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

Public policy favours the consensual resolution of litigation. Where that occurs before there has been a hearing on the merits and leaving only a dispute as to costs, generally the Court will make no order as to the parties’ costs. However, a different outcome may follow where what is presented as a resolution or sensible approach by one side is in fact a capitulation.

This judgment deals with that distinction, where it is said that the plaintiff gradually capitulated during the course of a hearing before me of three proceedings which were the final iteration of a dispute about a property at Galston. The litigation has run for several years and occupied a number of judges of this Division and the Court of Appeal. In the originating dispute, the plaintiff is Dr Renuka Mendonca, and the defendants are Mr Mark Tonna and Mrs Lorraine Tonna (to whom I refer without disrespect as the Tonnas).

In Tonna v Mendonca [2019] NSWSC 1849, Ward CJ in Eq (as the President then was) determined that Dr Mendonca held the property on resulting trust for herself and the Tonnas. The Tonnas had alleged that Dr Mendonca had contravened an agreement reached by Mr Tonna and Dr Mendonca’s husband (as agent for Dr Mendonca and also in his capacity as agent and accounting adviser to the Tonnas) whereby Dr Mendonca would purchase the property from the Tonnas and would hold the legal title on trust for their sole benefit until the sale of another property owned by the Tonnas at Schofields, with an obligation eventually to transfer the property to them. Dr Mendonca had denied that such agreement existed.

Her Honour also dismissed Dr Mendonca’s separate claims for damages for a breach of a residential tenancy agreement which was allegedly entered into between the parties, but which Mr Tonna denied ever existed.

Both of the findings referred to in the preceding paragraphs were upheld by the Court of Appeal in Mendonca v Tonna [2020] NSWCA 196.

Ward CJ in Eq also then determined the parties’ beneficial interest in the property - the Tonnas as to 28.87% and Dr Mendonca as to 71.13%: Tonna v Mendonca (No 2) [2020] NSWSC 306. I shall refer to these as the Interests.

On 4 June 2021, in the Real Property List, Justice Darke made orders under s 66G of the Conveyancing Act 1919 (NSW) for the appointment of trustees for the sale of the property and how the proceeds for the sale were to be applied. Dr Mendonca and the Tonnas were allowed to bid at the auction. Subsequently, Mr Hathaway and Mr Hosking became the Trustees for the sale of the property.

The auction of the property on the instructions of the Trustees took place on 18 September 2021. The Tonnas were successful with a bid of $4 million, over-bidding Dr Mendonca. However, the Tonnas’ initially only raised $3.5 million to make the purchase. The Trustees then issued several notices to complete to the Tonnas. The Tonnas were only able to complete their purchase by taking a loan from Mr Joseph Saliba. The Tonnas’ purchase of the property settled on 21 December 2021. The Trustees hold the proceeds in accordance with Darke J’s orders.

The three proceedings before me are the litigious fallout of that sale process. From September 2023 I case managed them to a hearing to bring all issues in dispute between the parties to an end.

The Trustee Remuneration Proceedings (2021/115917) concern an amended notice of motion filed by the Trustees on 28 September 2023 for the payment of their remuneration and expenses/disbursements. Dr Mendonca challenged whether the remuneration sought by the Trustees was reasonable.

The Negligence Proceedings (2022/264829) relate to the allegations raised by Dr Mendonca in her amended statement of claim filed on 19 February 2024 (ASC). This raised a litany of allegations relating to the conduct of the Trustees and the Tonnas during the sale of the property, including that the Trustees preferred the Tonnas’ interests, denied Dr Mendonca procedural fairness by failing to consult with her on various matters related to the sale, and also contended that a substantial part of the Trustees’ remuneration and disbursements should be borne by the Tonnas because of their conduct during the sale process. It was also alleged that the loan that Mr Saliba had provided to the Tonnas was void for illegality.

The Interpleader Proceedings (2022/7598) are an interpleader action. The Trustees commenced the proceedings by summons seeking an order that they pay into Court funds comprising a principal sum of $505,382.64 and interest in the amount of $15, 284.51 in response to a garnishee order which the Tonnas had successfully obtained in relation to a costs judgment the Tonnas had against Dr Mendonca. Both Dr Mendonca and the Tonnas subsequently filed notices of motion claiming entitlement to the funds.

The three proceedings were listed for hearing before me for three days commencing on 2 April 2024. As is set out in detail below, Dr Mendonca indicated at various points throughout the hearing that she no longer wished to press various parts of her ASC, contest the remuneration sought by the Trustees, or challenge the Tonnas’ entitlement to the funds. The effect of the numerous concessions provided by Dr Mendonca was that the Court was not required to determine the merits of any of her allegations.

At the conclusion of the hearing, the parties were directed to agree to a set of short minutes reflecting the positions on issues which had been agreed between the parties throughout the hearing. Those orders were made on 10 April 2024. As part of those orders the parties were given an opportunity to file and serve submissions concerning the costs of each of the proceedings for me to determine on the papers. This judgment resolves the issue of costs in the proceedings as between the parties.

Mr D Stewart of Counsel provided submissions for the Tonnas, Mr S Phillips of Counsel provided submissions for the Trustees. Dr Mendonca prepared her own submissions.

For the reasons which follow, the overall outcome (with some minor variations between the proceedings) is that the Court will order Dr Mendonca to pay the other parties’ costs.

These proceedings were commenced by Dr Mendonca by summons filed on 26 April 2021. On 4 June 2021, Darke J made orders under s 66G of the Conveyancing Act 1919 (NSW) for the appointment of trustees for the sale of the property and as to how the proceeds of any sale were to be applied. Relevantly for present purposes, order 5 authorised the Trustees to “charge at their usual hourly professional rates subject to the total sum not exceeding $20,000” and also allowed them to “deduct such expenses from the proceeds of sale.” Foreseeing further scope for argument between the parties, order 7 stipulated that the successful party to the auction could not apply the benefit of any asserted set-off entitlements or adjustments against the purchase price. These orders were substantially consistent with the orders sought by Dr Mendonca in her summons.

The auction of the property took place on 18 September 2021 with the Tonnas making the successful bid of $4 million. Initially, the Tonnas were only able to raise $3.5 million to make the purchase. The transaction was then subject to a notice to complete by the Trustees.

On 3 December 2021, the Tonnas filed a notice of motion seeking to vary the orders of Darke J, which would have enabled them to complete the purchase by only paying $3,056,597.79 to the Trustees and set off the remaining amount by relying on extant costs orders they had against Dr Mendonca. On 6 December 2021, sitting as Duty Judge, I dismissed the Tonna’s notice of motion on the basis that it was inappropriate to vary the orders made by Darke J on the basis his Honour had expressly considered a set-off should not be allowed to avoid the parties prolonging their dispute: Mendonca v Tonna [2021] NSWSC 1627 (Kunc J judgment). On that occasion, the Trustees also foreshadowed their intention to apply to the Court to increase the amount to which they were entitled to charge above the $20,000 amount set out in Order 5 of Darke J’s original orders.

