Davey v Silverstein

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

MAJOR TORTS LIST

S CI 2017 05235

THE QUEEN, on the application of JOHN PATRICK DAVEY	Plaintiff
v
RONALD DAVID SILVERSTEIN, PETER PATRICK DESSMAN and DESSCO PTY LTD (ACN 072 755 590)	Defendants

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JUDGE:	Richards J
WHERE HELD:	Melbourne
DATE OF HEARING:	18, 19, 23, 24 September 2019
DATE OF JUDGMENT:	11 November 2019
CASE MAY BE CITED AS:	Davey v Silverstein
MEDIUM NEUTRAL CITATION:	[2019] VSC 724

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CONTEMPT OF COURT – Alleged contempts of Magistrates’ Court – Whether conduct had tendency to interfere with the course of justice – Whether affidavits subject to the implied undertaking in Hearne v Street (2008) 235 CLR 125 – Affidavits filed voluntarily, not under court compulsion, and not subject to implied undertaking – No contempt of court proved.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr JP Davey, in person
For the Defendants	Mr RD Silverstein, in person and on behalf of the second and third defendants

HER HONOUR:

John Davey and Ronald Silverstein are both legal practitioners who may practice law in Victoria. This proceeding is one of several in which Mr Davey and Mr Silverstein are engaged in litigation against each other, in which each of them appears in person. It arises out of debt recovery proceedings brought by Mr Davey in 2016 in the Magistrates’ Court of Victoria against Peter Dessman and Dessco Pty Ltd,[1] concerning legal fees that Mr Davey claimed they owed him. Since February 2017, Mr Silverstein has been the solicitor for the defendants in the debt recovery proceedings. In this proceeding, Mr Davey alleges that various things that Mr Silverstein, Mr Dessman and Dessco did, or did not do, in relation to the debt recovery proceedings during 2017 were in contempt of the Magistrates’ Court.
[1]Magistrates’ Court of Victoria proceedings G11540735 and G11441224.

The allegations of contempt are made against a complex factual background involving a bankruptcy, a family trust and some fractured family relationships.

Mr Davey was declared bankrupt in February 2014. His trustee in bankruptcy was Henry Kazar, of Ernst & Young.

The bankruptcy loomed large in the debt recovery proceedings. On 15 February 2017, Mr Silverstein appeared at a hearing in those proceedings and raised a number of matters concerning Mr Davey, including the fact that he was an undischarged bankrupt. The magistrate adjourned the hearing and made directions for the exchange of written submissions and other material.

On behalf of his clients, Mr Silverstein submitted that Mr Davey, as an undischarged bankrupt, could not have instituted or continued the proceeding in his own name. The defendants submitted that the Magistrates’ Court should give judgment in their favour. Mr Davey also filed written submissions, together with an affidavit exhibiting correspondence between him and his trustee in bankruptcy. That correspondence included an email dated 21 February 2017, in which the trustee advised that he would not be intervening in the debt recovery proceedings because they related entirely to the recovery of income generated after the commencement of the bankruptcy.

On 22 March 2017, the magistrate ruled that Mr Davey had no standing to bring the debt recovery proceedings because he was an undischarged bankrupt. Her Honour stayed the proceedings and ordered Mr Davey to pay the defendants’ costs. The stay meant that the hearing that had been listed for 10 to 13 April 2017 did not go ahead.

Mr Davey appealed the magistrate’s decision to this Court. In December 2017, J Forrest J allowed the appeal and set aside the magistrate’s orders.[2] The Magistrates’ Court has now heard and determined the substance of the debt recovery proceedings.
[2]Davey v Dessco Pty Ltd (2017) 327 FLR 385.

The Teddington Trust is a discretionary trust, established by deed in 2008. The Trust’s principal beneficiary is John Davey and its main asset is a property in MacGregor in the Australian Capital Territory. Its original trustee was Australian Conservation Services Pty Ltd (ACS), a company controlled by Mr Davey’s father, Thomas Davey. In June 2016, ACS was replaced as trustee by Liladel Holdings Pty Ltd, a company controlled by Suzanne Davey. Suzanne Davey is the sister of John Davey and the daughter of Thomas Davey. Later that year, John Davey became concerned that ACS was attempting to sell the MacGregor property. In September 2016, he made an application to the Magistrates’ Court of Victoria for preliminary discovery of relevant documents from ACS (preliminary discovery application).

Mr Silverstein was the solicitor for ACS, in a proceeding in the Australian Capital Territory Supreme Court concerning the Teddington Trust. The ACT proceeding involved a dispute about who was the trustee of the Trust – ACS or Liladel. On 21 April 2017, Mossop J dismissed the proceeding. His Honour concluded that Liladel had been properly appointed as the trustee of the Trust.[3]
[3]Australian Conservation Services v Liladel Holdings (2017) 12 ACTLR 124.

In addition, in early March 2017, Mr Silverstein was engaged to act directly for Thomas Davey in relation to matters concerning the Trust. After taking instructions of Thomas Davey, Mr Silverstein sent numerous emails to John Davey’s trustee in bankruptcy during March 2017. These included emails inquiring about a public examination of John Davey and urging the trustee to extend the bankruptcy. He also sent the trustee copies of three affidavits filed in the debt recovery proceedings and Mr Davey’s affidavit in support of the preliminary discovery application.

John Davey is estranged from his father, Thomas Davey. He described his relationship with his father as always fractured. He has not always had a good relationship with his sister. The second defendant in this proceeding, Peter Dessman, is John Davey’s cousin. At one time, they were friends, and Mr Davey ran his legal practice from premises that he leased from Dessco. However, they have now been opposed in litigation for many years and no longer enjoy a warm relationship.

Mr Davey’s bankruptcy was due to end on 1 April 2017. However, on 27 March 2017, his trustee lodged a notice of objection to discharge, which extended the bankruptcy up to 1 April 2022. Mr Kazar’s decision to extend the bankruptcy was made on the basis of information provided to his office by Mr Silverstein. Mr Davey wrote to Mr Kazar, asking him to reconsider his decision. He did so, and on 13 April 2017 he withdraw his objection to discharge. Mr Davey was discharged from his bankruptcy on 18 April 2017.

To summarise, between February and April 2017, Mr Silverstein acted for parties opposed to Mr Davey’s interests in the debt recovery proceedings and the ACT proceeding, and also brought about an extension of his bankruptcy. Mr Silverstein did so on behalf of Mr Davey’s cousin and his estranged father. From Mr Davey’s point of view, he may have seemed to be a persecuting nemesis.

This proceeding, however, concerns only Mr Davey’s allegations that Mr Silverstein, Mr Dessman and Dessco were in contempt of the Magistrates’ Court. For the reasons that follow, I have concluded that none of them was in contempt of the Magistrates’ Court in any of the ways alleged.

