Butera v Mitch Karafili & Co
[2024] VSC 178
•17 April 2024
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
JUDICIAL REVIEW AND APPEALS LIST
S ECI 2022 05368
| LUCIE BUTERA | Applicant |
| v | |
| MITCH KARAFILI t/as MITCH KARAFILI & CO (ABN 68 838 792 326) | Respondent |
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JUDGE: | Forbes J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 8 February 2024 |
DATE OF JUDGMENT: | 17 April 2024 |
CASE MAY BE CITED AS: | Butera v Mitch Karafili & Co |
MEDIUM NEUTRAL CITATION: | [2024] VSC 178 |
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ADMINISTRATIVE LAW – Judicial review and appeals – Appeal against refusal of summary dismissal application by Victorian Civil and Administrative Tribunal – Where earlier proceeding was struck out with right of reinstatement – Whether consent orders constituted final determination and if so what was necessarily decided – Whether issue estoppel arises from earlier proceeding – Victorian Civil and Administrative Tribunal Act 1998 (Vic) s 75.
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APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr G Lubofsky | Phillips & Wilkins Solicitors & Consultants |
| For the Respondent | Mr A Ford | Merhi Lawyers |
HER HONOUR:
This is an appeal by Lucie Butera against the Victorian Civil and Administrative Tribunal (VCAT) refusal of her application for summary dismissal. The proceeding against her was one for payment of outstanding fees under a contract for accountancy services.
Mr Karafili trading as Mitch Karafili & Co, (the respondent) provided accountancy services to three clients: Ms Butera, her husband Mr Butera, and a related company JNG Constructions (collectively, the Butera parties) between 1 January 2014 and 31 October 2016. In October 2016 he made an application to VCAT for the amount outstanding for those services, which at that time totalled $189,475.48 (the first proceeding). This claim amount was later reduced to $144,300.88 in or around July 2018. The Butera parties were named as respondents on the basis that all were parties to the contract for Mr Karafili’s accountancy services, being signatories accepting the letter of offer. The first proceeding was settled prior to the hearing with a settlement sum of $110,000 to be paid by the Butera parties in instalments. It is common ground that, although the Deed of Settlement (the Deed) described the Butera parties as paying the settlement sum, only Mr Butera and Mr Karafili signed the document. Consent orders, also signed only by Mr Butera and Mr Karafili were provided to VCAT. On 30 July 2018 VCAT made orders striking out the proceeding with a right of reinstatement (the July 2018 orders).
After Mr Butera made two payments totalling $16,000 under the Deed, no further payment was made, so Mr Karafili applied to reinstate the first proceeding against all the Butera parties (the reinstated proceeding). VCAT ordered the proceeding be reinstated. The reinstated proceeding sought orders for the claim amount $144,300.88 less the two instalments paid under the Deed, a claim for $128,300.88 (the final claim amount). Both Ms Butera and Mr Butera opposed the reinstatement: Mr Butera because the Deed did not reflect the agreement reached and Ms Butera on the basis that she was not a signatory to the Deed and so not bound by it. Senior Member Forde made orders on 6 March 2020 striking out the proceeding against Ms Butera, concluding that the Deed was binding and enforceable against Mr Butera and listing the matter for directions (the March 2020 orders). Mr Butera subsequently went bankrupt and did not pay the ordered amount.
In May 2021 Mr Karafili requested VCAT again reinstate the first proceeding against Ms Butera on the basis that his agreement to remove her from the first proceeding was based on her acknowledgment to abide by any final judgment or order. VCAT refused this request in June 2021. Somewhat curiously, an email from a VCAT Customer Service staff member wrote that the reason for this decision was:
The final order made by the Tribunal was that the third respondent pay $128,300.88 to the applicant. There was no order that Lucie Butera pay moneys to the applicant. The claim against Lucie Butera was struck out on 6 March 2020. The Tribunal’s role is finished. There is no basis for a judgment to be entered against Lucie Butera.[1]
[1]Affidavit of Mitat Mitch Karafili sworn on 27 June 2022 in C6106/2021, [10], which forms part of exhibit bundle WJE-2 Applicant, ‘Affidavit of William James Elder’ sworn 17 May 2023 in Butera v Karafili S ECI 2022 05368, 163-9.
Mr Karafili then commenced a new VCAT proceeding against Ms Butera only, seeking payment of the final claim amount ordered in his favour by the March 2020 orders but which remained unpaid (the present proceeding). He alleges the amount is owed by Ms Butera under the agreement to provide accountancy services. It is this claim that Ms Butera sought to have summarily dismissed under s 75 of the Victorian Civil Administrative Tribunal Act 1998 (Vic) (the VCAT Act), on the basis that issue estoppel prevents Mr Karafili from making the present claim, which is identical to that made and determined in the first proceeding.
