433] Determination as to whether there was a binding and enforceable agreement [435] Mr and Mrs Tonna's submissions [443] Dr Mendonca's submissions [450] Determination whether the agreement, if binding, could be specifically performed [452] (iii) Is the Galston Property held by Dr Mendonca on a resulting trust for Mr and Mrs Tonna? [453] Mr and Mrs Tonna's submissions [453] Dr Mendonca's submissions [459] Determination of resulting trust claim [462] (iv) If the Galston Property is held by Dr Mendonca on trust for Mr and Mrs Tonna, did Dr Mendonca breach the fiduciary duty owed by a trustee to avoid a conflict of interest and not profit from her position? [480] Mr and Mrs Tonna's submissions [480] Dr Mendonca's submissions [482] Determination regarding breach of fiduciary duty by Dr Mendonca [483] (v) Consequence of conclusions on above issues in terms of relief to be granted against Dr Mendonca [487] Mr and Mrs Tonna's submissions [487] Dr Mendonca's submissions [488] Determination [489] (vi) Alternative unjust enrichment claim [490] Dr Mendonca's submissions [490] • Repayments in respect of the mortgage - see [79(i)(C)] of the further amended statement of claim [493] • Letting costs - see 79(D)] of the further amended statement of claim [495] Cost of the repairs and improvements made by Mr and Mrs Tonna to the Galston Property - see [79(i)(F) of the further amended statement of claim [496] • Increased value of the Galston Property from the repairs and improvements made to it by Mr and Mrs Tonna - see [79(ii)] of the further amended statement of claim [504] Increased value of the Galston Property - see [79(iii)] of the further amended statement of claim [505] Determination as to alternative unjust enrichment claim [506] (vii) Claim against Mr Mendonca and/or his company - alleged breach of duty as agent for Mr and Mrs Tonna in relation to the conveyance of the Galston Property from Mr and Mrs Tonna to Dr Mendonca, and the breach of the fiduciary duty owed by an agent to avoid a conflict of interest? [508] Mr and Mrs Tonna's submissions [508] Mr Mendonca/Business Services submissions [514] Determination in relation to the alleged breaches by Mr Mendonca [541] The Mendonca Proceedings [549] Issues in the Mendonca Proceedings [549] Issue 1: Did Mr Tonna enter into the Tenancy Agreement, orally or in writing, with Dr Mendonca and does this entry onto and occupation of the Galston Property arise on the basis that he was a beneficial owner? [552] Issue 8: Should there be a setoff payable by Dr Mendonca to Mr Tonna for the increase in the value of the Galston Property by the improvements undertaken by Mr Tonna [555] Issue 9: Quantum [556] Determination in the Mendonca Proceedings [559] Conclusion [564] Costs [571] Orders [574]

[11]

Tonna Proceedings

In the Tonna Proceedings, Mr and Mrs Tonna allege that an agreement was reached between Mr Tonna and Mr Mendonca (as agent for Dr Mendonca and also in his capacity as agent and accounting adviser to Mr and Mrs Tonna) (the Agreement) that, among other things, Dr Mendonca would purchase the Galston Property (from Mr and Mrs Tonna, simultaneously with the completion by them of an earlier contract to purchase the property from a third party) and would hold the legal title on trust (the Trust) for their sole benefit until the sale of a property owned by Mr and Mrs Tonna at Schofields (the Schofields Property), with an obligation on the part of Dr Mendonca not further to encumber the Galston Property for Dr Mendonca's own benefit or for the benefit of any person other than Mr and Mrs Tonna and, on direction by Mr and Mrs Tonna, to transfer the Galston Property to them (see further amended statement of claim filed 23 May 2019 at [38]).
The substance of the complaints made in the Tonna Proceedings against Dr Mendonca is that she breached the Agreement, and her duties as trustee under the Trust, by, among other things, denying the existence of the Agreement and Trust and refusing to transfer the Galston Property to Mr and Mrs Tonna after the sale of the Schofields Property had been completed.
There is also a claim against Dr Mendonca for unjust enrichment (by reference to Dr Mendonca's alleged breach of the Agreement (see [75] of the further amended statement of claim)) in that she has received the legal ownership of the Galston Property without paying various outgoings, as there particularised.
Dr Mendonca denies any obligation to transfer the Galston Property back to Mr and Mrs Tonna. Her position is that: there was no concluded and legally binding agreement for her to hold the Galston Property on trust for Mr and Mrs Tonna; to the extent that the Agreement and Trust relies on the conduct of Mr Mendonca, she was not privy to that conduct and Mr Mendonca was not authorised to make representations on her behalf; the contemporaneous documentary evidence in relation to the existence of that Agreement and the Trust is, at its highest, equivocal; and the conduct of the parties, both at the time of the alleged Agreement and afterwards, is inconsistent with the existence of a concluded and legally binding trust agreement. Dr Mendonca says that she bought the Galston Property from Mr and Mrs Tonna (as evidenced by the contract for sale and the payment of money from her to Mr and Mrs Tonna); and that by so doing she assisted them to avoid a substantial financial loss (as they were not in a position to complete the earlier sale contract).
As to the alternative unjust enrichment claim, Dr Mendonca's position is that she has never resiled from her obligation to repay Mr and Mrs Tonna the "shortfall loaned to her to purchase the [Galston] Property" from Mr and Mrs Tonna. It is said that Dr Mendonca has previously offered to repay those funds and remains willing to do so; and that she has been "trying to work this issue out for some time".
As against Mr Mendonca, and his company, Business Services, with some variation the claims broadly are of a failure to provide the Services (as defined in the pleading) at an acceptable level of care, skill and diligence (and it is alleged that there has been a breach of fiduciary or statutory duties in Mr Mendonca preferring the interests of Dr Mendonca over those of Mr and Mrs Tonna, to whom it is alleged a duty of care was owed). There are allegations of the making of representation(s) and misleading and deceptive conduct by Mr Mendonca but (as will be explained later) no relief appears to be sought in relation to those allegations. Rather, the relief sought against Mr Mendonca and Business Services is a claim for damages for breach of a common law duty of care (see prayer 6 of the further amended statement of claim).
Mr Mendonca and Business Services deny the allegations made against them. They maintain that there are fundamental problems with the claim in relation to issues of breach and causation (and say that, even if breach is established, Mr and Mrs Tonna were contributorily negligent and have failed to mitigate their loss).

[12]

Mendonca Proceedings

The Mendonca Proceedings relate to a residential tenancy agreement that Dr Mendonca alleges she entered into with Mr Tonna on 31 January 2014, commencing on 17 February 2014 (the Tenancy Agreement) (see [3] of the points of claim filed 27 August 2018), and, later, a licence (the Licence) in respect of the Galston Property. Dr Mendonca seeks "rental" arrears, vacant possession of the Galston Property, and damages with respect to alterations that Mr Tonna made to the Galston Property (contrary to the terms of the Tenancy Agreement and without Dr Mendonca's consent). Dr Mendonca also asserts that a party other than Mr and Mrs Tonna has occupied part of the Galston Property since September 2014. (A claim for work orders in relation to the property alterations is no longer pressed.)
The quantum of the damages claim in relation to the alterations in question (albeit not any liability therefor) was agreed between the parties during the course of the hearing as being: $64,771.93 in respect of the alterations referred to at [23(a)] and [23(b)] of the points of claim (installation of a large shed and concrete slab and demolition of an existing shed); and $7,529.66 (for demolition of a section of the boundary wall).
Mr Tonna's defence to this claim is two-fold: he maintains that he and Mrs Tonna are the true owners of the Galston Property (for the reasons propounded in the Tonna Proceedings); and he denies that he is bound by the Tenancy Agreement by reason of not having entered into it. His evidence - though this is contradicted by the expert forensic evidence - is that the signature that appears on the Tenancy Agreement is not his; but in any event there is an issue as to the authenticity of the Tenancy Agreement in that it appears that there are two different versions of the first page of the document and the evidence of the forensic expert called by Dr Mendonca is that the first page of the document that was initially propounded as the Tenancy Agreement is not likely to have been the version initially stapled to the document.
Dr Mendonca accepts that if Mr and Mrs Tonna can establish their primary claim in the Tonna Proceedings, then the "practical reality" is that there will not be a need to address the Mendonca Proceedings (as they will be the true owners of the Galston Property). To the extent that in that event there needs to be some adjustment for moneys not paid by Mr Tonna to Dr Mendonca in accordance with the alleged Agreement, it is noted that in his affidavit sworn 6 May 2019 (Mr Tonna's 6 May 2019 affidavit) Mr Tonna deposes to being ready willing and able to pay whatever amount he owes Dr Mendonca (he says that the payments owing are not rental payments, but some sort of mortgage payments he had to pay to Dr Mendonca under the arrangement propounded in the Tonna Proceedings).
If, on the other hand, Mr and Mrs Tonna are unsuccessful in the Tonna Proceedings, then Dr Mendonca says that the only remaining defence to the claim by her in the Mendonca Proceedings is the denial by Mr Tonna that he is bound by the Tenancy Agreement (and she maintains that the expert evidence establishes that it was signed by Mr Tonna). In that regard, it is said by Dr Mendonca that even if Mr Tonna is not bound by the Tenancy Agreement, there is no doubt that: Mr Tonna has occupied part of the Galston Property since February 2014; he has caused a third party (Mr Nielson) to occupy another part of the Galston Property (predominantly, the home on the Galston Property) since September 2014 and has collected money from Mr Nielson in return; he has not paid any money to Dr Mendonca since a payment made in May 2015, and had missed payments for March and April 2015; he has made alterations to the Galston Property without approval (in particular, he erected a large shed on the Galston Property which was used by Mr and Mrs Tonna to store various belongings); and that, in the absence of an agreement, he has no right to occupy the Galston Property.

[16]

Galston Property

In or about September 2013, Mr and Mrs Tonna inspected the Galston Property. On or about 4 October 2013, they made an offer to purchase the Galston Property for $1,450,000. The property was at that time owned by a company associated with a group of Buddhist monks. (It is not clear whether the Galston Property was actually occupied by the monks at that time or whether it was vacant and they were only in occupation of the neighbouring property to the Galston Property, as they apparently continued to be after the sale of the Galston Property, but little turns on this - its only apparent relevance arising in the context of cross-examination of the real estate agent who acted for the vendor on the sale, Ms Sandra Ward, as to certain photographs put forward by her as representing the state of the Galston Property after renovations by Mr and Mrs Tonna. Ms Ward in cross-examination accepted that those photographs, or at least some of them, were photographs used for marketing purposes when the Galston Property was originally for sale and hence were taken before any renovations were carried out by Mr and Mrs Tonna.)
The offer by Mr and Mrs Tonna was accepted by the vendor (Maha Budhi Company Pty Ltd) (Maha Budhi Co) in or about November 2013. There was a relatively short period of time allowed under the contract for completion of the contract (the completion date in the contract being specified as 23 December 2013 - see below).
Mr and Mrs Tonna retained a firm of solicitors in Parramatta (Matthews Folbigg) to act for them on the conveyance. Their evidence (corroborated by the solicitor who gave evidence from that firm) is that they were introduced to that firm of solicitors by Mr Mendonca. Mr Mendonca was aware of the firm from his dealings with the firm in the past in his position as an accountant with another firm. He had over the years referred a number of clients to the principal from Matthews Folbigg who acted on the conveyance of the Galston Property (Mr Stewart Gough). Mr Gough had assistance from time to time from a more junior lawyer at the firm, Mr Eric Leo, and a more senior lawyer, Mr Terry Doust. Mr and Mrs Tonna entered into a fee agreement with Matthews Folbigg (Exhibit E), and there is no dispute that they paid all the firm's legal fees in respect of the conveyance (and of the simultaneous conveyance to Dr Mendonca which is the subject of these proceedings).
It appears that, at the time of the retainer agreement with Matthews Folbigg, Mr Tonna raised with Mr Leo a number of matters in relation to the proposed purchase, including the costs involved in fencing the pool at the Galston Property (Exhibit 3). This has some relevance in comparing the special conditions in the respective sale contracts - see below.
Mr and Mrs Tonna accept that they required finance to complete the purchase of the Galston Property and it does not appear to be disputed (nor could it be having regard to the contemporaneous documents to which I refer below) that Mr Mendonca assisted Mr and Mrs Tonna in relation to the purchase, including, in particular, dealing with various brokers or lenders in connection with applications for finance for the proposed sale and with the vendor's agent (and with other solicitors in relation to the Hornsby Shire Council's (the Council) requirements regarding improving the land). Indeed, by late January 2014 (as the correspondence reveals), Mr Mendonca appears to have taken a somewhat personal interest in achieving completion of the sale transaction (in the sense that some of his communications are couched in quite emotive terms; not what one might expect of a dispassionate professional adviser).
On or about 4 December 2013, Mr and Mrs Tonna received conditional approval for a loan from National Australia Bank Limited (NAB) of $1,160,000. The balance of the purchase price was to be funded from Mr and Mrs Tonna's savings, supplemented by money to be provided by members of their family or entities associated with them (see further below).

[17]

Exchange of contracts for the Galston Property - 9 December 2013

On 4 December 2013, instructions were given to Mr Leo by Mr Mendonca to exchange contracts for the sale of the Galston Property to Mr and Mrs Tonna with a sale price of $1,450,000 and with a completion date of 23 December 2013. That occurred in the following circumstances.
On 4 December 2013, Mr Tonna received written advice from Mr Leo that: Mark, in any event, before signing the contract you should be satisfied that the finance will be available at the time of completing the purchase. [emphasis per the original]
Mr Leo gave the same advice to Mr Tonna at a meeting on the same day; and Mr Tonna expressly confirmed to his solicitor that he understood this advice. Matthews Folbigg's subsequent tax invoice dated 12 February 2014 records an entry for 4 December 2013: "[p]hone attendance with Mark re exchange, penalty interest, potential forfeiture of deposit and risk of being sued" and a conference with Mr Tonna and Mr Mendonca on that date "re exchange; risks and completion date".
On 5 December 2013, Mr and Mrs Tonna gave instructions to Matthews Folbigg to allow the deposit to be paid to the real estate agents acting for the vendors under the contract for sale. The contract for sale was then signed by Mr and Mrs Tonna (the first contract of sale). On 5 December 2013, Matthews Folbigg paid to Ms Ward (in her capacity as the real estate agent acting for the vendor), from trust funds deposited by Mr and Mrs Tonna, the deposit in the sum of $145,000. Mr Gough's tax invoice records an entry for 5 December 2013 in the following terms: Conference with Lorraine [Mrs Tonna] re signing of contract, potential risks associated with completion date such as penalty interest and forfeiture of deposit, collating documents in anticipation of exchange[.]
On 9 December 2013, contracts for the sale of the Galston Property were exchanged (with the sale price of $1.45 million and specified completion date of 23 December 2013).

[18]

Attempts to secure finance after exchange of contracts for the Galston Property

Following the exchange of contracts, Mr Mendonca, on behalf of Mr and Mrs Tonna, had dealings with a finance broker with a view to obtaining an unconditional loan approval from NAB. Those dealings were unsuccessful.
On or about 11 December 2013, Mr Mendonca advised Mr Tonna that NAB had refused to provide finance. Mr Tonna's evidence is that he was distressed by this news; that he did not want to lose the deposit or the Galston Property; and that Mr Mendonca recommended that they approach other lenders immediately.
Mr Mendonca subsequently assisted Mr and Mrs Tonna in applying for loans from various other lenders including the Bank of Queensland (with whom Mr Tonna was an existing customer) and "second tier" lenders known as Redilend and Prime Capital Nominees Pty Ltd (Prime Capital). Mr Mendonca charged Mr and Mrs Tonna fees for his professional services in assisting Mr and Mrs Tonna in this regard.
I interpose to note that Dr Mendonca points to the fact that, in the course of seeking finance, Mr and Mrs Tonna submitted applications that were known, at least by Mr Tonna, to be inaccurate (in that some were not complete at the time of signing and by reference to some of the contents of the applications - such as the identification of the purpose of the loan (as not being a residential loan but for business purpose) and as to the income or employment details of Mrs Tonna) (see for example at T 685.6-28); this being relied upon by Dr Mendonca not simply as going to the reliability of Mr and Mrs Tonna's evidence but as something from which (given that Mr Mendonca was heavily involved in making loan applications to the various lenders and helping Mr and Mrs Tonna to complete documents) is said to permit an inference that when Mr Mendonca included in his email correspondence suggestions as to Dr Mendonca being a guarantor, or having a 1% interest in the Galston Property, those suggestions were not based on instructions or directions from Dr Mendonca but were being put to the lenders "in order to somehow obtain the finance that they desired" (T 685.39). Dr Mendonca submits that those applications, as Mr Tonna frankly conceded, included whatever Mr Tonna believed the banks needed to hear in order to advance the money.
One factor that appears to have caused difficulty with the attempts to obtain finance at around this time was that a caveat was lodged on the title to the Schofield Property by Prime Capital for fees of about $39,000. See, for example, the Matthews Folbigg file note, dated 15 January 2013 (but which in context must have been 15 January 2014), of an attendance, on Mr Mendonca and Mr Tonna. That file note refers to a discussion as to the need to "get rid of [the] caveat" in the context of a discussion as to the "logistics of getting the deal done" and there are references in that file note to the applications to the Bank of Queensland and Prime Capital (see below).
Another complicating factor was what was referred to as the "red flag" issue: namely, the problem caused for Mr and Mrs Tonna by an earlier identity fraud; they having apparently been the victims of a fraud perpetrated by Mr Tonna's cousin to obtain bank funds, which led to a "red flag" being placed on their credit history.
By about 15 December 2013, Prime Capital had indicated its approval of an application for finance of $1.3 million to enable completion of the purchase of the Galston Property. While Mr Tonna's evidence is that he thought Prime Capital would let him down (see his email to Mr Mendonca on 18 December 2013 with the subject "Gerard these idiots are going to let us down") (and there is a later file note made by Mr Gough on 1 January 2014 which records Mr Tonna as saying that "Prime [is] not an option (even if loses $145k deposit)"), as at this point in time it appears that the Prime Capital loan was still a possibility (and hence Mr Tonna's evidence that he had finance available seems at least at that point credible). Mr Mendonca advised Mr Tonna that he would "chase them" (i.e., Prime Capital) and that he recommended that Mr and Mrs Tonna sign the mortgage documents for the proposed loan prepared by Gadens (the solicitors for Prime Capital). (Prime Capital was ultimately only prepared to lend about $870,000 for the purchase of the Galston Property. Prime Capital also later brought proceedings in the District Court for alleged breach by Mr and Mrs Tonna, and a company associated with them - Welcome Homes (NSW) Pty Ltd (Welcome Homes) - of a loan agreement constituted by acceptance of a loan offer made by Prime Capital around this time.)

[19]

Initial date for completion - 23 December 2013

Completion of the Galston Property purchase did not occur on 23 December 2013 (the completion date specified in the contract). It is not disputed that Mr and Mrs Tonna failed to complete the first contract for sale at that time because they were unable to obtain finance (see Mr Tonna's affidavit sworn 16 October 2017 at [45]) (though, as noted below, Mr Tonna did claim in the witness box to have had other loan funds available to him in the period after December 2013).
On 23 December 2013, Mr Mendonca went to India for a holiday. Mr Mendonca had initially planned to be overseas until 1 February 2014 (see Exhibit AJ) but, as it transpired, he returned to Australia in mid-January 2014 (see below).
According to Mr Tonna, shortly before Mr Mendonca left for India, Mr Mendonca offered to have the Galston Property purchased in the name of Dr Mendonca. (Dr Mendonca notes that Mr Tonna's evidence of that discussion (at [43] of his 16 October 2017 affidavit) does not disclose that any agreement was here communicated to Mr Tonna; in that Mr Tonna does not give evidence that Mr Mendonca telephoned him or sent him an email to the effect that Mr Mendonca had spoken with Dr Mendonca and she had agreed.) The first reference in the contemporaneous documents to any proposed involvement of Dr Mendonca in the transaction does not appear until Mr Mendonca was in India (and was then in the context of Dr Mendonca guaranteeing the loan -see below). Mr Tonna's recollection (in an affidavit prepared in other proceedings - see later) at one stage was that he had first suggested that Dr and Mr Mendonca be involved.
While Mr Mendonca was in India, he communicated with both Mr Tonna and Mr Gough by use of a different email address (which he advised Mr Tonna was his temporary address (see the email of 24 December 2013)). By emails sent from India on 23 December 2013, Mr Mendonca continued to pursue the Bank of Queensland (Mr Drew Clegg and Ms Kavi Gounder) for finance. At that time he proposed to Mr Tonna (and to Mr Tonna's daughter, Belinda) the following "plan of action": First let us wait and receive approval from Bank of Queensland. If Bank of Queensland approves then issue ends. If Bank of Queensland does not approve then ask Drew to approve with Renuka Mendonca as additional guarantor (with a caveat in favour of Renuka until December 2014 when you shall get your A$5million). Renuka's wage is around A$150,000 per year and has no debt on 2 homes: [there giving the addresses of two properties, one at Northmead and one at Winston Hills].
This is the first reference in the documents that I can find to a proposal that Dr Mendonca be involved in any way with the financing or purchase of the Galston Property (and, relevantly, it contemplates that Dr Mendonca would act as guarantor in respect of the purchase by Mr and Mrs Tonna; not that she would acquire the Galston Property). Mr Tonna's evidence was that he did not know about the idea of Dr Mendonca providing a guarantee at the time this email was sent (T 275.25). As pointed out for Dr Mendonca, there is no documentary evidence to suggest that she was aware of such a proposal at this time.

[22]

Bank of Queensland applications

As noted above, Mr Mendonca continued to press the Bank of Queensland in relation to a proposed loan while he was in India. By email to the Bank of Queensland sent on 7 January 2014, Mr Mendonca advised the representatives of the Bank of Queensland that he was returning to Sydney on 15 January 2014 to help Mr Tonna and (consistently with, though in one respect going further than, the "plan of action" earlier communicated to Mr Tonna) that: Also, please consider if the guarantee of my wife (a medical specialist with 2 properties without debt and A$150,000 wage) or the inclusion of my wife with 1% interest on the contact [sic] can help expedite the approval of the loan.
Insofar as what was proposed there included the alternative suggestion that Dr Mendonca acquire a 1% interest in the Galston Property this goes further than the "plan of action" that Mr Tonna had suggested on 23 December 2013. (Dr Mendonca does not accept that she was aware of the Galston Property at the time. Again, there is no documentary evidence to suggest that Dr Mendonca was aware that this was being proposed at the time.
Mr Mendonca returned to Australia on 15 January 2014. In response to a request from the Bank of Queensland for further information in relation to Welcome Homes, by email sent on 16 January 2014 at 11.58pm, Mr Mendonca advised: l am happy to help in any way possible even if it means being a co-borrower or guarantor or giving security over my 2 properties valued at a$1.5 million [sic] with no debt. Mark is desperately awaiting your written loan approval.
By this communication, Mr Mendonca thus seems to have been putting himself forward as a co-borrower, guarantor, or surety.
There is in evidence a Matthews Folbigg file note dated 17 January 2014 of an attendance by Mr Gough on Mr Tonna, Mr Mendonca, Mr Doust and Mr Leo at 12.26pm which includes the notation: Mark confirmed not proceeding with loan from Prime.
Mr Gough's 12 February 2014 tax invoice also records (at item 80) a conference on that day.
On 20 January 2014, Mr Clegg from the Bank of Queensland indicated that it would not provide finance to Mr and Mrs Tonna.
By this stage (on their own evidence) Mr and Mrs Tonna were in a state of desperation. Mr Tonna deposes in his 16 October 2017 affidavit that he felt he was "in a desperate situation and [he] was out of [his] mind with worry" (at [59]).

[24]

Thursday, 23 January 2014

On 23 January 2014 (i.e., the day before completion was required under the terms of the notice to complete), there appears to have been a flurry of email communications headed "Tonna - CEG - Letter of Offer - SUPER URGENT".
At 8.20am, Mr Gough emailed Mr Mendonca and Mr Tonna's email address (copied to Mr Leo and Mr Doust) advising as to the "current position" including as to: the position with Prime Capital and its caveat over the Schofields Property; the notice to complete; a proposed loan document from CEG Capital & Equity Group (CEG); the caveat (and the position if a lapsing notice were to be issued); and as to their legal costs.
At 10.25am, in response, Mr Mendonca responded that "Mark is happy to pay all your legal fes [sic] from your trust account" and that "Mark accepts all you[r] advice below and shall not accept the private loan offer unless the rate of interest is decreased and terms and conditions favourable to Mark (which we do not expect)".
At 10.36am, Mr Gough emailed Mr Mendonca and Mr Tonna's email address (copied to Mr Leo and Mr Doust) attaching terms of an extension to the settlement date and saying that he would ring "you" (presumably, Mr Mendonca since the email is addressed to him) "now".
At 11.37am, Mr Mendonca sent an email to Mr Gough and Mr Tonna's email address (copied to Mr Leo and Mr Doust), referring to Mr Gough's email and telephone call, and stating: Mark has approved the extention [sic] letter of vendor and shall call you today. Mark has not made a decision on a further offer to Prime. Bhart Bushan [associated with Universal] who has executed his option contract [for the Schofields Property] has promised to lend Mark A$1,000,000.00 - meeting tommorrow [sic] at 9AM - shall keep you updated.
Next in the chain of emails on that day is an email from Mr Gough to Mr Mendonca and Mr Tonna's email address (copied to Mr Leo and Mr Doust) sent at 12.03pm, thanking Mr Mendonca and Mr Tonna for their time (which on its face indicates that Mr Tonna was a participant to the telephone conversation to which reference is there made) and summarising those discussions as follows: • I spoke about options eg, proceed with the purchase or pull-out now (that is, cut your losses and run) - the decision is to proceed with the purchase and accept the proposal the vendor has made - I have notified their lawyer accordingly - Mark and Lorraine will be available at short notice to sign the paperwork when it arrives to document that agreement • you are NOT proceeding with CEG and will NOT sign any documents with them • you are seeing Bhart tomorrow re his offer of finance as a 'plan C' option and you have sufficient funds to cover the difference between what Bhart will offer and what we need for settlement (keeping in mind there will be another approx.. $10,000 in interest to pay plus the vendor's legal fees of around $2,000 that you need to budget for) • we still only have a short space of time to sort out finance as Monday is a public holiday • the 'red flag' problem relates to an identity fraud issue where Mark was the victim • the purchaser is now to be Welcome Homes (NSW) Pty Ltd - I understand the s18 Duties Act aspect has been considered • there is no counter-offer at this time to be made to Prime - we can discuss this further next week
The response to this from Mr Mendonca at 12.12pm was that "[a]gree with all you have written except that the purchaser on the contract shall remain the same until advised otherwise next week".
At 12.16pm, Mr Gough advised that "I will get some paperwork signed whilst Mark and Lorraine are in here just in case re Welcome Homes and just hold that on my file in case it is needed".
Then, relevantly, there was the following email at 1.24pm from Mr Mendonca to Mr Gough and Mr Tonna's email address (copied to Mr Leo and Mr Doust): Welcome Homes (NSW) Pty. Ltd. is not going to be used. Instead, the purchaser will be Renuka Mendonca and Borrower, Renuka Mendonca. This Plan "D" - "Desperate" - if nothing else works. I am expecting Renuka's written approval from ANZ Bank tommorrow [sic]. When Mark gets his A$5 million, Renuka shall transfer the property to Mark and Mark shall bear the stamp duty. [my emphasis] So, I believe Welcome Homes paperwork may not be necessary at all. I am going to get some ANZ paperwork signed from Renuka. Hence, shall expect to return at 3 PM. today.
The sum of "A$5 million" there appears to be a reference to the amount that it was expected would be realised by Mr and Mrs Tonna for the sale of the Schofields Property. (The call option in relation to that property had not been exercised at that time but, under the call option deed, the option was capable of being exercised at any time prior to the sunset date.) The email also, relevantly, suggests that at that stage nothing had been signed by Dr Mendonca in relation to the ANZ loan application.
On 23 January 2014, at 1.28pm, Mr Mendonca sent an email to an officer (Kiran Singh) at ANZ providing a copy of the contract and valuations for the Galston Property and confirming the settlement date as Friday, 31 January 2014 "with no extentions" [sic]. (That same email seems to have been forwarded again to ANZ twice later that day.)
At 4.08pm on 23 January 2014, Mr Gough (responding to Mr Mendonca's 'Plan D Desperate' email) emailed Mr Mendonca and Mr Tonna's email address (copied to Mr Leo and Mr Doust), stating: As discussed, one key item is the fact that if you nominate Renuka as the borrower unless she satisfies the "related persons" test under the Duties Act then you end up paying two lots of stamp duty - one by Mark and Lorraine as the purchasers on the contract - and two by Renuka who takes the property from Mark and Lorraine - and a third layer if Renuka then transfers it back to Mark and Lorraine. Extracted below are the relevant sections we need to keep in mind IF we are going to nominate any person or entity to buy the property other than Mark and Lorraine in their personal names: [there setting out various provisions from the legislation] If the vendor agreed to end the contract with Mark and enter into a new one with Renuka then potentially that could alleviate one lot of stamp duty BUT you need the vendor's consent [to] do this AND there is a concern that this arrangement is a fraud on the OSR as it is purely designed to deny it an extra lot of stamp duty (and of course we could not recommend such an approach)[.]
The narrative to Mr Gough's subsequent 12 February 2014 tax invoice records a number of entries for 23 January 2014 consistent with the above communications.

[25]

Friday, 24 January 2014

On 24 January 2014, Mr and Mrs Tonna signed a Deed of Agreement to release the deposit to the vendor in consideration for the vendor forbearing in the exercise of its rights under the notice to complete until 4pm on 31 January 2014 (cl 2.1). They also signed an Order on Agent directing the immediate release of the full amount of the deposit. The terms of the Deed of Agreement had been agreed as between Mr Gough and the solicitors for the vendor (Elson Pow & Associates) in the course of email correspondence on 23 and 24 January 2014. Mr Gough witnessed their signatures on the said documents. He had noted in an email sent at 10.32am on 24 January 2014 to Mr Mendonca and Mr Tonna's email address (copied to Mr Leo and Mr Doust) that the documents must be completed by around 12 pm and had there said it was critical that the documents be signed "when you arrive here at around 11am", which indicates the time of the execution of those documents. A direction was issued to the agent by the solicitors for the vendor on 24 January 2014 in that regard (and appears to have been sent by facsimile transmission at 12.44pm).
At 5.20pm on 24 January 2014, Mr Mendonca emailed Mr Gough and Mr Tonna's email address (copied to Mr Leo and Mr Doust) advising that: ANZ Loan verbally approved in the name of Renuka Mendonca. Please prepare contract in the name of Renuka Mendonca. Renuka will execute any deed of agreement agreeing to hand over the property to Mark Tonna when he gets the A$5 million. [my emphasis]
The reference to $5 million must logically be a reference to the amount payable if the call option was exercised in relation to the Schofields Property.
At 9.41pm on 24 January 2014, Mr Mendonca emailed Sonal Singh at ANZ (an email copied to Kiran Singh, Mr Doust, Mr Gough and Mr Leo) thanking the bank officer for the "quick 24 hour approval" and advising that: Renuka is happy to whole-heartedly accept the offer of ANZ with the best terms and conditions.
The email stated that "our solicitors" shall forward the contract containing Dr Mendonca as the purchaser and asked that, when the mortgage documents were ready, Dr Mendonca be contacted on a specified mobile phone number (a number that it is accepted was Dr Mendonca's mobile phone number).
At 10.14pm, Mr Mendonca emailed Ms Ward (the real estate agent), copied to Mr Tonna's email address, advising her, among other things: Loan is approved. Mortgage documents expected to be executed on Wednesday, 29 January 2014 and settled on or before 31 January 2014. … I return from Gold Coast on Wednesday, 29 January 2014 to sign mortgage documents and instruct bankers cheque to be prepared. [Interestingly, this suggests Mr Mendonca was to sign the mortgage documents - whereas the loan was to be to Dr Mendonca.]
At 10.33pm that day, Mr Mendonca sent an email to Mr Tonna's email address (copied to Ms Belinda Tonna) in the following terms: Please ensure all money in from Mangion Family Trust and Mark's Mum is transferred to Matthew Folbiggs [sic] trust account on or before Wednesday, 29 January 2014. Money = Final Settlement number (Please request Eric [Leo] to obtain final settlement sheet from vendor showing amount payable as at 31 January 2014) + stamp duty + All Matthew Folbiggs [sic] legal fees - less A$1,100,000.00. Contract in Renuka Mendonca's name. Please request Stewart [Gough] to prepare any legal document to protect your interest in the property and your money payments in respect of this property for Renuka to sign when Renuka arrives to sign the contract. This agreement can state that Renuka agrees to transfer the property to you at the same value when you are able to obtain a loan in your name or when you receive your A$5,000,000.00 whichever is earlier. Can include anything per Stewart's advice. If you have any urgent issues, please call me in [sic] the Gold Coast on [Renuka's mobile number] or else I shall return at Noon on Wednesday, 29 January 2014. [emphasis per original]
From the above, it appears that on 24 January 2014 ANZ had approved a loan to Dr Mendonca for $1.1 million. (See below as to the evidence of Dr Mendonca's knowledge, or lack thereof, of that occurring on that day.)
What is therefore tolerably clear on the face of the contemporaneous documents is that an application for a loan in the name of Dr Mendonca was submitted to ANZ sometime in the 24 hours up to 5.20pm on 24 January 2014. Dr Mendonca accepts that she signed an Applicant Guarantor Declaration dated 24 January 2014 to ANZ (see the cross-examination by Dr Mendonca as to her signing of this document - T 485ff) and appears to accept that this must have been at the request of Mr Mendonca, although her evidence on this was expressed in highly conditional terms - "if he had asked …") but she does not recall having signed the document. Dr Mendonca also accepted that Mr Mendonca must have submitted the document to ANZ (since she is adamant that she did not herself do so) but she denies that she authorised him to do so.
Certainly, by 24 January 2014, ANZ must have been in receipt of some form of application for a loan in favour of Dr Mendonca for it to have given the verbal opinion to which Mr Mendonca had referred in his 5.20pm email communication to Mr Mendonca (and there was no response from ANZ to his 9.41pm email to Sonal Singh to deny the making of an offer). There is in evidence a copy of an internal ANZ document dated 24 January 2014 (in similar handwriting to the date on the applicant guarantor declaration form), which records the loan objective as "Customers wish to buy an investment ppty @ Galston NSW". There is no suggestion that Dr Mendonca attended a meeting at ANZ on this date but it seems a reasonable inference that Mr Mendonca must have done so, or at least by some means had delivered the applicant guarantee request form to ANZ on 24 January 2014.
Dr Mendonca was (at least later) aware that Mr Mendonca had made the loan application to ANZ on her behalf. He must also have submitted sufficient financial information to ANZ to enable it to process the loan application. (Dr Mendonca's evidence in cross-examination as to what access her husband had to her financial information was to some extent contradictory - see T 536ff.) Even though Dr Mendonca said she did not know her husband had provided financial information to ANZ, it is said for Mr and Mrs Tonna that she was nevertheless "happy" to adopt whatever information had been provided by him to ANZ for the purpose of ANZ processing her loan application. Whether one would describe Dr Mendonca as "happy" about any of the arrangements at the relevant time is a moot point - her attitude in the witness box seemed to be one of relative indifference to whether or not she acquired the Galston Property. Relevantly, however, Dr Mendonca does not appear to have raised any objection to the provision by Mr Mendonca of the loan application (and whatever details were supplied to ANZ on 24 January 2014), insofar as she subsequently proceeded with the ANZ loan.