Alleged contempts

There were seven counts of contempt pleaded by Mr Davey in his fifth amended statement of claim, as follows:

COUNT 1
AND by their conduct pleaded and particularised above in the communications with the former Bankruptcy Trustee, the Defendants did conspire and attempt, and did indeed, pervert the course of Justice in the aforementioned Debt Recovery Proceedings.
COUNT 2
AND by the drafting and filing of the Fourth Affidavit of Thomas Alfred James Davey dated the 8^th March 2017 in the Debt Recovery Proceedings and providing same to the former Bankruptcy Trustee on the same day, the Defendants did commit an Abuse of Process amounting to perverting the course of justice and contempt of court of the Magistrates’ Court of Victoria.
COUNT 3
AND by their conduct as particularised above, the Defendants breached their substantive obligation to the Magistrates’ Court of Victoria not to use affidavits created in the course of litigation, or otherwise without the permissions of the Court, in whole or in part, or the information contained therein, for any purpose not directly connected with the conduct of the proceedings and did conspire and commit acts which:
(i) perverted the course of justice;
(iii) abused the processes of the Court.
And accordingly committed contempt of the Magistrates’ Court of Victoria.
COUNT 4
AND by his failure to disclose the Bankruptcy Trustee email correspondence of the 22^nd February 2017 to the Magistrates’ Court, the First Defendant on the instructions of the Second and third Defendant did conspire to mislead the Magistrates’ Court of Victoria, for the purposes of perverting the Course of Justice and amounting to Contempt of said court.
COUNT 5
AND by their omission and breach of their obligations pursuant to the Civil Procedure Act 2010 regarding the correspondence of the former Bankruptcy Trustee dated 22^nd February 2017, did with dishonest intent pervert the Course of Justice in the Victorian Magistrates Court and in doing so, did commit an act or acts of contempt of the Victorian Magistrates’ Court at Broadmeadows.
COUNT 6
AND by making the accusation of criminality, without justification against the Plaintiff in the Magistrates’ Court of Victoria at Broadmeadows on the 15^th February 2017, the First Defendant did commit an act of contempt of said Magistrates’ Court.
COUNT 7
AND by his conduct particularised in paragraph 31A above, the First Defendant intended to interfere with the conduct of the debt recovery proceedings in the Magistrates’ Court of Victoria and with the Plaintiff as a witness in those proceedings. By his conduct, the 1^st Defendant did commit an act of contempt of said Magistrates’ Court.

As can be seen, the pleading tended to conflate several distinct concepts that overlap with, but are not the same as, contempt of court – namely, abuse of process, conspiracy, perverting the course of justice, and contravention of the Civil Procedure Act2010 (Vic). It is therefore convenient to begin with a statement of the relevant legal principles concerning contempt of court.

Contempt of court – Legal principles

The types of conduct that constitute contempt of court are diverse. The common thread between them is interference with the due administration of justice.[4] The Supreme Court of Victoria can deal with contempts of inferior Victorian courts, including the Magistrates’ Court of Victoria.[5] This protective jurisdiction exists ‘in order to safeguard and uphold the rights of suitors and ensure that justice be done’.[6]
[4]Construction, Forestry, Mining and Energy Union v Grocon Constructors (Victoria) Pty Ltd (2014) 47 VR 527 (CFMEU v Grocon), [129].
[5]Supreme Court (General Civil Procedure) Rules 2005 (Vic), r 75.05(1)(c).
[6]John Fairfax & Sons Pty Ltd v McRae (1955) 93 CLR 351, 360, 363–365 (Dixon CJ, Fullagar, Kitto and Taylor JJ).

The essence of contempt of court is:[7]

… conduct which amounts to an interference with, or obstruction to, or having a tendency to interfere with or obstruct the due administration of justice.
Thus, to establish the offence of contempt of court it must be proved beyond reasonable doubt that conduct occurred which constituted an interference with or obstruction to the due administration of justice or which had a tendency to interfere with or obstruct the due administration of justice.

[7]R v Slaveski [2011] VSC 643 (Slaveski), [17]–[18].

Tendency to interfere with the administration of justice is an objective element of contempt. Conduct will not amount to a contempt of court unless it has ‘a real and definite tendency as a matter of practical reality’ to interfere with the administration of justice.[8] The need for a robust approach was explained by the High Court in John Fairfax & Sons Pty Ltd v McRae:[9]

Because [the summary jurisdiction to punish for contempt] is founded on the elementary necessities of justice, there must be no hesitation to exercise it, even to the point of great severity, whenever an act is done which is really calculated to embarrass the normal administration of justice. … On the other hand, because of its exceptional nature, this summary jurisdiction has always been regarded as one which is to be exercised with great caution, and, in this particular class of case, to be exercised only if it is made quite clear to the court that the matter published has, as a matter of practical reality, a tendency to interfere with the due course of justice in a particular case.

[8]R v Vasiliou [2012] VSC 216, [15].

[9](1955) 93 CLR 351, 370 (Dixon CJ, Fullagar, Kitto and Taylor JJ).

One established category of contemptuous conduct is breach of the implied undertaking not to use documents filed in a proceeding other than for the purposes of the proceeding – commonly referred to as the Harman undertaking.[10] The circumstances in which the undertaking is implied, and the types of material to which it applies, are discussed in relation to Count 3 below.
[10]Harman v Secretary of State for the Home Department [1983] 1 AC 280; Hearne v Street (2008) 235 CLR 125.

Proof of intention to interfere with or obstruct the due administration of justice is not an element of contempt of court. It is sufficient to prove that the alleged contemnor intended to make the statements or do the acts that had the requisite tendency to interfere. The presence or absence of a specific intent to interfere in the administration of justice is, however, relevant to penalty.[11]
[11]Slaveski, [19]–[20], [22].

There is a sometimes elusive distinction between criminal and civil contempt.[12] In this case, it has not been necessary to draw that distinction. All parties accepted that, while the Supreme Court (General Civil Procedure) Rules 2015 (Vic) applied to the proceeding, the proceeding was a ‘criminal proceeding’ for the purposes of the Evidence Act 2008 (Vic) and the standard of proof was beyond reasonable doubt.
[12]Witham v Holloway (1995) 183 CLR 525, 532–534 (Brennan, Deane, Toohey and Gaudron JJ); CFMEU v Grocon, [144]–[177].

The contempts alleged here concern a number of communications by Mr Silverstein to the trustee in bankruptcy, and aspects of his conduct of the debt recovery proceedings. On the admitted facts, some of that conduct appears to me to have been misguided and, in one instance, unprofessional. It is another question altogether whether, as a matter of practical reality, the conduct had a tendency to interfere with the due administration of justice in the debt recovery proceedings.

Count 1 – Extension of bankruptcy

The first count of contempt alleged was:

AND by their conduct pleaded and particularised above in the communications with the former Bankruptcy Trustee, the Defendants did conspire and attempt, and did indeed, pervert the course of Justice in the aforementioned Debt Recovery Proceedings.

Mr Silverstein admitted that he had engaged in the following communications with Mr Davey’s former trustee in bankruptcy:

(a) On 14 February 2017, Mr Silverstein sent an email to Fergus McFarlane, a consultant at Ernst & Young who, under the supervision of Mr Kazar and Lachlan Abbott, worked on Mr Davey’s bankruptcy. It read:

Subject: Possible offences under the Bankruptcy John Davey Bankrupt
…
See attached email.
If the case is dismissed with costs including reserved costs the magnitude of costs against him would be very substantial. This means he would have incurred credit beyond the $5000 limit which is another offense.

(b) On 16 February 2017, Mr Silverstein wrote to Mr McFarlane as follows:

Subject: John Davey Engagement of Counsel and security for costs
… This is in addition to our clients current outstanding costs of at least $25000. There are several litigious issues that will involve the conduct of the defendant for example not discussing the meaning of the cost agreement and not delivering a number of cost agreements etc. There is no basis of this action it is unfounded and lacks merit. It is also an abuse of process.
…
Without complicating this matter anymore the bankrupt has entered into a commercial lease with my client. You may need to consider if you are prepared to disclaim that lease.