Member Buchanan gave his oral reasons dismissing Ms Butera’s application for summary dismissal on 5 December 2022 at the hearing of the application. Before turning to Member Buchanan’s decision, it is necessary to say something of Ms Butera’s participation in the first proceeding and the effect of the July 2018 and March 2020 orders on her rights.
On 24 March 2017 a Points of Defence to the first proceeding was filed by solicitors acting for all three Butera parties. On 27 April 2017 an Amended Points of Defence were filed on behalf of Ms Butera by different solicitors (not those now acting for her). Those solicitors wrote to Mr Karafili on 5 December 2017 in a letter described as an open offer of compromise in the proceeding stating, relevantly:
2.From the date of this letter, due to medical reasons, our client puts you on notice that she will take no further part in defending your Claim.
3.The trial is currently listed on an estimate of 5 days. The trial will be consumed in substantial part by evidence in chief and cross examination regarding the alleged services and alleged quantums described in your invoices, rendered by you pursuant to the alleged Contract. However, our client is unable to give any evidence at trial relevant to the services and quantums described in your invoices. Such matters are not within her direct knowledge, as she neither provided instructions to you concerning the alleged works the subject of the invoices, nor was she privy to the instructions allegedly provided to you by the Second and Third Respondents. It follows that the evidence at trial regarding the alleged services and alleged quantums will be given by you and the Third Respondent.
4.On the basis of the above, and in the interests of avoiding the incursion of further legal costs associated with defending your Claim as described in the Amended Points of Claim dated 3 February 2017, our client acknowledges that on the questions of quantum (damages) and interest, she will abide by any final judgment or order of the Tribunal made at the conclusion of the trial in the proceeding (“Acknowledgement”).[2]
[2]’Letter from Luke Connolly to Mitch Karafili on 5 December 2017’ annexed as MK-1 to Affidavit of Mitat Mitch Karafili sworn 27 June 2022, which forms part of exhibit bundle WJE-2 in Affidavit of William James Elder sworn 17 May 2023, 171-3.
A compulsory conference was subsequently held at which Ms Butera gave Mr Butera authority to settle the first proceeding on her behalf. No settlement was reached at that time but approximately two months later Mr Karafili and Mr Butera signed the Deed. Mr Karafili and Mr Butera provided a minute of consent orders to VCAT. The consent minute sought an order that the first proceeding be ‘dismissed with a right of reinstatement’. The consent minute is not signed by Ms Butera. The July 2018 orders did not accord with the consent orders provided. Rather, it ordered that the first proceeding was ‘struck out with a right of reinstatement’.
Ms Butera did initially participate in the reinstated proceeding and swore an affidavit on 31 January 2019. That affidavit was sworn in opposition to the reinstatement and in support of an application made by the Butera parties to set aside the Deed. The affidavit confirms that Ms Butera did not authorise Mr Butera to enter into or execute the Deed on her behalf.
However, Ms Butera did not appear at the hearing of the reinstated proceeding on 27 June 2019 nor on 27 February 2020. The reasons of Senior Member Forde that accompany the March 2020 orders sets out the following background:
4.By way of background, the proceedings were commenced in 2016. On 24 July 2018 the Tribunal was notified by Karafili that the proceeding had been resolved. Orders were made on 30 July 2018 striking out the proceeding with a right of reinstatement.
5.On 21 November 2018 the proceedings were reinstated following the filing of an application for reinstatement by Karafili. The basis stated for the reinstatement was that the matter had settled on written terms and the terms had not been complied with. Karafili sought to have the proceeding reinstated and orders made in his favour for the amount originally claimed.
6.On 1 February 2019 Butera[3] filed an application seeking amongst other matters an order setting aside the written settlement terms. The terms are set out in a document headed ‘Deed of Settlement’ signed on 20 July 2018 by Butera and Karafili. The parties refer to it as the ‘deed/agreement’ as there is a dispute about whether it is a deed or an agreement.
7.The parties request the determination of a preliminary question notwithstanding that the matter is part heard…
[3]Butera as defined in the Tribunal’s reasons refers to Mr Butera.
PRELIMINARY QUESTION
8.The question for preliminary determination, as agreed by the parties, is:
what is the legal effect, if any, of the deed/agreement signed by Karafili and Butera on 20 July 2018?