[26]

Alleged meeting between Mr and Mrs Tonna and Dr and Mr Mendonca with Mr Gough on 24 January 2014

Mr Tonna has deposed (see [64] of his 16 October 2017 affidavit) that "on or about 24 January 2014" he attended a meeting at the office of Matthews Folbigg with Mrs Tonna, Dr Mendonca, Mr Mendonca, Mr Gough and other lawyers of Matthews Folbigg. He says the meeting went for more than an hour. He recalls that Mr Doust came in about three quarters of the way into the meeting. At [65]-[68] of this affidavit, Mr Tonna deposes to what was discussed at the meeting. At [44]-[47] of her affidavit also sworn 16 October 2017, Mrs Tonna also gives evidence of this meeting. (Mr and Mrs Tonna contend that the evidence of this meeting is consistent with the prior correspondence and supports their claim that the parties agreed to create a trust in respect of the Galston Property.)
At [63] of his affidavit sworn 8 March 2018, Mr Mendonca denies attending any meeting at the office of Matthews Folbigg on 24 January 2014. He says the first and only meeting he attended with Dr Mendonca and Mr and Mrs Tonna at Matthews Folbigg's office was on 30 January 2014. In response to [64]-[68] of Mr Tonna's affidavit of 16 October 2017, Dr Mendonca says "I have never met or spoken to Terry Doust".
I consider in due course the most likely sequence of events over the period 24-30 January 2014. Suffice it here to say that I cannot conclude that there was a meeting attended by Dr Mendonca at the offices of Matthews Folbigg on 24 January 2014.
What is, however, corroborated by reference to Mr Gough's subsequent 12 February 2014 tax invoice is that there was a conference on 24 January 2014 between Mr Gough and Mr and Mrs Tonna. See the following entry: 106. 24/01/2014 Conference with Mark and Lorraine to discuss the deed, direction to pay, order on the agent and Renuka becoming the new purchaser and discussions with vendor's lawyer re paying their account and organising same. [my emphasis]
An email from Mr Gough to the vendor's solicitor on 24 January 2014 at 7.36am confirms that such meeting had been arranged - as he requested the final clean version of the deed for signing by 11am "as my clients will attend at my office at that time to sign the Deed".

[27]

Position as at 24 January 2014

The position as at 24 January 2014 (by reference to the contemporaneous documents referred to above) was therefore that: an application, signed by Dr Mendonca and dated 24 January 2014, had been lodged in Dr Mendonca's name for a loan from ANZ for $1.1 million; the loan had apparently been at least verbally approved on 24 January 2014 and Mr Mendonca had communicated, to ANZ, Dr Mendonca's "whole-hearted" acceptance of the offer; Mr and Mrs Tonna had paid the sum of $141,292.75, being the balance of funds held in the Matthews Folbigg trust account after payment out to the vendor's agent of the deposit; and it was contemplated that they would also have access to further funds (which I understand to be an amount of $173,000, which was provided by Mrs Tonna's mother on 29 January 2014, and a further $20,000 provided by Mr Tonna's mother on 30 January 2014) to enable the purchase of the Galston Property to be completed.
Mr and Mrs Tonna contended in their opening outline of written submissions (at [31]) that the evidence established that, by 24 January 2014, Dr Mendonca and Mr and Mrs Tonna had reached an agreement which provided that: Mr and Mrs Tonna would complete the purchase of the Galston Property and contemporaneously convey the Galston Property to Dr Mendonca upon which she would hold the property on trust for Mr and Mrs Tonna; Dr Mendonca would borrow moneys from ANZ to be secured by mortgage over the Galston Property to enable completion of the purchase of the Galston Property by Mr and Mrs Tonna; Mr and Mrs Tonna would pay all stamp duty, conveyancing costs, the balance of the purchase price owing after the loan advance from ANZ, all repayments due under the loan from ANZ and all other costs associated with the purchase and holding of the Galston Property; and upon Mr and Mrs Tonna obtaining a discharge of the ANZ Mortgage and paying all costs associated with the discharge and re-conveyance, Dr Mendonca would re-convey the Galston Property to Mr and Mrs Tonna (this is referred to in the pleading as the Trust Agreement).
The position of Mr and Mrs Tonna as to the date by which this agreement is alleged to have been reached changed during the course of the hearing (as to which I say more in due course). Nevertheless, what is clear is that, on and from 24 January 2014, Mr Mendonca, both verbally and by email, communicated with ANZ (Mr and Mrs Tonna say this was on behalf of Dr Mendonca) in relation to finance and gave instructions to Mr Gough in relation to the purchase of the Galston Property by Dr Mendonca (Mr and Mrs Tonna say this was on behalf of Mr and Mrs Tonna and Dr Mendonca); Dr Mendonca accepts that Mr Mendonca was sending emails suggestive of the fact that Dr Mendonca had agreed to certain matters but her evidence is that she was unaware of this information. She denies that such emails were sent with her authority. (Although it was said in submissions for Dr Mendonca that this evidence was not challenged, it seems to me clear that there was a sustained attack mounted for Mr and Mrs Tonna to Dr Mendonca's denial throughout the hearing that Mr Mendonca was acting as Dr Mendonca's agent.)
Dr Mendonca points in this context to the evidence given by Mr Tonna to the effect that he was telling the lenders information that he knew not to be correct and what he thought they "might want to hear in order to lend [to Mr and Mrs Tonna] money" (T 273.37; T 274.21). Dr Mendonca submits that this includes statements to the effect of Dr Mendonca having an interest in the Galston Property despite Mr Tonna not knowing whether that was true (T 276.25).

[29]

Sunday, 26 January 2014

Relevantly, over the long weekend of 26-28 January 2014, Dr Mendonca and Mr Mendonca, with their children, went on holiday to the Gold Cost. Dr Mendonca's evidence is that this was the first occasion on which she heard about the proposed purchase of the Galston Property and about the existence of an indicative loan approval. In her affidavit affirmed 19 March 2018, Dr Mendonca deposes to a conversation where Mr Mendonca raises whether she would be interested in investing in a property in Galston and says "I've got an indicative pre-approval", to which Dr Mendonca says her response was that she did not wish to talk about it on holidays.
Dr Mendonca was cross-examined at some length as to aspects of this conversation. She was adamant that she had not been prepared to talk about this while she was on holiday with her family. More than once, Dr Mendonca (in evidence that was suggestive of some past, if not indeed continuing, disharmony in the relationship with Mr Mendonca) said that she did not wish to start a fight; her position being that she wanted to enjoy their holiday (see for example at T 485.39). There are aspects of Dr Mendonca's evidence as to the conversations about the Galston Property purchase (to which I will refer in due course) that I find implausible. While her refusal to engage in discussion about the acquisition of a property in Galston while she was on holiday with her children (and her desire not to start a fight about it), and her seemingly supreme indifference as to whatever indicative loan approval Mr Mendonca might have obtained, strikes me as not implausible, it does make her subsequent conduct less credible. For her to place such emphasis in cross-examination on not wanting to start a fight with her husband when the Galston Property issue was raised with her on 26 January 2014 is difficult to square with the seeming docility with which Dr Mendonca then seems to have been immediately willing to engage in such a discussion (on her evidence either at the airport in Queensland on her way back from the Gold Coast or in the car on the drive to her home at Northmead) and indeed the alacrity with which she seems to have then responded to the proposal put to her on 29 January 2014 that she acquire a property about which (on her evidence) she knew almost nothing and to do so within a very short space of time. It is also difficult to accept that Dr Mendonca did not raise with her husband (her tax accountant) what amount ANZ was prepared to lend her at the time.
In any event, Dr Mendonca's position is that she asked no questions about the Galston Property or the indicative loan approval when the subject was raised with her on 26 January 2014 (and, indeed, her evidence is that she never asked Mr Mendonca the amount of the indicative loan approval).
Also about this time (26 January 2014) it appears that Mr Tonna contacted a licensed conveyancer (Mrs Mary Mackman or her son Mr Philip Mackman) to act on the transaction in place of Matthews Folbigg. I say this because an email was sent on 26 January 2014 at 2.19pm by Mr Mendonca to Mr Gough and to Mr Tonna's email address (copied to Mr Leo and Mr Doust) responding to Mr Gough's email of 25 January 2014 and stating: Please do not forward anything to ANZ. [Presumably this was in response to Mr Gough's comments - not extracted above - in the last email as to documents that would be forwarded to ANZ on Tuesday - a copy of the front page of the contract and the non-conforming transfer] Your advice is accurate but Mark informed me that he cannot afford to pay stamp duty three times. Mark states that he has a conveyancer who has promised to get him over the line if ANZ provides the money. Hence, please give Mark the final legal bill for all issues including Prime and Victor Zammit issues, deduct all outstanding fees from your trust account money and transfer the money to Lorraine Tonna's account for Mark to prepare the required bank cheques for settlement. Immensely appreciating all that each of you have done for Mark and myself acting for Mark.
Consistent with the reference in that email to Mr Tonna having a conveyancer "who has promised to get him over the line …", at 6.03pm on 26 January 2014, Mr Mackman sent an email to Mr Mendonca attaching a front page of contract "as requested", that being the front page of a contract for the sale of the Galston Property direct from the then registered proprietor (Maha Budhi Co) to Dr Mendonca. The email requested Mr Mendonca to "print, sign and return to our office as soon as possible in anticipation of exchange" and the author (Mr Mackman) said that he had "just tried phoning however was unable to get through, please call to discuss further".
Dr Mendonca notes that the emails sent on 26 January 2014 raise, for the first time in writing, Mr and Mrs Tonna's wish to avoid paying various amounts of stamp duty; and Mr and Mrs Tonna is retainer of a new conveyancer known to them.
There was some confusion in the oral evidence of Mrs Mackman and her son, Mr Mackman, as to the timing of their involvement (or more precisely of the proposal for the involvement of Mrs Mackman) as licensed conveyancer. Certainly, it would appear that there was some perceived urgency about this on the part of at least Mr Mackman (since Mr Mackman went into the office on the Saturday of the long weekend to draft a new cover page for the contract of sale and forwarded it to Mr Mendonca at 6.30pm that day). The discrepancy in the Mackmans' evidence as to this is as to when the relevant conversation(s) took place and whether Mr Mendonca was privy to the said conversation(s) (see further below). There can, however, be no doubt that what Mr Mendonca was conveying to Mr Gough of Mathews Folbigg at the time of his 26 January 2014 email was that Mr Gough was no longer to be acting for Mr and Mrs Tonna (let alone for Dr Mendonca) in relation to the sale transaction(s) - see the reference to a "final" bill; and this was certainly how Mr Gough understood that email (see his 28 January 2014 emails below).

[30]

Monday, 27 January 2014

Monday, 27 January 2014 was a public holiday.
It appears that Mr Gough responded to the 26 January 2014 email above (i.e., the email advising him that Mr and Mrs Tonna proposed to engage a licensed conveyancer in the matter and asking him to render a final bill) on 27 January 2014, saying that "I will ring you tomorrow to clarify a couple of items"; and that Mr Mendonca then responded: I am in the Gold Coast on holiday and expect to arrive at my residence in Sydney at Noon on Wednesday, 29 January 2014. Please feel free to call me on [xxx] - Renuka's mobile. I have requested Renuka to pass on your telephone call. You are welcome to call me anytime but 8.30 AM to 9.30 AM is preferable because I would [be] in the Seaworld theme park at 10 AM attending with kids. Meanwhile, Renuka has been requested to retain his son [Aaron Tonna]'s mate as her conveyancer. Attached is the front page of her contract which has been submitted yesterday to the bank as per their request to facilitate their processing the mortgage documents on Tuesday 28 July 2014. … At this point in time, Mark understands that it is important for Mark to pay all his legal bills for all legal issues from your trust account tomorrow and receive the remainder funds so that Mark can prepare bank cheques on Wednesday, 29 January 2014 for potential settlement on or before 31 January 2014.
I place the timing of the above exchanges of emails as occurring on 27 January 2014 because the next email sequentially in the chain of emails (sent at 8.54pm on 27 January 2014) by Mr Mendonca to Mr Gough and to Mr Tonna's email address (copied to Mr Leo and Mr Doust) commences with clarification as to the difference in time between Sydney and Queensland time (obviously for the proposed call from Mr Gough the following morning) and Mr Gough's call occurred on 28 January 2014 (see the email below). Mr Mendonca in this email set out information researched from the Office of State Revenue website as to duty if a sale or transfer agreement is rescinded or annulled.
Mr Gough's tax invoice includes the following item: 109. 24/1/2014 Perusal of email from Gerard and reply (Australia Day public holiday)

[31]

Tuesday, 28 January 2014

On Tuesday, 28 January 2014 (when Dr and Mr Mendonca were still on holiday with their children at the Gold Cost) at 8:05am, Mr Gough sent an email to Mr Mendonca (copied to Mr Tonna's email address), setting out a list of matters that he said "[w]ith Mark, I will discuss … with you when we chat at 9.30am Sydney time to make sure I understand what is to happen to each item". The list comprised the following items: (1) Renuka • new contract • this conveyance will be handled by another firm • documentation between Renuka and Mark (we will attend to this if instructed to do so) • we will only be involved as instructed (2) Mark and Lorraine - Purchase • rescission of their contract (to be organised - by whom?) • application for refund of stamp duty (Mark/yourself to handle) • we no longer be [sic] acting on the purchase and are to cease work (3) Mark and Lorraine - Victor Zammit and Prime • we are to cease acting in each matter • Mark would like copies of all emails and letters between our firm and the lawyers for Victor and Prime • we will need to notify the other parties of our ceasing to act (4) Legal Fees • we are to deduct our legal fees in respect of the purchase (which includes Prime) and Victor Zammit matters from monies held in our trust account (5) Lorraine Transfer • we are to transfer the balance of funds (after deduction of legal fees) to Lorraine's account • we will need the account details to make the EFT (6) Mark - Red Flag Issue • whether we are still required to look into this issue
In a further email at 8.09am, Mr Gough responded to the 8.54pm 27 January 2014 email about the documents needed to apply for a refund and said "let's discuss later today".
On 28 January 2014 at 10:17am, Mr Gough sent an email to Mr Mendonca, following a telephone call with him (copied to Mr Tonna), confirming that he had sent the letter to the vendor's solicitors with the Deed providing for an extension, and including the following: With other items, to make sure nothing slips between the cracks: (1) Renuka • there is nothing for us to do as you will instruct the new conveyancer • make sure you ensure the conveyancer understand[s] the urgency of the situation (2) ANZ • there is nothing for us to do as you will handle all aspects of the loan/mortgage documents in conjunction with Renuka's conveyancer • I understand it was not an option for you to have Renuka simply borrow the money and then loan it to Mark/Lorraine to complete their purchase (3) Mark and Lorraine - Purchase • we are to immediately cease preparing for settlement • the only item we are to attend to is following up with the vendor's lawyer the Deed of Rescission and having that finalised asap • please appreciate this is putting all eggs in one basket if Renuka's purchase falls over/the vendor does not agree to rescind - we have advised previously of the consequences for failing to settle on Friday • you will assist Mark in applying for a stamp duty refund (note you will need to get the Transfer back from the vendor's lawyer) (4) Victor Zammit and Prime • apart from providing Mark with copies of emails/letters from us to their respective lawyers, we are to immediately cease undertaking any work • if Mark needs advice about the time limits to take action against Victor Zammit, let me know (if you do not file court proceedings within the allowed timeframe then usually this means you lose the right to sue for that issue) • at this stage we are not to let the other parties know we no longer act (5) Lorraine Transfer • to try and avoid delays in having an EFT clear, instead Renuka's conveyancer will tell us how to draw the settlement cheque and where to send it (ie, taking monies held in our trust account for Mark/Lorraine to help Renuka pay the purchase price on settlement) • Mark I need your written approval to take this step as we are being instructed to release YOUR money to help Renuka buy the property in her name - in addition, I STRONGLY recommend that whatever the arrangement is between Renuka and Mark/Lorraine that it be documented now eg, whether the monies are a loan and, if so, when they are to be repaid, whether interest applies and whether security is being given by Renuka to support the loan [emphasis as per original] • If there is to be a document prepared to record the arrangement and you need me to do it, let me know (6) Mark - Red Flag Issue • we are not to undertake any further work until you instruct us to do so (7) Accounts • we will finalise our accounts for the above matters, pay those accounts from monies held in trust and of course provide you with invoices for your records Gerard if your understanding is any different, please urgently let me know (plus if there is anything I have missed that you wish to address).
Relevantly, Mr Gough's tax invoice discloses a telephone attendance with Mr Tonna "re invoicing and instructed to conclude matter" on 28 January 2014 and also on that date the following items: 113. 28/01/2014 Phone attendance with Gerard and follow-up email and see colleague re action items and email and letter to vendor's lawyers the deed of recission [sic] 114. 28/01/2014 Drafting letter to Mark concluding matter 115. 28/01/2014 Perusal of email and letter from vendor's lawyer re deed of rescission and email Gerard re same 116. 28/01/2014 Phone attendance with Mary Mackman and email Gerard and ANZ email 117. 28/01/2014 Phone attendance with ANZ bank re new purchaser 118. 28/01/2014 Time spent but not charged Printing correspondences with o/s solicitors 119. 28/01/2014 Phone attendance with Sonal from ANZ 120. 28/01/2014 Phone attendance with Gerard
At 11.15 am on 28 January 2014, Mr Gough emailed Mr Mendonca (copied to Mr Tonna's email address and Mr Leo) to say: The vendor does not know anything about Renuka becoming the purchaser - see the attached - they want Mark and Lorraine to remain as the purchaser. I URGENTLY need to know what is happening.
At 11.57am, Sonal Singh emailed Mr Gough asking whether he would be the conveyancer for the customer (on the Galston Property contract with the purchaser Renuka Mendonca) having noted that the contract of sale from the customer stipulated "acting on own behalf".
On 28 January 2014 at 12.28 pm, Mr Gough sent an email to Mr Mendonca and Mr Tonna's email address (copied to Mr Leo) advising that Mrs Mackman had phoned him that morning and stating that: … I am not sure she is prepared to jump in and act for Renuka - I suggest you speak with her asap keeping in mind as yet the vendor has not agreed to allow Renuka to be the new purchaser".
The email went on to say "[i]f that remains, have you thought about a Plan B? We could still try and submit a non-conforming Transfer to the vendor with Renuka's name on it BUT there would be two lots of stamp duty". Mr Gough in that email sought urgent instructions.
On 28 January 2014 at 2.13pm, Mr Mendonca sent an email to Ms Ward, Mr Tonna and Mr Gough (copied to Mr Leo) referring to a telephone conversation with her and saying: Deed of Rescission is required to terminate Mark and Lorraine's contract and enable Mark and Lorraine to get a refund of their stamp duty paid as they are unable to obtain finance due to the red flag obstruction caused by Liberty Finance for no lawful or reasonable cause. Renuka Maria Mendonca is the new purchaser. Mark is happy to give A$145,000.00 deposit to Renuka. This means that Renuka shall pay the same settlement money including penalty interest that Mark would have paid on 31 January 2014. Mark's lawyers are preparing a Deed of Agreement between Mark and Renuka. ANZ Bank confirmed 30 minutes ago that they would like the exchanged contract in the name of Renuka Maria Mendonca. Renuka shall attend her lawyers office tomorrow at 1 PM to exchange her contract. Please instruct the vendors solicitors to exchange at around 1 PM tomorrow. I am available on [xxx] (Renuka's mobile) and [xxx] (my son [xxx]'s mobile) all day and night until my arrival at 12 noon at my home in Sydney. Upon completion of the Deed of recission and Exchange of new contract all looks good for settlement on Friday, 31 January 2014.
The email of Mr Gough sent on 28 January 2014 at 12.28pm expressly refers to a telephone call with Mrs Mackman that morning ("Mary Mackman has phoned me this morning") and Mr Gough there says he is "not sure she is prepared to jump in and act for Renuka".
Mrs Mackman's evidence in cross-examination was that she only had one conversation with a solicitor at Matthews Folbigg about the matter; that the telephone conversation was on a speaker phone when Mr Mendonca and Mr Tonna were present; and that it was "approximately" on 28 January 2014. See the following (at T 422.11): Q. How many times did you call that person? Just the once? A. Only the one time when we were in a meeting with Mr Mendonca and Mr Tonna. Q. You called this person on one occasion and on the one occasion you have that discussion, correct? A. Yes. Q. You say to her Honour on oath that at that time of that discussion, Gerard Mendonca had come to you with Mr Tonna? A. Yes. Q. At your office? A. Yes. Q. Whilst physically Gerard being in the room with you, you make this phone call to-- A. Yeah, and put it on speaker. Yes, sir. Q. There's no doubt in your mind after all these years that this conversation happened as you say to the Court, is that right? A. I've no doubt at all. Q. If I put to you that Mr Mendonca, that you made this phone call on 28 January 2014, would you agree with that or disagree with that? A. Yeah, that was about the time that, yeah, that it happened. It was after--
There cannot have been a telephone conversation at which Mr Mendonca was physically present in Mrs Mackman's office on 28 January 2014 because the contemporaneous communications (and Dr Mendonca's evidence) makes clear that Mr Mendonca was in Queensland at the time of that phone call. While Mrs Mackman made clear that this (i.e., the 28 January) was an approximate date, the difficulty is that she was adamant that she only had the one telephone conversation and that Mr Gough's tax invoice clearly puts his telephone call with her as occurring on 28 January. That is consistent with his contemporaneous email of that date. So Mrs Mackman's recollection cannot in this respect be correct. Dr Mendonca also points to the fact that Mr Gough's email to Mr Mendonca reads as though he was not part of the conversation (despite Mr Mackman deposing that his mother had identified to Mr Gough that the call was on speaker and that Mr Mendonca and Mr Tonna were involved in the conversation (his affidavit at [9]) and Mrs Mackman giving evidence that Mr Mendonca was involved in that call (T 422.19-28)).
Thus, there is force to the submission for Dr Mendonca that, if the conversation between Mrs Mackman and Mr Gough happened as asserted by Mrs Mackman and her son, then the words attributed to Mr Mendonca could not have been said by him on 28 January 2014 (as Mr Mendonca was in Queensland at that time).

[32]

Wednesday, 29 January 2014

Email communications

On 29 January 2014 at 6.53am (Queensland time presumably), Mr Mendonca emailed Mr Gough and Mr Tonna's email address (copied to Mr Leo) that he was on his way to the Gold Coast airport and asking that Mr Gough send a letter when he started work to the vendor asking for an "urgent / ASAP status" about the deed of rescission and new contract to be exchanged around 1pm that day and, "[i]f negative then please send the non-confirming transfer for urgent signing by vendor or extention [sic] in time to be granted".
At 7.34am that day, Mr Gough emailed Sonal Singh to confirm that he would be acting for Dr Mendonca "on her purchase". To the extent that Mr and Mrs Tonna placed weight on how communications were given to ANZ, at least some were sent by Mr Gough. (It is not clear how or when Mr Gough was instructed that he was to continue acting on the conveyances for Mr and Mrs Tonna instead of the licensed conveyancer - but that this must have happened is evident from the email below.)
At 8.01am on 29 January 2014, Mr Gough sent an email to Mr Mendonca and Mr Tonna's email address (copied to Mr Leo): Morning Gerard and Mark, For today: (1) ANZ • as discussed, they urgently need a signed front page of the contract - ie, an exchanged contract that has been signed by the vendor • I can only provide this once the vendor has signed their contract, swapped it with Renuka's signed contract and emailed me an exchanged front page (2) Vendor • I am yet to receive confirmation from the vendor's lawyer that the vendor agrees to the Deed of Rescission and new contract • I will ring them this morning - plus see the attached • If they agree, Renuka, Mark and Lorraine will need to come into my office to sign documents (once the vendor's lawyer has given them to me) and then they will need to be couriered on an urgent basis to the office of the vendor's lawyer (alternatively, you can drive in and drop them off) (3) Renuka • I will act for Renuka on her purchase • I need to see Renuka to sign the contract and make sure she is comfortable with what is happening (4) Prime and Victor Zammit • Mark, the documents you requested are being sent to you in the mail • we will cease work in each of these matters unless and until you instruct us to undertake any further work for you (5) Red Flag Issue • I understand we are not to undertake any work on this issue (for now) - when you would like us to action this item, please let me know. (6) Deed between Mark, Lorraine and Renuka • I strongly suggest a document be prepared setting out what the terms of the 'deal' between you all are and that this be prepared and signed now • to do this, amongst other things I need to know: - is the $145,000 that Mark/Lorraine has paid and which Renuka will use, a gift or a loan? - If it is a loan, is there any security to be taken by Mark/Lorraine? - Is Mark still paying all legal fees or will Renuka contribute? - What is the deal about Mark/Lorraine having an option to purchase the property from Renuka? If an option is to be created, we need to document it properly as Renuka will own the property, will she pay for all mortgage costs, rates, land tax (if any) etc or will Mark/Lorraine be contributing to those costs? • although I will prepare the first draft of this document once I have relevant details from you, it comes with the caveat that I strongly recommend each party obtain independent legal advice about it because you can appreciate [a sentence that trails off but seems to mean "as you can appreciate" though Mr Gough could not say for certain - see T 145.28] (7) Refund of Stamp Duty • Please appreciate at this point in time I have only had a chance to locate the relevant OSR form and advise generally that an application can be made - it is a question for the OSR, however, on examining the matter whether they consider the criteria are met to warrant a refund of the stamp duty paid by Mark and Lorraine (8) Settlement Monies • On settlement, we need to pay approx. $1,320,000 to the vendor including additional interest • I will have left in my trust account after payment of fees approx.. $113,000 • Gerard, Renuka will need to budget for the stamp duty of $65,260 Gerard please call me when you have landed and have read this email as items will need to be attended to as a matter of critical urgency today NB: I remain concerned about the timing of the above but in the circumstances I understand you are doing all you can
Pausing here, in examination in chief when asked how he came to the understanding that the property would be held by Dr Mendonca for Mr and Mrs Tonna, Mr Gough said that this was the "natural progression of the terms of the arrangement" - in other words, his conclusion as to the effect of what was proposed (not necessarily the terms of what was discussed)
At 10.12am, Mr Gough emailed Mr Mendonca and Mr Tonna's email address (copied to Mr Leo) advising that he had just spoken with the vendor's lawyer and: • they have not heard about the Deed of Rescission option/new contract to Renuka through the agent or anyone else (except through our letters) and in any event remain not agreeable to it • they are checking if they have signatories available to sign a non-conforming Transfer - if that option is selected then Mark and Lorraine will not be able to apply for a refund of stamp duty and Renuka will still need to pay another lot of stamp duty (no later than [sic] on settlement) [emphasis per the original] Gerard, please urgently call me to discuss whether to submit the non-conforming Transfer which will name Renuka as the purchaser (Mark, this means your contract remains on foot and yourself and Lorraine are still liable for any defaults albeit Renuka becomes the purchaser named on the Transfer)
Mr Gough prepared a typed file note of two telephone conversations he had that day with the vendor's lawyer - the first, attempting to speak to someone at the office and stressing the urgency of the situation; the second (consistent with his subsequent email to Mr Mendonca) at approximately 10.10am that day to the following effect: … • Michael [Kerr, the vendor's solicitor,] advised that no-one had spoken to his client about a Deed of Rescission/new Contract and in any event his client was not agreeable to that. • I informed Michael that we would need to submit a non-conforming Transfer and enquired whether his client would have signatories around to sign it - Michael said he would check. • I did say to Michael that realistically the only way that we're going to settle on Friday is if we have that non-conforming Transfer signed and available. (And see T 47)
At 10.57am, Mr Gough emailed Mr Mendonca and Mr Tonna's email address (copied to Mr Leo) advising that the vendor "will agree to accept a non-conforming Transfer and this will be signed under power of attorney". He said that he urgently needed to speak to them before sending the document to the vendor's lawyer and that he had left a message for Mr Mendonca on Dr Mendonca's phone.
At 2.35pm, Mr Gough advised Sonal Singh that they have had to do a non-conforming transfer given the vendor's position.
At 12.23pm on 29 January 2014, Sonal Singh emailed Mr Mendonca to advise that credit had signed off on a loan amount of "$1080K" being "20K under the $1100K that was assessed on Friday" and requesting that he ensure he had the remaining funds ready to settle. Mr Mendonca's response at 11.42pm was that "[w]e accept A$20,000 less money. $A20,000 is available with [sic] us" and that "we are ready to come in anytime to sign any bank documents including mortgage documents, loan offers etc. to facilitate the preparation of bank cheques for settlement". (Note on 29 January 2014 ANZ advised Mr Mendonca that the loan to be provided by ANZ would be $1.08 million and Mr Mendonca accepted on behalf of Dr Mendonca the loan offer, which was $20,000 less than expected. Mr Mendonca directed Mr Tonna to pay the difference.)

The meeting with Mr Gough

There is no dispute that on 29 January 2014, there was a meeting attended by each of Mr and Mrs Tonna and Dr and Mr Mendonca with Mr Gough in his office. However, the accounts of this meeting vary. What was in evidence was a handwritten file note taken by Mr Gough (my transcription of the first page of which is as follows): ALL expenses for Mark + Lorraine Wed 29.1.14 Conf Mark, Lorraine, Gerard + Renuka * Mark makes all decisions relating to the pty * rental pty March 2013 March 2014 Rec 2014 March 2015 $145,000 + loan monies * deposit MUST repay * Mark will buy-back by 30.6.2015 * Mark pays * Mark + Lorraine + once loan repaid * unsecured it will be transferred back * mtg repayments to Mark + Lorraine * $50k under call option = used to repay mtg * settle loan when settle under contract * best endeavours to sell if Bhart doesn't buy or if Mark can get a loan
The second page of the file note contained the following calculation: $1,320,000 $1,100,000 $220,000 ($47,000) $73,000
Those figures seem to represent the following: the first ($1,320,000) being the purchase price ($1.45 million less the deposit of $145,000 plus an interest component - presumably for delayed completion); the second ($1.1 million) the amount to come from the ANZ facility; and the balance of $220,000 being the amount required for completion less the amount held in the Matthews Folbigg trust account of $47,000. If that is correct then the estimated shortfall for completion was $73,000.
Dr Mendonca was cross-examined as to her recollection of events on 29 January 2014. Her recollection of events may be summarised as follows: there was a discussion (either at the airport while on the Gold Coast or in the car from the airport in Sydney to their Northmead home) in which Mr Mendonca asked if she was interested in purchasing a property at Galston and told her he had an indicative pre-loan approval from ANZ (her bank) but not the amount of that approval; they landed at Sydney airport; she cannot recall if they had taken more than carry-on luggage or if they had to wait for luggage at the luggage carousel; they had parked at a Park and Ride facility and she thinks the family either caught a shuttle bus to pick up the car or Mr Mendonca collected the car and picked the family up at the airport; they travelled to the Northmead home and unpacked the car (which took about 5 minutes); Mr Mendonca showed her the advertising brochure for the Galston Property; they dropped the children at the child care facility (and had to arrange lunch there for the children as they were too late for lunch); then they drove to Matthews Folbigg's Parramatta office where there was a short meeting (not attended by Mr and Mrs Tonna); then they drove to the ANZ branch at Wentworthville where, without an appointment, she saw a bank officer who looked her details up on a screen and told her she could borrow around a million dollars; then they returned to Mr Gough's office for a meeting with Mr and Mrs Tonna. Dr Mendonca says that at some time in that chronology of events, they drove past the Galston Property so she could see the property although she accepted that she would not have been able to see inside the Galston Property on that occasion.