(c) On 7 March 2017, at 5:00pm, Mr Silverstein sent this email to Mr McFarlane, attaching several documents:

Subject: Fw: John Patrick Davey undischarged Bankrupt EX Re 44C of Statement of affairs NON DISCLOSURE OF LOCATION OF ASSET IN STATEMENT OF AFFAIRS BY UNDISCHARGED BANKRUPT SOLICITOR
…
I cannot see how you can permit John Davey to be discharged in circumstances where he has not
1    Not lodged tax returns for 3 years.
2.   Not lodged an income statement
3    Failed to disclose the location of trust assets in which he was both an appointor and a corpus beneficiary. Based on current case law the property at 28 Eric De Salis property beneficially belonged to him as from the date of his sequestration
…

(d) Later on 7 March 2017, at 7:08pm, Mr Silverstein sent a further email to Mr McFarlane:

Subject: Extension of Bankruptcy Urgent
In view of the information given to you today and the fact that the Statement of Affairs contains false information it would seem appropriate you extend the bankruptcy by at least 30-60 days to give you time to investigate the matters. I have some evidence of receipt of income being payments made by client to the bankrupt for several cost orders and estate matters. Can you please let me know your decision in this matter by Thursday of this week.

(e) On 8 March 2017, Mr Silverstein wrote this email to Mr McFarlane at 2:53pm:

Subject: Tom Davey POD
Hi Fergus
You will shortly receive a Affidavits sworn this date by Tom Davey. In my opinion the contents of it are compelling evidence why you ought to lodge an Objection to his discharge.

(f) Later on 8 March 2017, Thomas Davey swore an affidavit in the debt recovery proceedings. This affidavit is the subject of Count 2. At 6:15pm, Mr Silverstein emailed a copy of the affidavit to Mr McFarlane. The provision of this and three other affidavits to the trustee in bankruptcy is the subject of Count 3. The covering email read:

Subject: Affidavit of Tom Davey dated the 8^th March 2017 Re concealment of assets from Trustee in Bankruptcy by undischarged bankrupt solicitor
Hi Fergus
FYI
Let me know if you need exhibits. Look at top of page 4.

(g) On 10 March 2017, Mr Silverstein sent another email to Mr McFarlane. It attached an affidavit of Kieran Wirtitsch dated 4 November 2016, filed in the debt recovery proceedings. The email read:

Subject: Re: John Patrick Davey undischarged bankrupt EX Re 44c of Statement of affairs NON DISCLOSURE OF LOCATION OF ASSET IN STATEMENT OF AFFAIRS BY UNDISCHARGED BANKRUPT SOLICITOR
Fergus
Reason why Trustee should lodge objection to release of the bankrupt. Offences committed John Patrick Davey undischarged bankrupt.
1.Concealed asset from Trustee Security Agreement for $100000 KSW-2 in above see section 265(1) details supplied to you on the 14^th February.
2.Concealed asset of Trust 44C of SOF Swore false affidavit. Breach of 263A and S267(2) of Bankruptcy Act 1966 See Affidavit of Tom Davey sworn 6^th March 2016
3.Failure to disclose income – no returns to you or to ATO

I would expect you to report this matter to the Inspector General at AFSA. I note my client has rights to review your decision under section 179 Bankruptcy Act. The trustee in Bankruptcy clearly needs to investigate the Teddington Trust and involvement of the bankrupt. I cannot see how he can do this in a period of less than 3 weeks.

(h) On 23 March 2017, Mr Silverstein spoke by telephone with Mr McFarlane. Among other things, he told Mr McFarlane that Mr Davey was in recept of undisclosed income from rental payments. He also emailed Mr McFarlane as follows:

Subject: ray white contact Nathan Wood John Patrick Davey undischarged bankrupt
Fergus
Telephone call this morning myself to you
A Income issue
Rental paid to whom?
Belconnen
You need to investigate
A Records issue
Have you received his books?
Has section 270 of Act has this been complied

(i) Mr McFarlane sent a reply email, summarising the information provided by Mr Silverstein that morning:

So from our conversation I acknowledge the following:
-Proceedings have been placed on stay as Trustee was not in Court;
-Costs order against Davey (circa 26k);
-Property of Trust has been leased for past 6 months;
-Recipient of income from rental payments has been either John Davey or his sister; and
-Nathan Wood of Ray White is the contact for the rental property.

(j) On 24 March 2017, Mr Silverstein sent this email to Mr McFarlane:

Subject: John Davey
Hi Fergus
I am still awaiting from you the answers to the following questions:
Tom Davey
1.Will you permit my client and/or myself to inspect the income records of John Davey? If so, when can we inspect the income records? This should be before 1 April 2017.
2.Are you prepared to have a public examination of John Davey? If so, under what conditions? I wish to ask a number of questions at any such public examination. I would be asking as counsel for Tom Davey.
Peter Dessman
1.Are you prepared to make an application to remove the stay on the proceedings at the Broadmeadows Magistrates’ Court case number G11540735 and case number G11441224?
2.John Davey has incurred a debt to my client for costs. The legal costs incurred by my client prior to 12 February 2017 were incurred when my client was unaware that John Davey was a bankrupt. At the date he became aware, m client had spent $20,000 on legal fees in defending himself from John Davey. As John Davey has incurred a debt in excess of $5,000 without disclosing he was a bankrupt, will the trustee report this matter to the inspector general?

(k) Mr Silverstein sent another email to Mr McFarlane on 26 March 2017:

Subject: transfer of shares by bankruptcy
Hi Fergus
The 50 shares are divisible property as at the date of bankruptcy. It is sold by the bankrupt. Non disclosure by bankrupt.

(l) Mr Silverstein sent several emails to Ernst & Young on 28 March 2017. The first was to Mr McFarlane, at 7:54am:

Subject: John Patrick Davey
Hi Fergus
Please provide me with documentary evidence of the extension of Bankruptcy of John Patrick Davey for two years.
At this stage my client has no idea who has been collecting the rent on the house. There is about 6 months rent unaccounted for.
my client have no idea who changed the locks.
The rental income may have been paid to an income beneficiary of the trust. I have asked his sister and received no reply.
It is very odd my client services the loan commitment but does not receive the income. If there has been a change of trustee, the new trustee has not accounted to my client either as beneficiary or paid my client pursuant to my clients proprietary right as to its right of indemnity.
Am I right it has not been disclosed to you.

(m) The next email was sent in reply to an email from Lachlan Abbott, explaining the trustee’s ability to undertake a public examination under s 81 of the Bankruptcy Act 1966 (Cth), to more thoroughly investigate the bankrupt’s financial affairs. Mr Abbott had invited Mr Silverstein’s client to discuss the possibility of funding such an investigation. Mr Silverstein replied:

Hi Fergus
What would my client get for a payment of $3000 to the Trustee. If he public examination clearly shows the Trust was an is effectively controlled by John Davey [would] my client get priority for costs of the public examination and its debt of $50000.
My client wants to know what happened to the $50000 after it was paid into his trust account. Have you obtained documentary evidence what happened to the $50000.

Mr Abbott replied to the effect that a public examination of the bankrupt would probably cost $30,000 to $45,000.

(n) Mr Silverstein then emailed Mr Abbott as follows:

Hi Lachlan,
I note section 81 of BA 1966 permits a creditor to do undertake public examination. This is the course I will be recommending this course to my client. The Applicant will be Tom Davey. To save costs I will be conducting the public examination. It will be held in Melbourne.

Mr Abbott replied, advising Mr Silverstein that John Davey had appealed the objection to the extension of his bankruptcy, and that the trustee did not have funds to obtain legal advice in relation to the various issues raised in the appeal. Mr Abbott noted Mr Silverstein’s advice that ‘your client has no objection to the Trustee withdrawing the objection to discharge and does not wish to fund the Trustee for the purpose of obtaining further legal advice or for the Trustee to conduct a Public Examination of the Bankrupt’.

(o) Mr Silverstein sent a further email to Mr McFarlane on 31 March 2017:

Subject: John Davey
Hi Fergus
This is a document under which John Davey received the sum of $3,000. I have no idea if it has been disclosed.
I am still confused about the Deed of Priority that was executed between John Davey and Dessco Pty Ltd, which is annexure “KSW-2” to the affidavit of Kieran Shaun Wirtitsch sent to you on 14 February 2017 at 12:55 pm. Is that Deed, which secures $100,000, divisible property of the trustee in bankruptcy?

