Mendonca v Tonna

1. [1]

   THE COURT: The applicant, Dr Renuka Mendonca, and the current respondents, Mr Mark Tonna and Ms Lorraine Tonna, have been engaged in a long-running dispute about a property in Galston in the Hills District of Sydney. The last set of iterations of that dispute were case managed and determined by Kunc J in the Supreme Court, leading up to a long judgment on various costs disputes handed down on 15 August 2024: Mendonca v Tonna; Mendonca v Hathaway; The application of Hathaway and Hosking [2024] NSWSC 1024 (Costs Judgment). The decisions reached in that judgment were crystallised in orders made on 3 September 2024.

2. [2]

   The applicant seeks leave to appeal from part of the orders made as a result of the Costs Judgment, along with various earlier orders made by his Honour (on 24 October 2023, 14 February 2024, and 3, 5 and 10 April 2024). The current respondents – whom we shall refer to as the Tonnas to avoid possible confusion with the trustee parties in the proceedings below – resist a grant of leave.

3. [3]

   Prior to seeking leave to appeal the applicant had filed a notice of appeal, which in due course she amended. The draft notice of appeal for which she sought leave was in materially the same terms as the amended notice of appeal. In the appeal proceedings the Tonnas had filed a motion seeking that the matter be dismissed as incompetent. The applicant accepted before us that leave to appeal is required and thus conceded that if leave to appeal were refused then the appeal should also be dismissed as incompetent (together with a motion in that matter seeking an extension of time).

4. [4]

   There are 22 appeal grounds in the draft notice of appeal, extending over six pages. The meaning and significance of the grounds is at times difficult to discern. The applicant filed a 20 page summary of argument followed by a 30 page reply submission – doing so despite the fact that the rules set a 10 page limit for the summary of argument: note Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 51.12(3)(a). These written submissions are also somewhat difficult to follow.

5. [5]

   This Court has recently described decisions whether to grant leave to appeal in the following terms (Mohareb v Local Court of New South Wales [2024] NSWCA 235 at [34], citation omitted):

6. [6]

   It is generally only appropriate to grant leave to appeal concerning matters that involve issues of principle, questions of general public importance or a reasonably clear injustice going beyond something that is merely arguable (ibid at [25]). The “ultimate issue is the interests of justice, taking into account both the circumstances of the particular case and broader interests in resolving matters of public importance and clarifying the law” (ibid at [26]). Also relevant in that regard, in relation to disputes about costs, is that the issue of awarding costs is an invariable one in litigation, and it is trial judges who are generally best placed to weigh up the interests involved in such awards: John Anthony Arena Pty Ltd v Franpina Developments Pty Ltd [2022] NSWCA 139 at [18].

7. [7]

   Taking account of those principles, we are not persuaded that the applicant has raised any issue of principle or question of general public importance, nor shown a reasonably clear injustice going beyond something that is merely arguable. More generally and in any event, it is in the interests of justice that this disputation – which is essentially now about costs – should come to an end. The application for leave to appeal, the appeal, and the motion seeking an extension of time should all be dismissed, with costs.

8. [8]

   In what follows we first set out the background to the matter, then address the three main issues sought to be raised by the applicant, before referring to other issues also addressed in the application.

Background

1. [9]

   The matter has a long and complicated history. The following is a brief overview. In 2019 Ward CJ in Eq held that Dr Mendonca held the property on resulting trust for herself and the Tonnas: Tonna v Mendonca [2019] NSWSC 1849. Her Honour subsequently determined the parties’ beneficial interest in the property, being the Tonnas as to 28.87% and Dr Mendonca as to 71.13%: Tonna v Mendonca (No 2) [2020] NSWSC 306. Her Honour’s decision on the resulting trust issue was upheld in this Court: Mendonca v Tonna [2020] NSWCA 196.

2. [10]

   On 4 June 2021 Darke J made orders pursuant to 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 for the sale were to be applied. Mr Stephen Hathway and Mr Philip Hosking became the trustees for the sale (the Trustees). Dr Mendonca and the Tonnas were allowed to bid at the auction. They bid against each other. The Tonnas were the successful purchaser.

