Davey v Costanzo Lawyers Ltd (ACN 158 282 163)
[2021] VSC 449
•30 July 2021
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
JUDICIAL REVIEW AND APPEALS LIST
S ECI 2020 02947
| SUE SEPEDAH DAVEY | Plaintiff |
| v | |
| COSTANZO LAWYERS LTD (ACN 158 282 163) atf COSTANZO LAWYERS TRUST trading as COSTANZO LAWYERS | First Defendant |
| MAGISTRATES’ COURT OF VICTORIA AT HEIDELBERG | Second Defendant |
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JUDGE: | Quigley J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 15 July 2021 |
DATE OF JUDGMENT: | 30 July 2021 |
CASE MAY BE CITED AS: | Davey v Costanzo Lawyers Ltd (ACN 158 282 163) |
MEDIUM NEUTRAL CITATION: | [2021] VSC 449 |
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JUDICIAL REVIEW – Review of a Magistrate’s decision – Whether default judgment should be set aside – Whether default judgment was entered irregularly – Claim for professional fees and disbursements – Cause of action must be established on the pleadings – Test for setting aside a default judgement – Lau v Citic Australia Commodity Trading Pty Ltd [1999] VSCA 34 and Lei v Zang [2020] VSCA 123 applied; Wheelahan & Anor v City of Casey& Ors (No 12) [2013] VSC 316 applied – Administrative Law Act 1978 (Vic), s 10 – Application for review allowed – Certiorari granted.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Thomas Bevan | Hone Legal & Conveyancing |
| For the Defendant | Timothy Scotter | Costanzo Lawyers Ltd |
HER HONOUR:
On 17 June 2019, judgment in the sum of $40,351.87 plus interest of $851.26 and costs of $2,551.90 was entered against Sue Sepedah Davey, the plaintiff in this judicial review proceeding. The judgment was entered in favour of Costanzo Lawyers Pty Ltd who were the plaintiff’s former lawyers and are the first defendant in this proceeding.
The judgment was entered in default of a defence being filed by the plaintiff. The claim was for professional legal fees and disbursements pursuant to a retainer entered into between the plaintiff and the first defendant.
An application to set aside the default judgment was refused by the judicial registrar at Heidelberg Magistrates Court on 30 July 2019. This decision was upheld on review by a Magistrate on 19 August 2019.
A second application to set aside the default judgment came before the same Magistrate on 7 February 2020. On this second occasion the plaintiff was legally represented by counsel. The application was dismissed on 15 May 2020 and her Honour provided written reasons (Reasons).[1]
[1]Costanzo Lawyers Ltd (ACN 158 282 163) atf Costanzo Lawyers Trust trading as Costanzo Lawyers v Sue Sepedah Davey (Magistrates Court of Victoria, Magistrate Tregent, 15 May 2020) (‘Costanzo Lawyers Ltd v Davey’).
I note that despite being promised transcript of the hearing before her Honour no transcript of the proceedings in the Magistrates Court was made available to this Court. Consequently, the affidavits filed in that proceeding and the Reasons are the material before this Court.
Background to the claim
Between February 2018 and approximately August 2018, the first defendant acted for the plaintiff in relation to family law proceedings between her and her former spouse. The plaintiff had been involved in protracted Family Court proceedings in relation to division of personal property and assets of the marriage. She had engaged a different firm of solicitors for most of the litigation but became dissatisfied with that firm shortly prior to the listing of a final hearing in the Family Court in February 2018.
The plaintiff consulted and then engaged the first defendant to act on her behalf at the scheduled Family Court final hearing. The plaintiff placed $11,000 into the first defendant’s trust account. The plaintiff was desirous of using counsel who was to be briefed by her earlier solicitors, but that barrister was unavailable, not being prepared to accept payment of the fees under a separate arrangement. This arrangement was that the first defendant along with the barrister to be briefed would receive payment of their costs at the conclusion of the family law proceeding and from the sale proceeds of a matrimonial property in Donvale.
The first defendant was not able to obtain services of counsel for the hearing on such a deferred payment plan. The daily fee of the barrister who was briefed was appreciably higher than counsel originally contemplated to be briefed. The decision to brief alternative counsel and at a higher cost was one of the matters of complaint about the services provided in contention before the Magistrate.[2]
[2]Ibid, [11].
The Family Court’s orders were appealed by the plaintiff’s former spouse. The plaintiff was reluctant to engage further lawyers or a barrister for the purpose of the appeal but after discussions with her solicitors she did engage the first defendant and obtained counsel for the purposes of the appeal. The outcome of the appeal was in her favour and her former spouse was ordered to pay her costs of the appeal. Those costs have not been recovered.