9.The parties agree the premise upon which the question is to be answered is as follows:
a. Butera did not sign the deed/agreement on behalf of the other respondents; and
b. Butera was not acting as agent for the other respondents at the time he executed the deed/agreement.
The reasons then analysed the Deed and set out the competing submissions of Mr Karafili and Mr Butera. VCAT recorded Mr Karafili’s submissions which referenced a letter from Ms Butera’s former solicitors dated 21 December 2017 referring to her non-participation in the first proceeding due to a serious medical condition, stating her intention to abide by any final order after trial and seeking her excusal from further participation in the first proceeding. VCAT concluded that the Deed was a deed and was binding as between the signatories only and Mr Karafili was entitled to pursue Mr Butera for the balance of payments due under that document.[4] The reasons also recorded that Mr Karafili and Mr Butera agreed that the proceeding against Ms Butera (who did not appear) be struck out.[5]
[4]Karafili v Butera (Civil Claims) [2020] VCAT 289, [64].
[5]Karafili v Butera (Civil Claims) [2020] VCAT 289, [3].
On this basis Senior Member Forde made the March 2020 orders.
At a directions hearing on 8 May 2020 Senior Member Forde then made orders that Mr Butera pay Mr Karafili the final claim amount forthwith, timetabled matters dealing with any application for costs and gave liberty to apply.
Ms Butera sought summary dismissal of the present proceeding on the basis that Mr Karafili was estopped by reason of the final determination of the dispute between herself and Mr Karafili by the July 2018 orders and/or the March 2020 orders.
In refusing Ms Butera’s application for summary dismissal Member Buchanan said:
One of the things that is relevant was the argument put forward by the Respondent that the objective intention of the parties in entering into the deed of settlement was a matter that was relevant in determining whether or not there was an estoppel. In the event that that’s correct, and the objective intention of the parties needs to be established, evidence would need to be given, and it’s not the role of the Tribunal on a section 75 application to make any decision about matters of fact, which could easily be contested. That’s a matter for hearing, and if that were the only basis on which this application is made, then that would be the end of the matter. However, the reality of the application is that it seeks to rely on the fact that strike out orders were made.
The principle of estoppel that begets this application is a sensible one and it’s a very old one. It was simply that people should not be put to the trouble of facing endless litigation over the same dispute. The simple principle has been extended somewhat more recently to include not only a matter where there’s been no final determination by a court or a Tribunal after hearing the evidence and weighing the competing cases and making a decision, it’s been extended to also include consent orders made where cases get dismissed. It has not, or certainly I was not led to any authorities to suggest that there had ever been an estoppel held in relation to a case where there had been consent orders to strike a matter out. Proceedings that get struck out are simply removed from the list of active cases in the Tribunal. They are not determined in any formal or final fashion, and there’s a good reason for that. Normally such orders are made when cases are settled and there’s a settlement agreement that the parties may wish to enforce, and such is the case in the original proceeding in this Tribunal.[6]
[6]‘Transcript of Proceedings’ which forms part of exhibit bundle WJE-1, Applicant, ‘Affidavit of William James Elder’ sworn 13 January 2023 in 4 Butera v Karafili S ECI 2022 05368, 40–1 (‘T’).
He concluded:
…the simple matter is that this is simply not the case for at least two good reasons why there should be an order made under s 75. Number one, I’m not satisfied that there is an estoppel raised by the consent orders made in the previous proceeding, and number two, in the event that it were the case, the Tribunal would need to look at the objective intention of the parties in entering into the deed of settlement – and I’m not convinced that that is correct – but if that were so there would have to be evidence, there would be the potential for conflict over facts, and it is not a matter that is at all appropriate for a Section 75 application.[7]
[7]Ibid, 42–3.
Member Buchanan made orders on 5 December 2022 dismissing Ms Butera’s s 75 application and reserving the costs of the application before moving to timetable matters in preparation for the substantive hearing.
The proposed appeal
Ms Butera identifies the question of law raised by her appeal to this Court as being whether VCAT was correct in holding that the present proceeding was not an abuse of process by reason of an issue estoppel arising from the July 2018 orders, or alternatively the March 2020 orders striking out the reinstated proceeding against her.
Ms Butera identifies five grounds of appeal. They are:
1. The Member erred in failing to hold that by consenting to, or submitting for filing, the orders made by VCAT on 30 July 2018 in the first, [Mr Karafili] objectively intended to dismiss the first proceeding on a substantive or final basis such that he is estopped from raising the same issues in the present proceeding.
