Elvin v Davey

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

JUDICIAL REVIEW AND APPEALS LIST

S ECI 2020 02841

MATTHEW POMEROY ELVIN	Appellant
v
JOHN PATRICK DAVEY	Respondent

S ECI 2020 02840

RONALD DAVID SILVERSTEIN	Appellant
v
JOHN PATRICK DAVEY	Respondent

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JUDGE:	Keogh J
WHERE HELD:	Melbourne
DATE OF HEARING:	26, 27 October 2021
DATE OF JUDGMENT:	2 May 2022
CASE MAY BE CITED AS:	Elvin v Davey
MEDIUM NEUTRAL CITATION:	[2022] VSC 214

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ADMINISTRATIVE LAW — Appeal from Magistrates’ Court of Victoria of orders made under s 29(1)(c) of Civil Procedure Act 2010 (Vic) in favour of the plaintiff/respondent — The appellants were the legal practitioners acting for defendants in Magistrates’ Court proceeding — Overarching obligation to act honestly — Requirement of proper basis — Overarching obligation not to mislead or deceive— Whether proper test applied — Whether findings of breach supported by evidence — Evidence Act 2008 (Vic) s 140 — Briginshaw v Briginshaw (1938) 60 CLR 336 — Peters v The Queen (1998) 192 CLR 493 — Respondent a self-represented legal practitioner — Whether compensation order was an order for costs — Bell Lawyers Pty Ltd v Pentelow [2019] HCA 29 — Discretion to award compensation — Evidence of financial or other loss — Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (No 5) [2014] VSC 400 — Hudspeth v Scholastic Cleaning and Consultancy Services Pty Ltd (No 8) [2014] VSC 567 — Bolitho v Banksia Securities Ltd (No 18) (remitter) [2021] VSC 666 — Civil Procedure Act 2010 (Vic) ss 17, 18, 21, 29.

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APPEARANCES:S ECI 2020 02841	Counsel	Solicitors
For the Appellant	CM Archibald QC with E Poole	Colin Biggers & Paisley
For the Respondent	Appeared in person
APPEARANCES:S ECI 2020 02840
For the Appellant	L Hannon QC with T Jeffrie	K & L Gates
For the Respondent	Appeared in person

HIS HONOUR:

Between 2013 and 2016 the respondent, John Davey, who was then a legal practitioner, acted for his cousin, Peter Dessmann, and Dessmann’s company, Dessco Pty Ltd (‘Dessco’) in a number of legal matters. In the same period, Dessmann erected business signage for Davey, purchased a commercial property as a superannuation investment that he rented to Davey’s firm (the ‘premises’), and alleged he gave Davey money to pay rent on the premises and assisted him in other ways.

After the relationship between them soured Davey brought two proceedings in the Magistrates’ Court of Victoria against Dessmann and Dessco (together, ‘the defendants’) for recovery of outstanding legal fees. The defendants agreed that Davey provided legal services to them, but denied liability on a number of grounds, including that this occurred in the context of a close familial relationship characterised by mutual gift giving, with the consequence that there was no contractual relationship between the parties.

Matthew Elvin, the appellant in proceeding S ECI 2020 02841, is a legal practitioner who was retained to act for the defendants in the Magistrates’ Court proceedings. Elvin filed defences that pleaded the mutual gift giving defence. In response to requests by Davey, Elvin served further and better particulars of gifts alleged in the defence.

Ronald Silverstein, the appellant in proceeding S ECI 2020 02840, is also a legal practitioner and replaced Elvin as the defendants’ lawyer in the Magistrates’ Court proceedings. Silverstein filed amended defences that repeated the mutual gift giving defence, but neglected to file a proper basis certificate in accordance with s 42 of the Civil Procedure Act 2010 (Vic) (‘CPA’). At around the same time, Silverstein filed points of claim in a proceeding in the Victorian Civil and Administrative Tribunal (‘VCAT’) in which Dessco claimed arrears of rent and outgoings on the property leased to Davey. Davey alleged the claim for rental arrears was inconsistent with the mutual gift giving defence.