Magistrates’ Court proceeding
In the complaint filed in the Magistrates’ Court, the first defendant claimed that on 28 August 2018 it rendered to the plaintiff a memorandum of professional fees and disbursements incorporating fees owing to it and the disbursements incurred on her behalf, being counsel’s fees. In the evidence before the learned Magistrate the first defendant maintained that at regular intervals throughout the family law proceedings the plaintiff was provided with detailed bills of costs setting out the work that had been undertaken on her behalf. Further, it was alleged, at no stage did the plaintiff take issue with the sums claimed.[3]
[3]Ibid, 3 [13].
The learned Magistrate extracted a summary of the plaintiff’s complaints about the work done by the first defendant from the material which had been filed by the plaintiff, including that filed subsequent to her Honour’s earlier refusal to overturn the decision of the judicial registrar. The summary is as follows:[4]
[4]Ibid, 5 [22].
·requests were consistently made for an itemised bill but the plaintiff never received one;
·the first defendant never provided a statement of account recognising the $11,000 the plaintiff had paid into trust and how that was reconciled;
·the quantum of the first defendant’s claim for work done was excessive given that most of the work had already been undertaken by previous solicitors;
·the fees for counsel chosen by the first defendant were three times higher than quoted for counsel by her previous solicitor;
·the first defendant did not try to enforce the Family Court Orders and incorrectly advised her that she could not enforce them herself;
·the first defendant misled the plaintiff by encouraging her to engage a barrister to appear at a hearing for an intervention order against her former husband;
·the plaintiff maintained she never received any documentation in relation to the debt proceedings and stated that if she had she would have lodged a defence;
·the fact of the existence of the judgment debt had left a black mark against her such that she could not secure a loan to refinance her mortgage; and
·she had reiterated to the first defendant she did not have the money to continue with the litigation.
The Plaintiff’s submissions before the Magistrate
Counsel for Ms Davey argued before her Honour that the considerations as to whether to allow a second application to set aside a default judgment vary from case to case. When considering the interests of justice there are no boundaries as to what could be taken into account and can include the effect such judgment has had on a party. It was conceded by counsel that his client was in a more difficult position coming back a second time.[5]
[5]Ibid, 10 [45].
Counsel submitted that the test was whether the facts, if established at trial, would give a defence and it was not for the Court to seek to determine the issue based on whose account it preferred in the affidavit material filed. Ultimately, for current purposes all that was necessary to be shown was that a prima facie defence existed.
It was further submitted that it was a denial of natural justice not to allow Ms Davey to have an opportunity to litigate these possible defences.
It was common ground that on a subsequent attempt to set aside a default judgment, there needed to be something new or different to that which was before the court on the first attempt.
Counsel for Ms Davey raised a number of propositions which were argued to be new and that had not previously been raised for her Honour’s consideration. These were:
·The existence of a judgment debt against Ms Davey’s name was interfering with her ability to refinance a home loan.
·Under s 194 of the Legal Profession Uniform Law (LPUL) recovery proceedings are prohibited until a bill of costs has been served and 30 days has passed, or an itemised bill provided on request and 30 days has passed. It was submitted that this would be a complete defence to the claim and not something foreshadowed previously.
·Counsel for Ms Davey conceded that the material before her Honour indicated a dispute as to whether or not his client had been provided with a bill or that she had sought an itemised bill.
·The default judgment had been entered irregularly. If the allegations contained in the complaint do not provide the elements necessary to establish a cause of action then judgment cannot be entered in default of a defence. It was argued that the complaint had not been pleaded sufficiently in that the complaint failed to plead:
(i) the work was performed;
(ii) how the quantum is arrived at, namely by reference to an hourly rate or otherwise; and
(iii) the amount claimed was reasonable.
·It was argued that where no cause of action arose supporting suing for an unpaid bill as disclosed in the pleading, judgment should not have been entered in default of defence.
·There was now a complaint that the $11,000 she had paid into trust had never been accounted for.
·There were specific complaints as to the work undertaken on Ms Davey’s behalf.
The first defendant opposed the setting aside of the default judgment, arguing that there was no substance to the application and that it was an abuse of process as there had been two previous opportunities to reopen the litigation.
Findings of the Magistrate
Her Honour said that in many respects the application filed before her was not vastly different to the one that was filed originally, and which was decided adversely to Ms Davey, firstly by the judicial registrar and then by herself on her first review. Her Honour noted that the more recent affidavits gave some more precise detail, however Ms Davey did not complain that the outcome of the Family Court proceeding was adverse to her as a consequence of the conduct of behalf of the first defendant.[6] In earlier affidavits Ms Davey had generally complained about the quality of the representation, stating work was prepared without or contrary to instructions.