On 16 May 2022, the Trustees filed a notice of motion for orders including:

The Trustees’ motion was ultimately listed for hearing before Hammerschlag CJ in Eq.

On 1 February 2023, his Honour determined that order 5 made by Darke J on 4 June 2021 did not finally limit to $20,000 the Trustees’ entitlement to charge for their services and disbursements. His Honour also made directions for the Trustees to provide Dr Mendonca and the Tonnas any further documentation to enable them to determine their position in relation to the remuneration application. Registrar Walton then made further directions on 5 April 2023 for Dr Mendonca and the Tonnas to serve further evidence by 10 May 2023 and the Trustees to file and serve any affidavits in reply by 31 May 2023. That timetable was extended on 7 June 2023. On that occasion the matter was also referred to court annexed mediation, but the matter did not settle when the mediation took place on 28 July 2023.

On 14 August 2023, the matter was listed for hearing before me for three days commencing on 2 April 2024. On 28 September 2023 I commenced case-managing this proceeding, together with the other two proceedings. On that occasion, I granted leave to the Trustees to file in Court an amended notice of motion and, given Dr Mendonca’s challenge to the Trustees’ remuneration, noted that the parties would endeavour to agree upon a referee and the terms of that reference with the intention of submitting consent orders to the Court for the disposition of the issues in that proceeding.

The Trustees’ amended notice of motion sought orders including:

On 24 October 2023, I made orders by consent appointing Mr Henry McKenna as the referee. Mr McKenna was required to answer the following questions:

Mr Mckenna completed his referee’s report on 29 January 2024.

In response to question 1, Mr McKenna concluded that the Trustees’ timesheet entries were mostly fair and reasonable although he believed that there should be some entries reduced or removed.

In response to question 2, Mr McKenna provided this table, being a reduction of 13.3% and which was accepted by the Trustees before me:

In relation to question 3, Mr McKenna did not consider that any of the work undertaken by the Trustees was negligent or unnecessary.

On 2 February 2024, Dr Mendonca filed a notice of motion seeking the following orders:

On 14 February 2024, I made directions for the parties to file and serve submissions as to whether the referee’s report should be adopted, file and serve submissions as to any adjustments which should be made to Dr Mendonca’s Interest in the proceeds after deduction of the costs and expenses of the Trustees, and required the Trustees to file an application for assessment of the costs of their former solicitor, Mr John Breene of Breene & Breene. I also ordered that all three proceedings be heard together with evidence in one being evidence in the other.

On 16 March 2024, Dr Mendonca filed a further notice of motion seeking these orders:

On 27 March 2024, I stood this further motion over to be heard at the main hearing to commence on 2 April 2024. At the hearing, Dr Mendonca informed me that the gravamen of her complaint was that the Trustees were out of time in filing the application for the costs assessment. This breach of the limitation period was cured by a decision of the Manager, Cost Assessment of this Court dated 26 March 2024 who exercised their discretion to extend the time within which the application was brought. Dr Mendonca sought the stay because she said that the extension of time was not in her interests as a beneficiary of the trust because the trust estate (the Proceeds) would bear the costs of an assessment that was brought out of time and, to use her description, was ‘statute-barred’.

I assumed for the purposes of the motion that Dr Mendonca had standing to bring the application, bearing in mind that a beneficiary generally only has a right to due administration of the trust estate. However, I dismissed the motion because Dr Mendonca failed to establish any basis upon which I could set aside the decision of the Manager, Costs Assessment. Furthermore, even if I could do so, I did not accept that it was not in her or the Tonnas’ interests for the Trustees’ solicitors’ costs to be assessed. In my respectful view, it was plainly in the interests of all parties to ensure that only the amount which is properly payable to the solicitors in respect of their costs is levied against the proceeds.

In opening, Mr Phillips informed the Court that there were two issues left to address in these proceedings:

In relation to the second issue, all the parties accepted that the Court should make an order providing for those costs to be paid as assessed from the proceeds. Dr Mendonca was concerned to ensure that the Tonnas paid the portion of costs which related to their notice of motion filed on 3 December 2021 which I had dismissed in the Kunc J judgment (see [19] above). This position was already conceded by Mr Stewart in his written opening submissions. Therefore, I asked the parties to produce short minutes outlining that the Trustees would be entitled to have their assessed solicitors’ costs out of the proceeds, with a notation that the Tonnas agreed they had to pay the Trustees’ costs associated with their (the Tonnas’) unsuccessful 3 December 2021 notice of motion.

The parties’ positions in relation to the first issue were not unanimous. The Trustees and the Tonnas consented to the Court adopting the referee’s report as the amount of remuneration to which the Trustees were entitled. However, Dr Mendonca challenged the referee’s report on the basis that she submitted the referee had incorrectly determined that there were no negligent acts by the Trustees which would justify their remuneration being further reduced.

In both written and oral submissions, Dr Mendonca contended that the Trustees had breached what she considered was their duty at general law and an obligation pursuant to s 66H of the Conveyancing Act 1919 (NSW) to consult with her about matters relating to the sale. Dr Mendonca submitted that the Trustees should have consulted her when they realised on or about 19 July 2021 that they were going to exceed the remuneration estimate of $20,000. It was her contention that had she been consulted the Trustees would have been replaced by the existing solicitors and real estate agents and this would have reduced costs. Dr Mendonca submitted that the parties would have been saved $48,000 had the Trustees been replaced by the solicitors because the solicitors’ fees were only $99,000 as at 20 July 2021 compared to the Trustees’ fees of $147,000.

Dr Mendonca also relied on s 66H to argue that the Trustees should have consulted her at the point at which the Trustees issued a second notice to complete to the Tonnas on 8 December 2021. She says that if they had done so, she would have informed them that she had obtained a loan from a bank and was willing to pay $4.1 million for the property. Therefore, the parties were deprived of $100,000, being the extra amount that Dr Mendonca was willing to bid in excess of what the Tonnas actually paid.

Finally, Dr Mendonca also suggested that the Trustees were negligent in not charging the Tonnas an occupation fee from 4 June 2021 until 21 December 2021 and therefore the Trustees may be liable for damages of up to $18,000.

In summary, Dr Mendonca challenged the referee’s report by contending that there should be a further reduction in the Trustees’ remuneration of $166,000 for the reasons outlined at [38] to [40] above.

In response, Mr Phillips submitted that Dr Mendonca had failed to identify any error which the referee had made in how the report has been prepared. I invited the parties to consider whether they pressed for the answer to question 3 of the report to be adopted. Mr Stewart pressed for that outcome but accepted that the Court was not bound by the referee’s conclusion that he would not reduce the amount of remuneration to which the Trustees were entitled because of a lack of evidence as to whether there was any negligence.