2. The Member erred in failing to hold that the orders made by VCAT on 6 March 2020 constituted a final disposition of the first proceeding, such that [Mr Karafili] is estopped from raising the same issues as in the first proceeding in the present proceeding.
3. The Member erred in characterising the July 2018 orders in the first proceeding and the March 2020 orders in the reinstated proceeding as being not determined in any formal or final fashion and as not being capable of having final or dispositive effect.
4. The member erred in holding that s 75 of the VCAT Act was not intended to extend to cases of issue estoppel.
5. The Member erred in holding that:
(a) the question of whether the proceeding was an abuse of process could not be decided in the absence of…further evidence from the parties; and
(b) ‘the potential for conflict over facts’ was sufficient justification to refuse [Ms Butera’s] application for summary dismissal.[8]
[8]T 43.9–13.
Legal principles
Appeal of VCAT decisions
The applicant requires leave to bring an appeal.[9] Leave to appeal to this Court may only be granted if this Court is satisfied that the proposed appeal has a real prospect of success.[10] Granting leave to appeal is discretionary.
[9]Victorian Civil Administrative Tribunal Act 1998 (Vic) s 148(1)(b) (‘VCAT Act’).
[10]VCAT Act s 148(2A).
Appeals of VCAT decisions to this Court are made under s 148 of the VCAT Act. This Court is permitted only to hear an appeal on a question of law. The Court’s ambit in hearing appeals under s 148 of the VCAT Act has been described as ‘limited’, and is neither a merits review nor an appeal merely involving a question of law.[11] Rather, the Court’s role is to review the legal limits of VCAT’s exercise of its powers and identify if there are any legal errors in this exercise.
[11]Commissioner of State Revenue (Vic) v STIC Australia Pty Ltd [2010] VSC 608, [9].
Issue estoppel
The parties agree on the relevant principles that apply to issue estoppel. They disagree on the application of these principles to the present facts.
Issue estoppel arises when a judicial determination directly involves an issue of fact or law.[12] It operates to:
[preclude] a party in a subsequent proceeding from raising the ultimate issue of fact or law which was necessarily resolved as a step in reaching the determination made in an earlier judgment.[13]
[12]Blair v Curran (1939) 62 CLR 464, 531–2 (Dixon J).
[13]German Constructions Pty Ltd v Westbourne Grammar School (Enforcement of Arbitral Award) [2022] VSC 6, [45](c), citing Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507, 517 [22] (French CJ, Bell, Gageler and Keane JJ).
There are three requirements for issue estoppel to be made out:
(a) the same question has been decided [in an earlier proceeding];
(b) the judicial decision which is said to create the estoppel was final; and
(c) the parties to the judicial decision or their privies were the same persons as the parties to the proceeding in which the estoppel was raised or their privies.[14]
[14]Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2) [1967] 1 AC 853, 935 (Lord Guest), quoted with approval in Kuligowski v Metrobus (2004) 220 CLR 363, 373 [21] (Gleeson CJ, McHugh, Gummow, Kirby, Hayne, Callinan and Heydon JJ).
The principles of issue estoppel can extend to the finalisation of claims by consent orders. Whether a consent order raises an issue estoppel will depend on what issues were decided by the agreed finalisation of the earlier claim. As was said in Chamberlain v Deputy Commissioner of Taxation:[15]
The fact that a judgment is entered by consent may on occasion make it hard to say what was necessarily decided by the judgment.[16]
[15](1988) 164 CLR 502 (‘Chamberlain’).
[16]Ibid 508 (Deane, Toohey and Gaudron JJ, although dealing there with res judicata).
To determine what was necessarily decided by a consent order, the Court can consider the ‘objective background leading to the judgment to determine what was decided’.[17] The subjective motivation of parties for consenting to the orders is irrelevant.[18] The task for a court, in determining whether a consent order gives rise to an issue estoppel, was described in this way:
…it may often be a matter of legitimate doubt and debate what, if any, particular questions or issues of right, title, or liability were, expressly or impliedly, the subject of the consent, and of the decision. For this purpose, as for all other purposes connected with the ascertainment of the subject-matter of a decision, the court will closely examine all such evidence, if any, as is available and admissible, and, by the aid of such materials, will ascertain whether any and what adjudication of matters in dispute was expressed, or necessarily involved, in the actual decision assented to.[19]
[17]Ekes v Commonwealth Bank of Australia (2014) 313 ALR 665, [114] (‘Ekes'), citing Handley, Spencer Bower and Handley Res Judicata (Lexis Nexis, 4th ed, 2009) and Isaacs v The Ocean Accident and Guarantee Corporation Ltd and Winslett (1957) 58 SR (NSW) 69.
