Davey v Silverstein
[2019] VSC 302
•8 May 2019
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
MAJOR TORTS LIST
S CI 2017 05235
| JOHN PATRICK DAVEY | Plaintiff |
| v | |
| RONALD DAVID SILVERSTEIN | Defendant |
| PETER PATRICK DESSMAN | Second Defendant |
| DESSCO PTY LTD (ACN 072 755 590) | Third Defendant |
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JUDGE: | Daly AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 6 May 2019 |
DATE OF JUDGMENT: | 8 May 2019 |
CASE MAY BE CITED AS: | Davey v Silverstein & ors |
MEDIUM NEUTRAL CITATION: | [2019] VSC 302 |
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PRACTICE AND PROCEDURE – Legal practitioners – Application to restrain legal practitioner, a defendant to the proceeding, from acting for co‑defendants – Allegation that legal practitioner may have conflict of interest in representing co‑defendants – Court’s inherent jurisdiction to protect its processes – Miller v Martin [2019] VSCA 86, applied – Finch v Heat Group Pty Ltd (No 2) (2016) 353 ALR 193, referred to – No real risk to the proper administration of justice – Application refused.
PRACTICE AND PROCEDURE – Interrogatories – Application to compel a corporate defendant to answer interrogatories – Where the sole director and shareholder of the corporate defendant, the only person who can answer interrogatories, invoked privilege against self‑incrimination – Re Australian Property Custodian Holdings Ltd (in liq) (No 2) (2012) 93 ACSR 130, considered and applied – CFMEU v Boral Resources (Vic) Pty Ltd (2015) 256 CLR 375, referred to – Discretionary considerations – Application refused.
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APPEARANCES: | Counsel | Solicitors |
| The Plaintiff in person | ||
| For the Defendants | Mr R D Silverstein |
HER HONOUR:
Introduction and background
In this proceeding, the plaintiff, Mr John Davey (‘Mr Davey’) is the moving party seeking orders that the Court punish the defendants for contempt in respect of certain conduct which is alleged to have perverted the course of justice. In the interests of expedition, given the pending trial date (28 May 2019), I shall not go into any detail concerning the background facts and the multiple court and tribunal proceedings in which the parties are involved. It is sufficient to say for present purposes that it is alleged that the first defendant, Mr Silverstein, the solicitor for the second and third defendants (‘co‑defendants’) in proceedings in the Magistrates’ Court and VCAT, and the second and third defendants are said to have misled the Magistrates’ Court, and have engaged in conduct which has impeded or has sought to impede Mr Davey’s conduct of the Magistrates’ Court proceeding,[1] including engaging in communications with Mr Davey’s then trustee in bankruptcy with the object and effect of extending the plaintiff’s period of bankruptcy.
[1]In the Magistrates’ Court proceeding, Mr Davey sought to recover legal fees from the co‑defendants. On 26 March 2019, a magistrate found that the co‑defendants were liable to pay Mr Davey’s fees. The quantum of those fees has now been fixed. What remains outstanding in the Magistrates’ Court proceeding is an application by the co‑defendants to amend their defence to plead a set‑off, and an application by Mr Davey that Mr Silverstein pay his costs of the Magistrates’ Court proceeding pursuant to s 29 of the Civil Procedure Act 2010 (Vic). I am told by Mr Davey that there is limited, if any, overlap between the issues in this proceeding and the s 29 application.
Notwithstanding the degree and variety of disputation between the parties in many forums, there are limited factual disputes in this proceeding, given that most of the conduct complained of was effected or evidenced in writing. Further, each of the defendants is said to be responsible for all of the conduct about which Mr Davey complains. There is no suggestion by any party that Mr Silverstein has acted other than on the instructions of the co‑defendants.