[33]

Mr Gough's evidence

At the hearing, not surprisingly given the fact that he had acted in the conveyancing transactions for all parties, Mr Gough gave evidence under compulsion having been served with a subpoena to give evidence issued by Mr and Mrs Tonna. His evidence in chief was thus called orally (and I was informed that it was without any prior consultation with the respective lawyers). He had been provided in advance by Mr and Mrs Tonna's solicitors with a selection of documents from the Matthews Folbigg files to review (MFI 1), including his 29 January 2014 file note (for Dr Mendonca emphasis is placed on the fact that he had not reviewed the entirety of the file). His evidence (consistent with the email communications in this period) was to the effect that, from 24 January 2014, he was working primarily with Mr Mendonca on the "solution" to the problem caused by Mr and Mrs Tonna's inability to obtain finance (see T 45.21-48). (I note that I was taken to no email communications between Mr Gough and Dr Mendonca during the period in question and from this I assume there were none.)
Mr Gough's evidence was that he had known Mr Mendonca for some time and that Mr Mendonca had referred clients to him "over the years", which was how he was first introduced to Mr and Mrs Tonna (T 44.45). His recollection was that he received instructions in relation to the purchase of the Galston Property essentially throughout by a combination of both Mr and Mrs Tonna and Mr Mendonca but that primarily it was via email with Mr Tonna and Mr Mendonca (T 45.11).
Mr Gough's recollection was that on 23 January 2014 Mr Mendonca "put forward a solution that Mrs [sic; Dr] Mendonca would become the purchaser, and buy the property" (T 45.48). His recollection of the proposals that had been put forward (such as the option that Welcome Homes might purchase the property, which "didn't work out"; and that there was a proposal for the first contract to be rescinded, which the vendor did not accept) was consistent with the documentary trail of emails (see T 45-46).
Taken in his evidence in chief to the email he had sent at 8.01am on 29 January 2014 and asked what had prompted him to suggest that a document be prepared setting out the terms of the "deal" between Mr and Mrs Tonna and Dr Mendonca, he said (T 47.32): Q. What prompted you to make that suggestion? A. That was my understanding of what the arrangement was going to be in terms of the solution that was proposed to the problem, was that Mrs Mendonca would buy the property. And because the, the, the - sorry let me go back? The solution was that Mrs [sic; Dr] Mendonca would buy the property. But the proposal was that effectively it would be held for Mr and Mrs Tonna. It would effectively be treated as their property. They'd pay all of the expenses associated with it. And the deed was to give effect to that arrangement. Q. How did you gain that understanding? A. There was 29 January - I'm just trying to recall. I know on 23 January, Mr Mendonca put that forward as a proposal. 24 January I saw Mr and Mrs Tonna to sign the deed extending the notice to complete. 25 January it was a Saturday where I set out the terms. Off the top of my head, it, it must've come up as a result of the first email I had from Mr Mendonca that Mrs [sic; Dr] Mendonca would buy the property. So it was just a natural progression of what the terms of that arrangement were.
The first occasion Mr Gough had met Dr Mendonca was on 29 January 2014 9see T 153). As to the 29 January 2014 meeting that was held at his office, he gave the following evidence (T 48.49): Q. Do you recall the substance and effect of what was said and by whom at that meeting? A. Well the meeting was a follow up of the fact that Mrs Mendonca [sic; Dr] was going to be the purchaser. It was a meeting whereby we discussed what the terms of the arrangement would be. Q. What was discussed about what the terms and the arrangement would be? A. I don't recall specifics in terms of what said what. But the essence of the agreement was, is that Mrs Mendonca would be the, the legal owner. However, it was to be held for Mr and Mrs Tonna, and that was just simply for the fact that, my understanding was that Mrs Mendonca could get finance. They could then complete the transaction with the vendor, and then eventually it would be transferred back to Mr and Mrs Tonna. And in fairness, they would also meet all of the expenses associated with the loan and the purchase and the legal fees. Q. Were matters to the effect that you've just stated discussed at the meeting? A. Yes. [my emphasis]
Mr Gough said that he made a file note "[o]f the big picture items" (T 50.8), as a matter of standard practice (T 50.13); and that it recorded "the essence of what we had discussed in terms of what the arrangement was to be" (T 50.16). He said that he was not able "off the top of [his] head" to recall the substantive effect of what was said at the meeting (T 50.21).
Evidence as to Mr Gough's understanding of the outcome of the discussion of the meeting (said for Mr and Mrs Tonna to be relevant to what he thought he had to do after the meeting and as to the nature of what was discussed at the meeting - see T 50.45) was only provisionally allowed by me at the time (over the objection of Counsel for Dr Mendonca). I consider it to be relevant in that it sets the context for what was done thereafter and I will therefore now treat that evidence as not subject to any provisional qualification (though I accept that Mr Gough's subjective understanding of the outcome of the discussion is not of itself evidence that an agreement was in fact reached at the meeting).
Questioned as to what was discussed at the meeting, there was the following exchange, in examination in chief (T 52.4): Q. Could you tell the Court what your recollection is of what was discussed at the meeting? A. So my recollection is that we discussed that Mrs Mendonca would be purchasing the property, that Mr and Mrs Tonna would pay all of the expenses associated with the property, and they would also effectively have control over the decision making in respect of how the property was utilised. There was also a discussion about, about how this would be dealt with in due course, and what I mean by that is, is that this couldn't go on forever in terms of what would be the ultimate outcome and when. So we discussed the fact that the Schofields property obviously was subject to an option and a what if the entity, I think it was Universal Group, didn't exercise that option in terms of how the property would be dealt with then. My recollection is that it was - one option was that the property be sold, which is the Schofields property. Another option is that Mr and Mrs Tonna would organise a loan, and that ultimately there was a sunset date of June 2015 off the top of my head.
Mr Gough had a recollection of the essence of what was discussed but did not remember who said what (T 52.40). At the end of the meeting his instructions, he said, were "to put a deed together that in essence was to give effect to the conversation that we'd had" (T 52.45). He did not recall any dispute or disagreement at the meeting in relation to anything that was discussed (T 52.50).
Taken through his file note, Mr Gough's recollection was that Mr and Mrs Tonna would be "footing all of the bills … paying everything related to the property and the … mortgage" and that "consistent with the fact that we'd be treated with - that Mr and Mrs Tonna would effectively own the property, that again "they'd pay all the expenses and they'd make all of the decisions" (T 53.23ff). His recollection was that the reference to "unsecured" in the file note related to the question as to how to treat the deposit that had been paid by Mr and Mrs Tonna "now that the property was to be legally owned by Mrs [sic; Dr] Mendonca" and that it was not to be treated as a secured loan (T 53.45). Mr Gough explained other aspects of the file note - namely that the further option fee that was to come in (for the Schofields Property) would be applied to the mortgage repayments and that ideally the loan that Dr Mendonca had taken out would settle at the same time as the sale of the Schofields Property and that 30 June 2015 was, he said, the date by which "the property needed to be transferred back to Mr and Mrs Tonna".
Mr Gough said that the proposed deed was "to record the agreement that was reached between Mr and Mrs Tonna and Mrs [sic; Dr] Mendonca … arising from the meeting" on 29 January 2014 (T 58.20). His recollection was that the deed drafted "primarily" by Mr Leo was never signed; that the question as to the transfer of the Galston Property "was paused a number of times" (effectively because the parties were not ready); and he said that it eventually got to the point where nothing was happening and he closed the file (see T 63.15).
In cross-examination, Mr Gough agreed that he did not have a clear recollection of events and that his recollection was largely what he had seen coming out of the documents he had reviewed and that he had not reviewed the entire file (see T 98). He confirmed that he had not spoken to or met Dr Mendonca prior to this transaction. There was the following exchange (at 140.4): Q. I understand that your evidence just now is that you would not have allowed the parties to leave the 29 January meeting without an agreement recorded in writing if there was such an agreement. Is that correct? A. They didn't take any documents away. The purpose of that meeting was to get the instructions so I could then prepare the agreement. Q. Prepare the agreement or prepare the proposal to allow them to go and take independent advice? A. Sorry, when I say "agreement" I mean the written agreement, the written document. Q. My question is prepared the agreement or prepared the proposal to allow them to go and get independent legal advice. A. It was to prepare a document that I understood based on the joint - or to effect - to give effect to what was discussed at the joint conference. Q. As a proposal to allow them to go and get independent legal advice, is that right? A. I believe so, correct. Q. It wasn't so that it was agreed, because if that was the point, what's the point of getting the advice? Do you understand that? A. Yes.
Mr Gough did not recall there being any dispute or disagreement in relation to anything that was discussed at the meeting.
Following the meeting, and in anticipation of settlement of the purchase of the Galston Property, on 29 January 2014 at 9:47pm Mr Gough sent an email to Mr Mendonca which stated: My colleague Eric [Leo] is busily working on the Deed between Renuka, Mark and Lorraine and I will review the draft tomorrow/Friday. If you could kindly follow up with Sonal at ANZ and make sure Renuka has signed everything they need for settlement
It is submitted by Mr and Mrs Tonna that the reference to the "Deed between Renuka, Mark and Lorraine" could only be a reference to restating the agreement to create the Trust in "fuller or more precise terms", but not different in effect to the terms of the Trust Agreement. (That, of course, presupposes that there was an agreement concluded at that 29 January 2014 meeting or by the conclusion of that 29 January 2014 meeting - which is not their pleaded case as to which see below.)
Mr Mendonca's response to that email, at 11.48pm that day, was that: I agree with all that you have written below. This assignment has been too tough for me and without your advice impossible for me. Mark is arranging A$20,000 to meet the ANZ shortfall per their latest e-mail blind copied by me to you for your information. I shall ensure Renuka signs the bank documents tommorrow [sic]. I expect to drop off Renuka's drivers licence at your office tommorrow [sic].
Matthews Folbigg agreed to act for Dr Mendonca on the conveyance. Mr Tonna, in the presence of Mr Mendonca, consulted Mrs Mackman and her son, Mr Mackman, licensed conveyancers, in relation to the conveyance and Trust Agreement. Mr and Mrs Tonna rely upon affidavits made on 22 November 2017 by Mr Mackman and 18 April 2018 by Mrs Mackman, respectively, as supporting the claim that the parties agreed to create a trust in respect of the Galston Property. For Mr and Mrs Tonna it is contended that Mr Mackman was not shaken in cross-examination on his evidence.
Mr Gough's tax invoice dated 12 February 2014 and issued to Mr and Mrs Tonna in relation to "Tonna purchase from Maha Budhi Company Pty Ltd - [Galston Property]" records a series of entries for 29 January 2014 (not all of the time entries being referable to work personally done by him): 121. 29/01/2014 Perusal of various emails re settlement, long report to Gerard and Mark, letter and email to vendor's solicitor, email ANZ, letter to Mark, settlement figures 122. 29/01/2014 Phone attendance with vendor's lawyer 123. 29/01/2014 Phone attendance with vendor's lawyer x 2, dictate file note and email summary to Gerard and Mark re options 124. 29/01/2014 Perusal of POA 125. 29/01/2014 Preparation of new Transfer and letter to vendor's lawyer re same 126. 29/01/2014 Conference with Mark, Lorraine, Gerard and Renuka to discuss various matters, prepare amended transfer, emails with ANZ re the structure of the Transfer and see colleague to prepare deed between the parties [my emphasis] 127. 29/01/2014 Time spent but not charged file note 128. 29/01/2014 Email Gerard re stamp duty 129. 29/01/2014 Drafting deed of agreement (start)
Relevantly, preparation of the deed started on 29 February 2014. Mr Gough's evidence was that "we had the meeting on the 29th and Eric [Leo] started to put the deed together and then the morning of the Thursday we ran into a problem with ANZ and so we put the deed preparation on pause" (T 116.45). At least so far as the ultimate draft of the deed reflects that which was commenced to be drafted on 29 February 2014, what seems to have been contemplated (at least by the lawyer drafting the deed - Mr Leo) seems to have been an arrangement for a put and call option to be granted in respect of the Galston Property - not a trust arrangement of the kind now pleaded).

[34]

Thursday, 30 January 2014

At 7.45am on 30 January 2014, Mr Gough emailed Mr Mendonca to ask that he drop off a bank cheque by 9am the following day "with the shortfall of $20,000". Mr Mendonca, at 8.57am, forwarded that email to Mr Tonna asking him "[p]lease urgently action".
By this time, it appears that Mr Mendonca was anxious to ensure settlement proceed on 31 January 2014 so that there was no risk that the Galston Property would be lost. By email to Sonal Singh at 8.53am (copied to Mr Gough and Mr Tonna's email address) Mr Mendonca attached a copy of an insurance policy and then made the following (quite extraordinary) proffer of an undertaking not simply from him, and perhaps his wife, but also from "our solicitors" as follows: We and our solicitors shall be happy to give a written undertaking to indemnify the bank for the entire amount of the loan if the bank finds any document incorrect. Please feel free to discuss this written undertaking issue with ANZ Legal or any person in ANZ. Trust giving this written undertaking shall keep the bank secure to meet settlement tommorrow so that we do not loose the property to another person after 31 January 2014 [sic].
It is highly unlikely the proffering of an undertaking from Matthews Folbigg (or Mr Gough) to that effect was done on instructions. It is difficult to conceive of any reason why Mr Gough or Matthews Folbigg would have given such an indemnity. There is nothing in the documents to support such a conclusion. It is, in my opinion, suggestive of a preparedness on Mr Mendonca's part to overstate the position or to make ambit promises without necessarily having a basis to do so.
At 9.01am, Mr Mendonca informed Sonal Singh that he was happy to give her the certificate of title of "my two properties with no debt (worth more than A$1,100,000.00) as security until ANZ completes the verification process but settles tomorrow". At 9.12am (copied amongst others to Mr Gough and to Mr Tonna's email address), Mr Mendonca then informed Sonal Singh that he had around US$110,000 in a term deposit with Citibank NA and that he was happy to assign it to ANZ (as collateral security) at any time that day when he handed over the two certificates of title until ANZ's verification process was completed; pressing for settlement at 2pm on 31 January 2014 "because the vendor and the vendor's agents are very difficult persons". At 9.32am, Mr Gough emailed Mr Mendonca and Sonal Singh (copied to Mr Tonna's email address and others) to the effect that anything that could be done to ensure settlement at 2pm the following day "is most preferable as there is no guarantee the vendor will agree to move the settlement date".
At 9.35am, Mr Mendonca emailed Sonal Singh (copied to Mr Gough and Mr Tonna's email address and others including Mr Leo): It is very fair to state as under; If any person in ANZ can successfully convince the difficult vendors grant an extention [sic] in time, please feel free to contact Sandra Ward on xxx or [the vendor's solicitor]. If the vendor or their agents or solicitors grant the extention in time then I am happy. If they deny the entention in time then I am very unhappy and sad. That is why I have offered COLLATERAL SECURITY of my home, block of land and US Dollars 110,000 term deposit (in Gerard's name) to be assigned in favour of ANZ Bank to enable the bank to complete their verification process.
Apparently not satisfied that this sufficiently emphasised the urgency of the situation or the strength of his desire not to lose the Galston Property, Mr Mendonca at 9.53am emailed Sonal Singh (copied to Mr Tonna's email address, Mr Gough and Mr Leo) including: If the WRITTEN extention [sic] in time is obtained by ANZ Bank from the vendor, we are all happy. If no extention [sic] in time can be obtained (which is the most likely scenario), then ANZ Bank has the following security: 1. New Property worth: A$1,450,000 with Title in the name of Renuka and ANZ as the lender 2. Our Northmead home - value is with ANZ Bank 3. Our block of land at Winston Hills which has a market value of around A$550,000 4. Cash term deposit with Citibank N.A. of around A$110,000 (Proof to be given to ANZ) Therefore, for $A$1,080,000.00 loan from ANZ Bank, the security in the possession of ANZ Bank shall be A$2,860,000. This should be good enough for ANZ Bank to trust their client, Renuka, and release the loan of A$1,080,000.00 if the extention [sic] in time is DENIED. All of the above is fair, reasonable and equitable to all parties including ANZ Bank that can peacefully verify all that is required to be verified with all the above security in the possession of ANZ Bank. THE BOTTOM LINE IS: WE DO NOT [in red] WISH TO LOOSE [sic] THIS GALSTON PROPERTY. [SIC] We appreciate all the help from any person in ANZ Bank with the necessary authority.
At 10.01am, Mr Mendonca sent a further email to Sonal Singh noting that Ms Ward was discussing with the vendor the possibility of having the contract in the name of Dr Mendonca directly. Mr Mendonca authorised Ms Ward to communicate with ANZ to help finalise the property purchase by Dr Mendonca. At 10.31am, Sonal Singh responded, having spoken to Ms Ward, and said that ANZ only needed two things: exchanged contracts of sale "with Renuka[']s name on it" and the original documents to be dropped to the city office from the Wentworthville branch.
At 11.07am, Mr Gough sent an email to Sonal Singh (copied to Mr Mendonca and Mr Tonna's email address) under the subject header "Renuka Mendonca - Contract of Sale - URGENT" as follows: Further to our emails and discussion this morning, just to step through the process: (1) Mark and Lorraine Tonna entered into a contract to purchase the [Galston Property] from Maha Budhi Company Pty Ltd • attached is a copy of the front page of that contract • you will see stamp duty has been paid in full on that contract (there is a stamp imprint on it) (2) under that contract, clause 4.3 allows Mark and Lorraine to nominate a different purchaser • attached is a copy of clause 4.3 of that contract (3) pursuant to that clause 4.3, Mark and Lorraine Tonna signed a direction and submitted a transfer nominating Renuka Maria Mendonca as the transferee • attached is a copy of the direction and the transfer with Renuka's name on it (4) the vendor has agreed to accept the transfer with Renuka's name on it and will be arranging for their client (under Power of Attorney) to sign that transfer tomorrow morning and will bring that transfer to settlement • attached is a copy of the power of attorney • attached is a copy of my letter to the vendor's lawyer submitting the direction and transfer We have previously asked the vendor to rescind the contract with Mark and Lorraine Tonna and enter into a new one directly with Renuka BUT that has been rejected, hence why we have had to rely upon our contractual right to have Renuka named as the transferee on the transfer Sonal I am happy to talk to anyone at ANZ to further explain the situation as needed NB: I have copied both Gerard and Mark and Lorraine Tonna in on this email - whatever else you need to verify/be comfortable with the above, let me know and I will organise it [I note that Mr Gough apparently saw no need to copy the email to Dr Mendonca]
At 11.16am, Mr Gough emailed Sonal Singh, copied to Mr Mendonca and Mr Tonna's email address, under the subject header "Renuka Mendonca - Contract of Sale - URGENT - option 2"; I was just speaking with Gerard and the ONLY option we have is to keep the current contract with Mark and Lorraine Tonna as purchaser BUT then have Mark and Lorraine enter into a sub-contract to sell to Renuka - thus it would work as follows: (1) Mark and Lorraine Tonna have entered into a contract to purchase the [Galston Property] from Maha Budhi Company Pty Ltd. (2) Mark and Lorraine Tonna now enter into a contract to sell the same property to Renuka. (3) thus, at settlement we have a simultaneous settlement whereby both contracts are completed at the same time (4) it would mean that you would have two Transfers to lodge at the land titles office, the first being from Maha Budhi Company Pty Ltd to Mark and Lorraine Tonna and the second from Mark and Lorraine to Renuka. Sonal I will have much to do if we went with this option 2 thus if this is the one that will get the deal over the line and settle tomorrow can you urgently let me know as I have to get paperwork ready and arrange signing
Mr Mendonca responded at 11.17am that Sonal "has agreed to your recommendation" (which I understand in the context of the email chains to have been the option 2 "recommendation").
At 11.50am, Mr Mendonca emailed Mr Gough in relation to option 2 that "[w]e expect to all be at your office at 12.30 PM today".
There is no dispute that, on 30 January 2014, Mr and Mrs Tonna met Dr Mendonca, Mr Mendonca and Mr Gough at the office of Matthews Folbigg and at that meeting Mr and Mrs Tonna and Dr Mendonca signed the contract for the sale of the Galston Property, prepared by Matthews Folbigg, in the presence of Mr Gough. The firm, Mathews Folbigg, is listed on the contract for sale as the solicitor for Mr and Mrs Tonna and for Dr Mendonca.
At [74]-[77] of his 16 October 2017 affidavit, Mr Tonna sets out his recollection of what was said at that meeting. At [88] of his 8 March 2018 affidavit, Mr Mendonca denies this account of the meeting and sets out his recollection of the meeting. At [39] and [40] of her 19 March 2018 affidavit, Dr Mendonca gives her version of what was said at the meeting. According to Dr Mendonca, Mr Gough said that Mr Tonna had agreed to "loan the balance of the purchase price required to Renuka".
Mr Gough's tax invoice records a series of entries for 30 January 2014 (again, not all of the time entries being necessarily referable to work done by him), the most relevant being: 130. 30/01/2014 Time spent preparing for settlement tomorrow including searches, emails to and from ANZ and Gerard, prepare amended directions and order on the agent, perusal and response to various emails throughout the day on an urgent basis, prepare new transfer and contracts, check revised settlement figures, conf with all to sign documents - do other acts
Mr Gough could not recall what he said during the meeting on 30 January 2014 (T 115.32); but he said that his usual practice was to explain contracts of sale to parties when they signed them (T 116.27). The contract for sale that was signed on 30 January 2014 between Mr and Mrs Tonna as vendor and Dr Mendonca as purchaser contained a special condition (cl 55) relating to the simultaneous settlement of the contract with settlement under the first contract.
There was some cross-examination as to various of the clauses in the second contract of sale (the contract with Dr Mendonca as vendor). A number of the special conditions appear simply to have been copied across from the first contract of sale and do not seem to be readily applicable to the situation as between Dr Mendonca and Mr and Mrs Tonna - so, for example, the warranty at cl 43.2 from the purchaser that the purchaser shall carry on a farming business after completion. Reliance is placed on this by Dr Mendonca as being inconsistent with the proposition that Mr Tonna was to pay all of the expenses in relation to the Galston Property (and Mr Gough accepted in cross-examination that there was an inconsistency - see T 139). (I do not see that anything of any moment turns on this - these being indemnity provisions referable to Dr Mendonca's use of the Galston Property after acquisition, which might potentially have had some application even on Mr Tonna's version of the arrangements and Mr Gough's explanation was that he just copied across conditions from the original contract - see T 138.) Not all of the special conditions were, however, retained in the second contract (see deletion of special condition 33 as to investment of deposit and amendment to special condition 34 to make time of the essence for the completion date). Mr Gough was unable in the witness box to reconcile the two contracts in this regards (see T 145-146).
Later, on 30 January 2014, Dr Mendonca says she attended on ANZ and signed the loan and mortgage documents. There is no dispute that Mr Mendonca delivered the mortgage documents to SAI Global in readiness for settlement.
On 30 January 2014, Mr Mendonca sent an email to Mr Gough (copied to Mr Leo and Mr Tonna's email address) at 9:47pm. The email states: Please find executed mortgage documents attached for each of you. Renuka is happy to sign whenever ready: 1. The Deed of Agreement and 2. An undated contract of sale from Renuka Maria Mendonca to Mark and Lorraine Tonna which can be dated in the future whenever Mark obtains his money from a lender or from the sale of his property, which [sic] occurs first as agreed. Sai Global gave me 1800 765 269 as the settlement booking telephone number. ANZ Bank gave 1800 603 361 as the number for settlement booking. Please feel free to e-mail me or call me on [xxx] if you require anything tomorrow.
Mr and Mrs Tonna submit that the reference to "Deed of Agreement" is a reference to Matthews Folbigg documenting the terms of the Trust Agreement in accordance with the agreement that had been reached between the parties and this confirms the agreement reached.
It is contended for Mr and Mrs Tonna that the above dealings and correspondence, when viewed as a whole and objectively from the point of view of reasonable persons on both sides, establish that a concluded bargain was reached by 30 January 2014.
In particular, for Mr and Mrs Tonna in closing submissions it is submitted that the evidence establishes that, by the time the parties signed the contract for the sale of the Galston Property on 30 January 2014, an agreement had been reached that Dr Mendonca would purchase the Galston Property and hold it on trust for Mr and Mrs Tonna. The essential terms of the alleged Agreement were that: first, Dr Mendonca would obtain finance from ANZ to complete the purchase of the Galston Property; second, Mr and Mrs Tonna would pay the balance of the purchase price owing after the loan advance from ANZ, all stamp duty, conveyancing costs and interest payable on the loan advance from ANZ and pay all other costs associated with the purchase and holding of the Galston Property; third, Mr and Mrs Tonna would complete the purchase of the Galston Property and simultaneously transfer the Galston Property to Dr Mendonca; fourth, Dr Mendonca would transfer the Galston Property back to Mr and Mrs Tonna when they had funds to pay out the loan from ANZ, which were to come from completion of a sale of the Schofields Property (Trust Agreement).
A formal letter of offer was issued by ANZ dated 30 January 2014 to Dr Mendonca. The specified repayments of principal and interest on a fortnightly basis were of $2,614.49 each (to which Mr and Mrs Tonna point as significant in relation to the "standing instructions" given by Mr Mendonca to Mr Tonna - see below).

[35]

Friday, 31 January 2014

On Friday, 31 January 2014, the purchase and sale of the Galston Property was completed (first the sale to Mr and Mrs Tonna and then the sale from Mr and Mrs Tonna to Dr Mendonca) and the following dealings were provided to or produced by ANZ in relation to the Galston Property, which were subsequently registered: a transfer from Maha Budhi Co to Mr and Mrs Tonna; a transfer from Mr and Mrs Tonna to Dr Mendonca; and a mortgage from Dr Mendonca to ANZ. The purchase price of the Galston Property, stamp duty and conveyancing costs were paid as follows: the deposit of $145,000 by Mr and Mrs Tonna; part balance of purchase price ($1.08 million) by ANZ; remaining balance of purchase price ($238,792.89) by Mr and Mrs Tonna; stamp duty on the contract for sale with Maha Budhi Co ($65,240) by Mr and Mrs Tonna; stamp duty on the contract for sale with Dr Mendonca ($65,240) by Mr and Mrs Tonna; solicitors' costs of Matthews Folbigg ($24,353.22) by Mr and Mrs Tonna; vendor's legal costs regarding the extension of the completion date ($1,918.40) by Mr and Mrs Tonna; Council rates ($1,118.80) by Mr and Mrs Tonna; Sydney water rates ($88.18) by Mr and Mrs Tonna; stamp duty on transfers ($10.00) by Mr and Mrs Tonna.
On 31 January 2014, at 2:29pm, Mr Gough sent an email to Mr Mendonca and Mr Tonna's email address, stating: Congratulations everyone settlement has just occurred!!! ... next week we will tackle the Deed and of course we still have the Prime and red flag issues to deal with but for now enjoy this moment[.]
It is contended on behalf of Mr and Mrs Tonna that: the reference to "the Deed" in the above email is a reference to Matthews Folbigg documenting the terms of the Trust Agreement in accordance with the agreement that had been reached between the parties; the reference to the "Prime" issue was a reference to a caveat Prime Capital had lodged on the title to the Schofields Property; and the reference to the "Red flag" issue was a reference to an adverse record of credit worthiness due to an unrelated identity fraud perpetrated against Mr Tonna.
On 31 January 2014, at 3:10pm, Mr Mendonca responded by email, stating, among other things: I agree with all that you have written below. Renuka is ready whenever you are ready. I would like to join Mark and his family to thank Eric for all his routine hard work, to thank Terry for his intelligent advice with the Prime horror issues and to my wife for her cooperation. My wife was very impressed with Stewart's professionalism and knowledge. … … Mark and his family would be always grateful to each of you.
Dr Mendonca alleges that on 30 January 2014, Mr Tonna came to her home (see her 19 March 2018 affidavit at [36]). She says that Mr Mendonca was present throughout the entire conversation which took place in the rumpus room. Dr Mendonca says that Mr Tonna and agreed to loan her "the balance required at the same rate of interest to be charged by ANZ". Mr Tonna denies meeting Dr Mendonca at her home on 30 or 31 January 2014.
Dr Mendonca says that Mr Tonna returned to her home again on 31 January 2014 and agreed to rent the Galston Property from her for $2,614.49 per fortnight (at [51]). She says that Mr Mendonca was present when Mr Tonna arrived. Mr Tonna denies the meeting. The claim that Mr Tonna offered to rent the Galston Property from Dr Mendonca is said by Mr and Mrs Tonna to be implausible in circumstances where the Trust Agreement required Mr and Mrs Tonna to meet the mortgage repayments and contribute a substantial part of the purchase price (that, of course, presupposes that there was a trust agreement). It is also said to be contrary to Mr Tonna subsequently renting out the Galston Property at a later date.
At [51] of her 19 March 2018 affidavit , Dr Mendonca says she recalls that she had a conversation with Mr Tonna to the following effect: Mark said: I came to thank you, Renuka, for buying the property at short notice and saving Lorraine and I a substantial loss of money. Would you be willing to lease the Galston property to my wife and I? How much money do you want for the lease of the whole property? I said: Yes, that fine. I want $2,619.49 rent each fortnight for me to make my loan repayments. Are you able to pick up the keys from the real estate agent? Mark said: Yes I'll do that. I agree to pay the rent you want and I will get Gerard to type up a tenancy agreement.
Mr Tonna denies the meeting and conversation took place. (Mr and Mrs Tonna argue that this evidence is implausible, not corroborated by contemporaneous documents and contrary to Mr Mendonca's standing instructions to Mr Tonna to make repayments due under the loan agreement between ANZ and Dr Mendonca - as to which, see below.)
Dr Mendonca did not call Mr Mendonca to give evidence to corroborate this claim and the unexplained failure of Dr Mendonca to call her husband is said to provide grounds in Mr and Mrs Tonna's submission for inferring that the uncalled evidence would not have assisted Dr Mendonca's case.

[37]

17 February 2014 - residential tenancy agreement

One of the more problematic factual issues in the case relates to the signing of a residential tenancy agreement document (i.e., the Tenancy Agreement).
Dr Mendonca says that, on or around 17 February 2014, Mr Tonna attended their home and signed a Residential Tenancy Agreement. The document does not identify the premises to be rented. Mr Tonna denies that he signed the document.
In evidence there were two copies of the front page of a residential tenancy agreement between the named parties (Renuka Mendonca as landlord and Mark Tonna as tenant). On neither is the address of the premises stated. One version has Renuka's mobile phone number on it. The second version of the front page has Dr Mendonca's home telephone number instead of a mobile number; and postcodes have been added to the addresses on the document. The rent is specified at $2,614.49 per fortnight. The term of the agreement is not specified but is stated as starting on 17 February 2014. Mr Mendonca appears to have signed as witness to each of Dr Mendonca and Mr Tonna's signatures.
Expert evidence from signature experts was served by the parties in relation to that document. Mr Dubedat, retained as the expert by Mr Tonna, says the signature of Mr Tonna on the document is most likely to be genuine but that the document itself is a composite. In particular, he says that the first page of the document is printed by a different printer and is printed on different paper than the remaining pages. Mr Dubedat opines, from an analysis of the staple mark, that the front page had been attached at a later time. Ms Novotny, retained as the expert for Dr Mendonca, says the signature of Mr Tonna on the document is most likely to be genuine but does not give an opinion as to whether the document is genuine and suggests, at [27] of her report, that there is further scope for examination of the document as a whole.
In reply to Mr Dubedat's findings, Dr Mendonca produced a further version of the first page of the document. Mr Dubedat has examined that document and opines that the subsequently produced front page also appears to have been printed on different paper and may have been created at a different time than the other pages of the document.
Dr Mendonca was cross-examined about how she kept the Tenancy Agreement after it was signed. She said the Tenancy Agreement was prepared by Mr Mendonca. For Mr and Mrs Tonna, it is said that Dr Mendonca's evidence did not shed light on the irregularities identified by Mr Dubedat or how two different front pages came to be attached to pages 2 to 11 of the Tenancy Agreement.

[38]

Subsequent conduct

Mr and Mrs Tonna say that the parties' subsequent conduct is consistent with entry into the Trust Agreement (and that they performed their obligations under the Trust Agreement in that regard). They point to the following: payment by them of part of the purchase price of the Galston Property (in addition to the deposit) and stamp duty on the transfer of the Galston Property to Dr Mendonca; payment by them of all the costs of Matthews Folbigg in relation to the conveyance and the costs of the registration of the transfer and mortgage to ANZ; the direction by Mr Mendonca to Mr Tonna to give "STANDING INSTRUCTIONS to Bank of Queensland to transfer A$5228.98 (A$ 2,614.49 x 2 per fortnight) on the 15th day of each month" from Mr and Mrs Tonna's account with Bank of Queensland to Dr Mendonca's account with ANZ, being the repayments due under the loan agreement between ANZ and Dr Mendonca; the making by Mr and Mrs Tonna of the repayments due under the loan agreement between ANZ and Dr Mendonca from February 2014 until May 2015; payment by them of insurance on the policy taken out in Dr Mendonca's name; and the fact that they took possession of the Galston Property, carried out improvements to the Galston Property and subsequently rented the Galston Property.
On 16 December 2013, Mr Mendonca recommended that Mr and Mrs Tonna obtain Income Protection Policy to cover Accident and Sickness on a monthly basis for income of around A$100,000 and said that "upon renting out the new home in Galston, you must arrange for Landlord Insurance on a MONTHLY BASIS from GIO or QBE Insurance".
From 15 February 2014 to 16 May 2015, Mr and Mrs Tonna paid to ANZ the monthly repayments of principal and interest due under the loan agreement between ANZ and Dr Mendonca. It is said for Mr and Mrs Tonna that the claim by Dr Mendonca that the monthly payments made by Mr and Mrs Tonna from February 2014 to May 2015 were payments of rent as opposed to loan repayments due on her loan from ANZ is contradicted by subsequent emails from Mr Mendonca to Mr Gough stating that Mr Tonna has made all the mortgage repayments.
From 18 February 2014 to 1 August 2014, Mrs Tonna paid the monthly premium due under a GIO Classic Home Insurance Policy obtained for Dr Mendonca. From 2 October 2014, Mr and Mrs Tonna paid the monthly premium due under a GIO Classic Home Insurance Policy obtained for Mr Tonna.

[39]

Draft Put and Call Option Deed in relation to the Galston Property

On 21 February 2014, at 9:09am, Mr Leo sent an email to Mr Mendonca and Mr Tonna attaching a draft Put and Call Option Deed and requesting further information. In that email, it is said: • When (realistically) is it expected that Mark / Lorraine will be in a position to purchase the property? This timeframe will invariably influence the terminating date under the call option and the commencing and terminating date under the put option - please also give consideration to these dates • What total amount have already been paid by Mark / Lorraine towards the property? (we just need to clarify this aspect) …
Mr Mendonca responded at 10.12am that day, providing his reply in red on the original email. To the above questions, he responded: • … Settlement Negotiations are in progress with Bank of Queensland. If they settle the matter, Mark could get their loan anytime between 18 March 2014 to 31 July 2014. If Mark does not then Mark has to rely on removal of the Red Flag by Liberty / Secure Funding to allow Pepper Loans / Homes Loans to approve his loan. Unable to estimate how long this process shall take. It would be reasonable to estimate that Mark may obtain the A$5 million from Bhart quicker than removing the Red Flag. That is why we all agreed in the presence of Stewart that 30 June 2015 is the deadline for Mark to obtain his loan. • … Mark has paid all the expenses including the monthly principal and interest. On paper Renuka is on title for ownership and debt.
It is noted by Mr and Mrs Tonna that the response from Mr Mendonca (in red) did not refer to the rental agreement relied upon by Dr Mendonca in these proceedings. Mr and Mrs Tonna further argue that the response from Mr Mendonca reflects that Dr Mendonca was holding the property as bare trustee. They accept that the draft document does not reflect the Trust Agreement that had been reached between Dr Mendonca and Mr and Mrs Tonna.
Mr Leo sought a meeting "with all the interested parties to discuss the documents in person" (see the email on 21 February 2014 at 10.58am). Mr Mendonca responded that Mr Tonna would prefer 25 February 2014 at 4pm, and that he would not be in attendance but that Mr Tonna and Mrs Tonna would pick up Dr Mendonca for the meeting.
On 24 February 2014 at 2.16pm, Mr Mendonca sent Mr Leo an email regarding the payments made by Mr and Mrs Tonna in respect of the Galston Property, stating: Dear Eric, Thank You for your telephone call. Mark has given me the following numbers: Renuka's Debt with ANZ: $1,080,000 Belinda (Mark's daughter): A$40,000 2 Stamp duties: A$ 130,000 Legal fees: A$24,500 Lorraine's Mum: A$173,000 Mark's Mum: A$20,000 Mark's Mum: $ A320,000 Put and Call option dates can be both 30 June 2015 to be safe.
It is not disputed that on 25 February 2014 Mr and Mrs Tonna and Dr Mendonca attended a meeting at the office of Matthews Folbigg with Mr Leo and Mr Gough. Mr Tonna says that Mr Mendonca arrived later at the meeting.
It is also not disputed that, at the above meeting, Mr and Mrs Tonna and Dr Mendonca signed the execution page for a Put and Call Option Deed (notwithstanding that the terms of the Put and Call Option Deed were not agreed). An execution page for a deed bearing a footer "PUT & CALL OPTION" as between Mr and Mrs Tonna and Dr Mendonca was signed by Mr and Mrs Tonna and witnessed by Mr Leo. A counterpart execution page was signed by Dr Mendonca (and witnessed by Mr Leo). (Mr Gough did not recall anything about the circumstances in which those execution pages were signed.)
According to Dr Mendonca, she signed the execution page at the request of Mr Leo who she understood was acting for Mr and Mrs Tonna. (Mr and Mrs Tonna say this is another instance of Dr Mendonca signing documents in relation to the Galston Property as requested with little thought. Whether or not that be the case, it seems to be a feature of this case that one or more of the parties have been prepared to sign incomplete documents from time to time (which is relevant when I come to consider the significance of the signed residential tenancy agreement document).)
There is a dispute about what was said at the 25 February 2014 meeting.
Mr Gough's handwritten file note of the meeting, as I have transcribed it, is as follows: • we not instr to look at "red flag issue" / prime issue as at yet. • 18 march - meeting with BOQ re the issue (coming from Qld) • Subj to what Gerard says earliest date 18 March 2014 latest 30 June 2015 • $ each mth - $5,228 (int only?) • check stamp duty (check legals) • time for us to follow up Bank after 4/3/14. • OK to proceed on basis of old special conditions (MT/RM). [underlinings per original]
Mr Gough prepared some handwritten notes as to the draft deed (on a file note with the time 3.30pm) but they do not appear to have been made in the conference.
A tax invoice was subsequently issued to Mr and Mrs Tonna regarding the legal fees in relation to the time spent drafting the option deed (invoice dated 19 March 2014), which includes an entry for the 25 February 2014 "conference with Renuka, Mark and Lorraine re call option".

[43]

Exercise of call option over Schofields Property - December 2014

On 3 December 2014, the call option granted by Mr and Mrs Tonna over the Schofields Property was exercised and on 3 December 2014 the deposit in the sum of $425,000 was released to Mr and Mrs Tonna. Upon completion of the contract for the sale of the Schofields Property, Mr and Mrs Tonna say they were in a position to pay out all liabilities associated with moneys loan by ANZ to purchase the Galston Property, obtain a discharge of the ANZ mortgage and have the Galston Property transferred back to them pursuant to the Trust Agreement.
On 15 December 2014, Mr and Mrs Tonna met Mr Gough and Ms Renay McKenzie (Ms McKenzie) at Matthews Folbigg in relation to obtaining a discharge of the mortgage to the Bank of Queensland registered on the title to the Schofields Property.
On 17 December 2014, at 2.49pm, Ms McKenzie (from Matthews Folbigg) sent an email to Mr Tonna (copied to Mr Mendonca and Mr Gough) setting out information required in order to complete the discharge documents required by the Bank of Queensland in relation the Schofields Property: Mark & Lorraine, Thank you for attending our office on Monday to sign the Bank of Queensland discharge authority. As discussed, I require the following information from you in order to complete the discharge authority form so that we can send it off to the Bank of Queensland to enable them to commence preparation of the discharge documents for settlement: 1. Loan account number. 2. The details of your bank account so that any surplus funds can be banked into it following settlement. 3. Your address following settlement, if know. I look forward to hearing from you.
On 17 December 2014 at 9.29pm, Mr Mendonca sent an email to Ms McKenzie and Mr Tonna's email address (copied to Mr Gough), responding to Ms McKenzie's email and stating: The ANZ Bank Loan would also have to be discharged for transfer of Galston property from Renuka to Mark as agreed. The contract of sale between Renuka and Mark must contain the clauses identical to the clause in the vendors contract specifying that Mark Tonna and Lorraine Tonna would be responsible for any state and federal taxes should they arise in the future.
Mr Gough then sent an email to Mr Mendonca, Ms McKenzie and Mr Tonna's email address, on 18 December 2014 at 9.01pm: Thanks Gerard With the [Galston Property], we need to have the contract completed with Renuka as vendor and Mark/Lorraine (or their nominated entity) as the purchaser - that is easy enough to prepare (but of course there are usual steps and processes we need to comply with) Am I right that the intention is to settle that transfer at the same time as the settlement of Mark and Lorraine's Schofields sale? NB: obviously stamp duty will need to be paid
Mr Mendonca responded to Mr Gough, Ms McKenzie and Mr Tonna on 18 December 2014 at 10.58pm: Dear Stewart, Thank You for your e-mail. You are correct as always. Kind Regards, Gerard
It is submitted by Mr and Mrs Tonna that these emails are consistent with the parties' common intention being that the Galston Property was being held on trust on the terms of the Trust Agreement.