[18]Ekes (n 17) [115].
[19]Isaacs v The Ocean Accident and Guarantee Corporation Ltd and Winslett (1957) 58 SR (NSW) 69, 79, quoted with approval in Land Enviro Corp Pty Ltd v HTT Huntley Heritage Pty Ltd [2014] HCASL 146, [64] (‘Land Enviro Corp’) quoting Spencer Bower on Res Judicata.
The applicant’s submissions
Appeal grounds 1 to 3 were argued together. The applicant submits that the first requirement for an estoppel is met, namely – that the claim made in each proceeding is identical. The Points of Claim in both proceedings identify a claim for unpaid invoices arising from the provision of accountancy services for which Ms Butera, as a signatory of the contractual retainer was jointly and severally liable. She identifies the key issue as the second requirement for an estoppel, being that of finality.
The applicant submits that there can be an extension of the principles of issue estoppel to claims finalised not by judicial determination but by a dismissal or discontinuance entered into by consent. In cases dismissed by consent, the Court considers whether the parties intended the subsequent order to have a final effect as if there had been a hearing on the merits. Reliance was placed on four cases: Land Enviro Corp Pty Ltd v HTT Huntley Heritage Pty Ltd,[20] Ekes v Commonwealth Bank of Australia,[21] Minero Pty Ltd v Redero Pty Ltd,[22] and New South Wales Trustee and Guardian v Philpott.[23]
[20]Land Enviro Corp (n 19).
[21]Ekes (n 17).
[22](Supreme Court of New South Wales, Santow J, 29 July 1998).
[23][2017] NSWSC 472.
Ms Butera therefore submits that the key question arising from the July 2018 and March 2020 orders was whether the orders were objectively intended by the parties, or as a matter of law constituted, a final disposition of the claim made against Ms Butera. Ms Butera’s submissions addressed the intention of Mr Karafili, arguing that his intention in relation to the July 2018 orders was to finally dispose of all issues against all the Butera parties. She submitted before me that this intention is objectively demonstrated by four matters: the terms of the Deed itself, the ‘dismissal’ of the first proceeding against all respondents, the limited purpose of the reinstated proceeding for enforcing rights arising from the Deed and finally Mr Karafili’s subjective understanding of the operation of the Deed. Her written submissions only addressed Mr Karafili’s intention.
As to the finality of the March 2020 orders the applicant submits that the accompanying reasons of Senior Member Forde record the consent to the claim being struck out but do not record the reason for that consent. She advances the submission that Mr Karafili had no choice but to consent because the reinstatement was for the sole and limited purpose of enforcing the Deed to which Ms Butera was not a party. In effect, she submits Mr Karafili had elected to take a course of action not to pursue the underlying claim against Ms Butera. Further she submits that, as there is no procedure to strike out a proceeding without the consent of a respondent (the procedure allows for a withdrawal by leave under s 74 of the VCAT Act), and as Mr Karafili did not withdraw his claim against Ms Butera and she had not consented to the strike out, what Mr Karafili was necessarily doing was consenting to final judgment in favour of Ms Butera. She submits that the VCAT email refusing reinstatement is consistent with this submission. The email, while not having judicial effect, was evidence of the fact that the March 2020 orders were intended by VCAT to dismiss the first proceeding.
The applicant submits that grounds 4 and 5 are intermediate errors. She submits that as s 75(1)(b) of the VCAT Act on its terms includes proceedings that are an abuse of process, a concept that closely overlaps with issue estoppel, VCAT clearly has power to summarily dismiss proceedings where an issue estoppel arises. Associated with that proposed error was Senior Member Forde’s suggestion that the matter should go to a final hearing because of the absence of evidence as to intention and the potential for conflict over facts. The applicant submits that suggestion is in error.
Consideration
For the reasons that follow the applicant’s submissions should be rejected. VCAT demonstrated no error in refusing the application for summary dismissal. None of the three requirements needed to raise an issue estoppel are present.
First , and critically, neither set of orders demonstrate a final determination as between Ms Butera and Mr Karafili. All that is done is to strike out the proceeding. The fact that Mr Butera and Mr Karafili submitted a minute seeking a dismissal is essentially a red herring. No dismissal order was, or has ever been, made in the first proceeding. A right of reinstatement was expressly sought and given in the July 2018 orders. On no view could it be said that the orders constitute a final determination. As Member Buchanan correctly stated, a VCAT order to strike out a proceeding carries with it a power to reinstate. A distinction is made, in law and in practice, between striking out a proceeding and dismissing it.[24] I accept the respondent’s submissions drawing attention to the distinction between orders dismissing a proceeding and orders that strike out a proceeding generally. The availability of reinstatement of a proceeding, whether by right or by application, tells against the existence of an issue estoppel created by such an order.