(p) There was another email from Mr Silverstein to Mr McFarlane on 4 April 2017:

Subject: John Davey
Hi Fergus
My client is not in a position to pass an resolutions on distributions or make any changes to the Trust Deed whilst this matter is before the Court. One of the major issues before the Supreme Court of the ACT is who is the true legally appointed current Trustee. It would be a contempt of Court for my client to take any steps whilst this matter is before the Court. I note you have no funds to fight his objection to his Bankruptcy extension. My client will in due course be conducting a public exanimation. My client requires copes of John Davey’s tax returns and income statements. Please email them to myself today. My client wishes to conduct a public examination of matters concerning the Trust and his financial affairs. John Davey was the appointer and beneficiary of the trust. Please revisit my email to yourself dated the 7th March 2017 at 9:30 am. The relevant case is ASIC v Carey Para 36. On the basis of the reasoning of that case John Davey is the beneficial owner and has remained so at all relevant times. My client is trying to find out who has taken the missing income of about $12000.

(q) The final email pleaded by Mr Davey was sent by Mr Silverstein on 19 April 2017, to counsel for ACS in the ACT Supreme Court proceeding. It seems Mr Silverstein blind copied that email to Mr McFarlane. It contained the following:

1. I understand from evidence given in Court yesterday that John Davey put in about $5500 at a certain time to renovate the property. I am certain Trustee in Bankruptcy was not aware of this at the time of his discharge.
2. This is money that never belong to John Davey but to his Trustee in Bankruptcy see Di Cioccio v Official Trustee in Bankruptcy (2015) 229 FCR 1. It is after acquired property. It should never have gone into the Property at McGregor. It is an offence to conceal assets from a Trustee. The money is in fact tainted money. Did Suzanne ever say she was aware John Davey was bankrupt. Look at para 25 of her Affidavit of the 12th April 2017 She mention John having difficulties without explaining what they are. The Trustee in Bankruptcy is Ernest and Young Canberra Fergus McFarlane.

Mr Davey obtained copies of Mr Silverstein’s correspondence with the trustee in bankruptcy in about October 2017, having sought an order for preliminary discovery from the trustee in the County Court of Victoria. He made the preliminary discovery application because the trustee would not disclose the correspondence without a court order. Mr Davey tendered the bundle of correspondence, as well as relying on the defendants’ admissions.

There was one further communication pleaded by Mr Davey, which was a telephone conversation between Mr Silverstein and Suzanne Davey on 21 March 2017. During that conversation, Mr Silverstein said:

Suzanne my name is Ron, Ron Silverstein and I’m taking you to court. We’re in court today actually. You need to get a lawyer. This is all about John Davey. He’s a very bad person. Really, he’s a criminal and we have to do this before he’s not bankrupt anymore. We have to stop him. I suggest to make this easy for you that you just agree and let me take care of him and this mess. You don’t know what he’s like and trust me you want nothing to do with him. We have to stop him and make sure he stays bankrupt. I’m trying to help you. It’s just awful what he’s done.

Ms Davey was involved in the ACT Supreme Court proceeding, as the person who controlled Liladel. She had no involvement in the debt recovery proceedings. While the defendants admitted the communication, neither the pleading nor the evidence connected it to the debt recovery proceedings or the trustee in bankruptcy. I have therefore set it to one side.

At the time that Mr Silverstein engaged in these communications, he was acting as the solicitor for Mr Dessman and Dessco in the debt recovery proceedings. Mr Silverstein also received instructions from Thomas Davey on 6 March 2017. Those instructions were to:

(a) investigate with the trustee in bankruptcy an advance of $50,000 that had been paid by Thomas Davey to John Davey;

(b) search the Magistrates’ Court file in the preliminary discovery application;

(c) examine the truthfulness of John Davey’s statement of affairs dated 1 April 2014, specifically his statement that the assets of the Teddington Trust were ‘Unknown’;

(d) request the trustee in bankruptcy to investigate John Davey’s interest in the MacGregor property; and

(e) if necessary, seek an extension of the bankruptcy in order for that investigation to occur.

Mr Silverstein pursued these instructions with vigour. In particular, he was insistent in his representations that the trustee in bankruptcy should extend the bankruptcy to enable further investigation of John Davey’s financial affairs.

His representations were successful. As already noted, on 27 March 2017, the trustee lodged an objection to discharge. I was satisfied by the evidence of Mr Kazar, Mr Abbott and Mr McFarlane that the trustee’s decision to extend the bankruptcy was made on the basis of material provided to the trustee by Mr Silverstein.

The extension did not last long, however. The trustee withdrew his objection to discharge once it became clear that Thomas Davey was not interested in paying for legal advice on John Davey’s appeal against the objection, or in funding the further investigation that he sought. John Davey was discharged from bankruptcy on 18 April 2017.

Count 1 – Consideration

Mr Davey contends that these communications were in contempt of the Magistrates’ Court because they were an attempt to have the plaintiff’s bankruptcy extended so that he would not have standing in the debt recovery proceedings, and so they tended to interfere with the due administration of justice in those proceedings. This contention cannot be accepted, for the following reasons.

First, the extension of Mr Davey’s bankruptcy could not have affected his standing in the debt recovery proceedings. His position before the magistrate was that he was entitled to bring the proceedings to recover income earned by him during the bankruptcy. That position was vindicated on appeal.[13] It was not the extension of Mr Davey’s bankruptcy that derailed the debt recovery proceedings in 2017. It was the fact that the magistrate accepted Mr Silverstein’s submission that, as an undischarged bankrupt, Mr Davey did not have standing to commence the proceeding in his own name. Both the submission and the magistrate’s decision turned out to be wrong, as a matter of law. However, as Mr Davey accepted, making a wrong submission of law does not amount to a contempt of court.
[13]Davey v Dessco Pty Ltd (2017) 327 FLR 385.

Second, the submission made by Mr Silverstein to the magistrate did not depend on the duration of Mr Davey’s bankruptcy. The submission was that Mr Davey could not have commenced the proceedings in his own name, because he was an undischarged bankrupt at the time he did so. Neither the written submissions made by Mr Silverstein nor the affidavit of Mr Davey filed in the debt recovery proceedings on 21 February 2017 mentioned that the bankruptcy was due to end on 1 April 2017. There is no evidence that the magistrate was made aware that the bankruptcy might be extended beyond that date, and nor was anything said to her about the significance of any possible extension.

Third, all of the representations to the trustee in bankruptcy, seeking an extension of the bankruptcy, were made after Mr Silverstein had applied to strike out the debt recovery proceedings. The application was made orally on 15 February 2017, and in written submissions dated 17 February 2017, and amended on 24 February 2017. The first email from Mr Silverstein suggesting that Mr Davey should not be discharged from his bankruptcy was not sent until 7 March 2017.

Fourth, I accepted Mr Silverstein’s evidence that his communications seeking an extension of the bankruptcy were not made for the purpose of the debt recovery proceedings. He sought to have the bankruptcy extended on the instructions of Thomas Davey, so that there could be a more detailed investigation of John Davey’s financial affairs. This evidence reinforced my conclusion that Mr Silverstein’s efforts to have the bankruptcy extended did not have ‘a real and definite tendency as a matter of practical reality’ to interfere with the due administration of justice in the debt recovery proceedings.

Count 1 is not made out.