Since this proceeding was issued on 21 December 2017, Mr Silverstein has acted for himself and the co‑defendants. The second defendant, Mr Peter Dessman, is the sole director and shareholder of the third defendant. Mr Silverstein’s evidence is that he has represented the co‑defendants on a pro‑bono basis. Mr Davey is also a solicitor, and represents himself. Over the course of 2018 and 2019, there have been a number of interlocutory hearings before me concerning pleadings, discovery, and preparation for trial generally. To the best of my recollection, Mr Dessman has been present in Court on most of those occasions.
On this occasion, there are two summonses before me: Mr Davey’s summons filed 5 April 2018 seeking to restrain the Mr Silverstein from acting for the co‑defendants, and Mr Davey’s summons filed 1 May 2019 seeking to strike out the third defendant’s defence on the basis of the third defendant’s failure to answer interrogatories pursuant to r 30.09.1 of the Supreme Court (General Civil Procedure) Rules 2015 (‘Rules’).
As can be seen from the above, the application to restrain Mr Silverstein from acting for the co‑defendants has been on foot for just over a year. The application was made on the basis of an alleged conflict of interest between the interests of Mr Silverstein on the one hand and the co-defendants on the other hand. Consideration of this issue was deferred in order to identify whether any real issues of conflict arose out of the first defendant’s representation of the co‑defendants. The application was deferred again pending the determination of the second defendant’s application to receive assistance from Victoria Legal Aid.
The application to Victoria Legal Aid was made on the basis that given this proceeding concerns an alleged contempt of court, the second defendant is at risk of a penalty of imprisonment. However, the application for funding from Victoria Legal Aid has been rejected. Accordingly it is now necessary to determine Mr Davey’s application to restrain Mr Silverstein from acting for the co‑defendants.
Given that the application was deferred on my initiative, no question of delay on the part of Mr Davey arises. He acted promptly in all of the circumstances. However, my experience of managing this proceeding to date has helped to shed light on the question of whether there has been a relevant conflict of interest.
The question of whether the third defendant should be required to answer Mr Davey’s interrogatories is of relatively limited compass. The third defendant resists answering the interrogatories on the basis that the second defendant, being the sole director and shareholder of the third defendant, has exercised his privilege against self-incrimination. The defendants submit that the second defendant is the only person who can answer the interrogatories on behalf of the third defendant. Accordingly, if the third defendant was compelled to answer the interrogatories, the practical effect of such an order would be to deprive the second defendant of his privilege against self-incrimination.
Application to restrain Mr Silverstein from acting for the co‑defendants
Ordinarily, a party would seek to restrain the lawyers for another party from acting where there is a risk that those lawyers might disclose confidential information, say for example, where they have previously acted for that party, or had inadvertently obtained the confidential information of that party. However, the current application is brought on the basis that by reason of the potential conflict between the interests of Mr Silverstein and the interests of the co-defendants, there is a risk to the administration of justice. While it is uncommon for applications to be made on this basis, they have been made from time to time. However, the approach of the courts to applications of this nature where there is no apparent risk to the interests of the party bringing the application has been cautious, and such applications are rarely granted.
It is accepted by both parties that the current situation, where Mr Silverstein is acting for both himself and the co‑defendants is less than ideal. However, the question is whether the current position poses such a risk to the administration of justice such as to warrant the co‑defendants being deprived of their chosen legal representative.
The legal principles governing applications of the current kind are well settled and not in dispute. The position is conveniently summarised in the recent decision of the Court of Appeal in Miller v Martin,[2] as follows (omitting footnotes):
This Court has jurisdiction to make an order, on the application of a party to a proceeding before it, to restrain a legal practitioner from acting for an opposing party in that proceeding. The circumstance which usually gives rise to such an application is where a party seeks to restrain a legal practitioner who previously acted for that party, from acting for an opposing party on the basis that the new representation will involve use by the legal practitioner of confidential information gained in the previous representation.