[6]Ibid, 11 [56].
The failure to lodge a defence in the matter had been canvassed at the time of the original application before the judicial registrar and later in her first review of the decision. Her Honour said that she had rejected the proposition argued by Ms Davey that she had not received the complaint and that she did not accept Ms Davey’s assertion that the methods by which the documents were transmitted to her, namely post and by email, had failed.[7]
[7]Ibid, 13 [65].
Although no written submissions were received prior to the hearing, her Honour recorded that counsel on behalf of Ms Davey made fulsome submissions as to the facts and the applicable supporting authorities. There were no ’new’ points raised for consideration that did not otherwise exist at the time of the prior applications. However, they had been more fully ventilated with the benefit of legal representation.[8]
[8]Ibid, 11 [56]–[57].
Her Honour concluded that the application was not an abuse of process but that it was in the interests of justice that she make a further review as to the appropriateness of whether an order should be made setting aside the judgment and allowing Ms Davey an opportunity to explore her defence.[9]
[9]Ibid, 12 [60].
Her Honour summarised the authorities relied upon by the parties in their submissions in the Reasons.[10]
[10]Ibid, 8-9 [31]–[39], [44].
Her Honour went on to state that as part of the two-step approach to applications such as these she must also be satisfied that an arguable defence exists. She cited Lau v Citic Australia Commodity Trading Pty Ltd (Lau)[11] and said that the primary consideration for the judge is whether there is merit in the defence to which the court should pay heed. Further, that it was not for the judge to determine the merits of the defence before the court or to resolve factual issues which might at that stage appear to exist on the material. In determining whether there was an arguable defence it was not the function of the judicial officer to assess the credibility of the parties. She agreed that there may be a fine line between finding that there is no material at all before the court to support a critical finding of fact, and a finding that the material will not support that fact because in the judge’s view it lacks sufficient weight or credibility. It was noted that even if a defence appears to be a weak one as long as it shows a defence on the merits, it has satisfied the test.
[11][1999] VSCA 34, [5], [7] (Winneke P) (‘Lau’).
Her Honour noted reference made by counsel to Grimshaw v Dunbar[12] and the observation of Jenkins LJ in that case that:
Then there is a more debatable point, as I regarded, as to how far the judge should consider the prospects of success of the party applying for a new trial. No doubt the judge is entitled to satisfy himself [or herself] that the party applying has a bona fide intention of defending the action, and that there is some possibility of his doing so with success.
[12][1953] 1 QB 408, 415; referred to in Kostokanellis v Alan [1974] VR 596 (Gowans, Crockett and Harris JJ) (‘Kostokanellis’).
Her Honour then turned to the material before her in consideration of whether there was evidence of material upon which it could be said that a prima facie defence has been established, even if weak.[13]
[13]Costanzo Lawyers Ltd v Davey (n 1), 13 [67].
Her Honour recorded that:
(a) The content of Ms Davey’s affidavits and annexures demonstrated that the claim for outstanding legal and counsel costs go back a considerable time until at least February 2018. Payment of those costs was to be made from the proceeds of the sale the Donvale property.
(b) Ms Davey indicated in emails that she was delaying the sale due to the real estate market being low. The lawyers continued to seek payment by email and warned her a delay (at that time) of eight months to place the Donvale property on the market was not in accordance with the orders of the Family Court.
(c) As noted in her email of 13 June 2018 to the first defendant, Ms Davey acknowledged she owed them approximately $16,000 plus barrister’s fees. Her Honour stated that:
At no point in this email or any other document annexed to the voluminous affidavits filed by the defendant does she make a complaint as to the work undertaken or the excessiveness of the fees. In fact, the defendant goes further to describe the conduct of the plaintiff’s solicitor as demonstrating very high integrity in all dealings and with the utmost professionalism and that the defendant would recommend that solicitor to anyone.
The defendant maintained that she sought a detailed bill of account and further an itemised bill. There is however, not one email in all the material filed that supports that such a request was made. The defendant did not seek an independent review of any bill of costs and not make any complaints as to misconduct with the relevant authority prior to the institution of the plaintiff’s proceedings.[14]
[14]Ibid, 13-14 [70]–[71].