Count 2 – Affidavit of Thomas Davey

Count 2 concerns the affidavit of Thomas Alfred James Davey dated 8 March 2017, filed in the debt recovery proceedings. John Davey contends that, by drafting and filing that affidavit, and providing it to his former trustee in bankruptcy before it had even been filed, the defendants were in contempt of the Magistrates’ Court. This conduct is said to be in contempt of court because it had a tendency to interfere with the due administration of justice in the debt recovery proceedings.

Thomas Davey’s affidavit was a spiteful document. It impugned John Davey’s honesty, by asserting that he had made a false declaration in his statement of affairs and had concealed assets from his trustee in bankruptcy.

The affidavit was also entirely irrelevant to any issue in the debt recovery proceedings, as defined by the complaints and the notice of defence. At the time the affidavit was filed, the defendants’ defence was that they had no contractual relationship with Mr Davey, and that the legal services were provided by Mr Davey as a gift. The defendants also alleged that Mr Davey had made false representations to them about the effect of the costs agreements and the invoices that related to the legal services.

Asked by Mr Davey to explain the relevance of the affidavit, Mr Silverstein said ‘It’s evidence of tendency of your dishonesty to your father, which was the same type of dishonesty that you had displayed to my client’. He said that it backed up the allegation of false representations. On one occasion, at an interlocutory hearing on 22 November 2018, Mr Silverstein indicated an intention to call Mr Davey’s father to give tendency evidence.

The explanation given by Mr Silverstein of the perceived relevance of Thomas Davey’s affidavit was muddled, and appeared to be based on a misunderstanding of the rules of evidence. If the contents of the affidavit were relevant at all, it was on the issue of John Davey’s credibility, and not as evidence of a tendency to be dishonest.[14]
[14]Evidence Act 2008 (Vic), ss 94(1), 97(1), 102, 103, 106.

Count 2 – Consideration

In relation to the affidavit of Thomas Davey, Mr Silverstein can be criticised for a confused understanding of the rules of evidence, and for burdening the Magistrates’ Court with material of very doubtful relevance. Mr Silverstein’s professional judgment appears to have been impaired by his sympathy for Thomas Davey. Asked why he had assisted Thomas Davey, he said ‘I had terrific sympathies with your dad, you know. Why wouldn’t I? He’s a decent guy’.

I do not, however, consider that the preparation and filing of the affidavit were in contempt of the Magistrates’ Court. Filing irrelevant material, confusion about the rules of evidence, and poor judgment, while all regrettable, did not amount to anything that had ‘a real and definite tendency as a matter of practical reality’ to interfere with the due administration of justice in the debt recovery proceedings.

In the event, Mr Silverstein did not tender the affidavit in the debt recovery proceedings, and nor did he attempt to call Thomas Davey as a witness. Before the trial, Mr Davey applied to have the affidavit removed from the Magistrates’ Court file. The magistrate asked Mr Silverstein how the affidavit was relevant, and he responded that it was ‘to do with the issue of tendency and I didn’t intend to pursue it’. Mr Silverstein consented to the affidavit being removed from the file. The offending affidavit was readily dealt with by the Magistrates’ Court’s own processes. It did not warrant contempt proceedings in the Supreme Court.

Mr Davey further contended that Mr Silverstein filed Thomas Davey’s affidavit in the debt recovery proceedings in order to ‘attract the umbrella of absolute privilege’ before providing the document to the trustee in bankruptcy. This contention is not sustainable, either factually or legally. The evidence was that Mr Silverstein sent a copy of the affidavit to Mr McFarlane before it had been filed in court. Further, Mr Silverstein denied that attracting privilege to the affidavit had ever occurred to him – ‘I never thought of it until you mentioned it just now.’ As to the legal position, merely filing a document in a Magistrates’ Court proceeding does not attract absolute privilege under s 4 of the Wrongs Act 1958 (Vic), or any form of qualified privilege.[15]
[15]Smith v Harris [1996] 2 VR 335. See also Defamation Act 2005 (Vic), s 29 – Defences of fair report of proceedings of public concern, which defines ‘proceedings of public concern’ to mean, among other things, ‘any proceedings in public of a court’.

Count 2 is not made out.

Count 3 – The implied undertaking

Count 3 concerns the provision by Mr Silverstein to the trustee in bankruptcy of four affidavits filed in the Magistrates’ Court: three in the debt recovery proceedings and one in the preliminary discovery application. Mr Davey contends that each of these affidavits was subject to the implied undertaking not to use them for a purpose other than the proceeding in which they were filed. He alleges that the provision of the affidavits to the trustee in bankruptcy was in breach of the implied undertaking and hence in contempt of court. He also relied on s 27 of the Civil Procedure Act.

The defendants admitted that they provided the four affidavits to Mr McFarlane. They also admitted that none of the affidavits had been read or tendered in court at the time they were provided to a non-party to the litigation, and that they did not seek leave from the Magistrates’ Court to release them from the implied undertaking. They argued, however, that none of the affidavits was subject to the implied undertaking.

The content of the implied undertaking was explained in Hearne v Street:[16]

Where one party to litigation is compelled, either by reason of a rule of court, or by reason of a specific order of the court, or otherwise, to disclose documents or information, the party obtaining the disclosure cannot, without the leave of the court, use it for any purpose other than that for which it was given unless it is received into evidence. The types of material disclosed to which this principle applies include documents inspected after discovery, answers to interrogatories, documents produced on subpoena, documents produced for the purposes of taxation of costs, documents produced pursuant to a direction from an arbitrator, documents seized pursuant to an Anton Piller order, witness statements served pursuant to a judicial direction and affidavits.

[16](2008) 235 CLR 125, [96] (Hayne, Heydon and Crennan JJ) (citations omitted).

On the basis of this passage, and in particular the final example given in the last sentence, Mr Davey argued that the implied undertaking extended to any affidavit filed in a proceeding. In the alternative, he argued that three of the affidavits were filed in accordance with rules of the Magistrates’ Court that required an affidavit to be filed in support of certain applications, and so those affidavits were compelled by a rule of court.

The defendants argued that all of the affidavits were produced voluntarily and not under compulsion of a court order or rule. Mr Silverstein relied on the decision of Rowe v Silverstein,[17] in which it was held that affidavits filed in support of an application for a Mareva injunction were not subject to the implied undertaking. This was because:[18]

These affidavits were not filed in the course of a compulsory process such as witness statements[19] or answers to interrogatories[20] where rules of a Court or orders of a Court require the production of such material. In this case, the affidavits were filed voluntarily by the Commissioner to obtain the injunction. In Uniflex (Australia) Pty Ltd v Hannybel,[21] Hasluck J held that the implied undertaking did not operate in relation to documents provided in the course of a Mareva injunction as they had been provided voluntarily to support the application in open Court. I agree and apply that proposition here.

[17][2009] VSC 157 (Rowe).

[18]Rowe, [25].

[19]Citing Central Queensland Cement Pty Ltd v Hardy [1989] 2 Qd R 509, 510–511.

[20]Citing Ainsworth v Hanrahan (1991) 25 NSWLR 155.

[21][2001] WASC 138, [141]–[155], particularly at [148].

Mr Silverstein also relied on the authorities cited in relation to affidavits, in the passage from Hearne v Street quoted above. The first of those, Medway v Doublelock Ltd,[22] concerned affidavits of means filed in a matrimonial proceeding, in accordance with an order of the Family Division of the High Court of England and Wales. In the second case cited, Re Addstone Pty Ltd (in liq); Ex parte Macks,[23] an order to disclose confidential affidavits was held to be equivalent to an order for discovery, so that the affidavits were subject to the implied undertaking. Both cases involved compulsion, in the form of a court order.
[22][1978] 1 WLR 710.
[23](1998) 30 ACSR 156.