However, the Court’s jurisdiction is not confined to cases involving allegations of breach of confidence. The Court has a broad, inherent jurisdiction to control its officers and protect its processes. As part of this broad jurisdiction, the Court may restrain a legal practitioner from acting in a proceeding where the integrity of the judicial process would be impaired if the legal practitioner did not cease to act. Instances where this jurisdiction has been exercised include where the legal practitioner is likely to be a material witness, where there is a material conflict between the interests of the client and those of the legal practitioner concerning the litigation in question or where, for any other reason, the independence and objectivity of the legal practitioner would be unacceptably compromised.[3]
[2][2019] VSCA 86.
[3]Ibid [17]-[18].
The Court referred to the decision of Brereton J of the New South Wales Supreme Court in Kallinicos v Hunt,[4] where his Honour said:
The test to be applied in this inherent jurisdiction is whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that a legal practitioner should be prevented from acting, in the interests of the protection of the integrity of the judicial process and the due administration of justice, including the appearance of justice …
The jurisdiction is to be regarded as exceptional and is to be exercised with caution …
Due weight should be given to the public interest in a litigant not being deprived of the lawyer of his or her choice without due cause … [5]
[4](2005) 64 NSWLR 561.
[5]Ibid [76].
The Court also referred to the decision of Pagone J in Finch v Heat Group Pty Ltd (No 2),[6] where his Honour emphasised the reluctance of the courts to deprive a litigant of his or her chosen legal practitioner, and the need to establish the necessity of restraining the legal practitioner from acting to preserve the integrity of the judicial process.
[6](2016) 353 ALR 193.
Mr Davey contends that Mr Silverstein continuing to act for the co‑defendants threatens the integrity of the judicial process, stating that:
It is unheard of in the authorities and literature that a co‑defendant acts as solicitor in the same proceedings.
Mr Davey relied upon the decision of the Queensland Court of Appeal in R v Pham.[7] In this case, the Court held the joint representation of co‑defendants in a criminal proceeding:
is apt to undermine public confidence in the legal profession and should be discouraged. Unless there is no possibility of a conflict existing or emerging, and such cases will be rare, co‑defendants should have separate legal representation.[8]
[7][2017] QCA 43.
[8]Ibid [60].
As noted above, Mr Silverstein accepts that the current position is less than ideal. However, he relies on the following matters in support of his contention that he should not be restrained from acting for the co‑defendants:
(a) the co‑defendants, while not insolvent, are cash poor, such that they are unable to afford legal representation. The third defendant is unable to raise funds because of a charge over its assets lodged by Mr Davey to secure the alleged debts which are the subject of the Magistrates’ Court proceeding;
(b) the second defendant has been denied legal aid. Accordingly, if Mr Silverstein is restrained from acting for the co‑defendants, in all likelihood the second defendant would be required to represent himself, and the third defendant would have no representation, in circumstances where the second defendant would be exposed to the risk of imprisonment;
(c) there is no risk that Mr Silverstein will give evidence at trial, as he and Mr Dessman have invoked, and will continue to invoke, the privilege against self‑incrimination;
(d) Mr Dessman has, on Mr Silverstein’s advice, sought independent legal advice on the very question of whether the co‑defendants should continue to instruct Mr Silverstein, and, having obtained such advice, has given evidence that he wishes to continue to do so;
(e) Mr Silverstein has not undertaken any work or conducted himself in this proceeding in any manner which reveals any actual or potential conflict of interest between him and the co‑defendants, and Mr Davey has not provided any details of how Mr Silverstein has not acted in accordance with his duties to his clients; and
(f) Mr Silverstein submitted as follows:
Whilst a reasonably informed fair-minded member of the public might consider it not prudent for First Defendant to act in the proceeding or never to have acted for the Second and Third Defendant that is a different proposition that the Administration of justice demands that he ceased to act or that he should never have acted in this matter as Solicitor for the Second Defendant and Third Defendant. The First Defendant has always considered that whilst his involvement in acting for the Second Defendant and the Third Defendant may be regarded by a reasonably informed member of the public as not prudent however in the unusual and unique circumstances of this case a reasonably informed fair‑minded member of the public would not consider the actions of the First Defendant as subservient to the administration of justice.