I concurred with Mr Stewart’s submission that I was not bound by the referee’s opinion that there was no negligence on behalf of the Trustees. I inquired of Dr Mendonca as to whether she would accept the report if I limited the response to question 3, namely that he “does not consider that work undertaken by the Trustees was negligent or unnecessary” as a matter of opinion and that the Court would still be required to determine if the Trustees’ conduct had been negligent in the ways she alleged. On this basis, Dr Mendonca agreed that the Court should accept the report in its entirety (Tcpt, 2 April 2024, p 33 (25)).

After the morning tea break, Dr Mendonca informed the Court that she had decided that she would accept the referee’s report in its entirety and only press her claim in relation to apportionment as to how costs were to be dealt with as between herself and the Tonnas (Tcpt, 2 April 2024, 35 (39-44)). To be clear, Dr Mendonca subsequently agreed that she did not dispute the referee’s conclusion that the Trustees should be paid $192,000 for their fees (Tscpt, 2 April 2024, p. 39(44-47)).

There was also a dispute as to whether the Tonnas in fact owed Dr Mendonca rental income in proportion to their Interests for the period 19 December 2021 (the date of Ward CJ in Eq’s judgment concerning the co-ownership status of the property) and the date that the Trustees were appointed on 4 June 2021. It was accepted that this amount should come from the Tonnas’ share of the net proceeds.

At the conclusion of the hearing, I requested the parties to prepare short minutes which reflected the various concessions and agreements between them. On 3 April 2024, I made the following orders in relation to these proceedings:

On 5 April 2024, pursuant to the slip rule I amended Order 2 made on 3 April 2024 by deleting the sum of $195, 095.50 and replacing it with the sum of $192, 095.50.

On 10 April 2024, I then made these further orders and notations to give effect to the parties’ further agreements as to the working out of the Court’s orders:

The Tonnas’ primary position is that Dr Mendonca should be solely liable for the Trustee’s remuneration and legal costs in these proceedings. In the alternative, they seek an order that Dr Mendonca bear 90% of the costs of the Trustees’ remuneration and legal costs and the Tonnas be liable for 10%. This 10% is put on the basis that the Tonnas did initially oppose the quantum of the remuneration and legal costs sought by the Trustees.

The costs order sought against Dr Mendonca was said to be justified on the basis that she unreasonably sought to challenge the Trustees’ remuneration, only to then accept the referee’s report and the (to be assessed) costs of the Trustees’ solicitors.

The Tonnas relied on Darke J’s observations in Stibbard-Leaver v Leaver [2021] NSWSC 65:

Whilst this is not expressly an application under s 66G of the Conveyancing Act 1919 (NSW), the principles outlined by Darke J are said to apply in this case by analogy.

The Tonnas advanced five reasons why the position of Dr Mendonca was unreasonable.

First, Dr Mendonca was the only party that pressed that the work undertaken by the Trustees was negligent, unnecessary or similar. For example, she requested the referee to consider what would be the fair or reasonable amount of remuneration for the Trustees if they assumed she was correct that work undertaken by the Trustees was negligent, unnecessary or similar; she pressed during the hearing that the Trustees were negligent; her claims went beyond negligence and overlapped with her claims in the Negligence Proceedings; and, she had argued against the adoption of the referee’s report because it did not account for her allegations without ever identifying how there was any error in the report.

Second, it was submitted that Dr Mendonca had a prior opportunity to ventilate her concerns to the referee and did so through her document called ‘Brief Statement of Findings of Fact and Law’ and therefore it was incorrect for her to say she needed to press her allegations at the hearing because she had no prior opportunity to do so.

Third, there was no basis for Dr Mendonca to refuse to accept the referee’s report because it was obvious the referee had been fair and independent of all parties.

Fourth, even if the Court found that Dr Mendonca had properly identified an error in the report because it did not take into account her allegations of the Trustees’ negligence, those allegations had been shown to be unmeritorious by the dismissal of the Negligence Proceedings.

Fifth, Dr Mendonca had refused to accept that the costs of Breene & Breene should be paid at all, as was demonstrated by her notice of motion filed on 16 March 2024 and amended notice of motion filed on 2 April 2024 which sought orders that my order of 14 February 2024 be set aside or stayed, and sought an order that the application of the Trustees for an assessment of Breene & Breene’s costs filed on 24 February 2024 was incompetent because it was time barred. It was submitted that Dr Mendonca was unreasonable to press this application when she had received a letter from Registrar Bellach that granted an extension of time for the assessment to take place, and then sought to challenge the Registrar’s decision on various grounds including unreasonableness and jurisdictional error.

Given Dr Mendonca then no longer sought to challenge the referee’s report, the Tonnas rely on Lewin v Lewin [2019] NSWSC 380, in which Darke J said:

The Tonnas also emphasise that they were not involved in the challenge to the referee’s report, save as to a query how a remuneration estimate for $20,000 increased to $130,0000 and how a legal bill of $90,000 was levied against the trust estate. Mr Stewart’s submission noted that the Tonnas agreed to an order that they pay $6,446.00 inclusive of GST from their part of the interim distribution, pursuant to order 4 of the 10 April 2024 orders, and agreed to the same order with respect to legal costs pursuant to order 6 of the 10 April 2024 orders.

If the Court were not minded to order Dr Mendonca pay the Trustees’ costs, the Tonnas submitted that a reduction of 20% should be made to the costs sought by the Trustees. Two submissions were put forward in support of this proposition. First, it was said that the Trustees’ remuneration after it was considered by the referee was reduced by approximately 13% meaning the beneficiaries had had a nominal success in the proceedings. Second, it was submitted that the Trustees unjustifiably delayed the cost assessment process in circumstances where the parties were disputing their legal costs and their subsequent delay caused a dispute as to whether the assessment process was out of time. Had the Trustees acted promptly, the Tonnas contended that the subsequent disputes would have fallen away.

In reply, the Trustees provided four reasons as to why a reduction of 20% should not be made:

The Trustees also submitted that any costs they bear in these proceedings should be paid by Dr Mendonca. They submitted that a Sanderson order should be made because Dr Mendonca was the true defendant in this case given her persistent challenges to the Trustees’ remuneration and costs and as such, she should be held responsible for all of the costs incurred.

The Tonnas reject that Dr Mendonca achieved any of the relief she sought in these proceedings or that her conduct was not unreasonable. They submitted that their initial opposition to the Trustees’ remuneration resulted in the referee being appointed and after that appointment they did not oppose the relief sought by the Trustees.

The Tonnas also reject that they adopted a false position on the costs that were due and payable by reason of my 6 December 2021 orders. Mr Stewart submitted that his clients always accepted that they were liable to pay $6, 446.00 inclusive of GST. This amount is vastly different to the amount Dr Mendonca sought to have the Tonnas pay, being $63,037.00.

The Tonnas further suggested that Dr Mendonca’s written submissions seek to reagitate a number of the issues she conceded during the hearing including: (a) the provenance of an excel spreadsheet from September; b) her loss of a valuable opportunity to remove the Trustees and their solicitors; (c) the extraneous costs assessments, costs orders, costs certificates, costs judgments and costs reviews; (d) the out of time costs assessment; (e) the large shed; (f) the tenancy agreement; (g) the notice to complete; (h) her damages and losses; (i) a failure to relist; and, f) the assertion she had made offers.