That was also the case in relation to the financial statements at issue in 32 Domain Pty Ltd v Hazell-Wright,[24] a case relied on by Mr Davey. There, Judge Ryan of the County Court held that the implied undertaking applied to financial statements filed in the Family Court of Australia in accordance with an order of Cronin J of that court.
[24][2019] VCC 629.

Mr Davey also referred me to Fotopoulos v Commonwealth Bank of Australia,[25] about an application for release from the implied undertaking in respect of a number of documents, including some affidavits. In Fotopoulos, there was no controversy about whether the implied undertaking applied to the documents in question. I therefore did not find it of assistance on the question of whether the implied undertaking applied to the documents in question here.
[25][2017] VSC 461.

Count 3 – Consideration

In my view, the implied undertaking applies only to documents that are filed or disclosed in a proceeding under compulsion of a court order or a rule of the court. Because that compulsion involves an invasion of a person’s privacy, the implied undertaking is a safeguard to ensure that the compulsion is pressed only so far as the course of justice requires.[26] It does not extend to a document – such as an affidavit in support of an interlocutory application – filed at a party’s ‘initiative and discretion rather than as a consequence of any compulsion’.[27]
[26]Hearne v Street, [105]–[108] (Hayne, Heydon and Crennan JJ).
[27]Bashour v Australian and New Zealand Banking Group Limited [2017] FCA 163, [162].

It remains to consider the four affidavits in question here, and whether they were filed voluntarily or under the compulsion of a court order or rule.

Both the affidavit of John Patrick Davey dated 30 August 2016 and the affidavit of Kieran Shaun Wirtitsch dated 4 November 2016 were filed in the debt recovery proceedings. They were filed in support of Mr Davey’s summons dated 4 November 2016, seeking summary judgment in his favour. Rule 22.03 of the Magistrates’ Court General Civil Procedure Rules 2010 (Vic) (Magistrates’ Court Rules) requires an application for summary judgment by a plaintiff in a civil proceeding to be made in accordance with Part 2 of Order 22 of those Rules. Rule 22.04 provides that an application must be made by summons supported by an affidavit, verifying the facts on which the claim is based and stating that, in the belief of the deponent, the defence has no real prospect of success.

While r 22.04 requires an application for summary judgment to be supported by an affidavit setting out certain things, it does not compel the making of the application. Like the Mareva injunction application in Rowe, the application for summary judgment was made on Mr Davey’s initiative. He was not compelled to make the application, either by a court order or by the rules of the Court. I do not consider that these two affidavits were subject to the implied undertaking.

The affidavit of John Patrick Davey dated 23 September 2016 was filed in the Magistrates’ Court in support of an application for preliminary discovery from ACS. Rule 32.08(2) of the Magistrates’ Court Rules provides that an application under rr 32.03 or 32.05 must be supported by an affidavit stating the facts on which the application is made and specifying or describing the documents sought. Again, although the rule requires a preliminary discovery application to be supported by an affidavit, it does not compel the application to be made. The application was made voluntarily, at Mr Davey’s own ‘initiative and discretion’, and I do not consider that the affidavit in support of it was subject to the implied undertaking.

The final affidavit was the affidavit of Thomas Alfred James Davey dated 8 March 2017. As discussed in relation to Count 2, this affidavit was filed in the debt recovery proceedings. It is not obvious why it was filed when it was – the affidavit appears to have been procedurally as well as substantively irrelevant. There was no suggestion that it was filed in accordance with a court order. It is expressed to be in response to an affidavit in support of John Davey dated 1 March 2017, although no such affidavit was in evidence before me. If it was filed in response to Mr Davey’s summary judgment application, r 22.05 makes it clear that it is a matter for a defendant whether it files anything to show cause why summary judgment should not be given. The only conclusion open is that the affidavit of Thomas Davey was filed voluntarily by the defendants in the debt recovery proceedings. It was not a document that was compelled by court order or by the Magistrates’ Court Rules, and was not subject to the implied undertaking.

In addition, at the time the affidavit was provided to the trustee in bankruptcy – by Mr Silverstein on behalf of his client the deponent – it had not been filed with the Magistrates’ Court. For that reason also the affidavit was not subject to the implied undertaking when it was sent to the trustee.

It remains to consider an alternative argument put by Mr Davey, based on ss 26 and 27 of the Civil Procedure Act. Section 26 requires a person to whom the overarching obligations apply to disclose the existence of all documents in that person’s possession, custody or control which are critical to the resolution of the dispute. These critical documents must be disclosed at the earliest reasonable time after the person becomes aware of the existence of the document. Section 27 of the Civil Procedure Act provides:

(1) A person who receives any information or documents provided by another person involved in the civil proceeding as a result of disclosure in compliance with the overarching obligation in section 26 is subject to an obligation not to use the information or documents, or permit the information or documents to be used, for a purpose other than in connection with the civil proceeding.
(2) The obligation under subsection (1) is taken to be an obligation to the court, contravention of which constitutes contempt of court.

Mr Davey submitted that the affidavits were critical documents that had been disclosed in compliance with s 26. He argued that the issue of voluntariness was immaterial to the obligation in s 27, and that Rowe was no longer good law on that issue.

I cannot accept this alternative submission. In the first place, it misconceived the purpose and effect of ss 26 and 27 of the Civil Procedure Act. Section 26 creates an overarching obligation of disclosure, by requiring parties to disclose critical documents early in a proceeding, prior to discovery. The purpose of compelling early disclosure is ‘to allow persons in dispute and their lawyers to have sufficient information upon which to have meaningful settlement discussions with the other side’.[28] As to s 27, its purpose is ‘to replicate the implied undertaking in relation to discovery that a party will not use any documents or information received for an ulterior purpose’.[29] Section 27 does not replace the implied undertaking, and does not displace authorities such as Hearne v Street and Rowe.
[28]Explanatory Memorandum for the Civil Procedure Bill 2010, cl 26, 12.
[29]Explanatory Memorandum for the Civil Procedure Bill 2010, cl 27, 13.

In the second place, there was no evidence that the affidavits were disclosed in compliance with the disclosure obligation in s 26. Section 27 of the Civil Procedure Act did not apply to the affidavits in question here.

Count 3 is not made out.

Counts 4 and 5 – Non-disclosure of email from trustee in bankruptcy

Counts 4 and 5 both concern the defendants’ non-disclosure to the Magistrates’ Court of an email from Mr McFarlane of Ernst & Young to Mr Silverstein dated 22 February 2017. The email read:

It is the view of the Trustee that the issue between the Bankrupt and your client pertains entirely to the recovery of income generated post commencement of the bankruptcy (27 February 2014). Accordingly, the Trustee does not intend to become involved in a matter that does not involve pre-appointment litigation. The merits of your claim and whether the Bankrupt has locus standii is not deemed to be a matter the Trustee is involved in, as such, it is a dispute that you and your client will have to resolve with either Mr Davey or through the Court.

In their defence, the defendants accepted Mr Davey’s characterisation of this email as stating that ‘the Trustee disagreed with Mr Silverstein’s assertion that the Plaintiff lacked standing … and that the trustee had no intention of intervening in the debt recovery proceedings’. They also admitted that the communication was not disclosed by Mr Silverstein to the magistrate who was, at that time, considering whether the debt recovery proceedings should be stayed or dismissed due to Mr Davey’s bankruptcy.

Mr Davey alleges that the conduct of the defendants in not disclosing this email to the Magistrates’ Court misled the Magistrates’ Court, was an abuse of its processes, was in breach of the defendants’ obligations under the Civil Procedure Act and tended to interfere with the due administration of justice. For these reasons, he alleges that the non-disclosure was a contempt of the Magistrates’ Court.

The defendants’ response was that the Magistrates’ Court was not misled by the non-disclosure, because the trustee’s position had already been conveyed to the Magistrates’ Court by Mr Davey. I accept this submission.