While, once again, I agree that the current situation is not ideal, and I cannot entirely discount there being a potential prejudice to the judicial process by reason of Mr Silverstein continuing to act for the co‑defendants, I am not satisfied that prejudice has manifested itself to date, or is realistically likely to emerge in the future. I say that having had Mr Davey and Mr Silverstein before me on twelve occasions since April 2018. While there have been a number of disputes regarding pleadings, particulars and discovery over that time, and both parties have put their positions with some vigour, it could not be said that Mr Silverstein has advanced his and the co‑defendants’ position with excessive zeal, or that there has emerged any material conflict between the position of Mr Silverstein and the co‑defendants.
Indeed, the primary reason why I deferred consideration of Mr Davey’s application to a later date was to be in a position to assess whether in fact there was a potential conflict of interest, and any potential prejudice to the administration of justice, once the pleadings were settled, the evidence was in, and the issues likely to arise at trial were clarified. Now that the proceeding is at that stage, I would make the following observations:
(a) the evidence upon which Mr Davey relies is entirely documentary, with there being no dispute of which I am aware concerning the authenticity of any documents. Accordingly, the real dispute at trial will not be whether any particular events, conduct or communications occurred, but the legal consequences of that conduct;
(b) to the extent that the communications and conduct complained of is that of Mr Silverstein, Mr Silverstein was acting on the instructions of the co‑defendants;
(c) I have no reason to doubt that Mr Silverstein and Mr Dessman will continue to claim their privilege against self‑incrimination at trial, and will thus not be giving evidence;[9] and
(d) accordingly, one would expect the trial to be taken up with the evidence of Mr Davey and any other witnesses he wishes to call, possible disputes about what documents ought to be tendered into evidence, and legal submissions with respect to whether the conduct of Mr Silverstein and the co‑defendants amounted to contempt. At this stage, it is difficult to see how Mr Silverstein would need to distinguish between the conduct of the co‑defendants and his own conduct, or whether he could represent the co‑defendants less ably than he can represent himself.
[9]In any event, I note that in Premier Capital (China) Ltd v Sandhurst Trustees Ltd [2012] VSC 611, Pagone J stated at [4] that ‘It is not sufficient to restrain a solicitor from acting in a proceeding that the solicitor may be a witness in the proceeding … ‘.
It may well be that the position may be different if Mr Silverstein and his co‑defendants were found to be guilty of contempt, although I am not in a position to form a concluded view on that matter. Different sentencing considerations may apply to Mr Silverstein, given that he is a solicitor. However, the trial judge would be in the best position to identify whether any concerns at this stage of the proceeding warrant the co‑defendants obtaining separate representation. However, as any sentencing process is likely to be conducted at a later stage, any need for separate representation is unlikely to cause too much disruption.
The fact that this proceeding is a quasi‑criminal proceeding does not, in my view, necessitate Mr Silverstein be restrained from acting. The decision in R v Pham does not stand for the proposition that co‑defendants in a criminal proceeding must have separate representation, it simply highlights the risks which may arise if there is no separate representation. Further, in that case, there was a real question mark as to whether the client was fully informed of any conflict of interest. No such concern arises here, given that Mr Dessman has received independent legal advice.
The current case can also be distinguished from the decision of this Court in Grimwade v Meagher and Ors,[10] where the Court restrained senior counsel for a party in a civil proceeding from acting where he had previously prosecuted the applicant in a long running criminal proceeding concerning the same transactions. Mandie J described the circumstances as ‘unique, extraordinary and exceptional’.[11] In that case, there was also an underlying concern that senior counsel had been privy to confidential information which may unconsciously have affected his conduct of the civil proceeding. Further, there was no suggestion that the party he represented would be unable to obtain alternative legal representation.
[10][1995] 1 VR 446.
[11]Ibid, 454.