[45]

January 2015

At 7.26am on 6 January 2015, Mr Gough emailed Mr Mendonca and Mr Tonna's email address (copied to Ms McKenzie), requesting information as to certain matters regarding the sale and purchase of the Galston Property, including that the purchaser would be Mr and Mrs Tonna (and would hold the Galston Property as joint tenants); that the purchase price would be $1,450,000; that there would be no adjustments required to be made on settlement for items such as water rates and Council rates "given, as I understand it, Mark and Lorraine have been paying all of the costs for the property to date (and will continue to do so until settlement)".
On 6 January 2015, Mr Mendonca emailed Mr Gough, Ms McKenzie and Mr Tonna's email address at 11.41pm "Re: Professional Fees for transfer of property from Renuka to Mark", responding to the above, including: I had a verbal discussion with Mark today. Renuka is happy for you to represent her in respect of the transfer of property from Renuka to Mark. Mark is happy for his conveyancer to represent him in respect of the transfer of property from Renuka to Mark. Mark is happy for you to continue to represent him in respect of his Schofields property. I shall respond to your e-mail in detail mid-next week for certain. Meanwhile, since Mark is paying for Renuka's legal fees could you please let us know the professional feesfor [sic] transfer of property from Renuka to Mark for Mark's approval. [emphasis as per original]
On 6 January 2015, Mr Gough sent an email to Mr Mendonca and Mr Tonna copied to Ms McKenzie with the subject sale and purchase of [the Galston Property]". The email set out various matters in relation to the re-conveyance of the Galston Property.
Mr Mendonca responded by email to Mr Gough, copied to Ms McKenzie, sent 10 January 2015 which stated: Renuka has signed this revised letter of engagement and enclosed a cheque for A$400 which I delivered to your office. Please commence work in this regard AFTER Mark receives his money into your trust account and gives us instructions to use his money to pay out ANZ Bank loan. The response to the issues in your e-mail dated 6 January 2015 at 7.25 AM are as follows: 1. The purchaser will be Mark Tonna only (NOT Mark Tonna and Lorraine Tonna) ... ... 4. Yes, Mark has been paying all the mortgage payments to-date. … [my emphasis]
No copy of any such retainer agreement referred to in the above email was produced (T 649). Mr and Mrs Tonna say that this demonstrates a common intention that the Galston Property was held on trust for Mr and Mrs Tonna and would be transferred back to them as agreed.

[47]

Completion of sale of the Schofields Property

On 17 April 2015, the sale of the Schofields Property completed and Mr and Mrs Tonna received the balance of the proceeds of sale. The net proceeds of sale were approximately $3,886,889.48. Those sale proceeds were paid into the trust account of Matthews Folbigg after which they were paid to Mr Tonna. Mr Tonna's evidence is that since April 2015, he and his wife have been ready willing and able to complete the transfer of the Galston Property in accordance with what he claims to be the Trust Agreement.
On 20 April 2015, Mr Gough sent an email to Mr Mendonca and Mr Tonna confirming that the sale of the Schofields Property had settled and stating: Now the question becomes whether you wish to proceed with transferring the Galston property from Renuka to Mark yet? Kindly let me know
Mr Gough's oral evidence was that he sent this email to Mr Mendonca and Mr Tonna as "just a natural part of the process, in terms of this property needed to be sold. So that Mr and Mrs Tonna then had the funds to purchase the Galston property" (T 62.23). His explanation of the above email was that "[i]t had been delayed several times previously, and so now that we had reached a milestone event, which was the sale of the … Schofields property, it made sense that we now completed the remaining steps" (T 62.30). He says he opened a file for Dr Mendonca in relation to the (proposed) sale of the Galston Property.
Mr Tonna thereafter requested Mr Mendonca to arrange for the Galston Property to be re-conveyed to him and Mrs Tonna. It is said that, at the time, Mr Mendonca was involved in litigation against his former employer. Mr Tonna says that in or about April 2015 he had a discussion with Mr Mendonca to the following effect (see [128] of his 16 October 2017 affidavit): Me: Gerard, the money has come in for Schofields, let's get the mortgage paid out Galston put back in my name. Gerard: I told you, all my asset and all Renuka's assets have all been frozen. That includes all our bank accounts and since Renuka is on title for Galston, that is included too.
That evidence is corroborated by Mr Tony Weller, a bank manager at Bendigo Bank at North Richmond, with whom Mr Tonna discussed the alleged freezing order that he said Mr Mendonca had told him was over his assets at the time Mr Tonna was seeking a transfer back of the Galston Property.

[49]

Summary of the issues in both proceedings

There is some disparity in the identification by the parties of the issues for determination in the respective proceedings but, not surprisingly, a large degree of overlap.
Broadly, the issues in the Tonna proceedings can be distilled as being: 1. whether there was an agency relationship between Mr Mendonca and Dr Mendonca; 2. whether there was a binding agreement pursuant to which Dr Mendonca was to hold the Galston Property, after its acquisition by her, for the benefit of Mr and Mrs Tonna (and to transfer the Galston Property back to them at their direction - at least if the direction was before 30 June 2015) giving rise to an express (or constructive) trust (and whether this binding agreement, if established, could be specifically performed); 3. in the alternative, whether the Galston Property is held by Dr Mendonca on a resulting trust for herself and Mr and Mrs Tonna in shares proportionate to their contribution to the purchase price (and, if so, how those contributions are to be determined); 4. whether, if Dr Mendonca holds the Galston Property as trustee, is she in breach of her duties as trustee; 5. the consequences, in terms of any relief to be granted against Dr Mendonca, following on from the conclusions on the above issues; 6. whether the alternative unjust enrichment claim is made good? 7. as against Mr Mendonca, and Business Services, did he or it breach the fiduciary duty (or, to the extent this is still pressed, a duty of care owed otherwise than as a fiduciary - see [65A] of the further amended statement of claim) and guarantees owed under the Australian Consumer Law; 8. the consequences, in terms of any relief against Mr Mendonca, of the conclusions on the above issues.
In the Mendonca proceedings, the issues raised are more limited. By the time of the hearing they were confined in effect as to whether there is a binding residential tenancy agreement on the terms of the document dated 17 February 2014 and, if so, what relief should be granted in relation to the unpaid rent and unauthorised building works (i.e., demolition of a shed and construction of a new shed on the premises together with a small claim for removal of part of a boundary wall). Those issues are identified by Dr Mendonca as follows: Issue 1: Did Mr Tonna enter into the Tenancy Agreement, orally or in writing, with Dr Mendonca and does his entry onto and occupation of the Property arise on the basis that he was a beneficial owner? Issue 8: Should there be a setoff payable by Dr Mendonca to Mr Tonna for the increase in the value of the Property by the improvements undertaken by him. Issue 9: Quantum.
As a preliminary issue, Mr and Mrs Tonna raise the question whether the "unexplained failure" of Dr Mendonca to call Mr Mendonca as a witness gives rise to an inference that his evidence would not have assisted Dr Mendonca. I propose to deal with that issue first in the context of considering the evidence of the witnesses as a whole.

[50]

Evidence of the lay witnesses

Each of Mr and Mrs Tonna gave evidence and was cross-examined. Mr and Mrs Tonna also adduced evidence from Ms Sandra Ward, the real estate agent acting on the sale transaction and subsequently the leasing of the Galston Property, and Mrs Mackman and Mr Mackman (the licensed conveyancers), all of whom were cross-examined. As already adverted to, Mr Gough was subpoenaed by Mr and Mrs Tonna to give evidence. Mr Leo, who, I was informed, is now working interstate, was not called (and no adverse inference is sought to be drawn from this).
Mr and Mrs Tonna also read affidavits from Mr Weller (the bank manager from Bendigo Bank), to corroborate the evidence as to Mr Mendonca's alleged misrepresentation in respect of the freezing of his assets, and Mr Nielsen (the tenant at the Galston Property) in respect of receipt of the notice of termination of the tenancy. The affidavit of Mr Weller was provisionally read, subject to relevance (see T 176/177) and I indicated that I would rule on this in my final reasons. Its relevance is moot given the absence of any claim based on the alleged misrepresentation by Mr Mendonca as to the freezing of his assets (said to have been the excuse proffered by him for the transfer back of the Galston Property not proceeding). However, to the extent that issues are raised as to the credibility of Mr Tonna's evidence in general it may have marginal relevance and I will allow it. Neither Mr Weller nor Mr Nielsen was required for cross-examination.
It is said for Dr Mendonca that the affidavit of Mr Weller does little to support Mr and Mrs Tonna's case. In short, according to that affidavit, Mr Tonna told Mr Weller that he had been to a meeting during which the solicitor "suggested" that Dr Mendonca get a loan and when the Schofields Property settled Mr and Mrs Tonna would be able to pay out the loan and have the Galston Property transferred back to them. It is noted that Mr Weller does not say that he was told by Mr Tonna that an agreement had been reached with Dr Mendonca.
Mr Nielsen was not required for cross-examination based on an agreed position as to his evidence. The affidavit of Mr Nielsen deposes that: Mr and Mrs Tonna carried out various works in maintaining the Galston Property over a period of time; he received correspondence from Mr Mendonca which he showed to Mr Tonna in early April 2016, following which he had a telephone call with Mr Mendonca during which Mr Tonna listened and Mr Mendonca asserted that he was the owner of the Galston Property, he wanted a lease with Mr Nielsen and somebody from LJ Hooker would be calling Mr Nielsen (at [25]); Dr Mendonca arrived on one occasion with the NSW Police and Mr Mendonca to see if she could obtain access to the Galston Property (at [28]); and, in May 2016, Dr Mendonca commenced proceedings in NCAT seeking to evict Mr Nielsen from the home located on the Galston Property.
The agreed position as to Mr Nielsen's evidence was that he could not recall whether he received the first Notice to Terminate Tenancy Agreement dated 6 April 2016; however, if he had, he would have provided it to Mr Tonna.
Dr Mendonca gave evidence and was cross-examined. No affidavit evidence was read by Mr Mendonca (or Business Services) in the proceedings; and Dr Mendonca did not, when that decision was finally made known at the close of Dr Mendonca's case, seek to re-open to call evidence from her husband in her own case.

[51]

Evidence of the expert witnesses

Expert handwriting evidence was adduced from Mr Stephen Dubedat (the expert retained by Dr Mendonca) and Ms Michelle Novotny (the expert retained by Mr and Mrs Tonna). Only Mr Dubedat attended for cross-examination (Ms Novotny being unable to attend for cross-examination). Dr Mendonca accepts that he presented his evidence in a truthful manner. I found him to be an objective and balanced witness; and his explanations to be helpful.
Ms Novotny gave evidence that her observations provide very strong support for the signature of Mr Tonna on the Tenancy Agreement to be his and no support for the position that the signature on the Tenancy Agreement was written by someone other than him (see Ms Novotny's Report dated 22 July 2016 at [24]). There is no reason to doubt her conclusion in this regard although, as I explain later, it does not answer the question as to what in fact was the document to which Mr Tonna's signature was actually appended at the time (and in what circumstances that occurred).
Mr and Mrs Tonna also adduced evidence of a building consultant (Mr Christopher Palumbo) (going to the shed that was erected on the Galston Property) and a valuation expert (Mr David Bird) (going to the current market value of the Galston Property (at October 2018) and, in particular, placing an increased value of the Galston Property as a result of the expenditure on improvements carried out by Mr and Mrs Tonna).
Dr Mendonca submits (and I accept) that the valuation report dated 26 October 2018 of Mr Bird was not ultimately relevant to the case brought against Dr Mendonca following rulings of admissibility by the court. (I do not here revisit the reasons for those rulings - which will be apparent from the transcript - other than to note that I was not persuaded that the reasoning process for his conclusion as to increased value referable to the improvements had been exposed in the report and hence I considered that I would not be in a position to test the opinion he had there set out.)
Lastly, Dr Mendonca also obtained a report from a building consultant expert, Mr David Hall. It was contemplated that during the hearing Mr Hall and Mr Bird would give their expert evidence concurrently. However, the parties reached agreement during the hearing as to the quantum of damages were I to find that the alterations in relation to the new machinery shed should take place or it should sound in damages (see T 364-365) (namely, costs for the demolition of the old shed and the installation of the new shed totalling A$64, 771.93 and for the demolition of a section of the boundary wall amounting to A$7,529.66. As a result, Mr Hall's affidavit was not read and Mr Bird was not required for cross-examination.

[52]

Jones v Dunkel inference

Turning first to the absence of any evidence from Mr Mendonca in the proceedings, reference is made by Mr and Mrs Tonna to the consideration of the principles applicable to the drawing of a Jones v Dunkel inference such an inference by McColl JA in RHG Mortgage Ltd v Rosario lanni [2015] NSWCA 56 (at [75]-[76]), where her Honour said: The rule in Jones v Dunkel is that the "unexplained failure by a party ... to call witnesses ... may in appropriate circumstances lead to an inference that the uncalled evidence ... would not have assisted that party's case" ... Any "explanation" such as unavailability or absence of recollection for the failure to call the witness must be established by evidence ... The "rule cannot be applied to the non-calling of a [non-party] witness unless it would be natural for the party to call the witness, or the party might reasonably be expected to call a witness" … The circumstances for drawing a Jones v Dunkel inference are found where the uncalled witness is "a person presumably able to put the true complexion on the facts relied on [by a party] as the ground" for any inference favourable to the plaintiff … [references omitted]
It is submitted by Mr and Mrs Tonna that the conditions for the drawing of a Jones v Dunkel inference are here satisfied, namely that the missing witness would be expected to be called by one party rather than the other; the witness' evidence would elucidate a particular matter; and the witness' absence is unexplained.
In that regard, it is submitted that, given Mr Mendonca's role in the matter, he would be expected to be called. It is noted that Mr Mendonca is married to, and (as evidenced by each of their affidavits verifying their respective defences) lives with, Dr Mendonca. It is said that there is no evidence of any falling out between the two; that Mr Mendonca plainly falls within Dr Mendonca's camp; and that it would be expected that he would be called by Dr Mendonca. Mr and Mrs Tonna submit that Mr Mendonca's evidence would inform the court of the extent of Dr Mendonca's knowledge of her husband's dealings and the agreement proposed by him; and that his absence is unexplained.
Although Mr Mendonca is also a defendant in the Tonna Proceedings with, potentially, a different interest to that of Dr Mendonca in those proceedings, it is emphasised that there is no claim between Mr Mendonca and Dr Mendonca; that they both deny the agency, the trust agreement and deny that the Galston Property was held on trust; and that their interests (while not necessarily aligned) are not so far in conflict that there is any basis to find or accept that there are grounds for Dr Mendonca to not call her husband in this case.
It is said that the evidence of Mr Mendonca would elucidate a number of matters: first, Dr Mendonca's knowledge; second, the circumstances in which the alleged loan agreements were made (noting that Dr Mendonca says her husband was present throughout the time that she had the discussion with Mr Tonna in which Mr Tonna agreed to loan the balance of the purchase price); and, third, as to the Tenancy Agreement that was prepared by him, how the two front pages came into existence, had different font and contained some different items of information and were on different pages to each other.
It is noted that Dr Mendonca did not adduce any evidence as to why Mr Mendonca was not being called to give evidence (and that it would have been open, when Counsel for Mr Mendonca elected not to adduce any evidence from him at the close of Dr Mendonca's case) for Dr Mendonca to have sought leave to reopen her case in order to call him.
Thus, it is submitted that a Jones v Dunkel inference should be drawn, from Dr Mendonca's failure to call Mr Mendonca, namely, an inference that his evidence would not have assisted her case.
For Dr Mendonca, it is submitted that no Jones v Dunkel inference should be drawn. It is noted, as is clearly correct, that the failure of a party to call the witness does not necessarily give rise to an adverse inference being drawn and that such an inference is available only if the evidence that is before the Court otherwise provides a basis on which that unfavourable inference can be drawn. Dr Mendonca's submission is that Mr Mendonca cannot be said to be in Dr Mendonca's "camp" in circumstances where, if Mr and Mrs Tonna are correct, Mr Mendonca "will be saddled with a large sum of money that [Dr Mendonca] won't have to pay". As to the relationship between the parties what was put by Counsel for Dr Mendonca was that: … Mr Mendonca is being pursued by Mr Newton's client [i.e., Mr and Mrs Tonna] for reasons other than that my client's not completely in line with - I don't wish to say anything about the state of the marriage, for reasons that I'm instructed [not] to.
Dr Mendonca submits that this is not a case where there is a basis elsewhere in the evidence to support the inference that Mr Mendonca was her agent. It is submitted that, at its highest, the evidence reveals that: Mr Mendonca drove Dr Mendonca to ANZ and to Matthews Folbigg's offices so that she could, personally, attend upon them (something said to be suggestive of the contrary to agency); Dr Mendonca is not included in any of the emails that have been sent; there is no evidence that Dr Mendonca has ever seen or been informed about the emails that passed from Mr Mendonca to the Tonnas or to Mathews Folbigg prior to the proceedings commencing; and Dr Mendonca denied that Mr Mendonca acted for her.
It is submitted that the absence of Mr Mendonca does not fill the evidentiary void, nor does it prevent the court from forming a view that Mr Mendonca did not have the authority to negotiate with Mr Tonna in respect of the Agreement.

[53]

Determination re Jones v Dunkel inference

I consider that it is open to draw a Jones v Dunkel inference from the failure of Dr Mendonca to call evidence from Mr Mendonca in her case - particularly as to the circumstances in which the Tenancy Agreement came to be prepared and witnessed by him.
True it is that the rule has no application if the failure to call the witness can be explained. However, in my opinion, the fact that Mr Mendonca is a defendant in the Tonna Proceedings does not adequately explain why he was not called as a witness in the Mendonca Proceedings (particularly where there is no cross-claim against him in the Tonna Proceedings and his interests are aligned to a large extent with those of Dr Mendonca in those proceedings).
Alderson B recognised in Boyle v Wiseman (1855) 10 Ex 647 at 651; (1855) 156 ER 598 at 600 that a failure by a party in civil proceedings to deny a fact which it was in their power to deny "gives a colour" to the other evidence against him.
As stated by JD Heydon in Cross on evidence (11th ed, 2017, LexisNexis Australia): The significance to be attributed to the fact that a witness did not give evidence will in the end depend upon whether, in the circumstances, it is to be inferred that the reason why the witness was not called was because the party expected to call him feared to do so. But there are circumstances in which it has been recognised that such an inference is not available or, if available, is of little significance.
Drawing a Jones v Dunkel inference does not entitle a court to speculate about "what other evidence might possibly have been led" (Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345; [2012] HCA 17 (Hellicar) (at [165] per the plurality) nor "does [it] enable the trier of fact to infer that the evidence of the absent witness would have been positively adverse to [the] party" who fails to call the witness (Hellicar (at [232]) per Heydon J; see also Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11 (at [64]) per Heydon, Crennan and Bell JJ (as cited in Vu v New South Wales Crime Commission [2013] NSWCA 282)). The inference cannot be used to "fill gaps" in the evidence (Adler v Australia Securities and Investments Commission; Williams v Australian Securities and Investments Commission [2003] NSWCA 131 (Adler v ASIC) (Giles JA with Mason P and Beazley JA, as Her Excellency then was, agreeing)) or to convert conjecture into suspicion.
In Dilosa v Latec Finance Pty Ltd (1966) 84 WN (Pt 1) (NSW) 557, Street J said (at 582) (as cited in Adler v ASIC): The inference which a Court can properly draw in the absence of a witness, where such absence is not satisfactorily accounted for, is that nothing which this witness could say would assist the case of the party who would normally have been expected to have called that witness. The significance of this inference differs according to the closeness of the relationship of the absent witness with the party against whom the inference is sought to be propounded. Where the absent witness is a party himself then considerable importance may well attach to the inference. … [my emphasis]
A legitimate explanation has been found in circumstances where calling the witness would cause jeopardy or prejudice to the witness in other criminal proceedings. In Adler v ASIC, the difference in relation to how the rule is applied in criminal proceedings and civil proceedings was discussed. It was stated that, in a criminal trial, there are "many reasons why an accused may not wish to give evidence, the most important being that he may consider that the evidence adduced by the prosecution does not prove the commission of the offence as alleged beyond reasonable doubt" (at [663]). However, in relation to civil proceedings, the standard of proof is the balance of probabilities and in RPS v The Queen (2000) 199 CLR 620; [2000] HCA 3 (at [26]) it was said (as cited in Azzopardi v The Queen (2001) 205 CLR 50; [2001] HCA 25 at [34]): In a civil trial there will very often be a reasonable expectation that a party would give or call relevant evidence. It will, therefore, be open in such a case to conclude that the failure of a party (or someone in that party's camp) to give evidence leads rationally to an inference that the evidence of that party or witness would not help the party's case … . [my emphasis; footnotes omitted]
In Chong v CC Containers Pty Ltd (2015) 49 VR 402; [2015] VSCA 137, it was said (at [212]): In Dilosa v Latec Finance Pty Ltd [No 2], Street J recognised that where the absent witness is a party then considerable importance may well attach to the inference that nothing which the party could say would assist his or her case. As Gleeson CJ said in Azzopardi, the judgments in Weissensteiner recognise that the inference that may be drawn from the silence of a party to civil litigation may be significant. Santow J drew such an inference in ASIC v Adler because the parties who were available and not called had a personal involvement in the transactions in question. Where a party elects not to give evidence 'the court is entitled to be bold'. As Heydon, Crennan and Bell JJ stated in Kuhl v Zurich Financial Services Australia Ltd, the rule has a particular application where it is the party which is the uncalled witness and may permit the court to draw, with greater confidence, any inference unfavourable to the party that failed to call the witness, if that uncalled witness appears to be in a position to cast light on whether the inference should be drawn.
In HIH Insurance Ltd (in prov liq) and HIH Casualty and General Insurance Ltd (in prov liq); Australian Securities and Investments Commission v Adler [2002] NSWSC 171; (2002) 41 ACSR 72 (ASIC v Adler), Santow J (as his Honour then was) was dealing with civil prosecution proceedings for breaches of the Corporations Act 2001 (Cth) and breaches of the Corporations Law. His Honour held that a Jones v Dunkel inference could be drawn against the defendants who did not give evidence in the proceedings. The defendants were parties who were clearly available and had a personal involvement in the transactions in question.
In Comptroller-General of Customs v Stephen Edward Parker [2006] NSWSC 390; (2006) 200 FLR 44, Simpson J, as her Honour then was, held that the same reasoning as applied by Santow J could apply in that case, where a witness who was not called was somebody "if anybody [who] could throw any light on any doubts or discrepancies revealed in the records" (see at [90]).
In Romeo v Papalia [2012] NSWCA 221 (Sackville AJA (Basten and Campbell JJA agreeing)), a wife gave instructions to a solicitor on her own behalf and on behalf of her husband for the solicitor to agree to entry of judgment against both the husband and wife. The primary judge found that either "[the husband] expressly agreed to [the wife] telling [the solicitor] to agree to the entry of judgment against both of them or he left it entirely in her hands to make the decision as to what should be done in the circumstances" (at [101]). On appeal, the argument was raised by the appellant (i.e., the husband) that the trial judge had erroneously invoked Jones v Dunkel, in attaching significance to the absence of the wife from the witness box as it was inappropriate for the trial judge to rely on the wife's failure to give evidence, "because her interests were not only separate from that of her husband, but were actually in conflict" (because "the appellant gave evidence that he had not signed the deed of loan or mortgage documentation and the obvious inference was that his wife had signed the documents in his name" - see at [104]). The court rejected this argument, noting that the absence of the wife from the witness box was "not the critical factor" in the findings of the primary judge; however, the primary judge was "entitled to rely on the failure to call Mrs Romeo as supporting the inference that her evidence would not have assisted the appellant" (at [123]).
In the present case, as I observed in the course of the hearing, there did not appear to be any interaction between Mr Mendonca and Dr Mendonca when both were in the court room at the same time. However, it is impossible for me to draw any concrete conclusions from that lack of interaction as to the state of their relationship or otherwise. What seems to me to be unarguable, however, is that it would have been open to Dr Mendonca to call her husband to give evidence at the very least as to matters such as the circumstances surrounding the entry into the Tenancy Agreement and that the failure to do so gives rise to an inference that he would not have assisted her case (though I accept that it does not permit me to draw any conclusion that is positively damaging to her case in that respect). I also consider that the failure by Dr Mendonca to call Mr Mendonca to give evidence as to his dealings with Dr Mendonca and others during the negotiation of the arrangements whereby Dr Mendonca came to acquire the Galston Property would support the drawing of an inference that his evidence would not have assisted her defence of the Tonna Proceedings.
However, ultimately it is not necessary for me to rely on any such adverse inference because even without such an inference I am satisfied on the evidence that is before me as to the critical issues in the Tonna Proceedings (namely, that, although Mr Mendonca was acting as Dr Mendonca's agent in the course of the negotiations relating to her purchase of the Galston Property, there was no binding agreement reached as alleged by Mr and Mrs Tonna) (and those conclusions will affect the conclusion in the Mendonca Proceedings, as was accepted in the course of argument).

[55]

Mark Tonna

Dr Mendonca submits that Mr Tonna was an unreliable witness; that he gave evidence as it suited him; and that he changed it during cross-examination. It is submitted that aspects of his evidence were unbelievable (referring to his evidence at T 296.36-297.12). It is said that, to the extent that Mr Tonna's evidence is not supported by a contemporaneous document, his evidence ought to be rejected.
The evidence to which Dr Mendonca here refers relates to the evidence Mr Tonna had given as to having other finance available (he having referred to three loans). See, for example, the following (at T 296.31ff): Q. …. Isn't the true position that you'd been knocked back by various lenders as at the time of this contract for sale, 30 January? A. By a lot of lenders yes. Q. In effect you'd signed a contract to buy the property from the monks that you couldn't afford to buy? A. But I could, I could afford to buy it. Q. You say you could afford to buy it? A. Yes. Q. How could you afford to buy it if you couldn't get any money from anybody? A. But I could have, I told you on Friday I got three loans approved. I mentioned on Friday, I had three other loans approved. Q. Where do I see in your affidavit you saying anything about having three loans approved? A. I didn't, I didn't say anything like that in my affidavit. Q. You put on three affidavits and in none of them do you say I had three loans approved. A. That's right. Q. Isn't the position that you couldn't complete the contract for sale and you were facing a substantial loss of the deposit and then some more? A. Isn't the position say that again please? Q. Yes. Isn't the position that you couldn't complete the contract for sale between the Tonnas and the monks and you were facing the potential loss of your deposit? A. But I could get the money. It was not the position no.
The evidence that he had given earlier (to which he there referred) was (at T 240.34): Q. … was it the position that you could not afford to pay stamp duty three times? A. Nobody can. Nobody wants to pay stamp duty three times. Q. I'm not asking about whether you want to. I don't want to pay stamp duty once. A. Nobody - I could, I could afford to it - I could afford to but I didn't want to. Q. You could afford to but you didn't want to? A. That's right.
Mr Tonna accepted that in his affidavits he had given evidence as to how he felt as though he was in a desperate situation but did not accept that he could not get the money (see at T 297.14): Q. At paragraph 59 as I understand your evidence you felt on or about 23 January 2014 as though you were in a desperate situation. A. I was all the way through yes. Q. You were in a desperate situation because you could not get the money. A. But I could get the money. Q. Sorry, end of the third line down, "As I depose in my earlier affidavit." Now your earlier affidavit is the one behind tab 25. We'll come to that in a moment. You say, "But I was, as I depose in my earlier affidavit, desperate and willing to follow that plan and was grateful for Renuka and Gerard's help." A. That's right. Q. Are you saying now that you had other financiers available and that you were not desperate and willing to follow that plan and weren't grateful for Renuka and Gerard's help? A. I was, I was desperate but I did have other finance in place if I - if needed … Q. You say, "I felt I was in a desperate situation and I was out of my mind with worry." A. That's exactly right. Q. Then you set out the plan. You say, "The plan Gerard had proposed was going to cost me a lot of money." A. Yes. Q. Then you go through. So am I correct in saying whilst you had other finance in place or available you decided that the better course was your to put yourself in a situation where you're going to pay three lots of stamp duty? A. It was better. … Q. "Between about 9 December 2013 and up until settlement, the stress of whether I would get finance to finish the purchase of the property was making me feel physically sick." Do you see that? A. Yes, it was making me sick. Q. Do you stand by the evidence that you've given to her Honour that you had other finance available, I think were your words? A. Yes, I do. It was all stressful.
I accept that there is on its face an inconsistency between the proposition that Mr Tonna was in a desperate situation (unable to complete the contract), as he confirmed at T 193.45, and the proposition that he had finance available (to enable him to do so) but, as I understood his evidence, Mr Tonna's position was that he had had various loan offers made to him ("three other loans approved" and "could get the money" - see T 296/297) and that he believed that he could obtain finance (albeit, as was the case with the Prime Capital or CEG loan offers, he did not pursue them). It seems to me that he was focussing on his ultimate ability to obtain finance (in which he obviously had confidence). It would have been otherwise had he denied feeling that he was in a desperate situation but he did not. He admits that he was in a desperate situation (see T 297).
I formed the impression that Mr Tonna was a genuine witness. He clearly did not have an understanding of legal concepts, such as the concept of rescission, (about which I make no criticism or intend any disrespect) and he was frank in conceding he was not "good" at dates but he had a down to earth view of what had occurred. So, for example, he considered that the idea of the sale or agreement being rescinded or annulled was that "[r]escinded I think from one to another"; "[f]rom one to another, rescinded, isn't that what it means"; and "[m]y understanding were - annulled was to get rid of it, it's not going to happen". Questioned the next day on the meaning of "rescinded", Mr Tonna said (at T 225.24): Q. And that you, at that point, were going to rescind the contract with the monks, correct? A. When you say "rescind" what do you - explain "rescind"? Q. You were going to terminate the contract with the monks, you weren't going to complete the contract for sale with the monks, do you agree with that? A. Yeah, okay, yes.
Similarly, he appears to have had a basic common sense view as to the transactions involved in "plan D". I have no difficulty accepting that he placed faith and trust in Mr Mendonca and that to a large extent he left it to Mr Mendonca to arrange the finance. I consider it to be consistent with that approach that Mr Tonna did not press for the alleged Agreement to be documented and that he accepted at face value (at least initially) the explanation he says Mr Mendonca gave as to why the Galston Property could not be re-transferred at an earlier time after the Schofields Property sold. Mr Tonna's conduct is consistent with him placing faith on what his advisers (particularly Mr Mendonca) told him (see, for example, his comment at T 307 that his lawyers were "running the show" - i.e., these proceedings, not him; when asked about whether he had given particular instructions).
That said, his memory of meetings at the relevant times was not consistent with the documentary record of meetings at Mr Gough's offices (at T 224.23): Q. Doctor Mendonca was not at that meeting? A. No, the two of them were at the first meeting of the three. There was three meetings in total, the two of them were at the first one. … Q. You've had more than three meetings with your lawyers, do you agree with that? A. I have, yes. Q. I just want to be clear when you used the expression "There was three meetings", you're saying there was three meetings with the Mendoncas present-- A. Correct. Q. --is that what you're saying? A. Correct. Q. You say the first one was 24 January, do you? A. Dates I'm not a hundred percent. But I would say so, yes. And then the next one the 25th I think I was. A. I think it was the 25th, the day after anyway. Q. The day after. Then the last one was what day? A. I think a weekend fell, then it was on a Monday, I think. I'm not a hundred percent sure on dates. Q. But definitely three meetings? A. Yes. Q. Yes? A. Yes. Q. Definitely at that spacing apart? A. Yes.
Mr Tonna's recollection cannot be correct insofar as he places any meeting with Dr Mendonca present on a date earlier than 29 January 2014 but if it is accepted that the first meeting with Mr and Dr Mendonca both present is taken to be 29 January 2014 (as it clearly was), then the spacing of the next meeting as being 30 January 2014 is correct. The spacing of a weekend between meetings is correct but not as to Dr Mendonca's attendance. (That said, the unreliability as to memory of dates was not confined to Mr Tonna. There was unreliability also in Dr Mendonca's account of events.)
One issue in respect of which Mr Tonna's credibility was cast in doubt was in relation to evidence that had been prepared for the District Court proceedings against him (and others) brought by Prime Capital (to which I have referred above). An affidavit that he had sworn in those proceedings was tendered in evidence. In that affidavit he had deposed to Dr Mendonca having taken the Galston Property "off their hands" (see Mr Tonna's affidavit sworn 21 September 2014 at [137]) (evidence Mr Tonna confirmed in the witness box before me) and to he and his wife having 'lost' the deposit paid in relation to the Galston Property. An objection was taken to questions in relation to (or use of) the affidavit (based on the complaint that the affidavit was covered by the Harman undertaking Harman v Secretary of State for the Home Department [1983] 1 AC 280 (Harman)) for the release of which leave had not been sought) (see the debate from T 183). It was not conceded that such an undertaking had arisen at all but, understandably, there was concern as to any breach of the undertaking if in fact it had arisen. There was also an issue raised as to whether any application to be released from such an undertaking were required to be brought to the court or tribunal in which the proceedings in which the undertaking had arisen. In the interests of the expeditious conduct of the proceedings, and being of the view that there was inherent jurisdiction to grant leave for the release of an implied undertaking of that kind, I indicated that I would proceed on the basis that if leave were required (because such an undertaking had arisen) I would grant that leave (and would rule in due course as to that issue). Mr and Mrs Tonna, in the commendable interest of the just, quick and cheap resolution of the real issues in dispute, did not press the issue as to whether any such release were required to be pursued from the court or tribunal in which the undertaking had arisen. I set out in due course my reasons on the Harman issue.
Mr Tonna was taken to a file note dated 28 April 2014 apparently prepared by a lawyer from Macedone Legal of a conference with Mr Tonna and Mr Fermanis of Counsel (the legal representatives then acting for Mr Tonna in relation to the Prime Capital dispute); and to various paragraphs of the affidavit he had sworn in relation to the claim then made against him. There was then the following exchange (at T 328.20): Q. At paragraph 131, you say, "As soon as I knew the purchase was not going to go ahead, I panicked. I was immediately concerned that Lorraine and I would not be able to obtain finance in time to complete the purchase of the Galston property." Do you see that? A. Yes. Q. That was the correct position, wasn't it? A. I did panic, yes. Q. You say in paragraph 132, "It was my understanding that the vendor would issue a notice to complete and Lorraine and I would need to pay interest on the outstanding amount owing to the vendor." A. That's right. Q. That was the understanding that you had in early January 2014; correct? A. Yes. Q. You also, at paragraph 133, say, "It was also my understanding that if Lorraine and I could not complete the purchase of the Galston property, the following would occur," and you identify the two matters there, (a) and (b). Do you see that? A. Yeah, I'll just read them. … Q. That was your understanding in 2014; correct? A. That's right. Q. When I say "2014", just to be clear, in January 2014? A. Yes. Q. At para 134, you say, "I immediately discussed my concerns with Lorraine and what we were going to do moving forward." Do you see that sentence? A. Yes, I can. Q. That was correct, wasn't it? A. Yes. Q. And, "Lorraine and I had a conversation with words to the following effect, Mark," that's you, "'What if we offer to the property to Gerard?" Loraine, "If you think that's best." Do you see that? A. Yes. Q. That was true, wasn't it? A. That's right. [Pausing here, there was no suggestion in the evidence in the present case that the initial suggestion that the Galston Property be purchased by Mr or Dr Mendonca had emanated from Mr Tonna] Q. I'm at paragraph 135: "Following my discussion with Lorraine, I had a discussion with Gerard. Gerard and I had a discussion with words to the following effect. Me, "Lorraine and I spoke about it. Would you be interested in taking the property off our hands?"" Do you see that? A. I can see that. Q. You did have that discussion with Mr Mendonca, did you not? A. Yes. Q. Mr Mendonca said, "I will speak to my wife." You had that discussion; correct? A. He had that discussion? Q. No, he said to you, "I will speak to my wife"? A. Yes, he said - yes. Q. Then, at paragraph 137, you say that, "Gerard, Lorraine," that's your wife, "Renuka," that's Dr Mendonca, "and I then had a discussion about the Galston property. Gerard then said words to the effect of, "Okay. We'll take the property off your hands."' Do you see those words? A. I can see the words … Q. They were "said". Gerard said those words to you, did he not? A. Yes.
There was then the somewhat surprising evidence (surprising at least to me since it had appeared in none of the affidavit evidence in these proceedings) that there was some other (third) contract of sale that had been prepared by Mr Mendonca and signed by the parties (see at T 329.49): Q. "Gerard then drew up a contract for Lorraine and I to sell the Galston property to Renuka." Do you see that? A. He did, yes. Q. The concept of "selling the Galston property to Renuka" was her buying it off you, wasn't it? A. No. Q. At paragraph 139, you say, "Lorraine, Renuka, and I then signed the contract drawn up by Gerard." Do you see that? A. Yes. … Q. At that time that you agreed to that sentence, was that the contract for sale that I've shown you of 30 January 2014? A. No. Q. Was there some other contract for sale? A. There's a third. Q. There's a third contract for sale? A. Yes. Q. Why is there a third contract for sale? A. Ask Mr Mendonca. … A. Mendonca is the one that drew it up.
There was then the following evidence (at T 331.25): Q. At paragraph 165, you say this, "It is my understanding that Renuka obtained finance from ANZ to complete the purchase of the Galston property." Do you see that? A. Yes, I can see that, yes. Q. Was that correct at the time you signed this affidavit? A. She obtained finance to, to, to take the property off our hands, yes. [my emphasis] Q. At 167 you say, "As Lorraine and I sold the Galston property to Renuka and lost the deposit, $145,000, and the stamp duty, $65,240 we paid." A. That's what that states. Q. That was correct at the time you signed this affidavit, correct? A. No it's not correct. We didn't lose that, but that's what that states. … Q. You see that? I took you to paragraph 167 and the reason why you were able to say at that point in time we lost the deposit and the stamp duty we paid was because at that point in time you had not resolved with Dr Mendonca how it was that she was to repay the deposit, correct? A. No, incorrect. She was never to pay the - repay the deposit. Q. What you had not worked out was how to repay the deposit because you were still interested in buying the property back, correct? A. I, I never had to buy the property back. Q. At paragraph 162 you say as a result - this is - let me go back a step to orientate you, go back a page to paragraph 161. Before I take you to this, do you recall you told her Honour earlier that you could obtain finance I think from three other lenders? A. Yes. Q. Do you recall that? A. Yes. Q. I take that to mean that you were saying that you had that availability in January or February 2014, am I mistaken about that date? A. January‑‑ Q. Or February 2014. A. Yes that's right. Q. At paragraph 161 you say this, "For the following reasons Lorraine and I decline to proceed with obtaining finance from Prime," and that you go through and set out the three reasons. Do you see that? A. What paragraph are we looking at? What number? Q. I started at paragraph 161, it's at the bottom of the page but the three reasons are over the top of the following page. A. Yes. Q. Do you see those reasons? A. Yes I do. Q. Then you say in 162, "As a result we could not obtain alternate finance." Do you see that? A. I can see that. Q. Was that correct at the time you signed your September 2014 affidavit? A. No it wasn't correct.
Troubling as the exchanges in relation to statements contained in his earlier affidavit are (and to be fair to Mr Tonna he said the affidavit was drafted following a short conference with his then legal representatives, and the reasoning underlying the statements to which he there deposed was not fully explained), overall I do not consider that any adverse credit finding in relation to Mr Tonna is warranted although (as with all the witnesses) I place more weight on the contemporaneous documents than on his present recollection of past events.