Her Honour noted that a bill of costs dated 12 February 2018[15] was produced and tendered to the court during the hearing which indicated an adjustment to the amount claimed recognising the $11,000 previously received and held on trust. Her Honour commented that she gained the impression that the contents of this document took counsel for Ms Davey somewhat by surprise.[16]
[15]Costanzo Lawyers Ltd (ACN 158 282 163) atf Costanzo Lawyers Trust trading as Costanzo Lawyers, ‘First Defendant’s Bill’, filed in Sue Sepedah Davey v Costanzo Lawyers Ltd (ACN 158 282 163) atf Costanzo Lawyers Trust trading as Costanzo Lawyers, S ECI 2020 02947, 12 February 2018 (‘First Defendant’s Bill’).
[16]Costanzo Lawyers Ltd v Davey (n 1), 11 [52].
Her Honour went on to say that there ‘is not a scintilla of material to support what the defendant now claims, notwithstanding there is extensive email correspondence that has been filed in this application’. She also said that ‘Given the way this debt has been dealt with by the defendant I have reason to doubt her bona fide’s [sic] in the defence as claimed’.[17]
[17]Ibid, 14 [72].
This particular finding of her Honour, that there was ‘not a scintilla of material’, formed one of the grounds argued in this appeal.
Her Honour concluded by stating that she was mindful of the repeated observations in the cases referred to that even if the defence raised appears to be a weak one the defendant should still be given the opportunity to litigate it. However, on the material before her she was not satisfied that a prima facie defence on the merits had been established.[18]
[18]Ibid, 14 [74].
Task before the Magistrate and the Court on Review
The task before the Magistrate was to determine whether the judgment entered in default ought be set aside.
The considerations relevant in this task were summarised by the Court of Appeal in Lau:[19]
The primary consideration for the judge is that there are merits in the defences to which the Court should pay heed. If there are merits in one or more of those defences the Court will ordinarily exercise its discretion in favour of allowing the matter to pass to final adjudication, provided that the applicant shows that he has an adequate explanation for his failure to file a defence. (See Kostakanellis v. Allen [1974] V.R. 596 at 602 ff.).
It is not for the judge, on an application of this nature, to determine the merits of the defence for himself [or herself] or to seek to resolve factual issues which might at that stage appear to exist on the materials before him [or her].
[19]Lau (n 11) [5].
In Lei v Zang,[20] where the Court of Appeal considered an application to set aside a judgment (in default of appearance) that the primary judge had determined did not raise any defence that was sufficiently arguable, it was said that the principles governing such applications before the Court were:
First, a court dealing with an application to set aside a default judgment has a broad discretion to be exercised according to the circumstances of the particular case. There are no universal rules governing the exercise of that discretion, but ordinarily it will be important to consider whether there is a reasonably arguable defence on the merits of the case, what reasons explain the applicant’s default, how promptly the application to set side was made after the default judgment came to the notice of the applicant, and whether a suitable award of costs or security would suffice to avoid prejudice to the party having the benefit of the judgment, if it were to be set aside.[21]
Secondly, because the decision is one in which the court has a discretion, the test for appellate intervention is that in House v R.[22] It is not sufficient for the appellate court simply to take a different view as to how the discretion should have been exercised. Rather, there must be shown to have been an error made in the exercise of the discretion. That must involve the judge having acted upon a wrong principle, relied on extraneous or irrelevant matters, mistaken the facts, or failed to take some material consideration into account. Alternatively, if none of these things can be shown, but the decision is unreasonable or plainly unjust, the appellate court may infer that in some unidentified way there has been a failure to exercise the discretion properly. In that event, the exercise of the discretion is set aside on the ground that a substantial wrong must have occurred.
[20][2020] VSCA 123, [21] – [22] (Kaye and McLeish JJA).
[21]Kostakanellis (n 12), 605–6; Lubura v Nezirevic (2013) 42 VR 43, 44 [3] (Warren CJ).
[22](1936) 55 CLR 499, 504–5 (Dixon, Evatt and McTiernan JJ).
In addition to these principles, as the application was the second time that the plaintiff had sought to set aside the judgment before Her Honour, new or additional issues or facts needed to be established lest there be a duplication of the same issues which may amount to an abuse of process.
The learned Magistrate had previously dealt with the issue of whether there was an explanation of the failure to file a defence in the earlier application before her. Her Honour did not accept that the plaintiff had not received a copy of the complaint based on the identified proven methods of service delivery. This issue was not relitigated in the second application.
The new or additional material argued before her Honour is set out above at [16]. Her Honour was sceptical that the matters identified were new or different. However, insofar as it is necessary to make any observation in this regard, it is apparent that a more cogent formulation of the basis of the potential defence(s) were articulated in this second application before her Honour. In my view, this may be sufficient to provide a change in circumstances from the situation which pertained before the Court on the first occasion.