The Trustees contended that the Court should make these costs orders:

In support of this position, the Trustees relied on a trustee’s right to recoup all expenses properly incurred in execution of the trustee’s powers pursuant to ss 59(4) and 93 of the Trustee Act 1925 No 14 (NSW) and r 42.25 of the Uniform Civil Procedure Rules 2005 (NSW).

Section 59(4) of the Trustee Act provides that “a trustee may reimburse himself or herself, or pay or discharge out of the trust property all expenses incurred in or about execution of the trustee’s trusts or powers”. Section 93(3) relevantly provides that “In any proceedings with respect to the management or administration of any property subject to a trust or forming part of the estate of a testator or intestate, or with respect to the interpretation of the trust instrument, the Court may, if it thinks fit, order any costs to be paid out of such part of the property as in the opinion of the Court is the real subject matter of the proceedings.“

UCPR r 42.25(1) empowers the Court to indemnify trustees for any costs incurred in similar terms to that outlined in s 93 of the Trustee Act:

The Trustees also drew to attention that the general law also provides them with a similar entitlement to their costs. As Leeming JA said in Perpetual Trustee Co Ltd v Attorney General [2018] NSWSC 1456:

Relying on the matters set out in the immediately preceding paragraphs, the Trustees submit that unless either party is able to demonstrate that the Trustees have acted improperly or unreasonably, the Trustees are entitled to have paid from the proceeds all of their costs incurred with respect to the proceedings while acting as trustees with respect to the sale and the proceeds.

More specifically, the Trustees submit that pursuant to UCPR r 42.25 the Trustees should be paid out of the proceeds without any apportionment as between the beneficiaries. This is justified on the basis that they were in substance the successful moving party in these proceedings given that their remuneration, costs and other disbursements and expenses incurred in their capacity as trustees were approved by the Court.

In support of their gross sum costs order application, the Trustees rely on the affidavit of their solicitor Ms Wendy Jacobs dated 11 April 2024. Ms Jacobs’ affidavit outlines that the Trustees will have incurred $208,821.78 in costs. The Trustees submit that a 1.8% discount should be applied to those costs, such that the total amount of the gross sum costs order in the Trustees’ favour should be $205,000.

Ms Jacobs’ affidavit also provides a basis for the Trustees’ costs to be apportioned across the three proceedings with 40% of the costs order being apportioned to the Trustee Remuneration Proceedings, 55% to the Negligence Proceedings and 5% to the Interpleader Proceedings. So apportioned, the total gross sum costs order which the Trustees submit should be made is:

In addition to the gross sum costs order, the Trustees also seek an order for the payment of interest on the costs incurred by the Trustees with respect to the proceedings from the date such costs were incurred. Whilst it is not necessary for the Court to be aware of the dates on which costs were incurred before making such an order (see Drummond v Rosen [2009] NSWCA 331 at [3]) the Trustees provide evidence for when such costs were incurred in Ms Jacobs’ affidavit. In support of their application, the Trustees rely on s 101(4)-(5) of the Civil Procedure Act:

An order for the payment of interest to be paid is said to be consistent with the Trustees’ entitlement to be indemnified by the fund.

In support of her position as to the costs of the proceedings, Dr Mendonca filed a 106-page affidavit on 22 April 2024. Her submissions formed Annexure Z to that affidavit (pp. 81-103). They were, with respect, not always easy to follow and I accept the Tonna’s general criticisms of her submissions set out at [66] above. As will be apparent from what follows, she submitted the three proceedings should be seen as one and framed her submissions accordingly. It is therefore more straightforward to include all of her submissions under this heading.

Dr Mendonca’s primary position is that because all three matters were heard together and ‘ultimately consolidated into a single proceeding’ by me on 14 February 2024, there is no need to apportion the amount of costs in each proceeding. She contends that the Trustees’ legal costs should be discounted by 20% and then otherwise the beneficiary parties pay their own costs.

In the alternative, she contends that the Tonnas should pay her legal costs on the indemnity or ordinary basis due to their ‘unreasonable conduct and unlawful conduct’. Dr Mendonca submits that the Tonnas’ capitulated in relation to the payment of rent to her between 20 December 2019 and 4 June 2021 as well as in relation to the land tax and mortgage issues.

In support of her contention that the Tonnas and Trustees acted unreasonably during the course of the hearing, Dr Mendonca submits that it was only after her cross-examination when I clarified that the Trustees’ costs in relation to the proceedings before me on 6 December 2021 are to be completely attributed to the Tonnas, that the Tonnas made concessions in relation to which of the Trustees’ costs they would pay. She submitted that the Trustees expressly or impliedly adopted the Tonnas’ position that the Trustees’ costs in relation to the 6 December 2021 hearing be apportioned in proportion to beneficial ownership and as such invited litigation on the quantum of costs orders which unnecessarily protracted the proceedings. She also posits that the $63,037 she received from the Tonnas to make up for lost rent was the most significant issue in the Negligence Proceedings and, on this basis, she was content to drop her other claims. Dr Mendonca also claims that the delays the Trustees took in getting their solicitors’ costs assessed created unnecessary delays.

In reply to the Tonnas’ submissions, Dr Mendonca sought to traverse all costs orders which she had in her favour against the Tonnas and all of the times that the parties had been before the court and had failed to file and serve evidence on time.

With respect to the Trustee Remuneration Proceedings, Dr Mendonca submits that she helped to narrow the issues in dispute by accepting the referee’s report in totality after it was clarified that the Court would treat the referee’s response to Question 3 that there was no negligence by the Trustees as an opinion of the referee. She contends that after that it became unnecessary to determine the merits of this issue.

Dr Mendonca submits that had the Trustees properly quantified their fees incurred in defence of the Tonnas’ 3 December 2021 motion determined by me in the Kunc J judgment, she would have made similar concessions as she did during the hearing, namely being to not have other apportionment issues dealt with on the merits.

Dr Mendonca also rejects the Tonnas’ submissions that she unreasonably sought to challenge the Trustee’s remuneration and solicitors’ fees. Dr Mendonca said that she accepted the first two sections of the referee’s report and that it was not unreasonable for her to challenge the third section of the report as the referee had allegedly contravened my direction to him that he should not consider the merits of whether there was any negligence by the Trustee (as opposed to quantifying what Dr Mendonca alleged was negligent). Dr Mendonca says that once it was clarified that I would determine the merits of any negligence claim and assume the amount the referee would deduct would be nil, she says she reasonably accepted the report.

Dr Mendonca also argues that she reasonably accepted the Trustees’ solicitors costs after an offer by the solicitors which she accepted. She also says it was not unreasonable for her to draw attention to the cost assessment being brought out of time.