[58]

Mary Mackman

Mrs Mackman is the licensed conveyancer who was approached to act on the conveyance at one stage. She is the mother of Phillip Mackman (a friend of Mr and Mrs Tonna's son).
Dr Mendonca submits that Mrs Mackman presented her evidence in a way that was suggestive of her being an advocate for Mr and Mrs Tonna's cause. In particular, reference was made to Mrs Mackman's response (when asked whether she recalled whether she spoke to a solicitor at Matthews Folbigg) in which she answered "[y]eah" before proceeding to give lengthy evidence about various matters (almost the entirety of her affidavit) (at T 420.12): Q. Do you recall whether or not you spoke to a solicitor at Matthews Folbigg about that? A. Yeah. See, because they were under a notice to complete, I thought by taking over the situation it would delay matters. I actually suggested something like - because they, they were proposing for Mr Mendonca to buy the property because Mr and Mrs Tonna didn't have finances at the, you know, couldn't complete their finance. So then Mr Mendonca said, you know, he's going to help Mr and Mrs Tonna out by he and his wife buying the property in lieu of them and then transferring the property back and then I said, "Well, that's going to cause three lots of stamp duty doing that". I says, "It will be the stamp duty for Tonna to buy, then for you to buy from Mr Tonna and then from Mr Tonna to buy back from you". I suggested how about if I just speak to the solicitor from Matthews Folbigg, can't remember his name, and then I asked him whether there would be anyway that the vendor, who sent the notice to complete, would actually agree to a mutual rescission and we exchange on the same terms and conditions so that Mr and Mrs Mendonca can buy it and then I didn't go on about what the conversation was that they would then buy it back. But just for that, with that situation I put to him and then I left it like that and when they said to me can I take over, I says, "No, because the vendor would hate dealing with another lot of" - "another firm. It'll be easier if you just go with the solicitor you've got and carry on with the matter". So that's why we didn't take it on. I mean it was just silly because it would delay things, you know, we didn't want to do anything to delay settlement of the matter and sorting out of the matter, yeah.
It is noted that there was no reference in her affidavit to any file notes or to her evidence being based on file notes although she gave evidence in cross-examination to having file notes. Dr Mendonca submits that her evidence should be treated with caution and points to the inconsistency in Mrs Mackman's recollection of the timing of events (to which I have earlier referred); particularly as to Mr Mendonca's physical presence during the 28 January 20147 telephone call.
Mrs Mackman gave her evidence in a didactic manner and she was seemingly keen to explain her point of view. I rather suspect that is her usual manner. It was certainly her consistent manner during the course of her evidence. She did not appear to focus carefully on the questions as opposed to the opinions that she wanted to give; and she was quick to defend any suggestion of lack of impartiality (at T 418.45): Q. Obviously, you're loyal to your son, I assume? A. I'm a licensed conveyancer. I'm also a Justice of the Peace. I tell the truth and it doesn't matter whether someone is a relative or not, it's whatever I believe the truth is and that's what I always stand by. I'm sorry.
And see (at T 422.38): Q. It was a day or two after the Australia Day long weekend, correct? A. If you say so. Like I recall ringing the firm of solicitors with a suggestion, but the - but can I make a point or, no, about something? Q. I'd rather you just answered the questions than debate the case. A. Yeah. Okay. Fine.
(That said, it is not uncommon for witnesses to volunteer more information than is necessary to answer directly the questions being put to them.)
Overall, I did not regard Mrs Mackman as an advocate for Mr and Mrs Tonna's cause; rather, I formed that view that she has a dominant personality and is someone who is confident of, ready authoritatively to proffer, her own opinion as to the conveyancing or other aspects of the matter. That said, again, I place more weight on the contemporaneous documents and it is apparent that Mrs Mackman's recollection (insofar as she places Mr Mendonca physically in the room when the relevant conversation took place) simply cannot be correct.

[60]

Stewart Gough

Mr Gough of Matthews Folbigg is the solicitor who acted in relation to the respective contracts for sale. He was retained by Mr and Mrs Tonna in respect of the contracts for sale, as well as various other matters concerning the inability of Mr and Mrs Tonna to obtain finance. Mr Gough's evidence was that Mr Mendonca had referred clients to him over the years (see T 44.02).
I allowed provisionally (over objection by Counsel for Dr Mendonca) questions as to Mr Gough's understanding of the outcome of the relevant discussion (see T 51) indicating I would rule on the admissibility of that evidence in my final reasons. I will allow the evidence as shedding light on what happened thereafter but I do not place weight on Mr Gough's perception on understanding of the discussions when reaching my conclusion as to whether there was a binding agreement at that time.
Dr Mendonca submits that he presented his evidence in a forthright manner "and seemingly to the best of his ability". However, Dr Mendonca says that his evidence needs to be viewed with caution. It is noted that, at the time of giving his evidence in chief, Mr Gough had only reviewed parts of his file as provided to him by Mr and Mrs Tonna. It is said that he was also only taken to select documents when he first gave his evidence, and from time to time Mr Gough "slipped" between the use of the expression "the agreement" and a "proposal" when describing the events of 29 January 2014.
I considered Mr Gough to be a truthful witness. A review of his file notes and correspondence indicates that he was conscious of the need to advise his clients to document any agreement in writing and to alert them to the prospect of conflicts arising between the respective parties for whom he was acting (although he does not appear to have considered that this precluded him from acting and, perhaps due to the urgency of the matter, he does not appear to have pressed for the parties to obtain independent legal advice).
I do not place weight on Mr Gough's understanding as to whether an agreement was reached at the 29 January 2014 meeting or not; nor as to whether any agreement in principle was intended to be immediately binding. Those are matters for determination in the present case. And I accept that his present recollection (insofar as it is informed by a review of his file notes) has the difficulty that it is a retrospective assessment of what was meant by his notes at the time (unless aided by an actual recollection of what was said by one or more of the parties - and no such independent recollection clearly emerged from his evidence in the witness box).
Relevantly, however, I have no doubt that Mr Gough left the 29 January 2014 meeting with an understanding that there had been some kind of in "principle" agreement reached between the parties. That emerges very clearly from the emails that he sent at the time and from the fact that on the same day of the meeting Mr Leo (presumably on Mr Gough's instructions) commenced drafting a put and call option agreement. However, it is also clear from the contemporaneous documents that Mr Gough (and Mr Leo) needed instructions as to various aspects of the "deal" that they were preparing to document.
Insofar as Dr Mendonca submits that Mr Gough's evidence should be treated with caution, I do not understand her to be advocating for any adverse credit finding, nor would any be warranted. Rather, this is the caution that would apply to any professional asked to interpret notes of a conference that occurred many years before (and not necessarily after having reviewed the entirety of the file). I accept that Mr Gough gave honest evidence as to his best recollection of events, as refreshed by reference to the documents to which he was taken. His evidence, coupled with a review of the contemporaneous documents does not, however, lead me to conclude that there was arrangement on the essential terms of the arrangement sufficient to give rise to a binding agreement whether on 29 January 2014 or thereafter.

[61]

Dr Mendonca

It is submitted for Dr Mendonca that she presented her evidence in a forthright and truthful manner; and that she made concessions appropriately and openly acknowledged what she could and could not recall. It is said that she attempted to answer all the questions put forward in cross-examination with detail and voluntarily gave evidence that was contrary to her interests (for example, it is said that when Counsel for Mr and Mrs Tonna sought to lead evidence that Dr Mendonca could not have left the airport and attended each of the events set out in her affidavit that she says took place on 29 January 2014, she gave evidence that assisted Mr and Mrs Tonna's argument in this regard).
For Mr and Mrs Tonna, it was submitted that much of Dr Mendonca's account of events was implausible and should be rejected. Counsel for Mr and Mrs Tonna said (T 637.28): … Dr Mendonca accepted when I put it to her that after she left the office of Matthews Folbigg on 29 January 2014 she didn't have a communication with Mr Gough until she returned to his office on 30 January 2014. Similarly, she accepted that when she left the Wentworthville branch of the ANZ Bank on 29 January 2014 she didn't have a discussion with the representatives that she saw until she returned on 30 January 2014, yet the bank were able to prepare mortgage and loan documents with the particulars of the Galston property. And if Dr Mendonca's evidence is to be accepted, then Dr Mendonca purchased the Galston property in these circumstances: firstly, she didn't make an offer to purchase the Galston property; secondly, she didn't accept an offer to buy the Galston property, she never lodged an application for a loan; she didn't provide the ANZ Bank with any details in relation to the Galston property or any of her own financial details; she never made an appointment to see a solicitor; she never retained a solicitor; without her instructions, the solicitor, Mr Gough, took it upon himself to act for her in relation to the conveyance; she never informed her solicitor that the bank had agreed to advance her $1,080,000, yet they were able to effect the settlement. I think her evidence was to this effect: "Well, if they needed to know some information they could contact the bank or contact me. I left my phone number and email number", and the bank was able to prepare all these loan and security documents and attend to settlement without her providing details of the property that was provided to the bank as security. It really is an extraordinary state of affairs if it's to be believed and we submit it's implausible and we submit that Dr Mendonca was not candid and she's not a reliable witness and she withheld critical information in relation to her dealings with Mr Mendonca and she refrained from disclosing that Mr and Mrs Tonna were at the meeting on 29 January for fear that if she did disclose her dealings with Mr Mendonca and the fact that Mr and Mrs Tonna were at the meeting on the 29th, she would feel that it didn't advance her case. I put, in effect, that to her and she denied it, but in my submission, the evidence, the contemporaneous documents, are against Dr Mendonca's stated position that she didn't know Mr Mendonca was acting for her and if he took the action alleged he did so without her knowledge, authority and instructions and Dr Mendonca does not have any contemporaneous documents to support her case which makes [sic] to counter the claims by Mr and Mrs Tonna that Mr Tonna attended at her home on 30 January and offered to loan her the balance. There's not one document that supports that alleged loan agreement. There's also not one document save for the residential tenancy agreement of 15 February, which has some problems with it, but there's nothing, there's no contemporaneous record of Mr Tonna attending on her property on 31 January 2014, after the settlement, and then offering to rent the property from Dr Mendonca. These are claims that Dr Mendonca make and we submit the circumstances in which she gives that evidence and advances a case that Mr Tonna agreed to loan her the balance are implausible and should not be accepted.
Dr Mendonca was a calm witness in the witness box. She considered the questions put to her and she responded courteously and formally. She is a doctor and I would infer from that that she is an intelligent woman. I considered her to be careful in her choice of words in response to the questions put to her. On various lines of questioning (such as whether she had asked her husband about the amount of the indicative loan approval when she was in Queensland or back in Sydney) she steadfastly maintained her position throughout cross-examination; and on some matters there was a consistent refrain (such as her desire to avoid marital disharmony while on a family holiday in Queensland).
However, unless Dr Mendonca had understood at the time (and permitted) her husband to represent himself as her agent (in relation to the application to ANZ for a loan, for example) then the indifference she displayed to the detail of the transactions into which she was entering could only be described as staggering. And, faced with what seemed to me to be logical difficulties in her account of events (such as the sheer timing of the activities that went on during the course of 29 January 2014 on her accord of events) and the implausibility of her being the decision-maker in relation to a transaction about which she knew almost nothing, Dr Mendonca's evidence lacked credibility. She appeared to disclaim any relevant knowledge of matters critical to the administrative features of the transaction. So, for example, the suggestion that Mr Tonna (the other party to the sale transaction into which she was entering) might have been in a position to give directions to the solicitor acting for her or ANZ (even accepting that in fact it was Mr Gough who gave directions to ANZ to prepare the mortgage documents) strains credibility; as does the suggestion that there was a loan arrangement for the shortfall of the purchase price at a time when Dr Mendonca could have had no real idea (on the limited information available to her) what that shortfall might be.
In saying this, I am not suggesting that Dr Mendonca was not a witness of truth. Rather, I consider her evidence makes it abundantly clear that she was leaving it to Mr Mendonca to take the relevant steps on her behalf in relation to a property purchase about which she seems to have been almost wholly ambivalent (see her answers as to the lack of urgency in relation to the transaction from her perspective). What seems to me clear from Dr Mendonca's evidence (accepting her evidence) that she had been interested for some time in acquiring an investment property; that a proposal had been put forward about an investment property and that; it was in an area that was acceptable to her); was that she left it to her husband to arrange the financing and conveyancing steps to be undertaken in relation to the property. She exhibited almost sublime indifference to any of the details of the transaction both at the time and in the witness box.

[62]

Harman undertaking issue

I do not propose to devote much time to this issue, which relates to the affidavit sworn by Mr Tonna in the earlier Prime Capital proceedings (but to refer generally to what was said in Hearne v Street (2008) 235 CLR 125; [2008] HCA 36 per Hayne, Heydon and Crennan JJ at [96]).
Suffice it to say that, in the present case ,it was not clear that such an undertaking had arisen in the first place; first, because of the limited information as to the circumstances in which the affidavit was prepared and what reliance had been placed on it in the earlier proceedings (noting that the implied undertaking arises by reference to the circumstance of materials having been prepared under compulsion of legal process) (Riddick v Thames Board Mills Ltd [1977] QB 881 per Lord Denning at 896; and see, for example, the discussion in Sapphire (SA) Pty Ltd (trading as River City Grain) v Barry Smith Grains Pty Ltd (in liq) [2011] NSWSC 1451); and, second, that the document in question had come into the possession of Dr Mendonca through the proper use of curial processes in the context of the present litigation (see, for example, Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10; [1995] HCA 19 (Esso Australia)).
As to the first, the requirement of compulsion seemingly explains those cases in which the implied undertaking has been held not to apply (see Hanneybel v Uniflex (Australia) Pty Ltd [2002] WASCA 349). In the present case, it is not clear what orders or directions may have been made pursuant to which the affidavit in question had been served and/or filed; nor was it clear whether it had formally been read (and hence had become a matter in the public domain - see Ainsworth v Hanrahan (1991) 25 NSWLR 155, Kirby P, as his Honour then was; Moage Ltd v Jagelman [2002] NSWSC 953, Gzell J (at [12]). (See, however, the decision of the English Court of Appeal in Bourns Inc v Raychem Corp [1999] 3 All ER 154 where documents were held to be subject to the implied undertaking even though they had not been produced according to any formal order, disclosure having been made "in circumstances where the documents were requested, they were directly relevant to an issue and natural justice meant that an order for production was necessary".)
As to the second, reliance was placed by Dr Mendonca on the observation in Esso Australia by Mason CJ (with whom Dawson and McHugh JJ agreed) (at 404) that "[n]o doubt the implied obligation must yield to inconsistent statutory provisions and to the requirements of curial process in other litigation, eg discovery and inspection". However, that observation was in the context that such a circumstance "is not a reason for denying the existence of the implied obligation".
Therefore, I proceeded, out of an abundance of caution, on the assumption that such an implied undertaking might have arisen in the present case. In those circumstances, it was my view that there was inherent jurisdiction to consider its release and that, in the interests of justice, there should be leave for the use of the affidavit in the present proceedings. The principles applicable where an application for release of the undertaking has been made have been considered in Liberty Funding Pty Ltd v Phoenix Capital Ltd [2005] FCAFC 3; (2005) 218 ALR 283 (Liberty Funding); and in Springfield Nominees Pty Ltd v Bridgelands Securities Ltd (1992) 38 FCR 217; 110 ALR 685 (Springfield Nominees) (among other cases).
The Full Court of the Federal Court in Liberty Funding said, of the requirement for "special circumstances" to warrant such a release that this "does not require that some extraordinary factors must bear on the question before the discretion will be exercised", it being "sufficient to say that, in all the circumstances, good reason must be shown why, contrary to the usual position, documents produced or information obtained in one piece of litigation should be used for the advantage of a party in another piece of litigation or for other non-litigious purposes". The discretion is a broad one and matters relevant to the exercise of the discretion include (see Springfield Nominees): the nature of the document; the circumstances under which the document came into existence; the attitude of the author of the document and any prejudice the author may sustain; whether the document pre-existed litigation or was created for that purpose and therefore expected to enter the public domain; the nature of the information in the document (in particular whether it contains personal data or commercially sensitive information); the circumstances in which the document came in to the hands of the applicant; and "most importantly of all, the likely contribution of the document to achieving justice in the other proceeding".
In the present case, while there was not a full exploration of all of those issues, it seemed to me to be clear that a document (the previous affidavit) that was likely to shed light on the understanding of Mr Tonna (at a time much closer to the relevant events) as to what had been discussed at the relevant meeting(s) (and which might be suggested to be inconsistent with the position now adopted in the present litigation by Mr and Mrs Tonna) was a document likely to contribute to achieving justice in the proceedings; and hence my ruling at the time. I remain of that view (and hence I do not, as I indicated I might later do if I came to the opposite conclusion, strike out the evidence given on this topic). There was an obvious relevance of this material and hence leave for its use (were such leave to have been necessary) was warranted.

[63]

The Tonna Proceedings

As there was some issue in the course of the hearing as to precisely what was alleged in relation to the pleaded Agreement, and the defendants made clear their position that the issues in the proceedings are to be confined to the pleaded claims, it is convenient here to summarise the claims made in the Tonna Proceedings.
The pleaded Agreement is alleged to have been reached "[f]rom at or about December 2013 to at least, 23 January 2014, in the course of several conversations and email correspondence held between [Mr Mendonca and Mr Tonna]" (at [38] of the further amended statement of claim).
It is alleged that Dr Mendonca: breached her obligations as trustee under the alleged Trust and her obligations arising under the alleged Agreement in refusing to transfer the Galston Property back to Mr and Mrs Tonna (see at [55A] of the further amended statement of claim); breached her obligations as a trustee under the Trust in refusing to enter into any written agreement by which the Galston Property would be transferred pursuant to the alleged Agreement; refusing to transfer the Galston Property to them "in any manner"; denying the existence of any trust and in particular the Trust and that Mr and Mrs Tonna had any beneficial interest in the Galston Property; retaining the benefit of all moneys applied by Mr and Mrs Tonna towards the purchase and improvement of the Galston Property; and denying the existence of the alleged Agreement ([71] of the further amended statement of claim); breached the alleged Agreement and her duty as a trustee of the Trust and committed an equitable fraud in refusing to enter into a written agreement to transfer the Galston Property back to Mr and Mrs Tonna and in denying the existence of the alleged Agreement and failure to transfer the Galston Property pursuant to the alleged Agreement ([72] of the further amended statement of claim); and breached her obligations as trustee of the Trust in dealing with the Galston Property for her own advantage and against the interests of Mr and Mrs Tonna (by reason of obtaining additional finance secured by way of mortgage over the Galston Property from ANZ and commencing proceedings against Mr Tonna and his tenant in NCAT seeking a termination of any lease or residential tenancy agreement and the payment of an amount of money allegedly in respect of rent) (see [74] of the further amended statement of claim).
As against Mr Mendonca, it is alleged that he: made a false and misleading representation to Mr Tonna on and from April 2015 (that litigation in which Mr Mendonca was involved had caused all his and Dr Mendonca's assets to be frozen and that the Galston Property could not be transferred back to Mr and Mrs Tonna as agreed ([56]-[57] of the further amended statement of claim)); failed to provide the Services (as defined) to Mr and Mrs Tonna at an acceptable standard of care and due diligence and failed to act in a manner which advanced their interests over his own interests or that of Dr Mendonca ([60]-[60A] of the further amended statement of claim); pursuant to the Competition and Consumer Act 2010 (Cth), Sch 2 - Australian Consumer Law (Australian Consumer Law) guaranteed to Mr and Mrs Tonna that the Services would be provided to Mr and Mrs Tonna at an acceptable level of care, skill and technical knowledge and that he would take all necessary steps to avoid loss or damage on behalf of them (see [62] of the further amended statement of claim); and breached his fiduciary duty and guarantees under the Australian Consumer Law in: failing to provide the Services at an acceptable level of skill and knowledge, failing to take all necessary steps to avoid loss or damage on behalf of Mr and Mrs Tonna; and acting in furtherance of his own and Dr Mendonca's financial interest to the detriment of Mr and Mrs Tonna (see [64] of the further amended statement of claim). Particulars of the allegation at [64] of the further amended statement of claim are: the making of the Representation and further representations (as to the freezing orders) (pleaded and particularised at [56] of the further amended statement of claim); the denial of the Agreement and the Trust Agreement; and the failure to take all reasonable steps to direct Dr Mendonca to transfer the Galston Property to Mr and Mrs Tonna.
As against Business Services, similar allegations are made to those against Mr Mendonca as to: failure to provide the Services at an acceptable level of care, skill and diligence in accordance with the Australian Consumer Law ([61] of the further amended statement of claim); a guarantee to the same effect as pleaded at [62] of the further amended statement of claim ([63] of the further amended statement of claim); and breach of fiduciary duty and the said guarantee by reference to the same matters alleged against Mr Mendonca ([64] of the further amended statement of claim).
At [65A] of the further amended statement of claim, breach of the alleged duty of care is pleaded against Mr Mendonca or Mr Mendonca and Business Services in that "in acting as agent for [Dr Mendonca] at the same time as providing the Services to Mr and Mrs Tonna" he or they acted in circumstances where Mr Mendonca preferred the interests of Dr Mendonca over the interests of Mr and Mrs Tonna to whom he (i.e., Mr Mendonca) owed the duty of care. This is particularised in the same way as the allegation at [64] of the further amended statement of claim.
At [66] of the further amended statement of claim, further breaches of the Australian Consumer Law are alleged against Mr Mendonca (namely that the representation made as set out at [56] "and following" was misleading and deceptive and a contravention of s 18 of the Australian Consumer Law).
It is alleged that, as a result of the actions of Dr Mendonca, Mr and Mrs Tonna have sustained financial loss and damage ([79] of the further amended statement of claim), particularised by reference to financial losses, losses on the increased value of the Galston Property arising from repairs and improvements made by them and loss of increased land value of the Galston Property over time; and that as a result of Dr Mendonca's breach of duty of the Trust and her refusal to transfer the Galston Property to Mr and Mrs Tonna, they have suffered financial loss and damage ([80] of the further amended statement of claim) particularised by reference to the loss of the Galston Property, loss of all financial contributions made by them with respect to the purchase of the Galston Property, loss of the value of improvements made by them to the Galston Property, loss of the rights to have the Galston Property transferred back to them and loss and damage (in the amount of $132,250) as a result of the further encumbrance of the Galston Property by the ANZ mortgage.
Thus, the essential allegations made against Mr Mendonca and/or Business Services (at [64] and [65A] of the further amended statement of claim), are of breach of various duties owed to Mr and Mrs Tonna (breaches of fiduciary duty, guarantees under the Australian Consumer Law and a duty of care at common law) by preferring the interest of his wife, Dr Mendonca, over the interests of Mr and Mrs Tonna: first, in the making of the various representations (in April, May and November 2015) in reliance on which it is alleged that Mr and Mrs Tonna ceased making payments to Dr Mendonca's account in respect of the mortgage and took no steps to achieve a transfer to them of the Galston Property; second, by denying the alleged agreement between Mr and Mrs Tonna and Dr Mendonca; and, third, by failing to take all reasonable steps to "direct" Dr Mendonca to transfer the Galston Property to Mr and Mrs Tonna.
However, there was some refinement (and particularly in the case of the claims against Mr Mendonca and Business Services, narrowing) of the pleaded case as the matter proceeded (see below).
In opening, Counsel for Mr and Mrs Tonna referred to an agreement that was brokered by Dr Mendonca (reflected in a series of emails passing between Mr Mendonca and, in particular, Mr Gough) and it was said that the agreement "was finally reached, explained to the parties and agreed to at a meeting between the parties" attended by Mr and Mrs Tonna and by Dr and Mr Mendonca. Counsel for Mr and Mrs Tonna made clear in opening that although the evidence of Mr and Mrs Tonna in their affidavits was that this meeting was on or about 24 January 2014, looking at the correspondence (and all of the evidence), the meeting where the agreement was finally reached occurred on 29 January 2014 and that there was only one meeting (the 29 January 2014 meeting) at which the agreement was finally reached and explained (T 3.13). It was said that the agreement was finally binding on 29 January 2014 (at T 3.28): … The agreement that was finally reached on the 29th was immediately binding. It was to be restated, in the terminology used in Masters v Cameron, in a form more full and precise, but no different in effect. But nevertheless, the parties left that meeting on 29 January, understanding and knowing that they had a binding agreement between the parties. Notwithstanding efforts by the lawyers to document the agreement, the agreement was not recorded in a deed signed by the parties. Mr and Mrs Tonna performed their obligations under the agreement. (See also at T 22.20; T 25.24; and later at T 26.28 when the 29 January 2014 meeting is identified as the "critical meeting".)
Dr Mendonca argues that two matters arise from this. First, it is said that this means that Mr and Mrs Tonna's pleaded case cannot succeed because that case depends on discussions between Mr Mendonca and Mr Tonna, not a discussion held directly with Dr Mendonca. (It is said that this position also impliedly admits that no agreement was reached prior to this time). Second, it is said that Mr and Mrs Tonna abandoned the opportunity to run the case that the Agreement was entered into during the 29 January 2014 meeting and it is submitted that any agreement entered on this day does not form part of their case.
The issue to which Counsel for Dr Mendonca has adverted in the second of those submissions arose as follows. After having opened the case on the basis that a binding agreement was concluded at the 29 January 2014 meeting, and after evidence had been adduced in chief (under compulsion of a subpoena to give evidence) from Mr Gough, on the second day of the hearing there was an application for leave further to amend the pleading in order to plead an agreement reached at the 29 January 2014 meeting. That application was opposed and I was informed, after some debate and after an adjournment to enable the parties to obtain instructions, that if leave to amend were to be granted then Dr Mendonca's instructions were to seek leave to file a cross-claim against Mr Gough (which, if also allowed, would inevitably have resulted in a vacation of the hearing dates). Ultimately, faced with the prospect of the vacation of the hearing dates, Mr and Mrs Tonna did not press the then proposed further amendment to the pleadings (the amendment sought in [38(a)] of the proposed further amended statement of claim) in that regard (although other amendments narrowing the scope of the claim against Mr Mendonca and his company were pressed, and not opposed).
The issue was then revisited in the course of the hearing on 28 May 2019, (see T 441ff), where Counsel for Mr and Mrs Tonna accepted that the case that there was an agreement entered into at the 29 January 2014 meeting at Matthews Folbigg was not pleaded (and was not being put) but that the agreement that it was pleaded had been reached (and on which Mr and Mrs Tonna sue) is an agreement that was concluded through the course of communications and conduct (the dealings between Mr Tonna, on behalf of he and Mrs Tonna, and Mr Mendonca for Dr Mendonca) from about December 2013 up to at least 23 January 2014 and including the emails particularised going through to 30 January 2014 (see the particulars to [38] of the further amended statement of claim, including at [28(h)(iii)]); and that, by 30 January 2014, the agreement had been wholly formed.
There was some debate as to the evidentiary significance of the events of the 29 January 2014 meeting (my understanding at that stage of the argument being put by Mr and Mrs Tonna was that the events of 29 January 2014 were confirmatory of the existence of the alleged Agreement, though not superseding it). Mr and Mrs Tonnas' version of events at that meeting was also relied upon as evidence of knowledge of the agency between Mr Mendonca and Dr Mendonca.
However, the position was clarified in that it was the position for Mr and Mrs Tonna that there case was not confined to an agreement reached before 29 January 2014; and that the conversations on 29 January 2014 are not relied upon as simply confirmatory of some earlier agreement.
In closing submissions, that was confirmed (at T 635.20): We don't say that the agreement was formed then and there [at the meeting on 29 January 2014]. But we do say all of the elements of the agreement were in place, were discussed, and Mr Gough was then going to go away and record that agreement in a deed in writing. That was the purpose of the meeting, so that Mr Gough could obtain the instructions. We think that that proposition is made good by the 8.01am email. …
And, at T 641.31: It's Mr and Mrs Tonna's position that by 30 January 2014 the deal had been done, that the parties had reached an agreement that, firstly, Dr Mendonca would obtain finance from the ANZ Bank to assist with the completion of the purchase of the property by Mr and Mrs Tonna. Mr and Mrs Tonna would contemporaneously transfer the property to Dr Mendonca. Dr Mendonca would hold the property for Mr and Mrs Tonna. Mr and Mrs Tonna would pay all the costs and expenses associated with the conveyances, firstly, the purchase by them and then the conveyance to Dr Mendonca, and would meet all expenses in relation to Dr Mendonca holding the property, which included mortgage repayments to the ANZ Bank. And, upon Mr and Mrs Tonna obtaining funds sufficient to pay out the ANZ Bank, which was expected to come from the sale of Schofields, Dr Mendonca would retransfer the property to them. She was a bare trustee holding the property on trust for Mr and Mrs Tonna pursuant to that arrangement which had been negotiated by Mr Mendonca for the parties and Dr Mendonca was aware of it. She was aware of these dealings and the objective circumstances, we say, strongly support our claim that she was aware and had knowledge of these dealings and Mr Mendonca's duel agency.
As to the case against Mr Mendonca (and Business Services), it was ultimately limited to a claim for breach of a duty of care (the Australian Consumer Law claim not being pressed), based on a finding that Mr Mendonca (and his company) acted for Mr and Mrs Tonna as their accountants and acted as their agent in relation to the finance and purchase of the Galston Property (T 655.35); and that they owed fiduciary duties and a duty of care; and breached that by failing to instruct and direct Dr Mendonca to re-convey the Galston Property (instead, stating to Dr Mendonca, according to her evidence, that Mr and Mrs Tonna were coming into a lot of money and would like to buy the Galston Property at market value (see Dr Mendonca's 19 March 2018 affidavit at [80]); and see T 657ff).

[64]

Summary of Issues in the Tonna Proceedings

By way of summary, in the Tonna Proceedings, Mr and Mrs Tonna allege that at all material times Mr Mendonca and/or Business Services acted as their agents and that Mr Mendonca acted as the agent of Dr Mendonca. They allege that Dr Mendonca holds the Galston Property as a trustee on trust for them; that in contravention of her obligations as trustee, Dr Mendonca has denied the existence of the Trust, refused to transfer the Galston Property to Mr and Mrs Tonna, retained the benefit of all moneys applied by Mr and Mrs Tonna towards the purchase and improvement of the Galston Property; and denied the existence of the Trust Agreement.
The claims brought by Mr and Mrs Tonna against Dr Mendonca are for: breaches of the Trust and the Agreement and for breaches of her duty as trustee; and, in the alternative, unjust enrichment. Mr and Mrs Tonna seek relief against Dr Mendonca in the form of: a declaration that Dr Mendonca holds her interest in the Galston Property on trust for Mr and Mrs Tonna and consequential orders; and in the alternative, damages. (It is noted by Dr Mendonca that, although damages are sought, the further amended statement of claim uses, at one point, the expression "unjust enrichment" and hence Dr Mendonca proceeded on the assumption that equitable compensation is also claimed.)
Dr Mendonca denies that Mr Mendonca acted as her agent. She admits that she has denied and continues to deny: the existence of the Trust; that Mr and Mrs Tonna have any beneficial interest in the Galston Property; and the existence of the Trust Agreement. She admits she has refused to transfer the Galston Property to Mr and Mrs Tonna in any manner and admits that she has retained the benefit of all moneys "(if any)" applied by Mr and Mrs Tonna towards the improvement of the Galston Property. She alleges that the loan repayments by Mr and Mrs Tonna were in fact payments of rent pursuant to the alleged Residential Tenancy Agreement.
Dr Mendonca submits that the sale to her of the Galston Property was the way that Mr and Mrs Tonna avoided being in breach of their first sale contract (and the risks that they had been advised about in respect of a claim by that third party for a failure to complete the contract for sale). It is submitted that, when Mr and Mrs Tonna were unable to complete the contract and were in a precarious position, with their deposit at risk, Dr Mendonca, with Mr and Mrs Tonna's consent, agreed to purchase the Galston Property; that Dr Mendonca did so and became, and remains, the registered proprietor of the Galston Property.
The case against Mr Mendonca and his company was substantially amended on the second day of the hearing.
Mr Mendonca points out that although it is alleged (at [66]-[69] of the further amended statement of claim) that Mr Mendonca engaged in misleading and deceptive conduct by making the Alleged Representations (as defined), no relief is sought in respect of that alleged conduct; and that there is no claim to recover loss or damage pursuant to ss 236 or 237 of the Australian Consumer Law.
Similarly, while there are allegations (at [61]-[65] of the further amended statement of claim) that Mr Mendonca breached consumer guarantees under the Australian Consumer Law, it is said that no cause of action is disclosed with respect to those allegations. It is noted that supply to a consumer of services involving a contravention of the statutory guarantees that those services will be rendered with due care and skill (s 60 of the Australian Consumer Law) and be reasonably fit for purpose (s 61 of the Australian Consumer Law) sounds in a monetary remedy only if an order for compensation is sought and obtained under s 267 of the Australian Consumer Law and that no such order is here sought, nor have Mr and Mrs Tonna pleaded or identified how the preconditions for compensation set out in that section are made out.
Finally, as to the allegations of breach of fiduciary duty (at [64] of the further amended statement of claim), it is noted that the remedy for breach of fiduciary duty, if proved, lies in equity (typically, the imposition of a constructive trust or equitable compensation); and that no such relief is sought in this case.
Mr Mendonca and Business Services: deny they acted as the agent of Mr and Mrs Tonna or Dr Mendonca in relation to the Galston Property; allege that the services they provided were limited to preparing personal tax returns and business activity statements for the financial years from 2011 to about 2014; and claim that Mr and Mrs Tonna caused or contributed to their claimed losses.