Judicial Review
It is well acknowledged that the jurisdiction of the Supreme Court in relation to proceedings of an inferior court or tribunal is supervisory and not by way of review of the decision of the court or tribunal below. The Court does not substitute its own decision for that made by the original decision maker.
The order for default judgment and the learned Magistrate’s subsequent order refusing to set aside that order are interlocutory and not final in nature. The Court’s role is to ensure that the court or tribunal below does not exceed its jurisdiction, procedural fairness is not denied and that the law is observed in reaching a decision.
In judicial review, the Court is concerned with the decision-making process and not with the decision itself. It is not a merits review and judicial review does not permit either a general review of the order or decision of the inferior court or the substitution of the order or decision which the Supreme Court thinks should be made.
In reviewing the decision, the Court may make an order in the nature of certiorari quashing the decision under review on a number of limited grounds including error on the face of the record. The Administrative Law Act 1978 (Vic) provides that a statement by a tribunal or inferior court of its reasons for decision, whether made orally or in writing, is taken to form part of the decision and accordingly incorporated into the record. It has been held for the purposes of the qualifications stated in Craig v South Australia that s 10 constitutes a statutory provision contrary to the general rule that a statement of reasons by an inferior court is not part of the record.[23] A reference in reasons to evidence or to the submissions of counsel might thereby make the evidence or submissions part of the record. In this judicial review application, the Court may have regard to the pleadings, orders and the Reasons.
[23](1995) 184 CLR 163 (Brennan , Deane , Toohey , Gaudron and McHugh JJ).
Grounds of review
The documentation that was filed in this application for review was voluminous, repetitive, and somewhat difficult to follow. Fortunately, just prior to the hearing of the application, counsel was briefed on behalf of the plaintiff and a sensible approach to the grounds argued was pursued.
Of the 21 grounds set out in the amended Originating Motion only two grounds were pursued, being Grounds 11 and 4 as follows:
·The learned Magistrate erred in law by failing to find the judgment was irregular for failure to disclose a cause of action and should be set aside ex debito justitiae (ground 11); and
·The learned Magistrate erred in law in finding that there was ‘not one scintilla of material’ to support the plaintiff’s claims regarding requests for itemised and/or detailed bills (ground 4).
It was argued these grounds amount to an error on the face of the record.
Ground 11 - irregular judgment as no cause of action disclosed on the pleadings
The plaintiff argued that there is a distinction to be drawn between a judgment entered regularly and one entered irregularly. Where a judgment is irregular it will be set aside ex debito justitiae - as of right. Such judgments ‘ought not to be on the records of the Court’.[24] For this reason, irregular judgments will be set aside whether or not the defendant has shown a defence on the merits.
[24]RT Co Pty Ltd v Minister for the Interior (1957) 98 CLR 168, 170 (Dixon CJ).
A judgment is irregular where it is not entered in accordance with the rules of court, or where there is some other defect such as an overstatement in the judgment amount. A defect which would support a claim of irregularity includes where a statement of claim does not disclose a cause of action, or where material facts necessary to support the pleaded cause of action are omitted.[25]
[25]Heike Jindra and Ors v Tech-Rentals Pty Ltd and Australian Pacific Technology Ltd [1999] VSC 206 (Warren J); Arnold v Forsythe [2012] NSWCA 18, [79]–[80] (Sackville AJA).
Order 13.01 of the Magistrates’ Court Rules General Civil Procedure Rules 2020 provides that a statement of claim must contain in summary form a statement of all material facts on which the plaintiff relies, but not evidence on which those facts are to be proven.
Particulars are not intended to fill gaps in or remedy a deficient pleading. It is not sufficient to simply plead a conclusion from unstated facts. Material facts (being those relied upon to establish the essential elements of the cause of action) must be stated.[26]
[26]See Wheelahan & Anor v City of Casey& Ors (No 12) [2013] VSC 316, [25] (Dixon J).
The deficiencies in the statement of claim alleged by the plaintiff were based on an analysis that, at a minimum, a pleading to establish a claim of debt for legal fees must include that:
(a) the parties entered into a contract pursuant to which the firm agreed to provide legal services to the client charged at its hourly rates;
(b) on particular dates, the firm performed legal services for the defendant pursuant to the contract;
(c) the firm issued legal bills for the work performed; and
(d) the client has failed or refused to pay.
It was claimed that the complaint filed in the proceeding was clearly deficient as:
(a) it failed to plead when work was carried out, or even that work was done. It was argued that this omission goes to the very heart of the cause of action without which there is no debt;
(b) the complaint did not contain sufficient information to enable the plaintiff to know the case she was expected to answer. It was not possible from the pleading to identify exactly for what work payment was being claimed. Some money had already been drawn down from the trust account,[27] but knowing what payment was being sought for what work was said to be important as the plaintiff had told the defendant she did not have money to continue with the litigation;[28]
[27]Costanzo Lawyers Ltd v Davey (n 1), 11 [52].