[24]See VCAT Act s 157A(3); The Herald and Weekly Times Pty Ltd v Victoria (2006) 25 VAR 124, [19].
The VCAT Act clearly differentiates an order striking out a proceeding from an order dismissing a proceeding. Numerous cases highlight the distinction in the context of orders under s 75, which specifically grants the power to ‘make an order summarily dismissing or striking out all, or any part of a proceeding’.[25] The same distinction is made when orders are made under other provisions of the VCAT Act.[26] This position reflects the distinction existing in other jurisdictions.[27]
[25]See Cunningham v Hayden Real Estate (Geelong) Pty Ltd [2003] VCAT 41; multiple cases referenced in Emrys Nekvapil, Pizer’s Annotated VCAT Act (Thomson Reuters, 7th ed, 2022).
[26]See Luck v Victoria Police(Review and Regulation) [2015] VCAT 71.
[27]See Tanska v Transport Accident Commission [2000] VSC 56.
The submissions did not grapple with the distinction between orders striking out and those dismissing a proceeding. While it is true that the current proceeding does replicate the relief sought against Ms Butera in the first proceeding, it is not true that the first proceeding was finally determined. The Tribunal’s clerical advice that ‘final orders’ were made in the sense of orders with final effect on the proceeding was inaccurate. None of the cases relied on by the applicant dealt with a consent order striking out a proceeding. On this basis the Tribunal stated it was not satisfied that the duplication was an abuse of process.[28]
[28]T 41.24-42.19.
In all four cases referred to by the applicant in support of an issue estoppel arising, the relevant orders dismissed the earlier claim. Finality was not in issue, and the cases generally addressed either the question of whether particular issues the subject of later litigation were issues finally determined by the effect of the consent dismissal, or whether there was privity of parties. None dealt with a case where the orders allowed for the proceeding to be reinstated.
Land Enviro Corp Pty Ltd v HTT Huntley Heritage Pty Ltd was relied on to demonstrate that two proceedings seeking the same relief could not be maintained. The plaintiff in the later proceeding sought as partial relief the setting aside of consent orders made dismissing the earlier proceeding and, if those orders were set aside, then the substantial relief as in the first proceeding on the basis they had been procured by fraud or misrepresentation. Relevantly Barrett J concluded that the claims for damages for fraud or deceptive conduct, could not be advanced while the earlier orders remained extant. The plaintiffs were not permitted to seek the relief that underpinned the first proceeding until such time as the earlier orders were set aside. His Honour said:
This, it seems to me, gives rise to a fundamental difficulty. Let it be assumed that the plaintiffs succeed in their claims to have the agreements and consent orders of 2004 set aside. At that point, those consent orders will no longer have effect. The claims in the 2001 proceedings that were dismissed by the 2004 orders (that is, the claims by LEC against HTT and Hickie) will be seen to be unadjudicated and extant. It will be open to LEC to continue the 2001 proceedings and to prosecute them to judgment upon the causes of action there pleaded against HTT and Hickie.
In the meantime, however, LEC will have prosecuted to finality in the 2007 proceedings what are in substance and in reality the very same causes of action against HTT and Hickie; and they will have done so in circumstances where to 2004 orders remain operative as the source of an estoppel.[29]
[29]Land Enviro Corp (n 19) [67]–[68].
The distinction here is that Mr Karafili commenced the present proceeding because he was given erroneous advice by the Tribunal staff about the status of the first proceeding. It was accepted by the Tribunal that this situation would require regularisation.[30] The question of finality of the orders was not in issue.
[30]T 45.2–27.
Ekes v Commonwealth Bank of Australia was an appeal from an order striking out a defence and refusing leave to file an amended defence and counterclaim. Earlier Federal Court proceedings had been commenced by borrower company seeking relief including a declaration that the notice of default relied on by the bank was invalid. Ultimately consent orders were made dismissing the Federal Court proceeding when the company was unable to comply with undertakings given to the Court that it provide security for costs. Ekes, as guarantor of the borrowing was not a party to that proceeding. Three days later the company was placed in liquidation. The Commonwealth Bank commenced proceedings against Ekes under the guarantee. The case is cited for the proposition that an issue estoppel can arise from a consent judgment.[31]
[31]Ekes (n 17) [111].