Dr Mendonca further alleges that the conduct of the Tonnas caused the proceedings to continue into a second day. As outlined below, Dr Mendonca relies on a number of costs orders and agreements allegedly entered into between the parties and claims the Tonnas misrepresented my orders on 6 December 2021 to avoid having to pay the Trustees’ fees:

As I have already noted (see [78] above), Dr Mendonca’s submissions also attempt to relitigate some of the concerns that she conceded she no longer pressed during the hearings. For example, she disputes that her conduct was unreasonable in relation to challenging the Trustees’ costs by pressing that the Tonnas had acted unreasonably by disputing whether the shed on the property was a fixture and by preventing her and the Trustees from inspecting the property. She also contends that various pieces of evidence demonstrate that the Tonnas also challenged aspects of the Trustees’ remuneration. Finally, Dr Mendonca contends that had the Tonnas accepted they were required to pay the Trustees’ costs of attending the 6 December 2021 hearing before me, that would have resolved all of the matters because that considerably reduced the amount of the Trustees’ costs that were in dispute.

Dr Mendonca also rejects that she was the only party that contended that the work undertaken by the Trustees was negligent or similar. She extracted in her submissions a number of times in the affidavit evidence where the Tonnas also sought to challenge the Trustees’ remuneration:

Dr Mendonca then submitted that the remaining apportionment issues did not require consideration because the costs dispute concerning my orders on 6 December 2021 was the largest issue to be considered in the proceedings. On this premise, Dr Mendonca suggested that had the Tonnas’ concession on who should pay the Trustees’ costs of attending the 6 December 2021 hearing been given earlier, Day 2 of the proceedings may have become unnecessary.

Dr Mendonca seeks to characterise the positions she adopted throughout the proceedings as concessions and not a capitulation. She describes her conduct as reasonable and an approach which resulted in significant costs savings for all parties. Dr Mendonca instead claims that the Tonnas capitulated in relation to the issues of land tax, insurance and mortgage rent payments. In contrast, she contends that she was successful in the proceedings as, pursuant to prayer 4 of her summons, she had achieved a significant reduction in the costs she owed to the Trustees by virtue of the Tonnas being required to pay their costs of the 6 December 2021 proceedings. Dr Mendonca contends all of her other claims which were abandoned in the Negligence Proceedings were claims for which she had evidence, but about which she made reasonable concessions. As a result of there being no hearing on the merits of these claims, Dr Mendonca submitted that the principles in Re Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 applied so that there should be no order as to costs.

Dr Mendonca also submits that she should not have to pay the Trustees’ costs of the various proceedings on the indemnity basis because the Tonnas also challenged the Trustees’ remuneration. Dr Mendonca claims that otherwise there was no determination on the merits of any of the proceedings and that as a result there should be no order as to costs, consistent with Lai Qin. She also rejects that none of her claims were without merit. She submits that she did have evidence to support her claims, but they were simply not heard on the merits.

Finally, Dr Mendonca also rejects the Trustees’ request for a gross sum costs order by stating that such an order would be unjust or unreasonable, albeit the basis for this contention is not clear from her submissions. She instead submits that there should be a 20% discount applied to the costs the Trustees seek. She also disagrees with the apportionment suggested by the Trustees (see [75] above) because she submits it is inconsistent with the order that all of the proceedings were to be heard together.

These proceedings were commenced by Dr Mendonca initially against the Trustees by summons filed on 5 September 2022. On 11 October 2022, Dr Mendonca then filed a notice of motion seeking the following relief, which was to substantially the same effect as her summons:

The motion was heard by Hammerschalg CJ in Eq on 1 February 2023 who stood the proceedings over to the Registrar to 5 April 2023. On that occasion, Registrar Walton required Dr Mendonca to file and serve a statement of claim joining Mr & Mrs Tonna as defendants in addition to the Trustees. On 20 April 2023, Dr Mendonca filed her statement of claim joining the Tonnas as the second defendants. The statement of claim sought this relief, being a revised form of the initial summons and notice of motion:

On 29 May 2023, the Trustees filed their defence. Paragraph 19 of that defence denied that Dr Mendonca was entitled to any of the relief claimed, or any other relief as against the Trustees. On 7 June 2023, Registrar Walton made orders extending the time for the Tonnas to file their defence and ordered that the parties attend a court-annexed mediation. On 15 June 2023, the Tonnas filed their defence denying the allegations against them, including that their conduct caused the costs of the sale process to increase and denied that they were unable or unwilling to complete. They also denied that the loan they received to be able to complete was invalid or void at law. The parties attended a court-annexed mediation on 28 July 2023 but were unable to settle the matter.

These proceedings then came before me on 28 September 2023 for pre-trial directions after being set down for hearing for three days from 2 April 2024 by Registrar Walton on 14 August 2023. On that occasion I directed Dr Mendonca to serve and file by email to my Associate a full outline of submissions in support of her case including identifying what affidavits and other materials she proposed to rely upon at hearing in support of her case. Further directions relating to the filing and serving of evidence were made on 24 October 2023.

On 29 January 2024, Dr Mendonca filed a notice of motion seeking leave to file and serve an amended statement of claim as well as an amended notice of motion. I gave Dr Mendonca leave to file and serve an amended statement of claim in the form which was Annexure A to her affidavit sworn on 27 January 2024 and to pay the other parties’ costs thrown away by the amendment. I also precluded Dr Mendonca from seeking to rely on any further evidence served after 12 February 2024 without leave of the Court. The defendants were to file any defences to the amended statement of claim by 15 March 2024. Dr Mendonca’s and the Tonnas’ expert accountants were also to attend a conclave and produce a joint expert’s report by 15 March 2024.

Dr Mendonca filed her amended statement of claim (ASC) on 19 February 2024. The only substantial differences in the relief sought between the ASC and the original pleading were to paragraphs 6 and 9 (amendments underlined).

Those allegations were particularised at [O] and [P] of the Amended Statement of Claim

The Trustees filed their defence to the ASC on 15 March 2024 (the Tonnas defence was filed in Court on the first day of the hearing). In relation to the new allegations the Trustees denied that they owed a duty as set out in paragraphs [O] and [P] of the ASC, denied that they excluded or restricted Dr Mendonca from enjoying access to the property, denied having any information which suggested that the Tonnas lived on the property and otherwise denied the further allegations.

On 22 March 2024, Mr Saliba, who provided the Tonnas with the loan which enabled them to complete the purchase of the property and which loan Dr Mendonca alleged was void, filed a notice of motion. He sought orders to set aside subpoenas issued by Dr Mendonca to him both for documents and that he give evidence.