[28]Ibid, 5-6 [23].
(c) the complaint did not plead how the quantum was arrived at by reference to an hourly rate and the complaint failed to plead the claimed amount was reasonable as required by section 172(1) of the LPUL;
(d) the defendant claimed interest at the Penalty Interest Rate of 10% and not interest in accordance with section 195(4) of the LPUL and rule 75 of the Legal Profession Uniform General Rules 2015, which caps interest payable on unpaid bills to 2 percentage points above the Cash Rate; and
(e) the defendant sought and received legal costs where the defendant was the solicitor on the record in its own matter and not entitled to receive legal costs contrary to the authority in Bell Lawyers Pty Ltd v Pentelow.[29]
[29][2019] HCA 29. It is noted that the law at the time did not prevent this circumstance.
The plaintiff argued at first instance that the default judgment was irregular and ought to be set aside as of right. This is recorded in the Reasons at [50] – [51].[30]
[30]Costanzo Lawyers Ltd v Davey (n 1), 10-11 [50]–[51].
The learned Magistrate did not rule on the issue or set aside the judgment on the basis that it was irregular.
The first defendant argued that the pleadings were adequate and set out all of the necessary components to make out the cause of action. These included that the statement of claim alleged that the plaintiff retained the first defendant, a bill had been rendered and fees have been incurred. The first defendant argued that the plaintiff’s pleadings defect argument was based on an allegation that the pleadings did not squarely allege that work was actually done for the plaintiff. The first defendant argued that there was a wealth of material before the Magistrate from both sides showing that extensive work had been done by the first defendant for the plaintiff.
The first defendant submitted that a prima facie defence on the merits needed to be shown and ‘not some cute pleading point’.
Finding
There is little to nothing in the Reasons that indicate her Honour has turned her mind to the irregularity argument relied upon by the plaintiff.
The pleadings must set out all of the material facts and not the evidence upon which the claim might be proved. The argument that the first defendant relies upon - that there was a wealth of material before the Magistrate from both sides showing that extensive work had been done by the first defendant for the plaintiff - does not remedy a deficient pleading in circumstances where a default judgment is in issue. If the pleading on its face does not make out the cause of action the judgment entered on that claim will be irregular.
On its face, the statement of claim[31] sets out the material facts as identified as required by the plaintiff’s submissions, save that it does not plead directly that work was done. That work was done would need to be implied by the pleading that a bill was rendered.
[31]Sue Sepedah Davey, ‘Copy of Costanzo Lawyers Summons in the Magistrates’ Court at Heidelberg’, filed in Sue Sepedah Davey v Costanzo Lawyers Ltd (ACN 158 282 163) atf Costanzo Lawyers Trust trading as Costanzo Lawyers, S ECI 2020 02947, 13 May 2021.
The pleading sets out amongst the terms of the retainer that the plaintiff would be charged by the first defendant for the first defendant’s services, the first defendant would render bills for its services and that the bills were due and payable in accordance with the terms and conditions of the written retainer. It pleads that on or about 29 August 2018, a memorandum of professional fees and disbursements was rendered to Ms Davey for the total sum of $12,370 and that interest had accrued in the sum of $721.87. It was pleaded that it was a term of the retainer that pursuant to s 2 of the Penalty Interest Rate Act 1983, interest was chargeable on all monies outstanding beyond 30 days at the rate specified from time to time under that Act.
It was also pleaded that pursuant to the terms of engagement and retainer, barrister’s fees had been incurred for the benefit of the plaintiff and at her request, and the specific amounts in total owing to counsel were set out.
Whilst the first defendant has criticised this argument as being ‘a cute pleading point’, setting out the material facts so that the essential elements of a cause of action are pleaded is essential. This cannot be ignored.
On my review of the pleadings, I am not satisfied that performance of the contract has been pleaded, nor the terms of the contract sufficiently identified to allow the calculation of the debt to be established.
I note by comparison that the same deficiency does not appear in the pleading in the County Court proceeding. It specifically pleads that work was done.[32] I am not satisfied that the material facts upon which the cause of action relies have been pleaded. An irregular judgment ought not remain on the record. I find this ground of review made out.