[67]

Mr and Mrs Tonna's submissions

It is noted that Mr Mendonca and Business Services deny that they acted as agent for Mr and Mrs Tonna in relation to the Galston Property; that Mr Mendonca pleads his role was strictly limited to a "mere liaison or spokesperson"; and that Dr Mendonca pleads that she understood in her dealings with Mr Mendonca that he was the agent of Mr and Mrs Tonna.
Mr and Mrs Tonna point to the following matters in this regard: that, since in or about 2005, Mr Mendonca (and since in or about 2013, Business Services) acted as the tax agents for Mr and Mrs Tonna; that Mr Mendonca provided his services as a tax agent through Business Services; that in 2013 and 2014, Mr Mendonca, with Mr Tonna's knowledge and consent, approached and negotiated with various financiers in an effort to obtain finance for Mr and Mrs Tonna to enable them to complete the purchase of the Galston Property; that Mr Mendonca dealt with lenders' representatives, gave instructions on behalf of Mr and Mrs Tonna to the vendor's real estate agent and to Matthews Folbigg, and gave advice to Mr and Mrs Tonna in relation to finance and the purchase of the Galston Property; and that Mr Mendonca charged for his services (and he and his company expressly stated that they were Mr Tonna's accountant).
It is said that when all attempts made by Mr Mendonca to obtain finance for Mr and Mrs Tonna were exhausted he introduced Dr Mendonca; and he proposed "plan D" which provided, in substance and effect, that the Galston Property would be conveyed to and held by Dr Mendonca as bare trustee and that Mr and Mrs Tonna would pay for all costs and expenses associated with the conveyance and re-conveyance of the Galston Property.
It is submitted that the relationship between Mr Mendonca and Business Services, on the one hand, and Mr and Mrs Tonna, on the other, was that of agent and principal, noting that a relationship of agency may arise expressly or may be implied as arising from the conduct or situation of the parties; and that the agency relationship is generally viewed as being fiduciary in nature; and that the agent is not permitted to put his or her duty in conflict with his or her interest unless the agent has first made to the principal full disclosure of the exact nature and extent of his or her interest and the principal has consented thereto. It is further noted that, depending on the nature of agency, it may also amount to a breach of fiduciary duty to act for more than one principal with competing interests (at least without full disclosure to each principal).
Mr and Mrs Tonna maintain that Mr Mendonca was "instrumental" in effecting the purchase of the Galston Property by them and its simultaneous conveyance to Dr Mendonca. They say that it would not, and could not, have been effected without him. It is submitted that the nature of their relationship and Mr Mendonca's communications with third parties establishes that he and/or his company acted as their agent.
Relevantly, for present purposes, it is said that Mr Mendonca: gave instructions to Matthews Folbigg both on behalf of Mr and Mrs Tonna on the one hand and on behalf of Dr Mendonca on the other; instructed ANZ on behalf of Dr Mendonca; and "orchestrated" the conveyance of the Galston Property to Dr Mendonca.
Mr and Mrs Tonna point to the fact that Dr Mendonca relies on the title to the Galston Property being registered in her name and does not acknowledge that Mr and Mrs Tonna have any interest in the Galston Property; and that she pleads that if Mr Mendonca proposed the Trust Agreement, requested Mr and Mrs Tonna to pay all insurance on the Galston Property, instructed Matthews Folbigg that documentation of the Trust Agreement was not required, he did so without her authority or instructions. It is noted that Dr Mendonca also pleads that she understood that, in her dealings with Mr Mendonca in respect of the Galston Property, Mr Mendonca was the agent for Mr and Mrs Tonna and says that in about April 2015 she requested Mr Mendonca, as the agent for Mr and Mrs Tonna, to give an indication of the price that they would be willing to pay to purchase the Galston Property from her.
Mr and Mrs Tonna note that an agency can be established by subsequent ratification; and that where there is no existing agency relationship or where an agency relationship exists but the agent does not act on behalf of the principal that is outside the agent's actual authority, the ramifications of an agency relationship can arise (and so it is said an agency is created) by way of ratification by the principal of the agent's otherwise unauthorised acts.
It is submitted that, as Mr Mendonca proposed and agreed to the Trust Agreement, orchestrated the conveyance of the Galston Property to Dr Mendonca and, as Dr Mendonca relies on those acts and asserts legal and beneficial ownership of the property, the relationship of principal and agency between Dr Mendonca and Mr Mendonca was constituted retrospectively by ratification.
In this regard, Dr Mendonca pleads that if Mr Mendonca proposed the Trust Agreement, requested Mr and Mrs Tonna to pay all insurance on the Galston Property, instructed Matthews Folbigg that documentation of the Trust Agreement was not required, he did so without her authority or instructions; and, again, that she understood that in her dealings with Mr Mendonca in respect of the Galston Property, Mr Mendonca was the agent for Mr and Mrs Tonna.
Mr and Mrs Tonna argue that the evidence in relation to the 29 January 2014 meeting with Mr Gough establishes that Dr Mendonca was aware of the proposal formulated by her husband and the essential terms of the Trust Agreement were known to her prior to her attendance at the meeting. It is said that this is so as there was no disagreement at the meeting and Dr Mendonca accepted that nothing that was said at the meeting came as a surprise to her save for Mr and Mrs Tonna being unable to obtain finance to complete their purchase of the Galston Property. Thus, it is submitted that the evidence establishes that Mr Mendonca was the authorised agent of Dr Mendonca.
Dr Mendonca's denial that Mr Mendonca acted as her agent is said to be: implausible; not corroborated by contemporaneous documents; and contrary to Mr Mendonca's attendance with her at the two meetings with Mr Gough and the two meetings she had with a representative of ANZ on 29 and 30 January 2014.

[68]

Dr Mendonca's submissions

As to agency and ratification, it is noted that in Equiticorp Finance (In Liq) v Bank of New Zealand (1993) 32 NSWLR 50 (Equiticorp) (at 132), the court said: Actual authority arises where a principal grants, and an agent accepts, authority for the agent to perform specific tasks on behalf of the principal - in short there must be a consensual agreement between the principal and agent. Notwithstanding the absence of an express agreement, the parties, that is, the principal and agent, may conduct themselves in such a way that it is proper to infer that the relevant authority has been conferred on the agent. Accordingly, where the question is whether the agent has implied authority to act in a particular way the court directs its attention to the conduct of the parties in order to decide whether the inference of authority should be drawn. Ostensible authority is quite different. The question then is whether the principal has held out the agent as having to act on its behalf. …
In Taylor v Smith (1926) 38 CLR 48 at 59; [1926] HCA 16 (Taylor v Smith), Higgins J said: There is no sufficient proof that the defendant consciously sanctioned the act of Serle in making the payment - no proof that he confirmed or ratified this act of Serle. Apart from estoppel - and there is no estoppel here - I cannot conceive of authority being given by a principal to an agent, either prospectively or retrospectively (by ratification), unless it be given consciously … But it is also necessary for ratification that at the time thereof the alleged ratifier should have full knowledge of all the material circumstances under which the act was done; and here the defendant did not know that Serle had made the payment under the error… . [references omitted]
Emphasis is placed by Dr Mendonca on the fact that nowhere do Mr and Mrs Tonna give evidence that Mr Mendonca said words to the effect "I have spoken with Dr Mendonca and she says that she agrees"; nor do the emails sent by Mr Mendonca refer to having spoken with Dr Mendonca before they were sent (though, to my mind, the emails outlined above at [73], [170] and [178] for example imply it). It is noted that Mr and Mrs Tonna have not put forward any documents, such as emails between Mr Mendonca and Dr Mendonca, that show that Dr Mendonca was being informed of any of the matters that are alleged to give rise to the Agreement (despite the very large number of emails Mr Mendonca was sending to others, including whilst he was in India).
It is submitted that Dr Mendonca's denial of any agency arrangement with Mr Mendonca is consistent with the objective evidence that Dr Mendonca personally went to ANZ, visited the Galston Property and attended the offices of Matthews Folbigg on 29 January 2014 (the most likely day of the first meeting with Mr and Mrs Tonna), 30 January 2014 (the day the second contract for sale was signed) and 24 February 2014 (the day she and Mr and Mrs Tonna attended to receive a copy of the proposed Agreement).
Dr Mendonca says that the closest Mr and Mrs Tonna have been able to point to is an implied agency by reason of an email address (which is not hers) and the contents of the emails (which were never sent to Dr Mendonca, and as to which there is no evidence she ever saw them or discussed them with Mr Mendonca before they were sent) and Dr Mendonca signing a form that she provided to Mr Mendonca to allow him to communicate with ANZ. It is submitted that providing him with that limited authority did not mean, nor could it mean that he then had authority to communicate with Mr Tonna in the manner alleged.
Furthermore, it is submitted that, objectively viewed, the emails in question contain "ludicrous propositions" such as Dr Mendonca going as guarantor for Mr and Mrs Tonna "even though they had no ability to finance the purchase at the time of the emails" (disputed by Mr Tonna) and Dr Mendonca being willing to sign agreements with "anything" contained in them. It is said that the absurdity of these matters is compounded by the fact that: the sums involved are significant; as put to Dr Mendonca in cross-examination, she is an intelligent woman; and Dr Mendonca did not know Mr and Mrs Tonna.
Pausing here, the emails do contain some extraordinary propositions (including at one stage the suggestion that the solicitor would personally indemnify the bank - see above) and were couched in increasingly emotive terms. Relevantly, however, the proposal that was the basis on which the transaction went forward was a far less ludicrous one - it involved Dr Mendonca acquiring an investment property (which she said she wanted to do and in an area she said was acceptable to her) whether as a short term proposition (until Mr and Mrs Tonna obtained funds to buy the Galston Property back) or outright; and in circumstances where the shortfall in her funding was covered by contributions from Mr and Mrs Tonna and they were to meet the expenses in relation to the Galston Property
As to ratification, it is noted that in order to ratify the unauthorised act of an agent, the principal must have done so by language or conduct that was unequivocal. It is submitted that here there is no language or conduct that can be described as unequivocal in that regard.
Dr Mendonca argues that the only matter that can be pointed to, in respect of ratification, is Dr Mendonca entering into the second contract for sale, but that that step (which she says was on terms inconsistent with the alleged Agreement) is indicative that Dr Mendonca has not ratified Mr Mendonca's alleged discussions that Dr Mendonca was going to enter into the Agreement. It is submitted that Dr Mendonca's subsequent actions are also inconsistent with the concept of agency in that she personally took all of the following steps: approached Ray White Real Estate when she formed the view that "her tenant", Mr Tonna, had breached the lease; wrote to Mr Nielsen in a manner consistent with asserting ownership of the Galston Property; and contacted Mr Nielsen over the telephone and asserted ownership (though Mr Nielsen's affidavit evidence is that Mr Mendonca called first and stated on the phone that his name was "Gerard Mendonca"), approached the NSW Police asserting ownership and brought applications in NCAT asserting ownership and to evict Mr Nielsen and Mr Tonna from the Galston Property.

[69]

Determination as to whether there was an agency relationship

I consider that it has been established on the balance of probabilities that Mr Mendonca was acting as an agent for his wife, Dr Mendonca, in relation to her purchase of the Galston Property from Mr and Mrs Tonna.
There is no longer an historically presumed agency relationship between husband and wife (cf Garcia v National Australia Bank Ltd (1998) 194 CLR 395; [1998] HCA 48 at [21]). (See the latest edition of Bowstead and Reynolds on Agency (21st ed, 2017, Sweet & Maxwell) where it is said that the idea of presumed authority arising because of the husband and wife relationship is no longer considered appropriate or of any force as "one spouse has no usual authority to bind the other in contract" (see at [3-043]).)
There are two essential elements of an agency relationship (see G E Dal Pont (ed), Law of Agency (3rd ed, 2014, LexisNexis Butterworths) (Law of Agency)), those being: first, the consent (or assent) of both principal and agent; and second, the authority given to the agent by the principal to act on the principal's behalf (see at [4.3]). (Arguably, there is a third element being a principal's control over the agent's actions; however, in Australian law, the alleged control element is "neither crucial to agency nor is it independent of the authority element" - at [4.3].)
Law of Agency states that "consent (or assent) requires some acceptance by the agent of a mandate, whether or not formal or contractual, from the principal" (at [4.4]). The principal "must intend that the agent will act for him or her and the agent must intend to accept the authority and act on it" (at [4.4]). An intention to create an agency relationship "may be manifested simply by placing another in a situation in which, according to the ordinary rules of law, or according to the ordinary usages of mankind, that other is understood to represent and act for the person who has so placed him" (see United Equipment Pty Ltd v Australian Portable Buildings Pty Ltd (No 2) [2017] WADC 73 citing Pole v Leask (1863) 8 LT 645 at 648).
As to the first element of consent, in Pola v Commonwealth Bank of Australia (Federal Court, Sundberg J, 19 December 1997, unrep) (Pola), Sundberg J stated (at 12) that "the consent of the principal may be implied where he places another in such a situation that a reasonable man would understand the other to have the principal's authority to act on his behalf, or where the principal's words or conduct, coming to the knowledge of the agent, are such as to lead to the reasonable inference that he is authorising the agent to act for him".
It is significant in my opinion that Dr Mendonca, at the 29 January 2014 meeting with Mr and Mrs Tonna was prepared to proceed on the basis of an indicative approval of approximately a $1 million loan from ANZ based on the information that Mr Mendonca had provided to ANZ. Dr Mendonca signed the relevant applicant guarantor declaration form and provided it to Mr Mendonca, arming him with the ability to lodge the application on her behalf. She made no steps herself to make any appointment prior to the meetings with Mr Gough or ANZ, nor did she seemingly take any steps independently herself to progress the transaction (or to inform herself about the relevant details of the transaction).
It is accepted by Dr Mendonca that she either authorised or held Mr Mendonca out as being able to communicate with ANZ (see T 681.18) but it was not accepted that this went as far as an acceptance that he was entitled to communicate with ANZ on her behalf (T 681.23) and it was not accepted that she had either authorised or held Mr Mendonca out as being able to lodge an application for finance with ANZ (T 681.10).
I would accept that simply delivering a signed form to a bank on behalf of a person (see T 684.23 and Vukmirica v Betyounan [2008] NSWCA 16 (Vukmirica v Betyounan)), or driving or accompanying that person to the bank to find out what amount the bank might be prepared to lend that person, would not amount to a general holding out or consent to an agency relationship in relation to all transactions. And I also accept that Dr Mendonca herself signed the relevant loan documents and directions (i.e., there were direct communications between Dr Mendonca on the one hand and ANZ on the other) and Mr Mendonca's role in relation to those was seemingly no more than facilitative. However, here the question is whether Dr Mendonca effectively held out Mr Mendonca as authorised to represent her in the negotiations with Mr and Mrs Tonna and it seems to me abundantly clear that she did so (through her lawyers who were also Mr and Mrs Tonna's lawyers) largely through the communications made by Mr Mendonca purportedly on her behalf (and that she in effect adopted by her participation without demur in the meetings on 29 January and 30 January 2014).
In relation to the second element of authority, a person can give another actual authority to act on his or her behalf as his or her agent. Actual authority can be express or implied. In Vukmirica v Betyounan, the Court of Appeal explained (at [50]) that actual authority may be found from the putative principal and agent so conducting themselves that it should be inferred (see for example Equiticorp at 132 per Clarke and Cripps JJA).
In Vukmirica v Betyounan, a solicitor had agreed, at the request of the husband, to act on behalf of a husband and his wife in a borrowing transaction. The solicitor submitted that because her retainer to act on behalf of the wife was through the agency of the husband, the husband was therefore the wife's agent for the purposes of the whole of the retainer, including directing how the money advanced was to be paid. This was rejected by Giles JA, with whom McColl JA and Bell JA (as her Honour then was) agreed. Relevantly, a submission that actual or ostensible authority was established by the wife's return of signed transactional documents through the husband was also rejected (see at [50]-[51]). It was stated (at [50]) that such evidence fell short of authority to direct how the loan was to be paid and that "[u]se of [the husband] as a courier was not a conferring of general authority" because the fact "that one vendor executes a contract and leaves it with another to deliver it to their solicitor does not convey anything about the authority of the second to instruct the solicitors "regarding completion of the sale"".
Further, the court held that the fact that the wife failed to advise the solicitor that the husband lacked authority "regarding any aspect of the completion" did not suggest that he had authority to do so as there had been no occasion for her to advise that he did not.
In Trajkovski v Simpson [2019] NSWCA 52, it was held (by Basten JA and Sackville AJA, Brereton JJA agreeing) that a husband had not been clothed with authority to give instructions to a solicitor as to the disbursement of the proceeds of sale of a property on behalf of his wife (the appellant). In that case, it was noted that a person may be authorised to retain a solicitor on behalf of other parties to a transaction, yet not have authority to give instructions to the solicitor on behalf of those other parties (see at [113]).
Moreover, authority for an agent to act on the behalf of a person can be inferred from "the words of the parties and the circumstances of the particular case, and may be implied from prior habits or from a course of dealing between the parties where the agent has repeatedly been permitted to perform similar acts in the past" (Pola citing Busby v Walker (1956) 84 So 2d 304).
Jordan CJ explained in Bonette v Woolworths Ltd (1937) 37 SR (NSW) 142 (at 150) that: Evidence that a person is purporting to do acts on behalf of a principal in some capacity in such circumstances that the knowledge and approval of the principal may fairly be inferred is evidence that the principal has authorised him to act in the particular capacity. If there is evidence justifying such an inference, it justifies the further inference that the person has authority to do such acts as would be done, as a matter of ordinary business practice, by a person acting in such a capacity.
In Picwoods Pty Ltd v Panagopoulos [2004] NSWSC 978, an issue in the proceedings was whether "the first defendant purported to enter into the alleged agreement for himself and as agent for the second defendant [his wife] and, if he did, whether he had authority to do so".
White J, as his Honour then was, held that, were it necessary to decide the point, his Honour would have been "inclined to the view that it should be implied from the course of dealing and their prior habits that the first defendant did have authority to bind his wife to an agreement" and that it was clear that the wife "as well as her husband was bound [by] what he had then agreed" (at [83]). However, his Honour stated that "although the [husband] may have such authority, it does not appear to me that he purported to exercise it" (at [85]) because he had only initialled the relevant document with his own initials and did not purport to initial it also on his wife's behalf. His Honour noted (at [88]) that "[i]t does not follow that because A has authority to contract on behalf of himself and B, that he does so when he signs a document without expressly exercising that authority. In each case it is a question of fact".
Ostensible authority can also be established in certain circumstances. According to Law on Agency (at [20.2]): The doctrine of ostensible authority dictates that a principal may be liable under a contract effected by a person who lacks actual authority from the principal to effect the contract, but on whom the principal has, by his or her words or actions, conferred 'apparent' or 'ostensible' authority to do so.
What is required to give rise to a situation of ostensible authority, is a representation, made by the principal, which is intended to be, and is in fact, acted upon by the third party, that the agent has authority to enter into a contract on behalf of the principal of a kind within the scope of the agent's apparent authority, so as to render the principal liable to perform any obligations imposed by such a contract (see Diplock LJ in Freeman & Lockyer (a firm) v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 at 503; [1964] 2 WLR 618 (Freeman & Lockyer v Buckhurst)).
Diplock LJ continued (at 503): … To the relationship so created the agent is a stranger. He need not be (although he generally is) aware of the existence of the representation but he must not purport to make the agreement as principal himself. The representation, when acted on by the contractor by entering into a contract with the agent, operates as an estoppel, preventing the principal from asserting that he is not bound by the contract. It is irrelevant whether the agent had actual authority to enter into the contract.
In Caxton Street Agencies Pty Ltd v Korkidas [2002] QSC 210, a contract relating to the sale of a property had been signed by the husband on his own behalf and also on his wife's behalf. In dismissing an application for summary judgment on a claim by the plaintiff for specific performance of the contract, Holmes J (as her Honour then was) stated (at [27]): It is trite law to say that it is not enough, in order to establish ostensible authority, that the agent makes a representation of authority. That representation, by words or conduct, must emanate from the principal. Clearly, the mere facts of the first defendant's being married to the second defendant, or registered as proprietor with her of the subject land, cannot amount to a representation of his having authority. The feature crucial to the pleading of ostensible authority is that the second defendant had "the apparent management, control and decision making in respect of the land". But that seems to me no better than a re-alleging of actual authority, with, tagged on, an assertion that if the first defendant had such authority, the second defendant must have known he would look to others as if he did. … [my emphasis and references omitted]
The onus of establishing ostensible authority is on the party making the claim. As estoppel is the foundation for ostensible authority, the elements of estoppel must be established - i.e., a representation which he or she relied upon; to his or her detriment; such that it is unjust for the person making the representation to resile from it (see Law of Agency at [20.8]).
It is the principal who must make a representation or 'holding out' that gives rise to the ostensible authority. The representation can arise from a course of dealing.
Denning LJ in Central Newbury Car Auctions Ltd v Unity Finance Ltd [1957] 1 QB 371 said (at 379-80): … [Y]ou start with an innocent person who has been led to believe in a state of affairs which he takes to be correct (in this case the purchaser has been led to believe that the rogue was the owner of the car) and has acted upon it. Then you ask yourself how has this innocent person been led into this belief. If it has been brought about by the conduct of another (in this case by the conduct of the original owner), who, though not solely responsible, nevertheless has contributed so large a part to it that it would be unfair or unjust to allow him to depart from it, then he is not allowed to go back on it as to prejudice the innocent person who has acted on it … [T]he basis of estoppel is that it would be unfair or unjust to allow a party to depart from a particular state of affairs which another has taken to be correct.
In relation to the second element (authority), I have concluded that Dr Mendonca through her actions impliedly or ostensibly (by making a representation through the course of dealing adopted) held out that Mr Mendonca had authority to act as her agent in the discussions with Mr and Mrs Tonna.
In Grefeld v Grefeld [2012] FamCAFC 71; (2012) FLC 93-508, a husband had taken funds from his sister's bank account in Germany (under the terms of a power of attorney) and had purchased a property in his wife's name with those funds. In the course of property settlement proceedings between the husband and wife, to which the sister had been joined, the sister claimed that the wife held the property on trust for her. On appeal, the wife argued that the trial judge erred in holding that the property was held on resulting or constructive trust for the sister by the wife. In response, the sister argued that the wife acquired legal title in the property through the agency of her husband, who: negotiated the purchase; instructed the solicitors to act on the purchase; executed the contract on behalf of the wife; and made all of the arrangements for use of the sister's funds to pay for the purchase. It was said that the wife only knew the husband was arranging the acquisition of the property in her name, and approved of him so doing.
The court stated (at [76]-[77] and [100]) that: A principal is bound by the acts of an agent done within the scope of the agent's actual or ostensible authority. As against a third party, the law imputes to a principal knowledge gained by his/her agent in the course of, and which is material to, a transaction in which the agent is employed on behalf of the principal, under such circumstances that it is the duty of the agent to communicate it to the principal. The principal is precluded from relying upon personal ignorance of that knowledge (see Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 658-659; Watts, P. G and Reynolds, F. M. B, Bowstead & Reynolds on Agency, (2010, 19th ed), Sweet & Maxwell, London, paras 8-207(1), 8-207(2)). Accordingly, although the wife was ignorant of the use of the sister's money, the husband's knowledge of that material fact is imputed to the wife by reason of the husband acting as her agent. … … [T]he husband used the funds he acquired from the sister in his capacity as agent for the wife as principal. When an agent acts, even beyond the scope of actual or ostensible authority, by obtaining money or property of a third party, in this case the sister, and the money or property is received or applied for the benefit of the principal, in this case the wife, the principal becomes liable to the extent of the benefit received (see Bowstead & Reynolds on Agency, paras 8-201, 8-203(1), 8-203(2); Halsbury's Laws of Australia, Vol 1(2), Butterworths, para 15-260).
Eade v Vogiazopoulos (No 2) [1999] 3 VR 889 involved a mortgage that was given over the family home of a husband and wife by the husband as security for a loan to finance their purchase of a business. The husband forged the wife's signature on the mortgage and got his wife to sign an ancillary statutory declaration that referred to a mortgage affecting their home but omitted details of the mortgage. After default under the mortgage, a variation of mortgage was executed, and the husband again forged his wife's signature. The wife only became aware of the mortgage when the mortgagee commenced proceedings for possession.
The evidence was that the husband tended to assume responsibility in the family for financial matters and generally the wife did what he asked including signing documents. The wife knew of the proposed purchase of the business but did not know that the purchase money would be borrowed. A solicitor purported to act for both the husband and wife in the transaction but took instructions only from the husband and "did not consult the wife to confirm his instructions to act for her or to ensure that the mortgage documents were duly executed by her".
Smith J held the neither actual nor ostensible authority for the husband to act on the wife's behalf could be established. His Honour accepted that, the husband was accustomed to taking responsibility for all financial decisions, and that the wife was accustomed to trusting her husband, but held that nevertheless there had not been a complete delegation of authority to the husband and was satisfied on the evidence that it was not known to the other parties in the proceedings that the husband tended to assume responsibility in the family about financial matters and that generally the wife did what he asked including executing documents. His Honour stated that "at most, the wife could only be said to have held out her husband as having authority to handle negotiations" (at 889).
In the present case, Dr Mendonca effectively left it to her husband to make the arrangements in relation to this transaction. It is not, in my opinion, an answer to say that Mr Mendonca was heavily involved in the transaction because he is the agent for Mr and Mrs Tonna (see T 684.50), although of course he was. However, he was also proffering Dr Mendonca's involvement in the transaction and, though even accepting that she may not have been privy to the emails, she was well aware that this was being proposed (at the latest by the meetings on 29 and 30 January 2014) and she did not disabuse anyone at those meetings of the notion that her husband was able to represent her in the arrangements there being discussed. Mr Mendonca's email after the settlement of the purpose, thanking his wife for her "co-operation" is telling in this regard. Had Mr Mendonca been on a frolic of his own up to the 29 January 2014 meeting, there was nothing to stop Dr Mendonca putting the record straight in that meeting and thus from that point on, even if Mr Mendonca did not have consent and authority from his wife to act as her agent, Dr Mendonca can be seen to have permitted him to hold himself out as able to speak for her.
As to ratification, for a principal to ratify the actions of the purported agent, he or she must have "full knowledge of all material circumstances" (Williams Group Australia Pty Ltd v Crocker [2015] NSWSC 1907; Williams Group Australia Pty Ltd v Crocker [2016] NSWCA 265 (Williams v Crocker); Petersen v Moloney (1951) 84 CLR 91 at 101; [1951] HCA 57). In Taylor v Smith, Knox CJ accepted (at 54) that, in the case of an agent exceeding its authority, ratification may be implied from silence or acquiescence of the principal. However, Higgins J, agreeing with Knox CJ, emphasised (at 59) that: … it is also, necessary, for ratification that at the time thereof the alleged ratifier should have full knowledge of all the material circumstances under which the act was done ... [references omitted]
In Leybourne v Permanent Custodians Ltd [2010] NSWCA 78 (at [134] per Giles JA, Tobias JA and Sackville AJA) it was also said that: There must be full knowledge of all the material circumstances in which the act was done, unless the principal intends to ratify and take the risk whatever the circumstances (for example, Bremner v Sinclair NSWCA, 3 November 1998; (2001) ANZ Conv R 29 at [32] per Campbell J). The extent of knowledge necessary depends on the particular facts. It should be enough knowledge to decide whether or not to adopt the unauthorised act (Bremner v Sinclair at [32]).
The Court of Appeal in Williams v Crocker said (at [65]): … for there to be a finding of ostensible authority in the present case, it would be necessary for the putative principal (Mr Crocker) in some fashion to have held out to Williams that whoever placed his electronic signature on the relevant documents (and forwarded them to Williams) [i.e., the putative agent] was authorised by him to do so. The representation need not have been communicated directly (and there is force in the submission that a direct communication would have established actual authority). It could, in an appropriate case, arise out of some omission on his part. However, there needs to have been a representation of authority by Mr Crocker (not the agent who applied the electronic signature), on which Williams relied when supplying goods to IDH on credit, for Mr Crocker to be bound by the guarantee..
It must have been very clear to Dr Mendonca at the 29 January 2014 meeting (unless she had abandoned all decision-making to her husband - which she denies; or was taking no part in the discussion at all - which is not what I understand her evidence to be) that what was contemplated in that discussion was that she would acquire the Galston Property and that, at some point in the future (relevantly, with a proposed sunset date of 30 June 2015), the arrangement would be that Mr and Mrs Tonna would buy it back or it would be transferred back (whichever, of the two ways in which the discussion has been put, was how it was then framed).
It is hard to see how, at least by the conclusion of that meeting, Dr Mendonca could honestly have thought that the arrangement being contemplated was one in which she would acquire an investment property in which Mr and Mrs Tonna would have no future interest (and with which she would be free to deal from the day of its acquisition), i.e., one in which she would take the Galston Property "off their hands" for good. That would make no sense in relation to the discussion that Mr Tonna was to make all decisions in relation to the Galston Property and bear all the expenses. Indeed, if that were in fact the position Dr Mendonca considered to be the case during the course of that meeting (that she was acquiring the property outright and Mr and Mrs Tonna would have no entitlement to acquire the property at a later time, on whatever basis or terms might have been agreed) then this would raise the spectre of equitable fraud because it is abundantly clear that, whatever else was being discussed, there was discussion as to an arrangement whereby at some point in the future Mr and Mrs Tonna would have some right or entitlement either to buy the Galston Property back or have it transferred back to them; and if she was of the view that there would be no such right or entitlement it was surely incumbent on Dr Mendonca to disabuse them of that misapprehension.
That, of course, highlights the difficulty to be considered in the second of the issues for determination - namely, whether any agreement (in principle or otherwise) was ultimately reached; and was it intended to be immediately binding (in the absence of writing). However, for the purposes of the first issue, I am persuaded that Mr Mendonca was held out by Dr Mendonca as being authorised (at least in a limited capacity) to act or represent Dr Mendonca in the ongoing discussions in relation to the purchase of the Galston Property, as her agent or representative. The issue of ratification therefore does not arise directly for determination.

[71]

Mr and Mrs Tonna's submissions

Mr and Mrs Tonna submit that the facts in the present case give rise to an actual express trust. Reference is made to Kauter v Hilton (1953) 90 CLR 86; [1953] HCA 95 (Kauter v Hilton) where Dixon CJ, Williams and Fullagar JJ referred to the "established rule that in order to constitute a trust the intention to do so must be clear and that it must also be clear what property is subject to the trust and reasonably certain who are the beneficiaries".
In addition to the four elements required for a trust (those being an identified trustee; one or more beneficiaries or a charitable purpose; trust property; and an equitable obligation that binds the trust property - see Muschinski v Dodds (1985) 160 CLR 583 at 613-614; [1985] HCA 78 (Muschinski v Dodds)) for an express trust to come into existence there must be certainty of intention on the part of the settlor to create the trust (assessed subjectively, albeit that reference can be made to objective circumstances - see Hyhonie Holdings Pty Ltd v Leroy [2004] NSWCA 72 at [43]; White v Shortall (2006) 68 NSWLR 650; [2006] NSWSC 1379 (White v Shortall)); certainty of subject matter, so that the trust property is clearly defined; and certainty of object, that is certainty as to who are the beneficiaries of the trust (see Kauter v Hilton at 97; White v Shortall).
It is submitted that the plan proposed by Mr Mendonca and agreed to by Mr and Mrs Tonna, and implemented by the parties, is sufficiently certain to amount to a declaration of trust on the part of Dr Mendonca. It is said that, by 30 January 2014, the parties had reached finality in arranging all the terms upon which the Galston Property would be transferred to Dr Mendonca and their conduct manifested an intention to be immediately bound to the performance of those terms. Mr and Mrs Tonna maintain that the evidence establishes that it was proposed to have the terms of the Trust Agreement restated in a form which would be fuller or more precise but not different in effect (see Masters v Cameron (1954) 91 CLR 353 at 360; [1954] HCA 72).
Mr and Mrs Tonna say that they transferred the Galston Property to Dr Mendonca to be held by her on the terms of the Trust Agreement. Mr and Mrs Tonna point to emails in which they maintain that Mr Mendonca effectively stated that Dr Mendonca was holding the Galston Property as bare trustee.
It is submitted that if an enforceable agreement to re-convey the Galston Property to Mr and Mrs Tonna on the terms of the Trust Agreement has been established, then this would give rise to a constructive trust in favour or Mr and Mrs Tonna over the Galston Property, pointing to the following statement in Varma v Varma [2010] NSWSC 786 at [497]: The remedy of a constructive trust is an equitable response to make good various equitable claims, is not confined to the circumstances of breach of fiduciary duty (albeit it is commonly a breach of this duty, that a constructive trust responds to; Muschinksi, per Deane J at [10], see Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41, at [96]) and can arise as a response to a claim based on promissory estoppel (Giumelli v Giumelli [1999] HCA 10; 196 CLR 101, at [3]; Sullivan v Sullivan). Indeed, it has been recognised that there is no reason to deny the availability of a constructive trust in any case where some principle of law or equity calls for the imposition upon the legal owner of property, regardless of actual or presumed agreement or intention, of the obligation to hold or apply the property for the benefit of another (Muschinksi, per Deane J at [10]).
Mr and Mrs Tonna note that the categories of cases in which constructive trusts arises include cases where there appears to be an express trust which fails to comply with formalities as to writing but is nevertheless enforced on the footing that it would be fraudulent for the alleged trustee to set up non-compliance with statutory requirements as a defence. It is accepted that in some cases (see Bannister v Bannister [1948] 2 All ER 133), the trusts are described as constructive but Mr and Mrs Tonna argue that the better view is that "the removal of fraudulent reliance on the statute clears the way to show an express trust was intended".