3. [11]

   Three proceedings arose from what Kunc J called the “the litigious fallout of that sale process”. The cases involved the current parties along with the Trustees. His Honour case-managed those matters to a hearing, which commenced on 2 April 2024. He summarised the proceedings, and what happened in the course of the hearing, as follows in the Costs Judgment:

4. [12]

   In the orders made on 3 September 2024, giving effect to the Costs Judgment, his Honour relevantly ordered that the Tonnas’ costs of the Trustee Remuneration Proceedings be paid by the applicant solely out of her net share of the sale proceeds held in Court, for the period up to 28 July 2023 on the ordinary basis, and thereafter on an indemnity basis. His Honour ordered that the applicant pay the Tonnas’ costs of the Negligence Proceedings on an indemnity basis, and of the Interpleader Proceedings on the ordinary basis.

5. [13]

   In this Court the applicant has not joined the Trustees as parties in her application for leave to appeal or her appeal.

6. [14]

   In her appeal proceedings the applicant sought a costs capping order. That was refused by Basten AJA: Mendonca v Tonna [2024] NSWCA 288 (Capping Judgment). As his Honour explained there at [12]-[13], leave to appeal is required because it seems that all orders challenged other than those on 3 September 2024 were made by consent, the latter orders related to costs, and the orders also appeared to be interlocutory: note Supreme Court Act 1970 (NSW), s 101(2)(c) and (e).

7. [15]

   A significant difficulty with this matter is that by and large the applicant’s numerous proposed grounds of appeal are not directed in a clear way to the orders that she seeks to challenge. In her submissions before Basten AJA the applicant said that she had “three main grounds”, relating to a set-off issue, a procedural fairness issue, and a “legal unreasonableness” issue. The respondents’ solicitor wrote to her subsequently seeking to clarify if she pressed her challenge only on those issues. She declined to confirm that. Before us she described those three issues as her “umbrella” and “main” grounds but said that there were also other grounds.

8. [16]

   In the circumstances we will address the three main issues, then briefly the residue of points raised.

The set-off issue

1. [17]

   This issue relates to an application made by the applicant which was determined by Kunc J on 3 April 2024. There was an amount of some $520,000 that had been paid into court pursuant to a garnishee order which, prima facie, represented funds to which the Tonnas were entitled. There was some procedural complexity associated with this amount, which was raised in the Interpleader Proceedings (as discussed in the Costs Judgment at [132]-[145]). In the end, the applicant sought that the amount paid out to the Tonnas from this sum should take into account that she had at least one costs judgment, if not other amounts, owing to her from the Tonnas.

2. [18]

   On 3 April 2024 his Honour declined that application and gave short ex tempore reasons explaining why. His Honour noted that “there are a number of what I will call extraneous debts extant” between the parties, being debts unrelated to the fund which was the product of the sale of the property; he had “sought to encourage the parties to discuss between themselves what those extraneous amounts are” so that they can “agree that whoever is owed money pursuant to that net position can be paid that money out of the ultimate acquittal of funds presently held by the trustees”; but said “that is not something that I can order, and cannot be something which, in my view, I can properly take into account in terms of fashioning orders as to the payment out of funds held by the trustees”.

3. [19]

   In this Court the applicant argued that his Honour had erred in principle in concluding that he could not make a set-off costs order, referring to a judgment of Brereton J in which such a set-off had occurred with respect to a costs judgment arising from proceedings in another court: In the matter of Fewin Pty Ltd [2017] NSWSC 1093.

4. [20]

   The reasons of Kunc J can possibly be understood as suggesting that the set-off proposed by the applicant was not available in principle. However, even if so read, it is apparent that critical to his Honour’s decision in any event was the view that whilst it would be desirable to set off all of the parties’ liabilities, this would require the parties to identify all such liabilities so that they could be brought to account. Implicit in his Honour’s decision was the view that that had not been done. His Honour was making a determination of what was just on the particular facts before him.

5. [21]

   In the respondents’ submissions to this Court it was said that “there is no injustice afforded to the applicant as she can still seek payment of these judgments as can the respondents against her”, and that “[i]n fact, the respondents have said this would sensibly be part of the working out of the final distribution from the Current Trust Fund”. The former argument is correct; there has been no suggestion the Tonnas are insolvent. As to the latter, the applicant disputed that characterisation, saying “[t]hey gave a figure without the interest payments, and were asking me to abide by that”. She also indicated that since his Honour’s decision on 3 April 2024 she has paid some $170,000 in fulfillment of a costs liability owed to the Tonnas (and the respondents accepted that that had been done).