I dealt with Mr Saliba’s motion on the first day of the hearing on 2 April 2024. Mr J Brook of Counsel appeared for Mr Saliba. Mr Brook informed the Court that the only document caught by the subpoena, being the Mortgage Loan Agreement dated 21 December 2021 entered into between Mr Saliba and the Tonnas, had been produced. It became clear that Dr Mendonca issued the subpoena to Mr Saliba because she wanted to call him in support of her claim that the loan agreement between Mr Saliba and the Tonnas was void on the grounds of illegality by reference to provisions of the Contracts Review Act 1980 (NSW) and the National Consumer Credit Protection Act 2009 (Cth). Whilst she initially wanted to cross-examine Mr Saliba, after it was explained that he would be her witness, she said she would call him in her case in chief.

After hearing argument, I set aside the subpoena requiring Mr Saliba to attend to give evidence filed on 20 February 2024, and a further subpoena filed on 4 March 2024 insofar as it also required Mr Saliba to attend to give evidence. The reason for the order was Dr Mendonca’s lack of standing to seek relief in relation to a loan agreement to which she was not a party. The Trustees, who were charged with the sale of the Property pursuant to orders of this Court, had accepted the highest bid, which came from the Tonnas. The transaction had settled. The funds which were to be paid under the loan agreement had been paid and Mr Saliba now held a registered mortgage over the property. The persons with standing to make any complaints about those arrangements were the Tonnas not Dr Mendonca. I therefore concluded that the subpoenas lacked a legitimate forensic purpose.

At the start of the hearing I also asked Dr Mendonca to specify what evidence she was relying on in these proceedings. The following exchange took place in which Dr Mendonca confirmed that she only pressed prayer 4 of the ASC which sought a “declaration that substantial trustees fees and disbursements be reduced from trustees fees and disbursements or be borne wholly by Tonnas or shared by trustees and Tonnas” (Tscpt 2 April 2024, pp 38(25)-39(15)):

Once again, for the avoidance of doubt, Dr Mendonca accepted that she no longer disputed that the Trustees were entitled to $192,000 for their fees. The dispute only concerned the proportions in which that amount should be paid between Dr Mendonca and the Tonnas (Tscpt, 2 April 2024, p.39(44-47).

The position adopted by Dr Mendonca differed from the relief sought in prayer 4 of her ASC. Dr Mendonca now contended that the Tonnas should not pay the entirety of the $192,000 owed to the Trustees. Instead, she submitted that each party should pay the initial estimate of Trustees fees referred to in Darke J’s orders, being $20,000, in the proportions of their Interests. She contended that the remaining $172,000 should be borne entirely by the Tonnas (Tscpt, 2 April 2024, p. 40 (15-26). I asked Dr Mendonca to go through the referee’s report during an extended luncheon adjournment and specify which costs she said should be borne by the Tonnas and why. She did so.

In light of Dr Mendonca only pressing prayer 4 of her ASC, there was no substantive relief sought against the Trustees. I therefore dismissed the claim as against the Trustees subject to reserving their right to seek their costs of these proceedings against Dr Mendonca. It also became clear that Dr Mendonca’s 11 October 2022 notice of motion (see [94] above), had yet to be formally dealt with. To avoid confusion with her ASC I dismissed that motion on 2 April 2024 and ordered that the parties’ costs of that notice of motion be their costs in the Negligence Proceedings.

The outstanding issue between Dr Mendonca and the Tonnas in these proceedings concerned which fees and costs should be borne by the Tonnas personally and which costs should be borne by the beneficiaries in proportion to their Interests.

The first fees in dispute were the costs the Trustees incurred obtaining expert reports to determine whether a large shed on the property, which the Tonnas were using to run their business, was a fixture (as contended by Dr Mendonca) or a chattel as contended by the Tonnas. Dr Mendonca submitted that cost should be borne by the Tonnas as they were the protagonists in this dispute and had eventually conceded the shed was a fixture.

The second disputed payment was whether the Tonnas should pay the costs the Trustees incurred with respect to engaging with the tenants occupying the property prior to it going to auction. Dr Mendonca said that she wanted the tenants to vacate the property as soon as possible but the Tonnas had indicated that they were willing to allow the tenants to stay in the property until some time until 2022.

The third disputed payment related to some of the costs the Trustees incurred by engaging LJ Hooker as the selling agent for the property. Dr Mendonca contended that some of the costs incurred in relation to allowing potential purchasers to enter and view the property should be borne by the Tonnas because they did not allow Dr Mendonca to view the Property. How liability for that should be apportioned was not made clear in her submissions or during the course of the hearing.

The fourth disputed payment was whether Dr Mendonca should be required to pay the costs the Trustees charged in relation to their personal attendance at the hearing before me on 6 December 2021 concerning the Tonnas’ unsuccessful motion. Dr Mendonca claimed she should not be visited with that cost given that motion was unsuccessfully brought by the Tonnas and those costs would otherwise not have been incurred.

The fifth disputed cost is the costs the Trustees incurred having to address a garnishee order obtained by the Tonnas (the garnished amount being the subject of the Interpleader Proceedings). Dr Mendonca submitted it was unreasonable for the Tonnas to seek the garnishee order because there was no money available at the time, therefore the order was premature and the application should not have been made.

The final dispute concerned whether there should be a set off from what Dr Mendonca owed to the Trustees of rent repayments which were received by the Tonnas and which Dr Mendonca said should have gone to her. Dr Mendonca submitted that between the judgment of Ward CJ in Eq on 19 December 2019, which stated that Dr Mendonca was a co-owner of the property, to the point that the Trustees were appointed on 4 June 2021, she was entitled to rent in the proportion of her Interest. Dr Mendonca pressed for the payment of that rent to her by the Tonnas by effectively setting-off that amount from the amount she owed the Trustees.

On the second day of the hearing, Mr Stewart cross-examined Dr Mendonca about the payments which were still in dispute, and which I have listed in the preceding paragraphs. After the luncheon adjournment on the second day, Mr Stewart indicated that the Tonnas accepted they were required to pay Dr Mendonca $63,000 for rental payments, and that they accepted that amounts in a particular accountant’s report were accurate (Tscpt, 3 April 2024, p. 114(26)-115(4)).

Late in the afternoon on the second day, having abandoned her claim in the Interpleader Proceedings (see [140] below), Dr Mendonca said that she would be content with all of the disputed payments being paid in accordance with the parties’ Interests on the basis of the indications Mr Stewart had given on behalf of the Tonnas recorded in the preceding paragraph (see Tscpt, 3 April 2024, p. 128(10)-130(14)). This meant that the remaining set off issues fell away. The parties therefore agreed that Dr Mendonca’s ASC should be dismissed.

It was accepted by the Tonnas that they were required to pay $17,000 pursuant to a costs order I made on 6 December 2021, in relation to their unsuccessful motion filed on 3 December 2021. Subject to the Tonnas accepting they were required to pay this amount, Dr Mendonca and the Tonnas reached the position that they should be responsible for the assessed legal fees of the Trustees in accordance with their Interests.