On 21 February 2017, Mr Davey made an affidavit in the debt recovery proceedings that included the following:

2. On the 15^th February 2017 Solicitor Ron Silverstein made an oral Application for dismissal of these proceedings before Her Honour, Magistrate Falla sitting at the Broadmeadows Magistrates’ Court. The stated grounds of that Application by Mr Silverstein was that the Plaintiff lacked locus standi to bring and continue proceedings due to my undischarged bankruptcy.
3. In oral submissions Mr Silverstein stated to the Court that the proceedings were vest in my Trustee.
4. On the same day I caused a letter to be issued to my Trustee.

A copy of that letter was exhibited to Mr Davey’s affidavit. The letter read:

As you are aware, I am engaged in practice as a solicitor in Melbourne. I have commenced recovery proceedings against a client who owes me money.
Today in Court, an issue arose whether I have the legal capacity to commence and continue these proceedings.
I became bankrupt on 27^th February 2014.
The cause of action for these proceedings (the debt recovery) commenced between the dates of 25^th January 2015 and 20 May 2016.
I understand that as income from my professional fees, that s. 116 Bankruptcy Act 1966 that income is not an asset vested in the trustee, but that over the threshold limit I am expected to make contribution.
Can you please confirm that I have a right to commence and continue proceedings to recover my income. I require this information within the next two weeks.

The affidavit continued:

5.On 21^st February 2017, I received correspondence from my Trustee stating that as the proceedings related to recovery of income, they would not be intervening in this matter.

That correspondence was an email from Mr Abbott, which was also exhibited to Mr Davey’s affidavit. It read, in part:

As this issue appears to relate entirely to the recovery of income generated post commencement of your bankruptcy, the Trustee will not be intervening in these proceedings.

Counts 4 and 5 – Consideration

Mr Davey’s affidavit of 21 February 2017, and the exhibited correspondence, conveyed to the Magistrates’ Court the position of the trustee in bankruptcy in relation to the debt recovery proceedings. It was perfectly clear that the trustee did not intend to intervene, because the proceedings related to income earned by Mr Davey after he was declared bankrupt. The trustee’s email to Mr Silverstein of 22 February 2017 was to the same effect. Mr Silverstein did not dispute the accuracy of Mr Davey’s affidavit. There was nothing to be gained by informing the Magistrates’ Court that the trustee had taken the same position in correspondence with Mr Silverstein.

Further, the defendants’ submissions to the Magistrates’ Court about the effect of Mr Davey’s bankruptcy did not depend on, and did not refer to, the position taken by the trustee. The submission was that, as an undischarged bankrupt, Mr Davey could not institute proceedings in his own name. The order sought was to strike out the proceedings as an abuse of process, under r 23.01 of the Magistrates’ Court Rules.

In the event, the magistrate was persuaded by Mr Silverstein that Mr Davey did not have standing. Her view was that the proceedings could only continue if they were adopted by the trustee. That is probably why she ordered that the proceedings be stayed, rather than struck out. In fact, Mr Silverstein wrote to Mr McFarlane on 24 February 2017, asking if the trustee was prepared to make an application to remove the stay on the debt recovery proceedings.[30] There was no change in the trustee’s position.
[30]In the email set out at [25](j) above.

I do not consider that the fact that the defendants did not disclose the email of 22 February 2017 to the Magistrates’ Court misled Magistrate Falla. She was aware of the trustee’s position, because Mr Davey had informed her of it. It follows that I do not consider the non-disclosure to have involved an abuse of process, a contravention of an obligation under the Civil Procedure Act, or a contempt of court.

The non-disclosure did not have ‘a real and definite tendency as a matter of practical reality’ to interfere with the due administration of justice in the debt recovery proceedings. As I have concluded at [33] above, it was the magistrate’s acceptance of Mr Silverstein’s wrong legal submission that derailed the proceeding during 2017.

Counts 4 and 5 are not made out.

Count 6 – Allegation of criminality

Count 6 concerns a statement made by Mr Silverstein during a hearing in the debt recovery proceedings on 15 February 2017. Mr Davey’s summary judgment application was listed for hearing that day, at the Magistrates’ Court at Broadmeadows. Mr Silverstein had only recently been instructed by Mr Dessman and Dessco, he had just filed their application to strike out the claim, and it was his first appearance in the debt recovery proceedings.

Mr Davey tendered a partial transcript of the hearing, which appears to start when the matter was called on for a second time. Mr Silverstein recalled an earlier part of the hearing, which was not transcribed, during which he opened the application he was making on behalf of Mr Dessman and Dessco. The available transcript records the magistrate saying that she had briefly glanced through the documents, and also noting that the application had taken Mr Davey by surprise. The discussion continued:

Magistrate:I think, Mr Davey, you should be afforded an opportunity to be heard with respect to what’s developed. Um, that I think comes primarily before anything else because if the court is in agreement with you, Mr Silverstein, then, um, that has a significant impact on these proceedings. … [D]o you want to say anything further?
Mr Silverstein:     Yeah, your Honour. I do agree with you, yes, that Mr Davey should be given procedural fairness. I think the matters are extremely serious.
Magistrate:Absolutely.
Mr Silverstein:     I think they actually go to criminality. … [crosstalk]
Magistrate:You’ll get an opportunity to take the witness stand, Mr Davey.
Mr Silverstein:     I think, ah, I think they are extremely serious. Um, I only became aware of this on Sunday night … the trustee was only aware of this yesterday …

Mr Davey took grave exception to the allegation of criminality made against him before the magistrate on 15 February 2017. He says not only that the allegation was false, but that it was intended to pervert the course of justice and amounted to a contempt of court. Mr Silverstein maintains that he had a proper basis to allege criminality against Mr Davey.

The transcript provides little indication of what the ‘matters’ were that Mr Silverstein said amounted to criminality, other than that they were connected in some way with Mr Silverstein’s bankruptcy. Mr Silverstein provided some context in his evidence.

Soon after Mr Silverstein received instructions from Mr Dessman in the debt recovery proceedings, the previous solicitors provided him with documents relevant to the proceedings. These included the affidavit of Kieran Shaun Wirtitsch dated 4 November 2016. That affidavit exhibited a deed of priority between Dessco and Mr Davey, which referred to a general security agreement. Mr Silverstein reviewed the deed and took instructions from Mr Dessman about the circumstances in which he signed it. He formed the view that the deed was in effect a gift of $100,000, and that Mr Davey had breached his fiduciary obligations to his client by not explaining the effect of the document. Put more plainly, Mr Silverstein considered that Mr Davey had tricked his client into signing a document that gave him $100,000.

Mr Silverstein said that he first became aware that Mr Davey was an undischarged bankrupt on about 12 February 2017. Mr Dessman had not been aware of the bankruptcy and sought advice about the implications of having entered into a commercial lease with Mr Davey during his bankruptcy. Mr Silverstein also thought that the trustee in bankruptcy had an interest in the security agreement between his client and Mr Davey.

On 14 February 2017, Mr Silverstein telephoned Mr McFarlane at Ernst & Young, alerted him to the existence of the debt recovery proceedings, and asked if he was aware of the general security agreement. He also sent an email to Mr McFarlane, as follows:

Hi Fergus,
There is Court case tomorrow at the Broadmeadows Magistrates Court at 9,30 am. The bankrupt has instituted proceedings against my client for about $86000 see above invoices. My client has incurred legal costs about $20000 in legal expenses to his previous solicitor. My clients Defence is basically no liability was incurred because there was an arrangement which is documented in various transcripts of mobile phone calls and texts messages whereby John Davey said he was doing work for free. In contravention of various Acts John Davey obtained security for invoices. …
I only became aware of his insolvency last Sunday evening. Mr Davey being a bankrupt never had standing to institute these proceedings. …
My client issued a summons on the 13th February 2017 returnable tomorrow to have the two proceedings dismissed with costs. The two actions are blatant cases of abuse of process.
…
I am not seeking a stay but a dismissal of the complaints.