Accordingly, I do not consider that Mr Davey has established there is a real risk that the judicial process will be prejudiced by Mr Silverstein’s continuing to act for the co‑defendants. However, I accept that there is a very real risk of prejudice to the co‑defendants should Mr Silverstein be compelled to cease to act for them. The evidence is that their financial position is parlous, and, if the judgment obtained by Mr Davey against them in the Magistrates’ Court is not either reduced by way of set‑off, or set aside on appeal, their financial position will deteriorate further. Accordingly, I have no reason to doubt that they cannot obtain legal assistance other than from Mr Silverstein, who is acting on a pro‑bono basis. Further, the co‑defendants have had an opportunity to obtain legal advice regarding this issue, and thus have no doubt been alerted to any potential conflict of interest on the part of Mr Silverstein. Indeed, Mr Dessman has been present in Court when this issue has been discussed. Accordingly, to the extent that there is any actual or potential conflict of interest, Mr Dessman is fully apprised of the potential conflict, and has made the decision to carry on regardless.
Interrogatories
As noted above, the third defendant, a corporation, has refused to answer the interrogatories delivered by Mr Davey. Mr Davey contends that, first, the decision of the High Court in CFMEU v Boral Resources (Vic) Pty Ltd[12] (‘Boral’) makes it clear that a proceeding for contempt is a civil proceeding, and thus the Rules apply. Further, s 187 of the Evidence Act 2008 (Vic) provides that a corporation may not avail itself of the privilege against self‑incrimination. As no objection to the interrogatories has been taken to answering the interrogatories on any of the grounds set out in r 30.07 of the Rules, the third defendant should be compelled to answer the interrogatories, and, if it fails to do so, judgment should be entered against it.
[12](2015) 256 CLR 375.
In response, Mr Silverstein submitted that as the sole director and shareholder of the third defendant is Mr Dessman, the only person who can answer the interrogatories on behalf of the third defendant is Mr Dessman. Mr Dessman has invoked, and will continue to invoke, the privilege against self‑incrimination. Mr Davey should not be able to deprive Mr Dessman of the privilege by directing interrogatories to the third defendant.
Mr Silverstein relied upon the decision of Robson J in Re Australian Property Custodian Holdings Ltd (in liq) (No 2)[13] (‘APCH’), where his Honour relieved the directors of a company and corporate entities associated with one of the directors being pursued by the Australian Security and Investments Commission from their obligations to specifically plead to allegations made by the liquidators of the company. His Honour’s conclusions are adequately summarised in the headnote of the report of this decision, as follows (omitting citations):
(iii)A party may be excused, in exceptional circumstances, from complying with the ordinary processes of a civil court in non‑penal proceedings which may be used to establish a penalty in other proceedings in violation of that party’s privileges against self-incrimination and exposure to a penalty.
…
(vii)A corporation can be excused, in exceptional circumstances, from complying with the ordinary processes of a civil court in non‑penal proceedings where compliance with those processes would necessarily undermine the privileges against self-incrimination and exposure to a penalty claimed by a sole director because the sole director is the only appropriate person to secure the corporation’s compliance.
(viii)Mr Lewski is the only appropriate person to secure the Lewski companies’ compliance with their obligations to plead specifically to the allegations made against them in the Supreme Court proceeding.
(ix)The Lewski companies are entitled to be excused from compliance with the [Rules] requiring them to plead specifically to the allegations made against them … to the extent that such compliance may require Mr Lewski to incriminate himself or expose himself to a civil penalty.
[13](2012) 93 ACSR 130.
Mr Davey contends that as ACPH[14] pre‑dated the decision of the High Court in Boral,[15] this decision has been overtaken by the emphatic statements of the High Court that the Rules apply to contempt cases.
[14](2012) 93 ASR 130.
[15](2015) 256 CLR 375.