[32]Costanzo Lawyers Ltd (ACN 158 282 163) atf Costanzo Lawyers Trust trading as Costanzo Lawyers, ‘Writ (County Court of Victoria, CL-21-1289)’, filed in Sue Sepedah Davey v Costanzo Lawyers Ltd (ACN 158 282 163) atf Costanzo Lawyers Trust trading as Costanzo Lawyers, S ECI 2020 02947, 6 April 2021.
Whilst this finding is sufficient to dispose of the proceeding, I note that even if the judgment had been entered regularly, the Magistrate appears to have strayed from the task that was required of her Honour in proceeding to analyse the factual strengths and merits of the proposed defence and make findings on the credibility of the plaintiff.
The learned Magistrate made an assessment of the evidence before her Honour and concluded the defence had no prospects of success.[33] This conclusion is based on her Honour’s assessment of the merits based on the material filed by both parties.[34] Her Honour has also drawn adverse inferences as to the plaintiff’s credit, motivation and candour, as evidenced by her finding that she did not accept the plaintiff did not receive the complaint initially,[35] the email which had been quoted only in part (which is fully set out by her Honour indicating a motivation not driven by a dispute with her lawyers’ fees but a disgruntlement with the Family Law system),[36] and an acknowledgement that she owed the lawyers $16,000 including counsel’s fees to that date.[37]
[33]Costanzo Lawyers Ltd v Davey (n 1), 14 [74].
[34]Ibid, 13 [67].
[35]Ibid, 13 [65].
[36]Ibid, 6 [24].
[37]Ibid, 5-6 [23].
The Reasons focus on the material that concludes there is evidence that there is a claim for outstanding legal and counsel costs that goes back a considerable time. The payment of those costs were to be made from the sale of the Donvale property. Nowhere does her Honour analyse the pleading deficiency issue raised, nor does her Honour rule on it.
Her Honour emphasises in her conclusion that her Honour is mindful that a first defendant should be given an opportunity to defend a claim, even if their defence identified is only a weak one. Her Honour’s conclusion however then states that on her assessment of the material before her no bona fide defence on the merits has been established and she refused the application.[38]
[38]Ibid, 14 [74].
Her Honour identifies correctly that she is not called on to assess the merits or make a finding about the credibility of a witness or the evidence overall. However, a fair reading of the decision indicates that is not what has been done. Her Honour has referred to the observation in Grimshaw v Dunbar that the judge is entitled to satisfy himself/herself that the party applying has a bona fide intention of defending the action and that there is some possibility of them doing so with success.
On the authorities by which the Court is bound, the task is to ascertain whether there is some possibility of a successful defence. However, the bar to ascertaining the likelihood of success is not high. That is not to say that any whimsical prospect of a defence is enough.
That said, the bar is not set particularly high where the judgment entered by default was done irregularly. The time and place for the evidence to be tested, and the legal questions to be ventilated is at the trial and not summarily. A plaintiff ought be given an opportunity to have the defence tested on its merits.
Ground 4 - no itemised bill requested
The plaintiff argued that the failure to provide an itemised bill when requested was a complete defence to the claim.[39] This was based on section 194 of the LPUL that prohibits recovery proceedings commencing until 30 days after a bill has been served, or an itemised bill provided on request and 30 days have passed.
[39]Ibid, 10 [48]–[49].
The plaintiff asserted that she had sought an itemised bill but no response had been provided. The first defendant argued that an itemised bill(s) had been provided and that the relevant time period had expired and thus there was no bar to taking action in pursuit of the debt.
What evidence was before her Honour that there was a request for an itemised bill of costs?
Her Honour commented that there was not a scintilla of evidence in the emails which indicated that Ms Davey had made a request for an itemised bill of costs or any complaint about the work undertaken by the first defendant. However, the affidavit of Raffaella Cossalter sworn 4 October 2019[40] deposes, without any bills exhibited that:
On regular intervals throughout her Family Court proceedings, the Defendant was provided with detailed Bills of Costs setting out the work that had been undertaken on her behalf to that date and the costs of such work.
[40]Costanzo Lawyers Ltd (ACN 158 282 163) atf Costanzo Lawyers Trust trading as Costanzo Lawyers, ‘Affidavit of Raffaella Cossalter’, filed in Sue Sepedah Davey v Costanzo Lawyers Ltd (ACN 158 282 163) atf Costanzo Lawyers Trust trading as Costanzo Lawyers, S ECI 2020 02947, 4 October 2019, [7] (‘Affidavit of Raffaella Cossalter’).
On 20 February 2020, the plaintiff’s solicitors had written to the first defendant complaining that the invoice produced at Court by the counsel on behalf of the first defendant in the plaintiff’s application to set aside the default judgment had never been seen by their client. It was noted also that it did not appear in the material filed in the proceeding before the Magistrates’ Court. A request was made for full details of how that invoice was produced and what was alleged about it being provided to Ms Davey.