The Magistrates’ Court proceedings were hard fought. In two separate contested trials Davey succeeded on the claim for legal fees, and successfully defended a set-off claim made by the defendants.

After he was successful in the Magistrates’ Court proceedings Davey applied for costs against the defendants and for orders that the defendants and their solicitors had contravened obligations owed under the CPA. Davey sought orders for costs and compensation for financial loss against Elvin and Silverstein (the ‘appellants’), pursuant to s 29(1)(a) and (c) of the CPA. In the course of determining the application it became clear that as a result of the decision of the High Court in Bell Lawyers Pty Ltd v Pentelow (‘Bell’),[1] Davey, as a self-represented legal practitioner, was not entitled to recover professional fees.
[1][2019] HCA 29.

The application was heard over a total of eight sitting days, following which the presiding Magistrate found that there were contraventions of the CPA by Elvin and Silverstein that had materially contributed to financial loss suffered by Davey. The learned Magistrate ordered that Elvin and Silverstein compensate Davey based on the Practitioner Remuneration Order (‘PRO’)[2] for the period that they each acted for the defendants in the Magistrates’ Court proceedings, and for the amount of compensation to be assessed by the Costs Court in the absence of agreement (the ‘compensation order’).
[2]The PRO is an order made under s 94 of the Legal Profession Uniform Law Application Act 2014 (Vic) with respect to the costs that may be charged by law practices for providing legal services other than in relation to litigious matters.

Elvin and Silverstein have appealed the compensation order. In relation to findings that they contravened provisions of the CPA, both Elvin and Silverstein rely on grounds that the Magistrate failed to identify and apply the correct test, failed to apply s 140 of the Evidence Act 2008 (Vic) (‘Evidence Act’) and the principles established in Briginshaw v Briginshaw (‘Briginshaw’),[3] and that the contravention determinations were not open on the evidence.[4] In relation to the award of compensation made to Davey by the learned Magistrate, Elvin and Silverstein rely on grounds that the Magistrate:
[3](1938) 60 CLR 336.
[4]Mr Silverstein appealed a finding by the Magistrate that he contravened an obligation to act honestly in s 17 of the CPA, but did not appeal a finding that he contravened the proper basis obligation in s 18 of the CPA.

(a) failed to consider whether to exercise the discretion under s 29 of the CPA to compensate Davey;

(b) erred in awarding compensation when there was no evidence of financial loss;

(c) erred in compensating Davey for professional fees in a manner inconsistent with the decision in Bell and s 29(1) of the CPA;

(d) failed to consider whether Davey’s conduct had exacerbated the time absorbed by, and costs incurred in, the Magistrates’ Court proceedings;

(e) failed to accord the appellants natural justice and procedural fairness by ordering that compensation be assessed under the PRO without giving them the opportunity to be heard; and

(f) erred in ordering that compensation be assessed by the Costs Court when there was no jurisdiction to do so.

It is convenient to deal separately with the grounds of appeal from findings that Elvin and Silverstein contravened the CPA, before considering together the common grounds relating to s 29(1) and the award of compensation raised by both appeals.

Davey applied for summary judgment under s 63 of the CPA in both proceedings on the basis that the appeals had no real prospect of success. Those applications were dismissed by a Judicial Registrar.[5] Davey appealed from the orders made by the Judicial Registrar. However, those appeals were effectively overtaken by the hearing of the appeals from the compensation order and did not raise any separate issue for consideration.

Relevant provisions of the CPA

[5]Dessco Pty Ltd v Davey; Elvin v Davey; Silverstein v Davey [2020] VSC 696.

The overarching obligations imposed by the CPA apply to, amongst others, any legal practitioner acting on behalf of a party to civil proceedings.[6]
[6]Civil Procedure Act 2010 (Vic) s 10.