6. [22]

   As Kunc J indicated, there is obvious good sense in the parties seeking to bring to account all of their various liabilities when finalising distribution of the sale proceeds. Doing so will reduce further disputation and legal costs. Whether or not there are matters of principle which might be argued were leave to appeal to be granted on this issue, we do not regard it as in the interests of justice to grant such leave given the following: the decision was substantially founded on the facts before him; it was made nearly a year ago (thus the challenge seems to require an extension of time); the position has since evolved; it remains open to the applicant to claim any amounts outstanding from the respondents; and there is still a possibility that common sense may prevail on both sides as the parties finalise their position.

The procedural fairness issue

1. [23]

   As we understand it the applicant’s complaint here has two main elements:

   1. (1)

      that Kunc J erred on 24 October 2023 in not referring to a referee, who was to review the Trustees’ claim for fees, a question addressed to verifying or apportioning the Trustees’ fees and legal fees relating to a dispute relating to the property that was determined adversely to the Tonnas in December 2021 (Mendoca v Tonna [2021] NSWSC 1627);

   2. (2)

      that his Honour erred in making an “arbitrary reduction from $63,037 to $6,446 without adequate reasons”.

2. [24]

   Leave to appeal on this issue should be refused. To begin with, the issue involves a challenge to orders made in favour of the Trustees, being orders 4 and 8(b) made on 10 April 2024. Order 4 was that:

3. [25]

   Order 8(b) related to the interim distribution to be paid to the Tonnas by the Trustee. To alter order 4 would potentially affect the Trustees as regards their entitlement to receive certain funds from an identified source. To alter order 8(b) would affect the Trustees in terms of what they were directed to do with the funds they held. Basten AJA pointed out in the Capping Judgment that “the appeal appears to require reconsideration of amounts payable to the trustees, either by way of remuneration or costs”, and thus “the trustees would need to be joined as respondents to the appeal” (at [15]). That has not occurred.

4. [26]

   Moreover, the issue involves no point of principle or public importance. Nor are we persuaded that the applicant has suffered a reasonably clear injustice going beyond something that is merely arguable, taking account of the following. It is not clear to us that the applicant in fact sought that the question identified should be referred to the referee. But even if she had, it is difficult to see how she would have suffered practical injustice when it remained open to her to make submissions on the issue to Kunc J in the final hearing in April 2024.

5. [27]

   As to the claimed “arbitrary reduction”, it was difficult to follow this argument, as it was not made clear what the figure of $63,037 related to. The applicant indicated that this amount had been identified in a spreadsheet produced pursuant to an order by a registrar, but that explanation threw relatively little light on the matter. The amount is listed in a spreadsheet as the sum of Trustee costs with respect to “Kunc J/Garnishee”. That is a different amount, relating to costs incurred on a different issue, to the liability the Tonnas incurred for their failed notice of motion in December 2021. As the Tonnas submitted, they were liable for the latter amount, but they had succeeded in obtaining a payment out of court from the proceeds of the garnishee order. To assert an “arbitrary reduction” assumes a relationship between the two figures which was not established. It may be that the applicant was again seeking to raise some version of the set-off argument, which we have already addressed.

The “legal unreasonableness” issue

1. [28]

   As noted above, the costs orders relevantly made by Kunc J was that the applicant pay the Tonnas’ legal fees with respect to:

   1. (1)

      the Trustee Remuneration Proceedings on the ordinary basis up to 28 July 2023, and on the indemnity basis thereafter;

   2. (2)

      the Negligence Proceedings on an indemnity basis; and

   3. (3)

      the Interpleader Proceedings on the ordinary basis.

2. [29]

   The applicant’s complaint seemed to be focused on the first of these, although it may have extended also to the other two. She submitted, for example, that “my conduct was not unreasonable after 28 July 2023 and [the] primary judge erred in principle”. Various notions of unreasonableness seemed to be at play, because she also argued that Kunc J’s “findings and conclusions in relation to 28 July 2023 … were infected by legal unreasonableness”. More generally, the applicant’s submissions appeared to raise a cavalcade of issues as to why his Honour’s costs orders were unfair or should be varied.