[72]

Dr Mendonca's submissions

Dr Mendonca submits that the alleged Agreement was never reached. In that regard, it is submitted that the inability of Mr and Mrs Tonna, over the course of the litigation and even now, to point to a specific date when the Agreement was formed and concluded tells against the concept that an agreement (particularly of the magnitude and impact here propounded) was concluded (and noting that it is not part of Mr and Mrs Tonna's case that the alleged Agreement was concluded at the 29 January 2014 meeting itself).
As to the clarity required of terms of an alleged agreement, reference is made to BM Sydney Building Materials Pty Ltd v AWT Building Group (Aust) Pty Ltd; BM Sydney Building Materials Pty Ltd v AWT Building Pty Ltd; Harpro Group Pty Ltd v BM Sydney Building Materials Pty Ltd [2019] NSWSC 421 (BM Sydney Building Materials) where Hammerschlag J observed (at [51]): Where a party seeks to rely upon spoken words as a foundation for a cause of action the conversation must be proved to the reasonable satisfaction of the Court. This means that the Court must feel an actual persuasion of its occurrence or its existence. In the absence of some reliable contemporaneous record or other satisfactory corroboration, a party may face serious difficulties of proof. Such reasonable satisfaction is not a state of mind that is obtained or established independently of the nature and consequences of the fact or facts to be proved. The seriousness of an allegation made, inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question of whether the issue has been proved to the reasonable satisfaction of the Court. Reasonable satisfaction should not be produced by inexact proofs, indefinite testimony, or indirect inferences: see Briginshaw v Briginshaw (1938) 60 CLR 336 at 362; Helton v Allen (1940) 63 CLR 691 at 712; Rejfek v McElroy (1965) 112 CLR 517 at 521; Watson v Foxman (1995) 49 NSWLR 315 at 319.
Mr and Mrs Tonna in answer to this point to what was said by Heydon JA, as his Honour then was, in Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61 (at [75]), citing the observation in earlier authority that "[t]he acid test … is whether, viewed as a whole and objectively from the point of view of reasonable persons on both sides, the dealings show a concluded bargain".
Dr Mendonca points to a number of matters that are said objectively to point against the conclusion that an agreement was reached, including that: the transactions involved a significant sum of money for the participants (Dr Mendonca incurring a personal liability in excess of $1 million, said to be the limit of what a lender was prepared to lend Dr Mendonca; Mr and Mrs Tonna having been unable to secure finance from a number of lenders, including second tier short term lenders, even though Mr Tonna maintained that he could afford the sum of $1 million); and that the alleged agreement required Dr Mendonca "to take on all the risk and receive no reward" (not being paid any consideration for entry into the alleged Agreement).
As to that last submission, true it is that on one perspective there was little benefit to Dr Mendonca from entry into the proposed arrangement if it was on the terms for which Mr and Mrs Tonna contend. However, that is but one of the unusual features of this transaction. Moreover, the impression to be gained from the email communications of Mr Mendonca (albeit that there is no evidence that these were shown to or discussed with Dr Mendonca) is that the arrangement was perceived to be in effect a short term arrangement whereby the Galston Property would be acquired and held pending the completion of the sale of the Schofields Property and as part of Mr Mendonca's desire to assist his clients to get the deal "over the line". In those circumstances, the absence of consideration or reward for Dr Mendonca to enter into the arrangements is not of itself as significant as it might otherwise have been (and the gratitude expressed by Mr Mendonca for his wife's "co-operation" is consistent with the arrangement being one in which she was providing some temporary accommodation or assistance at Mr Mendonca's request for the benefit of his clients - to whom he was charging fees for his assistance).
The next factor to which Dr Mendonca points is that experienced lawyers were involved during the relevant events of the transaction (retained by "at least" Mr and Mrs Tonna) and repeatedly consulted by Mr Tonna, both over the telephone and in person. Emphasis is placed on the fact that those lawyers "repeatedly and emphatically" urged Mr and Mrs Tonnas well before the 29 January 2014 meeting to instruct them to record whatever agreement they had with Dr Mendonca in writing; and that did not happen. It is submitted that the lack of any explanation by Mr and Mrs Tonna as to why this was not done is telling in circumstances where the transaction involved a significant amount of money and where they had previously been the subject of a fraud by a family member and Dr Mendonca was, in effect, a stranger to Mr and Mrs Tonna (noting that Mrs Tonna gave evidence in cross-examination as to her concern in relation to the transaction in January 2014 that Dr Mendonca might "do something").
Dr Mendonca points to the fact that the written agreement that was entered into (the second contract of sale), prepared by the lawyers, was detailed and included a number of special conditions (not being terms that are "back to back" with the first contract for sale). Dr Mendonca attaches significance to the fact that none of the terms of the alleged Trust or of the alleged Agreement is mentioned in the second contract for sale (and that many terms in the second contract for sale are to the opposite effect of the terms of the alleged Agreement); and, when compared with the first contract for sale, increase the burdens on the purchaser (Dr Mendonca) and remove some of the rights previously enjoyed by the purchaser (Mr and Mrs Tonna). It is submitted (see T 629) that it is improbable that Mr Gough would draft the second contract of sale without reference to the alleged Agreement had it been reached; and it is submitted that it is highly likely that at the meeting when the second contract of sale was signed he explained its terms.
It is noted that the lawyers retained by Mr and Mrs Tonna did not prepare a Trust Agreement; rather, what was prepared was a Put and Call Option Deed that none of the parties was prepared to sign; and that all they signed was an execution page (of a document described as a deed and bearing a footer "PUT & CALL OPTION" that appears to have been at least 16 pages long) but that this cannot have been the version of the document seemingly prepared and sent in February 2014 (as that document, at p 1612 of the Court Book (Volume 4), has the signature page at page 14).
Dr Mendonca also calls in aid the fact that, although they were dealing with various lawyers throughout 2014, Mr and Mrs Tonna made no complaint to those lawyers or asked those lawyers to take steps to protect their interests (even when faced with the situation that Dr Mendonca was refusing to transfer the Galston Property back to them).
It is submitted that those matters and the absence of clear language in the emails on which Mr and Mrs Tonna place reliance, and the uncertainty as to the words spoken during the 29 January 2014 meeting, mean that an intention to create a trust cannot clearly be discerned in this case.
In that regard, as to the emails passing between Mr Mendonca and Mr Tonna between 24 and early 29 January 2014, it is said that it is clear that Mr Mendonca and Mr Tonna "were not seeing matters in the same way" and were not seeing matters in a way that enabled Mr Gough to form a view that an agreement had been reached and what its terms were (referring to his evidence in cross-examination at T 99.42; and emphasising the use of the word "if" in the 25 January 2014 email from Mr Gough to Mr Tonna). It is submitted that the language of the 25 January 2014 email suggests that Mr Gough did not then understand an arrangement to be in place; that the email at 10.17am (reflecting the instructions that Mr Gough had received from Mr Mendonca) refutes a concluded arrangement and emphasis is placed on the fact that Mr Tonna raised no complaint about that language nor gave any instruction to prepare a document recording the terms of the alleged Agreement despite the recommendations of his lawyer and accountant.
As to the 29 January 2014 meeting attended by Dr Mendonca, Mr Mendonca, Mr and Mrs Tonna, and Mr Gough, Dr Mendonca maintains that the difficulty faced by Mr and Mrs Tonna is that which was highlighted in BM Sydney Building Materials, namely that they seek to rely upon spoken words as a foundation for a cause of action but have not proved what was there said. It is noted that the file note of the 29 January 2014 meeting was prepared by a lawyer familiar with property law and the Conveyancing Act (T 95.41ff); that the file note makes no reference to expressions such as "trust"; and that Mr Gough was unable to clarify what had occurred at the 29 January 2014 meeting (T 134.18) (his evidence being based largely on what he had "seen coming out of the documents" (T 98. 35).
It is noted that Mr Gough agreed that it would defeat the purpose of having a meeting where there were agreements being reached if the whole purpose of the meeting was for Matthews Folbigg to document something so that the parties could obtain independent advice in relation to it (T 134.35); and, further, that Mr Gough believed he was aware of s 23C of the Conveyancing Act (T 100.33) and that he would not have let the parties leave without documenting the alleged Agreement if an agreement was reached (T 135.36).
(As to that last proposition, care needs to be taken in my opinion in distinguishing between an agreement in principle and a binding and enforceable oral agreement. It is by no means inconsistent (with the purpose of a meeting being to document something for the purposes of obtaining independent legal advice) that the parties may have reached an agreement in principle at that meeting; nor is it clear to me that Mr Gough agreed with any proposition that he would not have let the parties leave the meeting without documenting an agreement "in principle" had one been reached at the meeting (as opposed to the proposition that was put at T 131-135 in relation to the recording of a "deal" done on 29 January 2014). It is clear from the contemporaneous documents that Mr Gough anticipated that there would be a document prepared following that meeting to record (and, I would infer, bind the parties to) the arrangements there discussed - and, on one view of the evidence - agreed at least in principle.)
Dr Mendonca argues that the events that took place after the 29 January 2014 meeting are consistent with a finding that no agreement on the terms alleged was reached at that meeting. Other matters that Dr Mendonca argues point away from a conclusion that the alleged Agreement was reached, include: that the terms of the second contract for sale included a number of terms that would, to Mr Gough's understanding, be inconsistent with the terms of the alleged Agreement as discussed on 29 January 2014 (referring to his cross-examination at T 139.11; T 145-151); that Mr Tonna signed the Tenancy Agreement with Dr Mendonca (though this is a matter of dispute in the Mendonca Proceedings); the evidence to which Mr Tonna deposed in the Prime Capital District Court proceedings (in which he deposed that Dr Mendonca bought the Galston Property from him without mention of the alleged Trust or Agreement now asserted; that he had asked Mr Mendonca if he and his wife could take the Galston Property "off their hands" and that he had "lost" his deposit and stamp duty); and the file note prepared by Macedone Legal in which there is reference to Mr Tonna having said that he wanted to buy back the Galston Property and "the loan needed to be worked out" (though Mr Tonna denied saying this - see T 305.457; T 306.18).
Insofar as Dr Mendonca has framed as a separate issue (her issue 3) what, if there was an express trust formed out of the communications between Mr Mendonca and Mr and Mrs Tonna, are the terms of that trust (an issue that I have dealt with as part of the second issue here under consideration), Dr Mendonca says, and I agree, that the primary reason why there is no agreement is because its terms have not been clearly identified.

[74]

Determination as to whether there was a binding and enforceable agreement

I am unable to conclude, to the requisite degree of satisfaction, that there was ever a binding and enforceable agreement reached between the parties (Mr and Mrs Tonna on the one hand and Dr Mendonca on the other) to the effect of that here alleged by Mr and Mrs Tonna.
I have no difficulty with the proposition (and I so find) that there was an agreement in principle, in broad terms, that Dr Mendonca would purchase the Galston Property from Mr and Mrs Tonna (in a settlement to occur simultaneously with the settlement of the purchase by Mr and Mrs Tonna of the Galston Property under their first contract of sale); that the deposit paid by Mr and Mrs Tonna would be in effect applied towards Dr Mendonca's purchase of the Galston Property from Mr and Mrs Tonna (but was not intended as a gift to Dr Mendonca); that Mr Tonna would pay all the expenses associated with the purchase by Dr Mendonca of the Galston Property and in relation to the Galston Property (including mortgage repayments); and that when the sale of the Schofields Property completed or Mr and Mrs Tonna were otherwise able to secure funds, the Galston Property would be transferred back to them or bought back by them. It is clear beyond doubt, in my opinion, that this was the understanding reached between the parties at the 29 January 2014 meeting.
The difficulty, to my mind, is that the terms of the arrangements by which that understanding was to be implemented were not the subject of clear agreement between the parties at that stage (and they were not clearly agreed thereafter): whether the subsequent transaction was to be a straightforward transfer for nominal consideration beyond the discharge of the ANZ mortgage or was to be for market value (or at some other price perhaps to reflect payments made in the interim); how the deposit and other contributions to the purchase price were to be treated; and the like.
Nor is it clear that the parties' common intention objectively ascertained at the time of the 29 January 2014 meeting (or subsequently) was that they were immediately to be bound to the terms (even assuming, which there is not, that there was sufficient certainty of those terms) of their agreement in principle in the absence of it being recorded in an executed written agreement.
I have no difficulty with the proposition that the absence of writing would not preclude enforcement of a trust arrangement or oral agreement for a trust arrangement, had one been established. However, I am not satisfied that there was a concluded agreement in sufficiently certain terms to be enforceable, whether arising at the 29 January 2014 meeting itself (though I note that this is not the pleaded case in any event) or subsequently.
Accordingly, I find that there was an agreement in principle but that its terms were not sufficiently certain to be enforceable and that the parties' common intention, objectively ascertained, was not to be bound by any such agreement unless and until it was formally documented and executed. That finding is fatal to the claims by Mr and Mrs Tonna to declaratory and other relief predicated on the existence of the Agreement. However, as I will explain below, it is not fatal to the alternative claim for relief based on the presumption of a resulting trust. Indeed, the finding that I have made as to the agreement in principle establishes the pre-condition for such a presumption to arise.
Insofar as Mr and Mrs Tonna have raised the issue as to whether the Trust Agreement, if established, is capable of being specifically performed, strictly speaking, this issue does not arise in light of my finding as to this issue. However, for completeness I will deal briefly with it.

[76]

Mr and Mrs Tonna's submissions

It is noted that although Dr Mendonca denies the Trust Agreement and the existence of any relationship of trustee and beneficiary, Dr Mendonca does not plead, in the alternative, that the Trust Agreement is unenforceable for failure to comply with s 23C of the Conveyancing Act (which provides that no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by the person's agent thereunto lawfully authorised in writing, or by will or by operation of law (s 23C(1)(a)); and a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust (s 23C(1)(b)).
Mr and Mrs Tonna note that the strict requirement of these provisions may not be insisted upon if, by doing so, the court would in effect be lending its aid to the perpetration of a fraud; and that the doctrine of part performance may be relied upon where there is a defence based on this section. As to acts of part performance, it is noted that in Ciavarella v Polimeni [2008] NSWSC 234 Young CJ in Eq (as his Honour then was) emphasised that (at [120] and [128]): … in order for the defendants' conduct in and about the contract to raise an equity sufficient to apply the doctrine of part performance, the plaintiff must have done acts in performance of the contract: Maddison v Alderson (1883) 8 App Cas 467. The exact limitation, whether the court looks for acts permitted by the contract as well as those required by it or what otherwise, is a nice question for law school moots (see the discussion in Meagher, Gummow & Lehane, Equity Doctrines & Remedies (4th ed) at [20-185]) but need not trouble me in this case. … ... It is clear on the authorities that the act must be in performance of the contract not merely in reliance on the contract, [referring by way of example to TA Dellaca Pty Ltd v PDL Industries Ltd [1992] 3 NZLR 88, where Tipping J held that acts preparatory or ancillary to the performance of the contract were insufficient].
Mr and Mrs Tonna argue that the evidence establishes that they acted in performance of their obligations under the Trust Agreement (including: payment of stamp duty on the transfer of the Galston Property to them and on the transfer of the Galston Property to Dr Mendonca; payment of the shortfall of the balance of the purchase price after the advance by ANZ; meeting all principal and interest repayments under the loan agreement and mortgage with ANZ; and paying insurance premiums on the home insurance policies in the names of Dr Mendonca and Mr Tonna).
Insofar as Mr Mendonca pleads that "if, which is denied, there was such an Agreement, the Plaintiffs have not at all times been ready, willing and able to undertake their obligations under the Agreement, in that the Plaintiffs have not made, or attempted to make all payments under the mortgage in respect of both principal and interest", Mr and Mrs Tonna dispute that this is the case. They say that they only ceased making the mortgage repayments when Mr Mendonca stated in effect that the accounts of Dr Mendonca had been frozen and that Mr Tonna was not to "do any act in relation to [the Galston Property] that has Renuka Mendonca and ANZ Bank on title". It is submitted that the evidence, particularly the affidavit of Mr Tonna of 6 May 2019, establishes that Mr and Mrs Tonna are ready, willing and able to complete.
In Mehmet v Benson (1965) 113 CLR 295 at 309; [1965] HCA 18, when discussing the effect of past breaches, Barwick CJ said: That the plaintiff was in default in payment of the instalments of the price and of the interest on the unpaid balance of it (time not being of the essence) though relevant to that question does not establish that he was not in the relevant sense ready, willing and able to perform the contract. If it were otherwise a purchaser in substantial default of inessential terms could never be awarded specific performance. Indeed, the significance of the distinction between essential and inessential terms is derived from the fact that a person in breach of inessential terms may be granted specific performance. … In my opinion, notwithstanding the defaults of the plaintiff in the payment of the instalments [sic] of price, he was not unready or unwilling to perform the contract in its essential terms: specific performance ought to have been granted.
It is noted that the discretion may or may not be exercised in favour of a grant of specific performance depending upon precisely what term(s) have been breached and whether they are to be regarded as essential or inessential; and that the question whether or not the plaintiff has been and is ready and willing to perform the contract is one of substance and not to be resolved in any technical or narrow sense. Mr and Mrs Tonna emphasise that one must bear in mind what is the substantial thing for which the parties contract and what, on the part of the plaintiff in a suit for specific performance, are his or her essential obligations.
It is submitted that the evidence supports the position that Mr and Mrs Tonna have performed and are ready, willing and able to perform the Trust Agreement; that to the extent that they ceased to make repayments of principal and interest under the loan agreement between Dr Mendonca and ANZ, they did so in reliance on the statements made by Mr Mendonca; and that if Dr Mendonca performed her obligations to re-convey the Galston Property to Mr and Mrs Tonna, they would have paid out ANZ and discharge all liability of Dr Mendonca to ANZ in about May 2015.

[80]

Mr and Mrs Tonna's submissions

For Mr and Mrs Tonna, it is noted that a resulting trust may arise where an express trust fails because of the trust's unenforceability through non-compliance with the provisions of the Statute of Frauds or its modern equivalents; and that in such cases, the property that is the subject of the trust that fails is held by the trustee in trust for the residuary beneficiaries according to the circumstances of the case.
Reference is made to Black Uhlans Incorporated v New South Wales Crime Commission [2002] NSWSC 1060 (Black Uhlans), where Campbell J, as his Honour then was, said (at [127]-[148]) that the presumption of a resulting trust can operate in broadly three types of situation: first, where the property is conveyed at law but the entire beneficial interest in the property is not disposed of; second, where the property has been conveyed at law on the basis which initially disposes of the entire beneficial interest but at a later time equitable obligations attaching to the property fail or are set aside; and third, where a presumption of resulting trust arises where one person provides the purchase price of property which is conveyed into the name of another person (at [129]).
It is noted that the first and second categories are concerned with the consequences of failure of some transaction or disposition; and that the third may arise from the contribution of purchase moneys where two or more persons contribute in unequal shares to the purchase of property which is conveyed to them either in their joint names or in the name of only one of the persons who contributed to the purchase price (and in that situation the party holding the legal estate is presumed in equity to hold the legal estate in trust as tenants in common in shares proportionate to their contributions).
Mr and Mrs Tonna argue that the evidence shows that the contributions made by the parties to the purchase price are that the amount borrowed by Dr Mendonca comprises her contribution ($1.08 million) and that the balance of the purchase price was contributed to by them.
Mr and Mrs Tonna thus contend that the facts, matters and circumstances in this case support their claim for a declaration that Dr Mendonca holds the Galston Property on trust for them.
It is submitted that in this case a declaration ought to be made that the Galston Property is held on trust to give effect to the intention of the parties at the time Dr Mendonca acquired legal title. It is said that, if it is not accepted that Dr Mendonca agreed to hold the Galston Property on trust for Mr and Mrs Mendonca (adopting what was said by Campbell J in Black Uhlans at 148), then, in the circumstances, the presumption of resulting trust should be applied so that, to the extent to which a party who asserts that it has provided part of the purchase price can demonstrate what part of the purchase price it has provided, to that extent it should be presumed that the party has a proportionate beneficial interest in this property.

[82]

Determination of resulting trust claim

Insofar as Mr and Mrs Tonna's claim is based on a constructive trust (for failure to document the alleged express trust), this does not arise given my earlier rulings. The real issue here is as to the claim based on a presumed resulting trust. In Amit Laundry Pty Ltd v Jain [2017] NSWSC 1495 (Amit Laundry), I considered the applicable principles where reliance was placed on a presumed resulting trust and I do not understand there to be a dispute by the parties as to the applicability of those principles (and see the Court of Appeal decision - Jain v Amit Laundry Pty Ltd [2019] NSWCA 20).
The relevant presumption, as formulated in Calverley v Green (1984) 155 CLR 242 at 266-267; [1984] HCA 81 (Calverley) by Deane J in the following terms (see also Gibbs CJ at 246-247 and Mason and Brennan JJ at 258) is that: … where two or more persons advance the purchase price of property in different shares, it is presumed that the person or persons to whom the legal title is transferred holds or hold the property upon resulting trust in favour of those who provided the purchase price in the shares in which they provided it.
I do not propose here to revisit the commentary as to the theoretical basis of resulting trusts (and the possibility or desirability of identifying clear-cut categories of resulting trust or reason for the appellation "resulting") that I considered in Amit Laundry.
Suffice it for present purposes here to note that the presumption of a resulting trust is thus a presumption as to a declaration of trust, premised on a presumed intention to create an equitable (beneficial) interest in the acquired property in someone other than, or in addition to, the person in whom legal title is vested; and that once the primary fact giving rise to the presumption is established (for example, that one or more persons has or have provided part or all of the purchase price but the legal title has been vested in another), the burden falls on the party disputing the existence of a resulting trust to rebut the presumed fact on the balance of probabilities (see Ryan v Ryan [2012] NSWSC 636 (Ryan v Ryan) at [57]; Weige v Cupton Pty Ltd [2012] NSWCA 414 (Weige v Cupton) at [46]). Where that party fails to rebut the presumption, the court "upon consideration of all circumstances presumes there was a declaration [of trust], either by wording or writing, though the plain and direct proof thereof be not extant" (Cook v Fountain (1818) 36 ER 984 at 987).
Thus, as I said in Amit Laundry, the presumption of resulting trust is the "starting point of a factual enquiry" about the intention of the party (or parties) who provided the funds for the purchase in question (Black Uhlans at [136]; Dyer v Dyer (1788) 2 Cox Eq Cas 92; (1788) 30 ER 42 at 43; Fowkes v Pascoe (1875) LR 10 Ch App 343 (Fowkes v Pascoe) at 352; Re Kerrigan; Ex parte Jones (1946) 47 SR (NSW) 76 at 83), the presumption operating "to place the burden of proof [on the party disputing the trust], if there be a paucity of evidence bearing upon such a relevant matter as the intention of the party who provided the funds for the purchase" (Nelson v Nelson (1995) 184 CLR 538 at 547; [1995] HCA 25 (Deane and Gummow JJ)).
The search for the intention of the relevant party (or parties) intention is as to proof of a "definite" not "nebulous" intention (Weige v Cupton at [46]; referring to Drever v Drever [1936] ALR 446 at 450 (Dixon J)); the "objective, or manifest, intention ... is not a subjective, uncommunicated intention but it is to be inferred from what the parties do or say" (Anderson v McPherson (No 2) [2012] WASC 19 at [156] (Edelman J, citing Calverley at 261 (Mason and Brennan JJ))). The relevant intention is to be found as at the date of purchase (or immediately thereafter) (Calverley at 251(Gibbs CJ); and at 262 (Mason and Brennan JJ)), although evidence of later acts and declarations are admissible (as admissions against interest) against the party who made them (Black Uhlans at [138] (Campbell J, as his Honour then was)).
Establishing on the balance of probabilities that a contribution of the requisite character has been made is a "factual precondition" to a successful assertion that there is a presumption of resulting trust (Hamed v Elddin [2016] NSWCA 9 at [23] (Meagher and Gleeson JJA, Sackville AJA); Elddin v Hamed (No 2) [2015] NSWSC 654 at [83] (Button J); see also, Ong v Lottwo Pty Ltd (in liq) (2013) 116 SASR 280; [2013] SASCFC 57 (Ong v Lottwo) at [40] (Nicholson J, with whom Kourakis CJ and Stanley J agreed)). It is essential that the alleged contribution bears the character of purchase moneys (Calverley at 246 (Gibbs CJ); see also, Ong v Lottwo at [28]-[30]).
In the present case, it is relevant to note that in identifying the purchase price, a "broader concept" is to be applied than simply the stipulated consideration for the purchase (Black Uhlans at [144] (Campbell J, as his Honour then was)). Regard may be had to the incidental costs of the purchase, such as legal expenses, stamp duty and registration (Murtagh v Murtagh [2013] NSWSC 926 at [81] (Hallen J); Ryan v Ryan at [46]; Martech Energy Systems Pty Ltd (in liq) v Bell [2005] VSC 198 at [8] (Hollingworth J); Shepherd v Doolan [2005] NSWSC 42 at [24] (White J, as his Honour then was); Black Uhlans at [144] (Campbell J); Ryan v Dries [2002] NSWCA 3 at [52]-[53] (Hodgson JA); Currie v Hamilton [1984] 1 NSWLR 687 (Currie v Hamilton) at 691 (McLelland J, as his Honour then was)). What is significant "is the cost to the purchasers rather than the benefit to the vendor" (Currie v Hamilton at 691).
Incurring liability under a mortgage (as Dr Mendonca here did) will amount to a contribution to the purchase price ("parties borrowing jointly in order to make up the acquisition cost are treated as having contributed the borrowed capital in equal shares" - see Buffrey v Buffrey [2006] NSWSC 1349 at [14(7)(c)] (Palmer J); Calverley). However, as a general proposition, mortgage repayments (such as those made by Mr and Mrs Tonna) will not constitute a direct contribution to the purchase price (for the reason that "the extent of the beneficial interests of the respective parties must be determined at the time when the property was purchased and the trust created" - see Calverley at 252 (Gibbs CJ); and also 257 (Mason and Brennan JJ)). Although there are two qualifications to that general proposition, neither appears applicable in the present case. As to the first of those qualifications, in certain circumstances such repayments may be recoverable on some other basis (see, for example, Black Uhlans at [143]); however no such claim is here made other than insofar as the unjust enrichment claim might be said to raise this - and it was not argued as such. As to the second qualification (that there may be sufficient evidence from which it can be discerned that the shared intention of each purchaser was that the parties' respective interests in the property would be determined by their contribution, not just to the purchase price, but also by way of repayment of the loan and in discharge of the mortgage debt in respect of the land - see Bloch v Bloch (1981) 180 CLR 390; [1981] HCA 56 (Bloch)), this also is not applicable here, since I cannot conclude that the shared intention of the parties at the time of the purchase was that the making of the mortgage repayments by Mr and Mrs Tonna was that the "price paid to free the land of mortgage as well as the price paid for the title to the land itself must be taken into account in determining the parties' beneficial interests" (see Calverley at 263 (Mason and Brennan JJ)). Put another way, I am not persuaded that the shared intention of the parties at the relevant time was that their interests in the Galston Property were to be determined by reference not only to the contribution to the purchase price but also by reference to their contribution to the loan repayments in discharge of the mortgage debt (see, for example, Cowcher v Cowcher [1972] 1 All ER 943; [1972] 1 WLR 425 at 442 per Bagnall J; Allen v Snyder [1977] 2 NSWLR 685 at 692 per Glass JA with whom Samuels JA agreed). Thus, I do not accept that contributions made by Mr and Mrs Tonna to the payment of the mortgage fall within the Bloch exception.
As to whether the presumption has been rebutted, it has been said that the strength of the presumption of resulting trust will vary from case to case (see Fowkes v Pascoe at 352; Bennet v Bennet (1879) 10 Ch D 474 at 479-480 per Jessel MR); and that it is more easily rebutted in the case of a relative or close friend than it is if the property is vested in a complete stranger (see Wallington v Kokotovich Constructions Pty Ltd (1993) 11 ACSR 759 at 764; Young J, as his Honour then was, relying on Fowkes v Pascoe at 352-353).
In Black Uhlans, Campbell J noted (at [138]) that: … [t]he sort of conduct which could possibly be taken into account in this way could include who took occupation and control of the property, who made improvements to it and in what circumstances, who paid periodical outgoings on the property, who received any rent from the property, and who paid income tax on any rent received from the property. To the extent that any of these types of transaction occurred at a time which was not "so immediately thereafter as to constitute a part of the transaction", they could be taken into account only to the extent that they were admissions. [emphasis per the original]
In the present case, whatever the legal effect of the understanding or agreement in principle reached in the meetings in late January 2014, it is clear, in my opinion, that while it was intended that Dr Mendonca would be registered on the title of the Galston Property and become the legal owner of the Galston Property, Mr and Mrs Tonna were contributing to the purchase price with the understanding that they would have an entitlement to acquire the Galston Property in due course and, in that sense, Dr Mendonca's legal title was not to be unconditional to that extent.
In other words, I am not persuaded that the intention of the parties at the time of Dr Mendonca's registration as legal owner on the title to the Galston Property was that Dr Mendonca was to have an immediate unconditional interest in the Galston Property without in some way taking into account Mr and Mrs Tonna's expectations and their contribution to the acquisition of the purchase price.
It was not the case that Mr and Mrs Tonna were here intending to make a gift of the deposit moneys to Dr Mendonca, nor were they gifting to her the other moneys contributed by their own family members to the acquisition of the Galston Property (the so-called "shortfall"). Nor can they be seen to have been agreeing to pay all expenses in relation to the Galston Property out of some form of altruism or charity to Dr Mendonca. To my mind, to find such an intention existed between the parties would defy logic and is inconsistent with the contemporaneous documents in evidence. Why the Tonnas would be assisting Dr Mendonca, a medical practitioner, who (according to the email sent by Mr Mendonca on 7 January 2014 referred to at [48] above) makes $150,000 a year, has no debt, and already owns two investment properties, acquire another property, makes no sense and is highly improbable.
Further, I am not satisfied that this was simply a loan arrangement (whereby the amount so contributed could be recovered on demand or otherwise from Dr Mendonca). The very fact that no demand was made for those amounts reinforces that Mr and Mrs Tonna understood that they were in effect making a contribution to the purchase price of the Galston Property in which they were to have an interest (in fact, they understood it would be their property); and it is telling that Dr Mendonca herself made no effort to repay those moneys (although professing that she was always willing to do so). Moreover, there is real doubt as to what amount Dr Mendonca would have been the subject of the so-called loan agreement (or at least as to how it could be determined in advance).
Thus, I conclude that it was not intended at the time of the acquisition of the Galston Property by the parties that Dr Mendonca would then be free to do whatever she wanted with the Galston Property (at least until the expiry of the "sunset date" of 30 June 2015 of which there was discussion at the 29 January 2014 meeting) to the exclusion of Mr and Mrs Tonna.
Accordingly, I do not accept that registration of the transfer to Dr Mendonca was intended by the contributors to the purchase price to confer on Dr Mendonca an immediate unconditional beneficial interest in the Galston Property free of any claim by Mr and Mrs Tonna in relation to their contribution to the Galston Property. I thus find that the Galston Property is held on resulting trust by Dr Mendonca for herself and Mr and Mrs Tonna as tenants in common in shares reflecting their respective contributions to the Galston Property. That contribution, in Dr Mendonca's case, is the $1.08 million she borrowed from ANZ; in Mr and Mrs Tonna's case, their contribution comprises the sums of $145,000 plus $225,000 plus the legal expenses and stamp duty in relation to the acquisition of the Galston Property by Dr Mendonca (but not the stamp duty and legal expenses in relation to the first contract of sale entered into by Mr and Mrs Tonna as purchasers; nor any legal costs referable to the financing issues or disputes in relation to the first contract of sale).
Calculations will need to be provided to me by the parties as to those precise figures before the final interests in the Galston Property can be determined.

[86]

Determination regarding breach of fiduciary duty by Dr Mendonca

The principles as to the fiduciary duties owed by trustees are well known and do not need here to be restated beyond noting the two fundamental and distinct rules binding fiduciaries (as recognised in Chan v Zacharia (1984) 154 CLR 178; [1984] HCA 36), both of which are of strict application, namely: the duty not to profit by reason of one's position as a fiduciary; and the duty not to place oneself in a position of potential conflict (at 198-199): The variations between more precise formulations of the principle governing the liability to account are largely the result of the fact that what is conveniently regarded as the one "fundamental rule" embodies two themes. The first is that which appropriates for the benefit of the person to whom the fiduciary duty is owed any benefit or gain obtained or received by the fiduciary in circumstances where there existed a conflict of personal interest and fiduciary duty or a significant possibility of such conflict: the objective is to preclude the fiduciary from being swayed by considerations of personal interest. The second is that which requires the fiduciary to account for any benefit or gain obtained or received by reason of or by use of his fiduciary position or of opportunity or knowledge resulting from it: the objective is to preclude the fiduciary from actually misusing his position for his personal advantage. Notwithstanding authoritative statements to the effect that the "use of fiduciary position" doctrine is but an illustration or part of a wider "conflict of interest and duty" doctrine (see, e.g., Phipps v. Boardman; N.Z. Netherlands Society "Oranje" Inc. v. Kuys), the two themes, while overlapping, are distinct. Neither theme fully comprehends the other and a formulation of the principle by reference to one only of them will be incomplete. Stated comprehensively in terms of the liability to account, the principle of equity is that a person who is under a fiduciary obligation must account to the person to whom the obligation is owed for any benefit or gain (i) which has been obtained or received in circumstances where a conflict or significant possibility of conflict existed between his fiduciary duty and his personal interest in the pursuit or possible receipt of such a benefit or gain or (ii) which was obtained or received by use or by reason of his fiduciary position or of opportunity or knowledge resulting from it. [my emphasis; footnotes omitted]
As recognised in Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 67; [1984] HCA 64, these principles have been described as "inflexible" (Birtchnell v The Equity Trustees, Executors and Agency Company Limited (1929) 42 CLR 384 at 408; [1929] HCA 24) and "fundamental" (Boardman v Phipps [1967] 2 AC 46; [1966] 3 All ER 721 at 756 (Boardman v Phipps)).
In applying the no conflict and no profit rules, it does not matter whether the fiduciary acted bona fide and in what the fiduciary thought was the best interests of the beneficiary/ies (Boardman v Phipps; Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134; [1942] 1 All ER 378 (Regal Hastings)); it does not matter whether no loss is caused (Keech v Sandford (1726) Sel Cas Ch 61; (1726) 25 ER 223 (Keech v Sandford)) or that a profit was actually made for the beneficiary (Boardman v Phipps; Regal Hastings; and Gemstone Corporation of Australia Ltd v Grasso (1994) 62 SASR 239; (1994) 13 ACSR 695); and it does not matter whether the profit is made in circumstances where there is no conflict of interest (Keech v Sandford; Regal Hastings; Boardman v Phipps) (and if there is a breach of the no conflict rule, but no profits are made, then equitable compensation would instead be an appropriate remedy if there has been loss caused).
As I have not found an express trust, it is not necessary here to consider these issues further. Suffice it to note that Dr Mendonca will need to discharge increased borrowings under the ANZ loan facility herself (or account in some way for the further encumbrance of the Galston Property) at the appropriate time (such as, on any sale of the Galston Property).

[94]

• Cost of the repairs and improvements made by Mr and Mrs Tonna to the Galston Property - see [79(i)(F)] of the further amended statement of claim

Mr and Mrs Tonna have claimed the cost of repairs to the Galston Property incurred by them. Dr Mendonca does not dispute that if repairs to the Galston Property have been carried out, then Dr Mendonca should account for those reasonable costs. However, she maintains that Mr and Mrs Tonna have not sufficiently established the costs of those repairs, nor to any level how they are reasonable.
It is noted that Mrs Tonna deposed in her 16 October 2017 affidavit to setting aside the money in her bank account to carry out renovations (at [22]); but that in cross-examination when asked to identify the amount spent on those renovations from that account she was unable to do so. It appears that approximately $900 was spent at Bunnings from her accounts, but complaint is made that it is unknown whether that was spent on the renovations or something else (noting that money had been spent at Bunnings before the purchase of the Galston Property).
Mr Tonna deposes at [144]-[178] of his 16 October 2017 affidavit that almost $196,880 had been spent on various matters, including "all" $26,000 (at [157]) in Mrs Tonna's bank account. Dr Mendonca points out that this evidence as to Mrs Tonna's bank account was demonstrably wrong; and that it was clear that Mr Tonna has no knowledge of what money in Mrs Tonna's bank account was used on the Galston Property.
It is noted that Dr Mendonca sought (through a notice to produce - Exhibit 15) invoices, receipts statements of account and any other document recording or evidencing the improvements referred to at [144]-[178] of Mr Tonna's 16 October 2017 affidavit and that nothing was produced in answer to this call (despite it having been alleged that significant sums of money were paid to third parties such as $92,000 for the new shed (at [149])).
A further notice to produce was issued seeking the bank statements of Mr Tonna, in response to which Mr and Mrs Tonna produced the materials that became Exhibit 14. It is submitted by Dr Mendonca that those bank statements do not assist Mr and Mrs Tonna's case, noting that they reveal that during the period 1 February 2014 to 30 September 2014 (the renovation period): debits were made from the accounts totalling $148,544.41; within those amounts are monthly payments equal to the amount the parties assert is either mortgage payments or rent payments (those monthly payments continue after the renovation period comes to an end) and that when those are deducted from the total debits, the debits during the renovation period are reduced to $94,172.39; that within that amount are recurring monthly payments in the sum of $3,558.98 that continue after the lease is entered into with Mr Nielsen in September 2014 (and when those are deducted the debits during the above period are further reduced to $60,698.80); and that this amount needs to be further reduced to account for numerous expenses that, on their face, appear unrelated to renovations such as overdraft and bank charges, petrol, and three cheques written on 17 March 2014 for a combined $25,850.
As to the said cheques, it is noted that no cheque stub was produced in answer to the notice to produce (Exhibit 15) seeking such records nor was a copy of the cheque obtained from the bank and none of the expenditures identified by Mr Tonna equals the three cheque amounts for 17 March 2014.
Dr Mendonca thus submits that Mr Tonna has spent an amount far less than the approximately $80,000 he deposes to having spent from his account in the period he fixed up the Galston Property, which it is assumed occurred before Mr Nielsen rented the Galston Property.
Further, it is said that the court does not know whether or not the amounts spent were reasonable. Complaint is made that the description provided by Mr Tonna in respect of some of the work is so vague that it is impossible to determine this, reference being made by way of example to the evidence of Mr Tonna (at [164] of his 16 October 2017 affidavit) to spending $8,600 to replace the wooden railings with steel railings. It is said that this evidence is devoid of any detail that would allow a determination that such work was reasonable (such that Mr and Mrs Tonna are unable to establish that the quantum of this aspect of their claim is reasonable) noting that this could have easily been established by evidence from the expert builder retained by Mr and Mrs Tonna.