The overarching obligation to act honestly is imposed by s 17 of the CPA:

A person to whom the overarching obligations apply must act honestly at all times in relation to a civil proceeding.

The Magistrate found Silverstein contravened the obligation to act honestly in the Magistrates’ Court proceedings.

The requirement for a proper basis in a civil proceeding is imposed by s 18 of the CPA:

A person to whom the overarching obligations apply must not make any claim or make a response to any claim in a civil proceeding that—
(a)is frivolous; or
(b)is vexatious; or
(c)is an abuse of process; or
(d)does not, on the factual and legal material available to the person at the time of making the claim or responding to the claim, as the case requires, have a proper basis.

The Magistrate found Elvin and Silverstein contravened the overarching obligation in s 18 of the CPA. The Magistrate’s finding that Silverstein conduct breached s 18(d) is not the subject of this appeal.

The overarching obligation not to mislead or deceive is imposed by s 21 of the CPA:

A person to whom the overarching obligations apply must not, in respect of a civil proceeding, engage in conduct which is–
(a) misleading or deceptive; or
(b) likely to mislead or deceive.

The Magistrate found Elvin contravened s 21.

Section 29 of the CPA, which concerns the orders a court may make if satisfied any overarching obligation imposed by the Act has been contravened, relevantly reads:

(1)If a court is satisfied that, on the balance of probabilities, a person has contravened any overarching obligation, the court may make any order it considers appropriate in the interests of justice including, but not limited to—
(a)an order that the person pay some or all of the legal costs or other costs or expenses of any person arising from the contravention of the overarching obligation;
(c)an order that the person compensate any person for any financial loss or other loss which was materially contributed to by the contravention of the overarching obligation, including—
(i)an order for penalty interest in accordance with the penalty interest rate in respect of any delay in the payment of an amount claimed in the civil proceeding; or
(ii)an order for no interest or reduced interest;

…

(3)This section does not limit any other power of a court to make any order, including any order as to costs.

The Magistrate made orders against Elvin and Silverstein under s 29(1)(c) of the CPA that they compensate Davey for his time and effort in the Magistrates’ Court proceedings calculated by applying the PRO.

Part 4.5 of the CPA deals with the powers of the court as to costs. The Magistrate said he made the compensation orders in favour of Davey against Elvin and Silverstein under Part 4.5 of the CPA.

Background

Davey filed the Magistrates’ Court complaints in May and June 2016 in which he claimed that the defendants had failed to pay invoices for legal work performed pursuant to client agreements between the parties. Attached to each complaint was a client statement from Davey’s firm setting out the dates, description and amounts of invoices for legal fees in various matters.

Elvin was first contacted by Dessmann on 10 June 2016, and was formally retained to act for the defendants on 24 June.

Defences were due to be filed on 30 June 2016. Elvin’s request for an extension was refused by Davey.

Between 24 June and 3 July 2016 Dessmann provided further instructions and numerous documents in frequent communications to Elvin. One of the documents provided was an email from Davey to Dessmann marked ‘without prejudice save as to costs’. In an affidavit filed in the Magistrates’ Court s 29 application Elvin said:

I do not disclose the contents of the email from Davey to Dessmann in case it contains information that is subject to without prejudice privilege, which I cannot waive. However, the email from Davey to Dessmann dated 29 April 2016 reinforced my view that the defence I ultimately drafted had a proper basis and was reasonably arguable.

Another document provided to Elvin by Dessmann was an email exchange in September 2015 relating to cost estimates provided by Davey. Dessmann’s response included:

If you need me to pay them all then I better shut the doors mate, stop everything, and call it a day …

Davey responded:
Oh calm down. We have to provide them in case we are audited and I’ve been slack with you. Also if we claim costs against the other side you have to incur them first. We also need to pay for the signs and stuff you are doing for the firm.