The end result was that on 3 April 2024, at the conclusion of the hearing, I made the following orders in relation to these proceedings:

The Tonnas submit that Dr Mendonca should pay their costs on the indemnity basis. They submit that her ASC and notice of motion dated 11 October 2022, both being dismissed on 3 April 2024 with an order that the costs of the motion were to be the parties’ costs in the proceedings, means that Dr Mendonca is the unsuccessful party in these proceedings. As costs follow the event, Dr Mendonca should be required to pay the Tonnas’ costs.

In support of the proposition that costs should be paid on the indemnity basis, the Tonnas submit that Dr Mendonca effectively abandoned all but prayer 4 of her ASC which sought that the Trustees’ substantial fees and disbursements be wholly borne by the Tonnas.

This meant that [A] to [J] and the first ten and a half lines of [K], [L]. [M], [N] and [P] of her ASC were all abandoned. The Tonnas sought to highlight the severity of the matters which had been dismissed. [A]-[D] of her ASC raised alleged breaches of duty based on the premise that the Trustees were required to consult Dr Mendonca pursuant to s 66H on various matters related to the sale, and had they done so she would have ‘got a better deal’ on solicitor and real estate agents costs. [E]-[N] alleged that the loan the Tonnas obtained to complete the contract was void for illegality and that the Trustees incurred unnecessary costs by extending the opportunity the Trustees had to complete the contract using ‘crime loan proceeds’. Mr Stewart also noted that Dr Mendonca even sought to subpoena Mr Saliba to establish whether the contract for sale was void for illegality. [O] challenged whether the Tonnas had a right to occupy the property at the time of sale and whether that occupation caused unnecessary costs to the Trustees.

Finally, [P] contended that the Trustees ‘failed to comply with their duty to give due consideration to whether $20,000 has been incurred’. This was said to be unreasonable in light of the ruling by Hammerschlag CJ Eq at [22] above, that the effect of Darke J’s orders on 4 June 2021 was not to cap the costs the Trustees could incur to $20,000.

It was submitted that the unreasonableness of her conduct was exacerbated in circumstances where Dr Mendonca was apparently baselessly challenging the indefeasible title of the Tonnas to the property from 21 December 2021, yet concurrently was content to otherwise receive 71.13% of the proceeds.

In summary, it was said that Dr Mendonca had abandoned serious allegations that the Trustees had preferred the Tonnas’ interests over Dr Mendonca’s interests, that Dr Mendonca was denied procedural fairness, allegations as to illegal loans and “crime loan” proceeds being used by the Tonnas to purchase the property and breaches of various legislative provisions.

As a result of the concessions made by Dr Mendonca, the only issue remaining in dispute related to prayer 4 of the relief which sought a ‘declaration that trustees fees and disbursements or be borne wholly by Tonnas or shared by Trustees & Tonnas.’

Insofar as Dr Mendonca maintained prayer 4 of the ASC, Mr Stewart’s submissions outlined the precise amounts of costs which Dr Mendonca sought for the Tonnas to bear personally:

It was submitted that the size of Dr Mendonca’s claim was minimal relative to the size of the claims which regularly appear before this Court. It was also said to be incommensurate with the extent of costs and time which had been incurred to prepare an 8 volume court book, have scheduled a three-day hearing and required Dr Mendonca to undergo a lengthy cross-examination. The unreasonableness of the costs and time incurred only became more stark when Dr Mendonca dropped all of her claims in these proceedings after her cross-examination.

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

The same submissions in support of their application for a gross sum costs order (see [74]-[75]) are applicable to their application in these proceedings.

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

These proceedings were commenced by summons filed by the Trustees on 10 January 2022. The Trustees sought an order directing payment into Court of the principal sum of $505,382.64 together with interest thereon of $15,284.51 in answer to a garnishee order issued in favour of the Tonnas in the District Court.

The next development came on 20 March 2023, when Dr Mendonca filed a notice of motion for these orders:

On 7 June 2023, Registrar Walton ordered any motions or amended applications and any evidence in support to be filed by 19 June 2023 and referred the matter to a court-annexed mediation. That mediation occurred on 28 July 2023, but the proceedings did not settle.

On 20 June 2023, Dr Mendonca filed an amended notice of motion for these orders:

On 27 June 2023, the Tonnas filed a Notice of Motion seeking the following orders:

After the unsuccessful mediation on 28 July 2023, the matter was set down before me for hearing from 2 April 2024 by Registrar Walton on 14 August 2023, I also commenced case managing these proceedings. On 28 September 2023, I made directions for Dr Mendonca and the Tonnas to serve and file by email to my Associate a document setting out the details of the matters in the report of Mr David Rosenthal (see [138] below) with which that party agreed and the matters with which that party disagreed. On 14 February 2024, I ordered that Dr Mendonca’s and the Tonnas’ experts attend a conclave and produce a joint expert’s report which identified the areas on which the experts agreed and disagreed, and the reasons for any disagreement, with such report to be circulated to the parties and to be filed by the Trustees by 22 March 2024.

Mr Rosenthal (whose report the parties referred to as the Judge Accountants Report) was an independent accountant retained by the parties to calculate the set-offs to which they were entitled in relation to the proceeds of sale of the property. Mr Rosenthal’s report was intended to facilitate the parties complying with the judgment of Ward CJ in Eq of 25 March 2020 that the parties proportionate shares of contributions paid towards the property be set-off against each other. The payments the subject of the set-off include mortgage, rent and insurance payments made by the parties.

Despite her notice of motion initially suggesting she was disputing the conclusions of the Judge Accountants Report, at the hearing Dr Mendonca said that what she pressed from her motion was for the Tonnas to be paid the difference between $520,000 and whatever the report suggested she was owed (Tscpt, 2 April 2024, p. 53(25)-(30)).

Given her concession that the Judge Accountants Report was accurate, and the concessions given in the related proceedings, Dr Mendonca agreed that her amended notice of motion filed 20 June 2023 was redundant (Tscpt, 2 April 2024, p. 55(6)-(14)). The parties agreed that all they were arguing about was how the funds should be divided, which in substance was the dispute enlivened by the Tonnas’ notice of motion filed 27 June 2023 (see [136] above). Against that background, I dismissed Dr Mendonca’s amended notice of motion with the parties’ costs of that amended notice of motion being their costs in the proceedings.

Mr Stewart informed me that in relation to the Tonna motion, the only question remaining for me to determine was what should the final figures from the Judge Accountants Report actually reflect? Mr Stewart foreshadowed that he had some new evidence which he would seek to put on in relation to that report.

During the course of the hearing it became clear that Dr Mendonca’s concern was not with the amount of money that may be paid out and to whom, but rather that she submitted she was owed money by the Tonnas in respect of least one costs judgment in her favour, if not also other amounts, which she said should be satisfied from the funds (Tscpt, 2 April 2024, p. 124 (15)).