[97]

Determination as to alternative unjust enrichment claim

For the alternative unjust enrichment claim to succeed, it would be necessary for Mr and Mrs Tonna to establish the requisite vitiating factor (such as mistake, duress or illegality). In David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 at 379; [1992] HCA 48, Mason CJ, Deane, Toohey, Gaudron and McHugh JJ rejected an approach that in Australian law unjust enrichment is a definitive legal principle according to its own terms, saying that "recovery depends upon the existence of a qualifying or vitiating factor such as mistake, duress or illegality". It was said in Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 (by Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ) (at [150]-[151]) that: … whether enrichment is unjust is not determined by reference to a subjective evaluation of what is unfair or unconscionable: recovery rather depends on the existence of a qualifying or vitiating factor falling into some particular category. In David Securities Pty Ltd v Commonwealth Bank of Australia, Mason CJ, Deane, Toohey, Gaudron and McHugh JJ gave as instances of a qualifying or vitiating factor mistake, duress or illegality. … [footnotes omitted]
Insofar as the unjust enrichment claim is here predicated on the existence of a binding agreement it would necessarily fail for the reasons set out above in considering whether there was a binding agreement. Moreover, in view of the findings I have made on the resulting trust claim, it is not necessary to explore in any detail the alternative unjust enrichment claim. Suffice it to note that I accept the submission that, even if such a claim had been established (say, on the basis that there was an agreement in principle from which Dr Mendonca has now resiled, making the retention of the benefit of outright legal ownership an unjust enrichment - which is how in essence I understand the argument to be put), the amounts referable to the letting costs, claimed loss of value of the Galston Property and the like, should not be allowed, for the reasons submitted by Dr Mendonca. In particular, I consider that the evidence of Mr and Mrs Tonna as to the expenditure of moneys on the improvements was unreliable (being based on little more than an assumption as to where moneys expended from their bank account had gone).

[99]

Mr and Mrs Tonna's submissions

As noted earlier, Mr Mendonca is sued for damages for alleged breach of a duty of care owed to Mr and Mrs Tonna to exercise reasonable care, skill and competence as to the administration of the Tonnas' financial and taxation affairs and to act in a manner which advanced their interests over the interest of any other person. It is alleged that Mr Mendonca breached this duty of care (and obligations in similar terms said to be owed by Mr Mendonca under the Australian Consumer Law) by: instructing the solicitors acting for Mr and Mrs Tonna, Matthews Folbigg, to proceed to exchange of contracts (for Mr and Mrs Tonna's' purchase of the Galston Property) in circumstances where Mr and Mrs Tonna had only obtained a conditional offer of finance; and acting in a position of conflict and preferring the interests of his wife, Dr Mendonca, over the interests of Mr and Mrs Tonna. In relation to Dr Mendonca, their complaint, in effect, is that by January 2015, when it was clear that the sale of the Schofields Property would settle and Mr and Mrs Tonna would have sufficient funds to discharge the ANZ loan, Mr Mendonca did not direct Dr Mendonca to re-transfer the Galston Property.
Mr and Mrs Tonna say that the (untrue) statement made by Mr Mendonca in or about April 2015 that his and Dr Mendonca's assets had been frozen (see at [234] above); Mr Mendonca's failure to direct Dr Mendonca to transfer the Galston Property to Mr and Mrs Tonna; and Mr Mendonca's denials that he acted as Dr Mendonca's agent and that the Galston Property is held on trust for Mr and Mrs Tonna have enabled Dr Mendonca to: assert that she is the beneficial owner of the Galston Property; encumber the Galston Property by a further $132,250.51 unconnected with the maintenance and preservation of the Galston Property; and assert a claim for possession of the Galston Property.
It is said that this conduct is in breach of Mr Mendonca's fiduciary duty as an agent and exposed Mr and Mrs Tonna to the increased obligation to ANZ in the amount of $132,250.51 and the legal costs of pursuing these proceedings.
As to remedy for breach of the duty to avoid a conflict of interest, it is noted that on an agent's breach of duty, the principal's remedy lies in damages, in an account, or in an action for money had and received (noting that the remedies of damages and money had and received are alternative and not cumulative). Reliance is also placed on s 60 (headed 'Guarantee as to due care and skill') of the Australian Consumer Law which provides: If a person supplies, in trade or commerce, services to a consumer, there is a guarantee that the services will be rendered with due care and skill.
It is submitted that Mr and Mrs Tonna are consumers within the definition provided by s 3 of the Australian Consumer Law and that Mr Mendonca and Business Services supplied, in trade or commerce, services to Mr and Mrs Tonna (including his services acting as agent in relation to the acquisition of the Galston Property). It is noted that Mr Mendonca proposed and took steps to implement the arrangement whereby Dr Mendonca obtained title to the Galston Property.
Mr and Mrs Tonna submit that, by reason of Mr Mendonca placing himself in a position of conflict, preferring and advancing the interests of Dr Mendonca over the interests of Mr and Mrs Tonna, he has failed to provide the Services (as defined) with due care and skill and is liable for damages.

[100]

Mr Mendonca/Business Services submissions

Mr Mendonca notes that the claims against him are narrow: he is not alleged to be a party to the alleged contract (instead, he is alleged to have acted as the agent of both Dr Mendonca and Mr and Mrs Tonna in its formation) and no relief is sought against him for any breach of the alleged contract; and that an allegation that Mr Mendonca acted in breach of duty by failing properly to prepare Mr and Mrs Tonna's business and personal taxation returns has been abandoned. The only loss now claimed from Mr Mendonca is the further liability on the ANZ loan and the legal costs of the present proceedings (T 73).
Mr Mendonca submits that the pleaded claims against him (and Business Services) are not established on the evidence. It is noted that despite the advice from their solicitor in relation to the risk of not having obtained unconditional finance, and despite not having obtained unconditional finance, on 5 December 2013, Mr and Mrs Tonna signed the first contract of sale, paid a deposit of $145,000, and exchanged contracts on 9 December 2013. Mr Mendonca says that: it was Mr and Mrs Tonna's decision to do these things; they were the ones who signed the first contract of sale, allowed its exchange and paid the deposit of $145,000; and they did so of their own free will and volition and with the benefit of legal advice and representation throughout.
Mr Mendonca says that the suggestion that Mr Mendonca is liable for the events which followed the exchange of contracts (i.e., NAB declining the application for finance) is untenable and that he merely conveyed to the solicitors the instructions of Mr and Mrs Tonna that they wished to proceed to exchange. It is said that there is no suggestion that that was not their wish and the evidence demonstrates that it was (noting that Mr Tonna, on his own evidence, was "very keen to get the [Galston] Property"; and that he knew that by signing the contract he was "locked in" to buying the Galston Property and, as a result, was anxious to obtain finance).
Further it is said that, even if Mr Mendonca did act in breach of duty in conveying (accurately) Mr and Mrs Tonna's instructions, no loss was thereby caused; instead, any losses flowing from entry into the first contract of sale were caused by the fact that Mr and Mrs Tonna decided to, and did, proceed to exchange despite clear legal advice that they not do so without having unconditional finance.
As to the alleged conflict of interest, it is said that this relates to the alleged Agreement (or Trust), by which it is said that Dr Mendonca agreed to purchase the Galston Property and to hold it on trust for Mr and Mrs Tonna, until such time as Mr and Mrs Tonna directed her to transfer the Galston Property to them. As noted earlier, Mr Mendonca denies that such an agreement was ever made and denies that he acted as the agent of either party (or both) in its formation. It is said that at the critical meetings at which the agreement is alleged to have been formed, Dr Mendonca was herself present and (on Mr and Mrs Tonna's evidence) actively participated.
Furthermore, it is said that even if Mr and Mrs Tonna succeed in establishing the existence of the alleged Agreement (or Trust) upon which they sue, there can be no question but that the Agreement was made with their express, informed consent, and for their benefit. It is noted that Mr and Mrs Tonna's case is that the Agreement was conceived (and agreed to by them) as a means of rescuing them from an otherwise desperate situation (faced with a vendor who would give no further extensions, and without funds to complete the purchase, they stood likely to lose their deposit of $145,000 and possibly more, for default under the first contract of sale). Mr Mendonca says that it was in these circumstances that Mr and Mrs Tonna say they made the Agreement they did with Dr Mendonca; and that the evidence demonstrates that Mr and Mrs Tonna, who clearly knew that Dr Mendonca and Mr Mendonca were married, not only knew of and accepted the proposal to transfer the Galston Property to Dr Mendonca but in fact requested that that occur.
It is submitted that, whatever was the arrangement between the parties and whatever was said, Mr and Mrs Tonna entered into the arrangement with full knowledge of what they were doing and its effect. It is said that, on Mr and Mrs Tonna's own evidence, lawyers from Matthews Folbigg were not only present when the arrangement was discussed but explained it carefully to Mr and Mrs Tonna.
In these circumstances, Mr Mendonca submits that his role in facilitating the alleged Agreement between Mr and Mrs Tonna and Dr Mendonca involved no breach of a duty of care (nor any breach of fiduciary duty, though he says this was not pleaded), as it was done for the benefit of Mr and Mrs Tonna and with their fully informed knowledge and consent.
Mr Mendonca submits that the claims against him and Business Services for breach of duty of care in connection with the entry into the alleged Agreement (or Trust) between Mr and Mrs Tonna and Dr Mendonca should be rejected; and it is submitted that the claims against Mr Mendonca under the Australian Consumer Law fail for the same reasons (and for the additional reason that Mr and Mrs Tonna were not "consumers" within the meaning of s 3 of the Australian Consumer Law).
It is noted that the heads of loss claimed against Mr Mendonca and Business Services are identified in the particulars to [81] and [82] of the further amended statement of claim and comprise loss and damage alleged to arise from Mr Mendonca's advice to Mr and Mrs Tonna to enter into the purchase contract in respect of the Galston Property, consisting of: payment of the deposit; financing and legal expenses arising from attempts to obtain alternative finance; costs of these proceedings to recover the Galston Property from Dr Mendonca; loss of opportunity (bargain) in respect of the offer of private finance; and (unspecified) expenses paid in furtherance of the alleged Agreement between Mr and Mrs Tonna and Dr Mendonca.
It is submitted that if Mr and Mrs Tonna succeed in their claims against Dr Mendonca, and obtain orders requiring her to transfer the Galston Property to them, many of the alleged losses will not arise; and that if Mr and Mrs Tonna fail against Dr Mendonca, then the claimed losses were in any event not caused by any breach of duty by Mr Mendonca. It is submitted that the true cause of those losses was instead Mr and Mrs Tonna's decision to enter into the purchase contract in the first place, against advice, and in full knowledge of the risk they were taking.
Further, it is noted that on 25 and 29 January 2014, Mr and Mrs Tonna received advice from Matthews Folbigg that any agreement between them and Dr Mendonca with respect to the Galston Property should be documented and signed prior to completion of the contract for the purchase of the Galston Property, and that Mr and Mrs Tonna should obtain independent legal advice about any such agreement. It is submitted that, had they obtained independent legal advice, the advice would have been to the same effect as had already been received from Matthews Folbigg - i.e., they should be sure to have the alleged Agreement with Dr Mendonca recorded in a deed or registrable instrument, and to do so before Dr Mendonca obtained title.
Mr Mendonca says that Mr and Mrs Tonna failed to follow that advice of their solicitors in that they did not ensure that the alleged Agreement was ever documented in writing by way of a deed or instrument prior to Dr Mendonca purchasing the Galston Property. Thus, it is said that the claimed losses, even if suffered, were not caused by any breach of duty of Mr Mendonca but rather by Mr and Mrs Tonna's own conduct in failing to follow and implement the advice they had been given. Alternatively, it is said that these matters demonstrate that Mr and Mrs Tonna were contributorily negligent and failed to mitigate their losses.
It is submitted that if there was no binding agreement between Dr Mendonca and Mr and Mrs Tonna, then there was no duty on the part of Mr Mendonca (breach of which duty is pleaded at [64] and [65A] of the further amended statement of claim). Alternatively, if (which is denied) there was a binding agreement between Mr and Mrs Tonna and Dr Mendonca, it is said that that agreement, on Mr and Mrs Tonna's case, was reached on or before 30 January 2014.
Mr Mendonca says that the evidence relied on by Mr and Mrs Tonna does not establish that, after that date, Mr Mendonca continued to act as the agent of Mr and Mrs Tonna with respect to the implementation (as distinct from the formation) of the alleged agreement or in respect of any other matter. It is said that the matters relied upon by Mr and Mrs Tonna to establish the existence and scope of the agency said to have existed after 30 January 2014 are not pleaded nor particularised (nor are they identified in Mr and Mrs Tonna's closing submissions dated 3 June 2019). It is submitted that there is no evidence of an express agreement of agency after 30 January 2014, nor does the evidence point to or establish matters sufficient to infer a relationship of agency or the scope of that relationship.
Instead, it is submitted that Mr and Mrs Tonna's closing submissions, both oral and written, put the matter no higher than that Mr Mendonca acted as Mr and Mrs Tonna's agent in relation to the finance and purchase of the Galston Property and that this says nothing which would lead to the conclusion that there was an agency arrangement which persisted after purchase of the Galston Property, right through 2015, requiring Mr Mendonca as an incident of that relationship to "direct" Dr Mendonca to transfer the Galston Property.
Mr Mendonca notes that the scope of an agent's authority determines the extent to which the agent's actions can, without personal liability for so doing, impact on the principal's affairs; and also determines the scope of the legal obligations and entitlements as between agent and principal (referring to Law of Agency at [4.9] and the authorities there cited). It is submitted that, that being so, before liability will be visited on a putative agent for breaches of duties said to have arisen in the course of the agency relationship, the evidence must be clear enough to enable affirmative findings: first, that there was an agency relationship and, second, that the scope of the agency relationship extended to cover the matters of which complaint is made (including, for example, in this case, a duty to "direct" Dr Mendonca to transfer the property to Mr and Mrs Tonna; in circumstances where it is said that it would normally be left to lawyers (not an accountant) to pursue the enforcement of a legal agreement, and Mr and Mrs Tonna in fact had lawyers acting for them).
Mr Mendonca says that no real attempt has been made by Mr and Mrs Tonna in this case to establish either of those matters; and that they have failed to discharge the onus upon them of establishing that Mr Mendonca after 30 January 2014 was acting in the capacity of agent for them, and, in that capacity, owed to them the duties alleged.
Mr Mendonca further submits that there has been no breach occasioning loss. It is submitted that there are a number of fundamental problems with respect to breach and causation.
First, that there can have been no breach of any obligation prior to April 2015 (or breach of any obligation causing loss), as prior to that time Mr and Mrs Tonna admittedly did not have any funds to purchase the Galston Property and, on their version of the Agreement, no entitlement to take a transfer of the Galston Property. It is said that, on Mr and Mrs Tonna's case, Dr Mendonca was only obliged to transfer the Galston Property to Mr and Mrs Tonna upon receipt by them of the sale proceeds from the Schofields Property (which occurred in April 2015). Hence, it is submitted that any failure by Mr Mendonca to "direct" Dr Mendonca to transfer the Galston Property to Mr and Mrs Tonna, or not to deny the existence of the alleged Agreement, prior to April 2015, cannot have caused any loss because Mr and Mrs Tonna at that time were not entitled to the Galston Property. It is said that although, in closing oral submissions (T 658.38), it was asserted for Mr and Mrs Tonna that a direction should have been given by Mr Mendonca in December 2014 or January 2015 for Dr Mendonca to retransfer the Galston Property, this is an unsustainable proposition and should be rejected.
Second, so far as the loss relating to the additional drawdown on the mortgage is concerned, it is said that that loss was incurred in December 2014 (see the particulars to [65] and [65B] of the further amended statement of claim; see also Exhibit A-G (the ANZ letter dated 23 December 2014)), which records the further funds as having been drawn down on 16 December 2014. The alleged breaches occurred after that date. It is said that, as the loss predated the alleged breaches, it cannot logically have been caused by those breaches.
Third, that the loss relating to the additional drawdown on the mortgage is not a loss that has been suffered by Mr and Mrs Tonna - that they are not out-of-pocket for that amount; nor, on their version of the Agreement, should they ever be liable to repay that amount. It is noted that, under the Agreement as pleaded, they are liable only to pay all charges on the mortgage incurred by Dr Mendonca in connection with the initial purchase. It is submitted that this is logical and that it is far-fetched and unlikely that the parties would have agreed that Mr and Mrs Tonna would be liable for any debt incurred by Dr Mendonca and secured against the Galston Property.
Fourth, that Mr and Mrs Tonna have not established (and there is no basis for any finding) that, had the alleged breaches not occurred, the claimed losses would not have been suffered. It is noted that Dr Mendonca has steadfastly asserted she is the owner of the Galston Property and has denied any obligation to transfer the Galston Property to Mr and Mrs Tonna. Mr Mendonca says that there is no evidence to suggest the position would have been any different if Mr Mendonca had not made the Alleged Representation; or had "directed" Dr Mendonca to transfer the Galston Property to Mr and Mrs Tonna; or had not "denied" the existence of the Agreement. Mr Mendonca says that Mr and Mrs Tonna bear the burden of establishing that, had Mr Mendonca not acted in breach of duty (such as by giving a "direction" to Dr Mendonca), that Dr Mendonca would have transferred the Galston Property to Mr and Mrs Tonna, or would not have defended these proceedings but that the evidence does not permit such a finding. In this regard, it is submitted that the evidence shows that Dr Mendonca was not amenable to suggestion from Mr Mendonca (reference being made to the conversation at [80] of Dr Mendonca's 19 March 2018 affidavit, upon which Mr and Mrs Tonna rely, in which Dr Mendonca gives evidence that, when asked by Mr Mendonca whether she was interested in selling the Galston property to Mr Tonna, Dr Mendonca replied that "[f]or me to consider whether I wish to sell or not sell my Galston Property, I need to know how much Mark [Tonna] is willing to offer me"). That, and her evidence (at [69] of Dr Mendonca's 19 March 2018 affidavit) that she was "not interested" in the Put and Call Option (to which she adhered in cross-examination, see T 585.19ff; 586.12, 586.21) is said to be inconsistent with Dr Mendonca "being disposed slavishly follow the directions of Mr Mendonca" and reveals Dr Mendonca as being independently minded and determined to hold the Galston Property unless and until she received an acceptable offer of purchase the Galston Property from Mr Tonna.
As to the claim for the legal costs, the same submissions are made. It is said that the "obvious, inescapable cause of the proceedings" against Dr Mendonca is the fact that Dr Mendonca, as registered proprietor of the Galston Property, has denied she was party to any agreement with Mr and Mrs Tonna and has refused to transfer the Galston Property to them. It is noted that Dr Mendonca has taken that stance separately from Mr Mendonca and with the benefit of her own independent legal advice. It is submitted that litigation against Dr Mendonca was therefore inevitable, regardless of the conduct alleged against Mr Mendonca.
Further or in the alternative, it is submitted that if Mr and Mrs Tonna did suffer the claimed losses, those losses were caused not by any breach of duty by Mr Mendonca but rather by the failure of Mr and Mrs Tonna to follow the express, written advice of their solicitors to ensure that any agreement with Mr Mendonca was recorded in writing prior to any transfer of the Galston Property taking place.
The advice (to have any "deal" documented, and to obtain independent legal advice) is said to be contained in the emails from Mr Gough to Mr Tonna on 25 January 2014, 26 January 2014, 28 January 2014 and 29 January 2014. It is noted that Mr and Mrs Tonna had also received advice from Mr Mendonca to ensure that any agreement was documented, by email dated 25 January 2014.
Mr Mendonca points out that Mr and Mrs Tonna failed to follow the advice of their solicitors (and Mr Mendonca); that they did not ensure that the alleged Agreement, was ever documented in writing by way of a deed or instrument prior to Dr Mendonca purchasing the Galston Property; and that had they done so, it is probable that the claimed losses would have arisen. It is submitted that their failure to follow the advice of their solicitors (and Mr Mendonca himself) cannot be laid at the feet of Mr Mendonca; and that alternatively, these matters demonstrate that Mr and Mrs Tonna were contributorily negligent and failed to mitigate their losses.

[101]

Determination in relation to the alleged breaches by Mr Mendonca

As noted earlier, the claim against Mr Mendonca and Business Services was in the course of the hearing substantially narrowed. In essence, it is a claim based on alleged breach of a duty of care owed by Mr Mendonca in his capacity as financial adviser to Mr and Mrs Tonna (and a corresponding claim against Business Services to the extent that Mr Mendonca was performing his role as financial adviser under the auspices of that company). Although allegations of fiduciary duty were raised in the pleading, no equitable compensation or claim for relief for breach of fiduciary duty was expressly pleaded.
There is (and could be) no dispute that Mr Mendonca acted as an adviser to Mr and Mrs Tonna in relation to their applications for finance and in their dealings with various people (i.e., bank officers, finance brokers, real estate agent, and lawyers alike) in relation to the Galston Property transactions. Mr Mendonca was the person involved in the day to day communications with those people in relation to the transactions. Indeed, as noted earlier, Mr Mendonca's communications reveal an increasing level of urgency or desperation over the period from December 2013 to January 2014 - not simply from the perspective of finding a suitable financing solution but a desperation that "we" not "loose" [sic; lose] the Galston Property.
Seen through the prism of the Civil Liability Act 2002 (NSW), Mr Mendonca was certainly in the position where there was a reasonable risk of significant harm (in terms of financial loss) in relation to the giving of financial advice to Mr and Mrs Tonna regarding the relevant transactions, so as to give rise to a duty of care in the giving of that advice (though careful attention needs here to be given to the circumstances in which, and nature of, the advice that was or should have been given); and it would not have been onerous for him to have given the relevant advice (such as the risk involved in entering into an unconditional sale contract when there was not an unconditional loan approval and the risk involved in not documenting any arrangement reached with Dr Mendonca for the transfer back to them of the Galston Property), or referred Mr and Mrs Tonna to other advisers. The fact, however, is that such advice was given to Mr and Mrs Tonna and they proceeded nonetheless.
It is less clear that Mr Mendonca was acting in a fiduciary role (see the discussion by Black J as to the circumstances when fiduciary obligations arise, in Vanguard Financial Planners Pty Ltd v Ale [2018] NSWSC 314 from [51] to [60], and the authorities considered therein) but ultimately it is not necessary to make any final determination on that issue since no claim for relief based on any breach of fiduciary duty is here pressed.
As to the particulars of the alleged breach of duty of care, the first relates to the conveying of instructions by Mr Mendonca in relation to the exchange of unconditional contracts at a time when there was no unconditional loan approval. I am not persuaded that there was any breach of a duty of care in that regard. Mr and Mrs Tonna understood that they were running a risk in exchanging contracts at the time that they did (and were privy to legal advice to that effect). Even if there was a duty of care in that regard, it is clear that it was not causative of any loss and that the decision to exchange contracts was made in full knowledge of the relevant risk.
As to the alleged conflict of interest, to the extent that these claims are predicated on Mr Mendonca preferring the interests of his wife, Dr Mendonca, to those of Mr and Mrs Tonna in the arrangements pursuant to which they entered into the respective sale contracts, the difficulty is that I can discern no preferential arrangement in the entry into the sale contracts as such. Rather, the position seems to be that Dr Mendonca's entry into the contract to purchase the Galston Property enabled Mr and Mrs Tonna to avoid what they accepted was likely otherwise to have been a substantial loss. Moreover, any conflict arising from the relationship between Mr Mendonca and his wife is one that Mr and Mrs Tonna must be taken to have accepted - since they well knew of the marital relationship (and indeed it is obvious that this was the genesis of the ultimate plan to resolve their financing difficulties - whether that was a proposal in the first instance from Mr Mendonca or from Mr Tonna, as Mr Tonna's earlier evidence in the Prime Capital proceedings suggested).
Insofar as a claim based on the failure of Mr Mendonca to direct Dr Mendonca to transfer the Galston Property to Mr and Mrs Tonna, the difficulty I have is that there is nothing to suggest that Mr Mendonca was in a position to compel Dr Mendonca to act in accordance with such a direction (and if this were put on a loss of the chance that she might have done so, it fails for the reason that it is abundantly clear that, for whatever reason, Dr Mendonca's earlier spirit of "co-operation" had well and truly dissipated by late 2014/early 2015).
Therefore, largely for the reasons submitted by Counsel for Mr Mendonca and Business Services, I find that the claims against Mr Mendonca and Business Services have not been made good.

[103]

Issue 1: Did Mr Tonna enter into the Tenancy Agreement, orally or in writing, with Dr Mendonca and does his entry onto and occupation of the Galston Property arise on the basis that he was a beneficial owner?

Dr Mendonca submits that a finding that Mr Tonna did not sign the Tenancy Agreement would be contrary to the expert evidence put forward by both parties, who describe the signature as genuine. Dr Mendonca argues that the evidence by Mr Dubedat (to the effect that the document, as a whole, is a composite (given that page 1 appears to be on a different type of paper than pages 2 through to the end; as to which I have referred earlier)) leads nowhere and is no more than a "red-herring".
It is submitted by Dr Mendonca that Mr Tonna plainly signed a tenancy agreement with her. Dr Mendonca points out that Mr Tonna does not assert he signed some other tenancy agreement with some other person and that Mrs Tonna gave evidence that they were not leasing any other premises during the relevant period (T 416). Dr Mendonca says that the only plausible explanation of events is that given by her under cross-examination (see T 573.4ff; 578-582), namely, her explanation to the effect that she made changes to the original (unsigned) version because she wanted to include her land telephone number (landline) not her mobile telephone number on the agreement; that after she and Mr Tonna signed the document she copied it; and that this happened on numerous occasions, including when she took a copy of the agreement to ANZ. She says that, later, she found the original front page and produced that to Mr Dubedat.
It is said that there can be little doubt that the front page was the original front page, given Mr Dubedat's expert opinion (at [9]) that the document labelled by him as "Q2" (which has Dr Mendonca's landline on it) was almost certainly attached to the front of pages 2 to 11 of the original version on which Dr Mendonca relied (labelled by him as "Q1") with a staple at an earlier time and long enough, under suitable conditions, for rust to form.

[106]

Determination in the Mendonca Proceedings

I am not persuaded, to the requisite degree of satisfaction, that the arrangements between Dr Mendonca on the one hand and Mr (and Mrs) Tonna on the other hand in relation to the occupation of the Galston Property were governed by the terms of, and subject to, the Tenancy Agreement document that was in evidence.
I find that Mr Tonna did sign a document bearing the word "tenant" in the form of the concluding page of the Tenancy Agreement but I cannot be confident that the document, when he signed it, was complete and, in particular, I cannot be confident which version of the cover page formed part of the document that he in fact signed (assuming that he signed an entire version of the Tenancy Agreement at the time). The evidence was unsatisfactory in that regard to say the least. In part, this was because Dr Mendonca's explanation of removing the cover page (when photocopying the document on multiple occasions) cannot logically explain how the subsequent version of the cover page came to be attached after the document was signed or how (on the contrary scenario) an earlier (and on her account superseded) version came to be the one subsequently attached and then copied on those multiple occasions. Taking apart a document, copying it and then re-stapling it might well lead to missing or wrongly ordered pages, but it does not readily encompass the substitution of a different page in that process. Thus, if the front version of the coversheet (containing Dr Mendonca's landline) was the version attached to the document that Mr Tonna signed, then any later substitution was an alteration to the signed document (and cannot have been binding on him) and, if not, then why it was attached to the document for long enough for the staple in the document to rust is unclear.
In circumstances where the parties seem to have been willing on at least one other occasion to sign an execution page without agreement as to the terms of the document itself (which was the case in relation to the draft put and call option deed), and while this was also contemplated at one stage (in relation to the Welcome Homes loan application), at least one possibility is that Mr Tonna simply signed the execution page of the Tenancy Agreement but without the document having been complete at that time. (That is not so far-fetched in circumstances where Mr Tonna was apparently unconcerned to sign blank loan applications - see for example T 201; and hence he does not appear to have been overly concerned with such a practice.) Another possibility is that, whatever document Mr Tonna signed, it was one that Dr Mendonca then altered (and I do not suggest for any nefarious motivation) in the sense of replacing at least the cover page (to remove a page that contained her landline). That is, of course, no more than speculation but it highlights that I am left in considerable doubt as to the circumstances in which the document came into existence (and I certainly cannot conclude on the balance of probabilities that the parties' common intention as at February 2014 was that Mr Tonna would be bound by the terms of the Tenancy Agreement or that he was agreeing to occupy the Galston Property as a tenant, under any particular form of Tenancy Agreement).
The giving by Mr Mendonca of the standing instructions for the mortgage repayment sums (even if Mr Mendonca was not then held out as, and/or cannot be said to be, acting for Dr Mendonca in the implementation (as opposed to the formation) of the arrangements post the acquisition of the Galston Property) makes it difficult to conclude that there was any common intention of the relevant parties back in February 2014 that Mr and Mrs Tonna would occupy the Galston Property as tenants.
Accordingly, the claim by Dr Mendonca under the Tenancy Agreement (and subsequent Licence) must fail; and the question of liability for breach of the Tenancy Agreement by the making of unauthorised Alterations or sub-letting of the Galston Property does not arise. So too, does the claim for unpaid rent fail. (Had the Tenancy Agreement been established, then I would have allowed the sum for rental arrears but would have been inclined to offset those against any contribution to mortgage repayments as contemplated in the in principle agreement that I have found was reached between the parties. I would not have allowed an offset (against the cost of removal of the Alterations) for the value added to the Galston Property as a result of those improvements, since the evidence in respect of value was not persuasive. In any event, on the findings I have made this does not arise.)

[107]

Conclusion

I have found that there was an agreement in principle (albeit not a binding contract as a matter of law) between Mr and Mrs Tonna on the one hand and Dr Mendonca on the other (reached most likely at the 29 January 2014 meeting but certainly at the latest on 30 January 2014 when the parties took steps to implement that "in principle" agreement) to the effect of that contended for by Mr and Mrs Tonna (albeit that certain aspects of the "in principle" agreement were uncertain). Pursuant to that "in principle" agreement, Mr and Mrs Tonna made payments (until March 2015) directly to meet the mortgage repayments due in respect of the ANZ loan facility entered into by Dr Mendonca at the time of acquisition by her of the Galston Property. Further, as part of that "in principle" agreement, Mr and Mrs Tonna were to have the benefit of occupation of the Galston Property (their "new home").
As it transpired, Mr and Mrs Tonna have had the benefit of occupation of the Galston Property (albeit for some part of the time through a tenant, Mr Nielsen) since the completion of the sale transaction, but, from May 2015, they have not paid the mortgage repayments (or rent, as Dr Mendonca says was required).
Up to the period when a request was made (with which Mr and Mrs Tonna were objectively able to proceed) for the transfer to Mr and Mrs Tonna of the Galston Property, which was not until December 2014, the payment by Mr and Mrs Tonna of amounts referable to the mortgage repayments was consistent with the "in principle" agreement. Thereafter, in circumstances where Dr Mendonca refused to recognise any beneficial interest of Mr and Mrs Tonna in the Galston Property and Mr and Mrs Tonna were in a position to proceed with the "in principle" agreement, I consider that it is appropriate that those repayments should be borne as between the parties proportionate to their beneficial interest in the Galston Property since the mortgage repayments (on the original loan facility amount; i.e., not including the increase in the borrowings secured by that facility) will ultimately benefit both owners of the Galston Property.
Accordingly, I consider that Mr and Mrs Tonna should account to Dr Mendonca for their proportionate share of the repayments that were required to be made (and were paid by Dr Mendonca) for the original amount of the loan facility from the time that they ceased paying any such payments (which was in March 2015 when Mr Tonna's evidence is that he was concerned that in light of the freezing orders that he understood had been obtained if he continued to make the repayments they would not "go to the property" - see T 348.19) and that Dr Mendonca should account for her proportionate share of the December 2014 - March 2015 mortgage repayments made by Mr and Mrs Tonna.
Since it was contemplated (see the email correspondence from Mr Mendonca referring to Mr and Mrs Tonna's "new home" and the absence of any contrary position then taken by Dr Mendonca) that Mr and Mrs Tonna would have the benefit of occupation of the Galston Property after its acquisition by Dr Mendonca, I do not consider it appropriate to require Mr and Mrs Tonna to account for the rents obtained from Mr Nielsen during his occupation of part of the Galston Property. However, it was accepted by Mr and Mrs Tonna that (on the assumption that they succeeded in their principal claim) they ought account for amounts paid by Dr Mendonca for items such as insurance premiums, Council rates and water rates in respect of the Galston Property.
As to the improvements or alterations effected by Mr and Mrs Tonna to the Galston Property, the amount referable to the boundary fence is nominal in the scheme of things and, as to the new shed, although I accept that this was erected without the consent of Dr Mendonca, it is by no means apparent that this is an alteration which is to the detriment of the Galston Property as a whole (in that it is by no means clear that DA approval could not retrospectively be obtained). Bearing in mind that Dr Mendonca was aware at some point of the requirement by the Council for DA approval and chose to take no action in that regard, I would make no adjustment for that item.
The appropriate time for the making of adjustments in relation to contributions made after the acquisition of the Galston Property (which do not count as part of the determination of the proportionate contributions to the purchase price) is likely to be on any sale of the Galston Property (since I assume that it is unlikely that the parties will wish to persist in co-ownership of this property). Therefore, I will make no order in that regard but will invite submissions as to the appropriate way in which account should be made of those adjustments.

[110]

In the Tonna Proceedings 1. Declare that the first defendant holds the legal title to the property referred to in these proceedings as the Galston Property on a resulting trust for herself and the plaintiffs in the proportions that reflect their respective contributions to the purchase price for the Galston Property (the precise proportions to be as specified in orders to be entered following determination of the legal costs referable to the conveyancing aspects of the contract for sale to the first defendant of the Galston Property). 2. Order the first defendant to execute and provide to the plaintiffs, within 28 days of the making of orders specifying the proportionate share of the plaintiffs' beneficial interest in the Galston Property, in accordance with Order 1 above, a transfer in registrable form in respect of the Galston Property to record the plaintiffs' interest in the Galston Property as declared by Order 1 above. 3. Order the plaintiffs to account to the first defendant for their proportionate share of the mortgage repayments referable to the original amount advanced under the said loan facility (i.e., not the increased amount of the facility drawn down by the first defendant after the acquisition of the Galston Property) from February 2015 (taking into account that an amount was in fact paid by the plaintiffs in May 2015 towards the mortgage repayments) and for there to be a proportionate adjustment of amounts paid by the first defendant in relation to expenses associated with the Galston Property (Council rates, water rates and insurance premiums); such accounting and adjustment to be in accordance with orders to be made following the provision of any further submissions on that issue. 4. Order that, on any subsequent sale of the Galston Property, the first defendant's proportionate share of the net proceeds of sale be reduced by the amount required to discharge the increased amount of the ANZ loan facility drawn down by the first defendant after the acquisition of the Galston Property. 5. Direct the parties to file short minutes of order to give effect to Order 1 above (as to the proportionate contributions by each of the first defendant on the one hand and the plaintiffs on the other hand to the purchase price, having regard to the conveyancing costs referred to in Order 1 above), and as to the necessary adjustments to be made in accordance with these reasons in relation to expenses paid by the first defendant in respect of the Galston Property, within 21 days (and, failing agreement as to the said proportionate contributions and relevant adjustments, to file and serve brief written submissions on that issue within that time period). 6. Dismiss the plaintiffs' claim against the second and third defendants. 7. Reserve the question of costs and direct the parties to file brief written submissions on costs within 21 days, with a view to costs being dealt with on the papers.

At a glance

Court

Decision date

Before

Source

Judgment (112 paragraphs)

Parties

Legislation Cited (4)

Cases Cited (102)