It was with this email that Mr Silverstein sent Mr McFarlane copies of Mr Wirtitsch’s affidavit and Mr Davey’s affidavit of 30 August 2016.

That evening, Mr Silverstein made other inquiries about Mr Davey’s background and found information that raised further questions in his mind about Mr Davey’s honesty. The following morning he met with Mr Dessman, and discussed with him the information he had obtained about Mr Davey. Mr Dessman instructed Mr Silverstein to draw to the magistrate’s attention ‘the similarity of behaviour conducted by Mr Davey to himself’. Mr Silverstein deposed:

I made the allegation of criminality based on those instructions and from combination factors being that he failed to discover in the Magistrates proceedings a General Security Agreement, the absence of any correspondence between the fiduciary Plaintiff and my client explaining the transaction and the lack of any benefit to my client in signing such document and substance of my conversations with Trustee in Bankruptcy on the 14th February 2017.

It was not at all clear from this evidence what crime it was that Mr Silverstein believed that Mr Davey had committed. In his correspondence with Mr McFarlane, he alleged contraventions of ‘various Acts’ by Mr Davey. In opening his case before me, he characterised the allegation as one of obtaining a financial advantage by deception. He made no attempt, however, to identify the elements of that offence or to relate them to the deed of priority.

In his evidence, Mr Davey denied any criminality. He said that he had not concealed assets from or failed to disclose income to his trustee in bankruptcy. Although he was behind in filing some income tax returns, he had not provided false income statements to the trustee. He denied committing any offence against the Bankruptcy Act. Mr Davey said that the deed of priority was not a security at all, it simply gave the legal fees owed to him by Mr Dessman and Dessco priority over other debts, in the event that either of them became insolvent. He explained that the bankruptcy trustee had disavowed any interest in those legal fees, and hence had no interest in the deed of priority.

Count 6 – Consideration

I accepted Mr Davey’s evidence on this issue. It was consistent with the deed of priority, and was not contradicted by Mr Dessman, who did not give evidence.

I do not consider that the allegation of criminality made by Mr Silverstein against Mr Davey at the hearing on 15 February 2017 was justified. It is questionable whether the allegation was made in accordance with r 21.4.1 of the Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015. On the evidence before me, by 15 February 2017, Mr Silverstein had a reasonable basis for his belief that Mr Davey was not an honest person. However, the available material did not provide a proper basis for an allegation of criminality. In particular, Mr Silverstein seems to have misunderstood the purpose and effect of the deed of priority, in a way that I do not consider was reasonable. It is also notable that he did not take instructions from Thomas Davey until some weeks later, and that Thomas Davey’s affidavit was not ‘available material’ on 15 February 2017.

However, I am not concerned here with Mr Silverstein’s professional conduct. I am concerned with whether Mr Silverstein was in contempt of court. I cannot find that he was.

The allegation of criminality made on 15 February 2017 did not have ‘a real and definite tendency as a matter of practical reality’ to interfere with the due administration of justice in the debt recovery proceedings. It was made once, in the course of a discussion about timetabling the hearing of the defendants’ strike out application. Mr Davey’s objection was immediately noted by the magistrate, who assured him he would have an opportunity to respond. The magistrate then made directions for the filing of material in relation to the application. As it turned out, the allegation of criminality was not repeated. It did not feature in the submissions made by Mr Silverstein in support of the strike out application, and nor was it referred to in the reasons for decision given by her Honour on 22 March 2017.

Count 6 is not made out.

Count 7 – Suggestion to disclaim lease

The final count concerned a statement made by Mr Silverstein in an email to Mr McFarlane on 16 February 2017, as follows:

Without complicating this matter anymore the bankrupt has entered into a commercial lease with my client. You may need to consider if you are prepared to disclaim that lease.

The email is quoted more fully at [25](b) above.

Mr Davey contended that this statement was in contempt of court because it tended to interfere with the due administration of justice in the debt recovery proceedings, specifically by interfering with him as a witness in those proceedings.

It is a contempt of court to subject a litigant to improper pressure to discontinue or compromise a proceeding.[31] It is also a contempt to intimidate a witness in a manner likely to deter the witness from giving evidence.[32] In both cases, what matters is whether the impugned conduct had a tendency, as a matter of practical reality, to interfere with the due administration of justice. The conduct need not have actually had that effect.
[31]Harkianakis v Skalkos (1997) 42 NSWLR 22.
[32]Farahbakht v Midas Australia Pty Ltd [2006] NSWSC 1322, [25].

Mr Davey was anxious to show that this communication was made by Mr Silverstein without instructions from Mr Dessman and Dessco, and wished to tender quite a lot of evidence directed to that issue. I ruled that evidence to be irrelevant, because the allegation of contempt in Count 7 was made only against Mr Silverstein. Mr Davey did not allege that Mr Dessman and Dessco had improperly pressured him to discontinue the proceeding, or that they had intimidated him in a way that might have deterred him from giving evidence. It was therefore not relevant, in determining whether Mr Silverstein had committed a contempt of court, whether he was acting on instructions when he raised the lease with the trustee in bankruptcy.

Mr Silverstein denied that there was anything improper about the communication. He explained:

My client had granted a lease to Mr Davey. My client had borrowed money on the property. My client had a mortgage. My client, ah, was concerned that when he found out that Mr Davey was a bankrupt as to who was to pay the lease, the legal payments and outgoings. In particular, I had raised with my client a very important issue, and that is under s 5 of the Bankruptcy Act, personal property vests in the hands of the trustee … and this was an asset which, although in Mr Davey’s name, didn’t belong to him. That belonged to the trustee. Therefore, it was the legitimate question for me to contact the trustee to ask him if he was going to disclaim the lease.

Count 7 – Consideration

It is not necessary to consider whether this communication was proper or improper,[33] because it is clear that it put no pressure at all on Mr Davey. The communication was not directed to Mr Davey, but to his trustee in bankruptcy. The trustee did not disclaim the lease, and the suggestion was not repeated. Mr Davey might never have known about it, had he not in October 2017 compelled the trustee to disclose Mr Silverstein’s correspondence.[34] At the time Mr Davey read the email, he had been discharged from bankruptcy. By then, the trustee was no longer in a position to disclaim the lease.
[33]Harkianakis, 30.
[34]See [26] above.

Mr Davey was not, as a matter of fact, pressured or intimidated by the query raised by Mr Silverstein in his email to the trustee of 16 February 2017. The communication therefore did not have a tendency to interfere with the due administration of justice in the debt recovery proceedings.

Count 7 is not made out.

Disposition

None of the seven counts of contempt of court has been made out. The proceeding must be dismissed.

I will hear the parties on the question of the costs of the proceeding.

Citations

Davey v Silverstein [2019] VSC 724

Most Recent Citation

Cases Citing This Decision

8

Connelly and Harris v McGrath [2019] QSC 304

The Queen, On the Application of John Patrick Davey v Ronald David Silverstein & Ors (according to the attached Schedule) [No 2] [2020] VSCA 251

R v Silverstein [2020] VSCA 233

Cases Cited

13

Statutory Material Cited

0

Davey v Dessco Pty Ltd and Anor (Bankruptcy) [2017] VSC 744

Australian Conservation Services v Liladel Holdings [2017] ACTSC 162

Construction, Forestry, Mining and Energy Union v Grocon Constructors (Victoria) Pty Ltd [2014] VSCA 261

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11 November 2019