I delivered an ex-tempore judgment during the course of the hearing explaining why the Court would not accede to Dr Mendonca’s application. In that judgment I noted that Mr Stewart had drawn my attention to the fact that an even larger debt is owed by Dr Mendonca to the Tonnas, arising from costs orders made in the proceedings heard by Ward CJ in Eq. It became apparent that that there are a number of what I called extraneous debts extant between the Tonnas and Dr Mendonca (in her own right or with her husband). I used the word "extraneous" to make the point that those debts are unrelated to the sale or the proceeds now held by the Trustees on the statutory trusts. In my respectful view, it was not open to the Court to order adjustments or set offs unrelated to the property, the proceeds or the three matters which the Court was hearing.

I was firmly of the view that the funds were properly funds to which the Tonnas were entitled pursuant to the garnishee orders. I was not satisfied that anything Dr Mendonca had said or drawn to my attention would justify disrupting the ordinary course, namely that those funds should be paid out to the Tonnas.

Therefore, at the conclusion of the hearing I made the following orders in relation to these proceedings:

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

Consistent with their position in the Negligence Proceedings, the Trustees submit their costs should be paid on the indemnity basis by Dr Mendonca and for a gross sum costs order (see [75] above).

As to their primary position that Dr Mendonca should pay their costs of the Interpleader Proceedings on the indemnity basis, the Trustees submit that in substance Dr Mendonca was the unsuccessful party in these proceedings. Whilst the Trustees were the respondents to a notice of motion in these proceedings without any specific relief sought against them, the Trustees submit that Dr Mendonca effectively duplicated the relief sought in the Negligence Proceedings and sought that the motion be heard together with the other proceedings. Therefore, the Trustees submit that Dr Mendonca was also unsuccessful in these proceedings and should be required to pay the Trustees’ costs in these proceedings as well.

While the Tonnas filed a motion in the Interpleader Proceedings on 27 June 2023 to be paid the funds, the Trustees submit that the costs incurred in these proceedings were all incurred in response to Dr Mendonca’s motion rather than to the Tonnas, because the Trustees did not oppose the funds being paid out to the Tonnas. Therefore, it is Dr Mendonca and not the Tonnas or the proceeds which should be visited with the costs of these proceedings.

Dr Mendonca rejects that she should have to pay the Trustees’ costs. She contends that the Trustees should have accepted the offer made by her solicitors at the time, Unsworth Legal, to use the liberty to apply to Darke J to resolve issues concerning the money sought in the garnishee order, rather than commence these proceedings. Therefore, she contends that there should be no order as to costs.

In response to the Tonnas, Dr Mendonca alleges that the Tonnas breached the orders of Darke J made on 4 June 2021 by seeking a garnishee order against the Trustees for payment into Court of $505,284.52 instead of allowing the money to be held on trust until there was agreement as to the amounts to be distributed to the beneficiaries. Dr Mendonca says this conduct was especially unreasonable given the other costs orders that had been made in her favour.

Finally, I record that the Trustees did not provide a formal response to Dr Mendonca’s submissions, choosing instead to rely on their initial submissions as to costs. The Trustees noted that Dr Mendonca had not sought to engage or respond directly with the Trustees’ submissions regarding the costs of these proceedings.

While for the sake of clarity, and to record Dr Mendonca’s conduct of the proceedings, I have set out above a detailed history of what occurred by reference to each of the three proceedings, the fact remains that they were case managed and heard together. Having regard to the Court’s broad discretion as to costs (as to which see further below), that fact is why the Court accepts Dr Mendonca’s submission that the question of costs should be resolved by looking at the three sets of proceedings as a whole. However, whether it is viewed that way, or by reference to each proceeding, the result is the same and not favourable to Dr Mendonca for the reasons which follow.

It is useful to begin with some general propositions:

Turning to the three cases at bar, the Court’s conclusions set out below rest on two basic considerations.

First, the Court accepts that the Trustees have not engaged in any conduct which would displace the outcome referred to in [154(5)] above.

Second, the lengthy history recounted over the preceding pages warrants the conclusion, which the Court readily draws, that three days of Court time were set aside and a court book of 8 volumes was produced to deal with what were complaints and challenges pressed by Dr Mendonca. However Dr Mendonca may attempt to characterise what occurred, the events as they unfolded before me at the hearing were a gradual capitulation and abandonment by Dr Mendonca of each of her substantive complaints and challenges. In particular, I do not accept that the resolution of any debate about the Tonnas’ costs obligations under the Kunc J judgment was the decisive watershed that Dr Mendonca contends. During the course of the hearing, as it became necessary for her to identify the evidence and specific arguments in support of her particular contentions, she chose not to press them. By the end, it was a complete capitulation.

Both by reason of that capitulation and the nature of the matters she had sought to raise, the Court concludes that her various contentions and objections had been unreasonably maintained by her. The Court also accepts the Tonnas’ specific submissions at [53] to [59] and [121] to [128] above as to Dr Mendonca’s unreasonable prosecution of the proceedings. As to the matters she sought to advance, the Court also concludes that, properly advised, Dr Mendonca should have known that her various contentions and objections had no chance of success. In reaching that conclusion, I have not overlooked the reduction of the Trustee’s remuneration determined by the referee’s report, but on any view Dr Mendonca was pressing for a far greater reduction than 13.3%. By reason of the conclusions set out in this paragraph, the Court does not accept Dr Mendonca’s submissions set out above at [78] and following and [150] to [151] including her reliance on Lai Qin for the proposition that there should, to any extent, be no order as to costs.

Before turning to specific orders in each proceeding, it is convenient to deal first with the issue of who should bear the burden of the Trustees’ remuneration and expenses other than legal costs and the application of the principle set out in [154(6)] above. For example, the Tonnas submit that the Trustees’ remuneration and expenses of the Remuneration Proceedings should be borne by Dr Mendonca. The Trustees submit these should be deducted from the Proceeds without apportionment. This would mean in practical terms that they would be borne by Dr Mendonca and the Tonnas in their respective Interests.

Because of Dr Mendonca’s conduct referred to in [157] and [158] above, in my respectful opinion that is not a just outcome, whether in relation to the Remuneration Proceedings or more generally. It must be recognised that some of the Trustees’ remuneration and expenses would have been incurred even without Dr Mendonca’s interventions, and the Court is not in a position to perform any kind of precise dissection of what they might be. Nevertheless, that does not mean the Court should not do the best it can to achieve a fair result, especially in the interests of bringing finality to the parties.

To that end, I have concluded that the relevant starting point for any adjustment should be after the unsuccessful mediation on 28 July 2023. This resulted in the proceedings being fixed before me for management and hearing. As to the division between Dr Mendonca and the Tonnas, my impression derived from my involvement is that requiring Dr Mendonca to meet half the remuneration and non-legal expenses of the Trustees after that date would be both fair and conservative, given that the various controversies were essentially driven by her.

Accordingly, the Court will direct that the Trustees’ approved remuneration and expenses (other than legal costs) incurred in all three matters and generally are to be paid as follows:

I will next turn to the legal costs in each of the three proceedings.

In relation to the Trustee Remuneration Proceedings:

As to the Negligence Proceedings, by reason of the conclusions set out in [157] and [158] above:

As to the Interpleader Proceedings:

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