The Court (Bathurst CJ, Beazley P and Emmett JA) determined that, although the subject matter gave rise to an issue estoppel, it was held that the guarantor was not a privy of the company. The guarantor was not prevented from filing his desired amended defence and cross claim. Again, the finality of the consent judgment was not in issue.
Minero Pty Ltd v Redero Pty Ltd also dealt with consent orders dismissing a proceeding. Finality was not in issue despite the lack of adjudication on the merits, rather the question articulated was whether the dismissal was substantive or procedural, being in effect akin to a default judgment or dismissal for want of prosecution which did not demonstrate finality. Minero considered circumstances where a dismissal order might nevertheless be procedural.
Finally in New South Wales Trustee and Guardian v Philpott, the plaintiff as executor of an estate sought possession of a property of the estate from the deceased's sister. Previously the sister had in proceedings pleaded a gift of the property to the plaintiff. The earlier proceeding was finalised by a consent orders that the matter is dismissed and there be no order as to costs. The sister’s defence and cross claim in the possession proceeding again pleads a gift or expectation of the property. An application was made for summary judgment including on the basis of issue estoppel. Again, as an order dismissing the proceeding was accepted as being final, the question of what was objectively finally determined was a relevant matter.
None of the cases relied on support the argument that a strike out order has, or is capable of having, the necessary finality.
Second, Ms Butera did not provide consent to either the July 2018 orders or the March 2020 orders. She wishes to argue that these orders are binding as to the rights and liabilities between her and Mr Karafili, despite her position that she did not provide consent to the settlement that led to the July 2018 orders or consent to the March 2020 orders. Nor does she say that when Mr Butera consented to the March 2020 orders he was acting as her proxy. It is true that the orders benefit Ms Butera, despite the absence of her consent, in that their effect is that the claim was not and would not be actively pursued against her if the amount in the Deed was paid by Mr Butera as he had agreed. However the benefit she obtained from the March 2020 orders was no greater than that.
I do not accept Ms Butera’s submission that the reasons supporting the March 2020 orders did not address the reason for the consent to strike out the claim against her. The reasons accompanying the March 2020 orders expressly addressed her non-appearance in so much of the proceeding as had been heard prior to the decision on the preliminary question. The reason for this was explained by the Senior Member:
36. Lucie Butera’s former solicitors, Luke Connelly workplace law and consulting wrote…on 5 December 2017 advising that [Ms Butera] would take no further part in defending the claim due to medical reasons. Luke Connelly workplace law and consulting wrote a further letter…dated 21 December 2017 where they advised among other matters ‘Due to a serious medical condition, our client is unable to give evidence at the trial of this proceeding and on that basis, will abide any final order of the tribunal after trial…On that basis our client seeks to be excused from further participation in the proceeding.’
The circumstances surrounding the making of both sets of the consent orders is only relevant to ascertain what in fact was finally determined. If there is no finality to the orders, then questions of what the parties intended or agreed by their consent is irrelevant. Member Buchanan concluded that if the consent orders were capable of giving rise to an estoppel, the question of what was agreed or intended to be determined by the orders would be a matter involving disputed facts. That decision was plainly correct and so Ground 5 of the appeal must fail. The applicant’s submissions invited certain inferences as to Mr Karafili’s intention from various documents. Other, contrary, intention could be inferred from other actions of Mr Karafili such as the applications for reinstatement and the reasons expressed by him there. More fundamentally, all relevant circumstances are to be considered, including matters demonstrating the objective intent of all who consented to the relevant order. There was no evidence or submission directed to Mr Butera’s consent. To the extent Ms Butera’s intent might be relevant, because Ms Butera said the orders were binding on her, the only evidence going to her consent would appear to be the acknowledgement that she would abide the outcome of the case. The content of any issue estoppel, if one might exist, was clearly a matter requiring a factual foundation lacking in the summary dismissal application.
Third, the applicant’s submissions on the effect of reinstatement proceed on the erroneous basis that reinstatement was for a limited purpose of only enforcing the settlement agreement. Reinstatement re-enlivens the proceeding, returning it to active consideration so that VCAT can deal fully with the issues in the proceeding. Those issues are the underlying claims not yet determined. It may be that a party seeking reinstatement may also rely on a binding settlement agreement and seek orders enforcing that settlement, but that is not what Mr Karafili did. Nor was he limited to such relief. He sought reinstatement for the purpose of recovering the amount of his claim less the further payments made and not the settlement amount agreed to in the Deed which was $111,000. The orders sought for the final claim amount were sought against all the Butera parties.[32]
[32]‘Affidavit in Support of Application for reinstatement of proceeding and entry of judgement’ of Mitch Mitat Karafili sworn on 7 November 2018 in C6245/2016, [11], which forms part of exhibit bundle WJE-2 Affidavit of William James Elder sworn 17 May 2023, 62-3.