I disagree that the decision in Boral[16] means that the considerations referred to in APCH[17] are not relevant to the current application. Mr Davey’s submissions ignore that, in determining whether to make orders for discovery (which was the issue in Boral),[18] or to answer interrogatories, the Court retains a discretion to decline to make such orders. Indeed, the majority in Boral[19] expressly refer to the existence of such a discretion in r 29.07 of the Rules. The majority stated as follows:
[16]Ibid.
[17](2012) 93 ASR 130.
[18](2015) 256 CLR 375.
[19]Ibid.
It is important to appreciate that the respondent can be protected from oppressive conduct by the applicant by the exercise of the judicial discretion conferred by r 29.07(2).[20]
And further:
Secondly, no question arises under r 29.07(2) of the Rules as to the appellant being required to give evidence against itself as a witness for the prosecution. The documents required to be discovered speak for themselves. In the nature of things, such documents have been brought into existence in the course of the conduct of the corporation’s affairs by or through other (natural) persons acting in the service of the corporation. In such a case, the concerns that testimonial admissions may be extracted by oppressive conduct and that confessions of dubious reliability will be adduced do not arise. If such concerns were to arise in different circumstances, they would fall to be considered as part of the discretion conferred by the rule. (citation omitted)[21]
[20]Ibid [32].
[21]Ibid [38].
Accordingly, the majority recognised that the issue that has arisen in the current case, being a concern that making an order that the third defendant deliver answers to interrogatories may in effect deprive the second defendant of the privilege against self‑incrimination, is a relevant consideration in the exercise of the Court’s discretion as to whether to order discovery.
The mirror provision with respect to interrogatories is to be found in r 30.09 of the Rules, which provides that:
Where a party interrogated fails to answer the interrogatories within the time limited or does not answer the interrogatories sufficiently, the Court may order that the party answer or answer further … (emphasis added).
I do not quarrel with the contentions of Mr Davey that the relevant provisions of the Rules apply to the conduct of this proceeding, or that the third defendant is not entitled to claim the privilege against self‑incrimination. To that, I would add that a corporation is not entitled to claim the privilege on behalf of another party.[22]
[22]HRF Nominees Pty Ltd (in liq) & Ors v Man Civil Constructions Pty Ltd & ors [2014] VSC 93 [41]-[42].
However, in my view, it is not the case that the matters considered by Robson J in APCH[23] are not relevant matters to be taken into account in the exercise of the discretion as to whether to order that the third defendant answer the interrogatories. The only person who can answer the interrogatories is Mr Dessman. The interrogatories go to the issues in this proceeding, and indeed, also seem to traverse the issues in dispute in the Magistrates’ Court proceeding and the VCAT proceeding. One would query the relevance of the latter category of interrogatories. Once the interrogatories have been answered, they may be tendered into evidence. In my view, the discretionary considerations weighing against making an order that the third defendant provide answers to interrogatories are more powerful than the discretionary considerations which might apply to say, an order for discovery. Indeed, such a distinction was recognised by the High Court in Boral,[24] and by Robson J in APCH.[25] Further, I note the recent observations of the Court of Appeal in Sidebottom v R,[26] where the Court stated that as contempt is punishable by imprisonment, safeguards similar to those appropriate in criminal proceedings apply.[27] Avoiding a situation where an individual is compelled to in effect give evidence against himself is one such safeguard.
[23](2012) 93 ACSR 130.
[24](2015) 256 CLR 375.
[25](2012) 93 ACSR 130 [161], where Robson J distinguished the case before him with other authorities where a corporation was compelled to provide discovery or answer subpoenas.
[26][2018] VSCA 280.
[27]Ibid [56].
Accordingly, given that requiring the third defendant to answer interrogatories will, to the extent that the questions are relevant to the issues in the proceeding, in effect deprive Mr Dessman of his privilege against self‑incrimination, I will exercise my discretion to decline to order the third defendant to answer the interrogatories. To the extent that the questions are not relevant to the issues in the proceeding, I can see no reason why any orders compelling the provision of answers to interrogatories ought be made.
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