On Saturday 2 July 2016, Elvin wrote to Dessmann saying he intended to file the defences the following afternoon, and seeking further instructions and documents, including copies of cost agreements and disclosure statements. Later that day Elvin emailed a draft defence which he requested Dessmann check carefully. The draft included the mutual gift giving defence.

On the same day Dessmann sent Elvin copies of emails and correspondence dated in July 2015 in which Davey confirmed details of a conversation during which Dessmann agreed to garage a Holden Captiva motor vehicle (the ‘vehicle’) at his business premises for one of Davey’s clients at a charge of $50 per week for storage, and indicated his preparedness for his business address to be the VicRoads registration address for the vehicle.

Later that night Dessmann emailed Elvin with further instructions, which included:

All along he continued to bill me and said it was just for legal purposes again not wanting money from me.

In further emails sent early on the Sunday morning, Dessmann responded in detail to the paragraphs of the draft defence, in which he repeated similar assertions, such as that Davey made it quite clear to him ‘… over and over again that he wasn’t after my money …’. In response to an allegation pleaded by Davey that in breach of client agreements Dessmann had failed to make payments for legal services, Dessmann said:
Breeching [sic] client agreements were never discussed. I had made many payments, all under Johns strict instructions. He mainly asked for all payments made to be put towards his rent of the premises which I own. We had many meetings which were recorded when john called me in, not to pay any outstanding invoices but to pay his rent & outgoings. He provided banking details & i did so, even tho [sic] money was extremely tight.

On 3 July Elvin emailed Dessmann. Part of that email, and of Dessmann’s response (in bold text) are as follows:

… in the last week or so you've forwarded me an enormous number of emails and documents. Your file is enormous. In the timeframe given and the budget we are trying to work to, it's impossible for me to thoroughly read and consider every email and document and draft an excellent defence. This means that there will be weaknesses in your case/defence. You need to know this ...
There are other weaknesses too. In particular, the legal services he provided to you from the date when your relationship started breaking down (March?) could well be found to be legitimate, because he does start saying that you will need to start paying for his services in some correspondences from around that date. (it's the only time he's asked for payment ever) Also, it looks to me that you admit that you owe him a lot of the money (you seem to agree with a figure in the $50,000 - $70,000 range in some communications) in some of those emails. Yes I agree that I may have said this, as john pressured me to pay him, but he always said I don't want your money (as mentioned on numerous times in the recordings) in an invoiced manner, just help me pay my rent & outgoings, Build me my office walls, do more signage for my side wall (Chanka Bandara over heard John say this on many occasions and can testify to this, he is my employee) & I will continue to help represent you, John Stated.

In the same email exchange Dessmann repeated assertions that he had not been paid for signage and other services provided to Davey, and that most of Davey’s legal work was created by him, and not done at Dessmann’s request.

Later that day Dessmann emailed Elvin a copy of a text message exchange between he and Davey that occurred on 2 May 2015, in which the latter said that in 2015, 65% of all of his work was done on the Dessco and Peter Dessmann files. Davey texted:

The staff have recorded in excess of $18k in legal work and I understand we will be offsetting signage etc… But I have an immediate crisis in cashflow

Dessmann responded:
Mate with all due respect why did we buy this building for. Im cash strapped atm. When mums property sells I will pay you.

Davey sent a number of texts in response, including:
I don’t need you to pay me or is [sic] send you an invoice. I just need some assistance now

Elvin provided a final draft of the defences to Dessmann on the Sunday afternoon, and filed the settled defences electronically with the Magistrates’ Court that evening. In the pleadings the defendants admitted the client agreements between the parties, but alleged they were not binding contracts, and that the legal services were given by Davey to the defendants as part of the relationship of mutual gift giving between he and Dessmann. The defendants alleged gifts given by them to Davey included:

(a)Cash, as requested from time to time by the plaintiff;
(b)Meals and drinks for the plaintiff;
(c)Payment of the plaintiff’s rent from time to time;
(d)Provision of signage worth approximately $12,500;
(e)Assistance with aspects of the plaintiff’s legal cases;
(f)Signed documents, created invoices issued from the defendant’s business and performed other tasks at the request of the plaintiff to assist with the plaintiff’s legal practice business.