The March 2020 orders on their face did not deal finally with the first proceeding. They reflected the answer to the agreed preliminary question determined by VCAT affecting the rights and liabilities under the Deed. That question affected only the two parties who signed the Deed, being Mr Butera and Mr Karafili. They did not address the underlying joint and several liability alleged against the other respondents, including Ms Butera. That issue was not yet determined in the first proceeding either by VCAT or by a final consent order.
The email from the VCAT staff member describing the orders of May 2020 as ‘final’, could only be final in the sense of being the last order in time made in the proceeding. The true position was that the only matter determined by the preliminary question and the orders resulting from it was Mr Butera’s liability under the Deed. Nothing was necessarily determined as to the cause of action arising from the contract, which Ms Butera admitted signing, as to her joint or several liability to pay the sums outstanding. That issue remained outstanding in the reinstated first proceeding which was part heard before Senior Member Forde at the time the preliminary question was determined.
True it is also that as a consequence of the refusal of VCAT to deal further with the first proceeding, Mr Karafili commenced the present proceeding seeking the same relief as was sought against Ms Butera in the first proceeding, so that there are now two proceedings seeking the same relief. Counsel for Ms Butera[33] raised the issue with VCAT in the context of the present proceeding going forward. VCAT confirmed that it did not find the present proceeding to be an abuse of process[34] and considered the question of duplication of proceedings to be a matter that can be raised and dealt with at final hearing or earlier.
[33]Different Counsel to that appearing before me.
[34]T 45.25-27.
The applicant’s written submissions dealing with Grounds 1 to 3 of the appeal did not grapple with the respondent’s submission that VCAT’s decision to decline summary dismissal was a discretionary decision. Member Buchanan doubted that a strike out order gave rise to an issue estoppel, but that if it could, there was likely to be a factual contest and so the question is better left to a final hearing. The applicant had to show error of the kind found in House v The King,[35] being an error in the proper exercise of that discretion: such as acting on wrong principle, affected or guided by irrelevant or extraneous matters, mistaking the facts, or not taking into account some material consideration. In oral submissions, the applicant contended that whether an issue estoppel arises is a question of law of a type that does not give rise to any discretion.[36] The submission overlooks the fact that the refusal of summary dismissal does not finally determine whether or not an issue estoppel arises but leaves the question to a determination at final hearing. Given the absence of clear authority as to the application of settled principles of issue estoppel to strike out orders, the discretion did not miscarry. Ms Butera, as advised, may maintain her argument as to the effect of the July 2018 orders and March 2020 orders at final hearing before VCAT. Her decision to appeal a refusal to deal with the matter summarily has simply delayed VCAT from dealing with the merits of the substantive claim.
[35](1936) 55 CLR 499.
[36]Transcript of Proceedings, Butera v Karafili (Supreme Court of Victoria, S ECI 2022 05368, Justice Forbes, 8 February 2024), 32.13–33.4.
Ground 4 also has no prospect of success. Member Buchanan did not conclude that s 75 was ‘not intended to extend to cases of issue estoppel’.[37] His reasons in fact said:
It’s very obvious from the language of Section 75 that it is not intended to deal with situations like the present, or with arguments such as that put by the Respondent. The wording of the Section “At any time the Tribunal may make an order summarily dismissing or striking out all or part of a proceeding that is in its opinion” – and this is the critical part – “is frivolous, vexatious, misconceived or lacking in substance or otherwise an abuse of process.” In the plainest of language, it’s obvious what the legislature has in mind. It’s for hopeless cases which shouldn’t be brought by people who should have known better or maybe don’t know enough to know better. It does not get attracted by arguable and not, in my view, well supported – I say that in terms of the authorities, I don’t refer to the way in which the argument was presented today … – it’s not intended to extend to nice arguments about whether or not the principle of estoppel is going to apply.[38]
[37]Applicant, ‘Appellant’s Outline of Submissions’ in Butera v Karafili S ECI 2022 05368, [48], referencing T 42.1–19.
[38]T 42.1–19.
In my view, Member Buchanan correctly stated that the summary procedure was not an appropriate vehicle for the complex legal and factual argument that Ms Butera wished to make and was able to make at a final hearing.
None of the grounds have a real prospect of success and so I will refuse to grant leave for Ms Butera to appeal.
I will hear from the parties as to the form of orders.
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