3. [30]

   His Honour’s core conclusions on the Tonnas’ costs overlapped with his conclusions with respect to the Trustees’ costs. His Honour said the following:

4. [31]

   His Honour’s selection of the date of the unsuccessful mediation was not because he attributed any blame to the applicant for the failure of the matter to settle. Rather, he was seeking to adjust the various costs liabilities so as to recognise that her (ultimately abandoned) pursuit of various arguments in the proceedings was unreasonable, but his Honour did not consider that an unrestrained indemnity costs order should be made as regards the Trustee Remuneration Proceedings.

5. [32]

   There was nothing unreasonable about his Honour seeking to take such an approach. Given the complicated and unusual nature of the proceedings below, his Honour was well placed to make the appropriate judgment as to costs. No issue of principle or public importance is raised, and we are not persuaded that the applicant has suffered any reasonably clear injustice going beyond something that is merely arguable. On the contrary, the Costs Judgment manifests a detailed and careful process of reasoning, taking account of the extensive submissions made, and seeking to achieve a just and fair outcome.

Other issues

1. [33]

   We have addressed the orders which the applicant seeks to challenge other than those made on 14 February 2024 and 5 April 2024. As to the former, on 2 February 2024 the applicant filed a motion seeking orders with respect to who should bear responsibility for various legal and Trustee costs. On 14 February 2024 Kunc J made procedural orders relating to determining whether the referee’s report should be adopted and ordering that the three proceedings be heard together: see Costs Judgment at [30]-[31]. It is not clear what complaint the applicant has about these orders, which seem to be anodyne procedural directions. The draft notice of appeal does not include orders of 14 February 2024 in what is sought to be challenged.

2. [34]

   As for the orders of 5 April 2024, this complaint seems to relate to a decision by Kunc J not to proceed under r 36.13(3B) of the UCPR, as urged by the applicant, with respect to orders made on 3 April 2024. Those orders apparently contained an error. His Honour said that “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”: Costs Judgment at [47]. Rule 36.13(3B) provides that “[w]ithin 14 days after a judgment or order is entered, the court may of its own motion set aside or vary the judgment or order as if the judgment or order had not been entered”. Given that the rule relates to the court acting of its own motion, and Pt 36 makes separate provision for parties to apply to vary orders, it is difficult to see that the applicant has any cause for complaint.

3. [35]

   As noted above, the applicant seeks to raise 22 grounds of appeal. At the end of her written reply submissions she listed 10 questions which she said were raised by the application and which were matters of principle, public interest and a substantial miscarriage of justice. Eight of the ten questions listed were followed by this secondary question: “If yes, whether it would be an appropriate exercise of discretion in this case to order Dr Mendonca pay Tonna parties costs on indemnity basis from 28 July 2023?”

4. [36]

   That question suggests that ultimately most of her complaints are directed to a discretionary exercise of power with respect to costs. As indicated, leave is not readily granted with respect to such matters. Nothing in the remainder of her submissions has identified any issue worthy of a grant of leave to appeal.

5. [37]

   Of the two questions which did not end with the secondary question just identified, one was “[w]hether Tonna parties had been so unreasonable in their approach to the conduct of the matter”. This question is in essence another merits complaint about his Honour’s discretionary exercise of power with respect to costs.

6. [38]

   The other of the two questions was whether Kunc J erred “in principle by failing to give adequate reasons”. This question may relate to the “arbitrary reduction” point raised with respect to procedural fairness. Neither on that point, nor on any other point, has any material doubt been raised as to the adequacy of his Honour’s reasons.

Orders

1. [39]

   The orders of the Court will be as follows. In matter number 2025/039861 (the application for leave to appeal):

   1. (1)

      Application for leave to appeal dismissed.

   2. (2)

      The applicant is to pay the respondents’ costs.

2. [40]

   In matter number 2024/332024 (the appeal):

   1. (1)

      Dismiss so much of the applicant’s amended motion filed on 2 December 2024 as seeks an extension of time.

   2. (2)

      Appeal dismissed as incompetent.

   3. (3)

      The appellant is to pay the respondents’ costs.