This letter went unanswered by the first defendant and a further letter from the plaintiff’s solicitors on 28 September 2020 sought:
(a) a reply to that earlier letter;
(b) other documents and;
(c) made a further request that copies of such detailed bills and itemised accounts and proof of when and how they were provided to Ms Davey, as alleged in Ms Cossalter’s affidavit, be provided.
In an exhibit to the affidavit of George Mantzoros sworn 31 July 2020,[41] which was sworn in opposition to the plaintiff’s application for a stay in the Supreme Court, reference is made to a bill of costs dated 12 February 2018,[42] which Mr Mantzoros deposes was tendered into evidence before her Honour at the plaintiff’s second application for rehearing on 7 February 2020.
[41]Costanzo Lawyers Ltd (ACN 158 282 163) atf Costanzo Lawyers Trust trading as Costanzo Lawyers, ‘Affidavit of George Mantzoros’, filed in Sue Sepedah Davey v Costanzo Lawyers Ltd (ACN 158 282 163) atf Costanzo Lawyers Trust trading as Costanzo Lawyers, S ECI 2020 02947, 3 August 2020, 3 [5].
[42]First Defendant’s Bill (n 15).
The bill of costs was expressed to be for the period from 23 January 2018 to 12 February 2018, was dated 12 February 2018 and was addressed to Ms Sue Davey, 120 Hill Road, Balwyn North 3104. It set out in some detail professional work identified amounting to $11,550 and detailed disbursements of $190. It identified an amount of $11,000 paid and also set out counsel’s fees of $16,000 which were not detailed. The total amount of the account was expressed to be an account statement to date.
Her Honour commented in the Reasons that to successfully argue this defence the plaintiff would need establish that an itemised bill had been requested.[43] Her Honour recorded that counsel for Ms Davey conceded that in Ms Cossalter’s affidavit,[44] Ms Cossalter disagreed that Ms Davey had not been provided with an itemised bill. Further, her Honour noted that a copy of the bill dated 12 February 2018 tendered to her by counsel for Costanzo Lawyers indicated that there had been an adjustment to the amount claimed recognising the $11,000 paid into trust.[45]
[43]Costanzo Lawyers Ltd v Davey (n 1), 10 [48].
[44]Affidavit of Raffaella Cossalter (n 44), [11].
[45]Costanzo Lawyers Ltd v Davey (n 1), 11 [52].
The first defendant submitted that Ground 4, which on its face seeks to challenge the finding that ‘there was not one scintilla of material to support the plaintiff’s claims’ (regarding her request for itemised and/or detailed bills), was misconceived because on a fair and contextual reading of the Reasons what was being said by her Honour at [72], was that her Honour was referring to the email evidence, not the evidence overall. What was submitted was that her Honour was discussing lack of any contemporaneous email correspondence in this regard, despite extensive email correspondence being exhibited.
It was further submitted that this is a factual finding and not an error of law let alone one justifying review.
It is clear that there was contradictory evidence of whether an itemised bill or bills were requested, and whether or when such accounts were provided. It is also clear that it cannot follow that an observation that there was ‘not a scintilla of material’ to support what the plaintiff now claims as to the request or provision of an itemised bill(s) is a correct observation.
Finding
An error of fact is not of itself an error of law unless in the process of finding that fact some error has occurred.
Where there is no evidence at all, and it was necessary for the establishment as to a particular fact, such failure can amount to an error of law.
However, here it is clear there is material before me that there was evidence available to her Honour to form the view that not only a request (or requests) were made but were replied to by provision of an itemised bill or bills.[46] There is clearly a dispute on the evidence about whether the account(s) were received but that is a different factual matter to whether a request was made, or whether the request was answered and an itemised bill sent. In my view the explanation for the ‘not one scintilla of evidence’ comment by her Honour can be attributed to the confines of the email correspondence as submitted by the first defendant. It is not otherwise an accurate account of the evidence before her Honour.
[46]Affidavit of Raffaella Cossalter (n 44), [11].
Conclusion
I have determined that the default judgement was entered irregularly and the judgement cannot remain on the record. The application for review will be allowed on that ground.
Further, I have concluded that her Honour had formed an adverse view of Ms Davey’s credit, candour and motivation. Her Honour has also gone beyond an assessment of whether there is a defence articulated that might be valid when tested at trial. Both of these findings go beyond the task required.
It is open to the Court to set aside a judgment entered by default by making an order in the nature of certiorari. I propose to do so in this matter.
I will hear the parties further as to the form of orders and in relation to costs.
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