In the alternative to the mutual gift giving defence, the defendants pleaded Davey’s claim failed because of his misleading and deceptive conduct, or misrepresentation. In a further alternative, the defendants pleaded the client agreements were part of broader contractual arrangements between the parties, and that they had completed their obligations to the plaintiff and accordingly he had no cause of action against them.

On 4 July 2016, Davey wrote to Elvin seeking further and better particulars of the defences, including particulars of gifts asserted to have been given by Dessmann and Dessco to Davey, rent paid for Davey, and assistance given with aspects of his legal cases.

Dessmann provided to Elvin as part of his instructions a document titled:

Summary of payments made to Davey by Dessmann on Davey’s request

The summary of payments had three columns, giving the date, description and amount of each payment. The description for some of the payments was ‘legal fees’ or ‘Herm legal fees’.

At the hearing before me Davey asserted the summary of payments was provided to Elvin on 3 July 2016, before the defences were filed. There was no finding to that effect by the Magistrate. Davey’s assertion is not established on the face of documents tendered as exhibits to affidavits filed in this proceeding. Elvin submitted the chain of documents in which the summary of payments appears commences with an email dated 18 July 2016. In an affidavit filed in this proceeding Elvin said he received the summary of payments around that time.

On 18 July 2016 Elvin emailed Dessmann seeking further instructions in order to finalise the further and better particulars, including whether Dessmann ever sent invoices to Davey’s client in relation to the vehicle he was asked to garage. On the same day Dessmann responded, in relation to the vehicle:

Never had an opportunity to send anything to [Davey’s client]. I was unsure & felt uncomfortable about putting fake invoices thru [sic] my business to hide this asset, from a divorce in NSW which John was representing the Husband in the proceedings. John had told me that the husband had given John the car to hide of [sic] from the marital asset pool. John informed me that he was taking the car as payment to offset John informed me to do the invoices and gave me the back story in regards to where the car came from so as if any questions were ever asked, for whatever reason he would have the invoices so as to offset legal costs.

Later on the same day Elvin filed further and better particulars in response to Davey’s request. The gifts asserted by Dessmann were set out in paragraph 1 of the particulars. Paragraph 1(e) recorded the date and dollar amount, but not the description, of each payment from the summary of payments. The particularised gifts also included provision of office stationery and furniture, and business signage. In response to a request for further and better particulars in relation to payment of Davey’s rent, the particulars record:

(a)the defendant deposited funds into the plaintiff’s bank account, the amounts and dates of which are set out at 1(e) hereof; and
(b)some of these deposited funds were used to pay the plaintiff’s rent, but the defendant has no knowledge of which amounts of the deposited funds the plaintiff used to make rental payments and on which dates, as this information is peculiarly within the knowledge of the plaintiff.

In relation to the vehicle, the particulars state Davey:
requested the defendants to assist him with the legal case by:
(a)Agreeing to enter into a written agreement to store a vehicle which belonged to [Davey’s client] in the defendant’s garage;
(b)Agreeing to allow that vehicle to be registered at the defendant’s business address; and
(c)Agreeing to issue weekly storage invoices to [Davey’s client] in the sum of $50.

In submissions Davey said at the time he checked his own records which showed the payments made by Dessmann were part-payments of his legal fees, and that Davey had issued transaction receipts for those payments.

Despite knowing what the payments were for, on 19 July 2016 Davey made a broad further request for particulars of the alleged gifts, and whether the arrangement in relation to the vehicle was ever put into place. On 14 August 2016 Elvin responded by saying that further particulars would be provided after discovery. Davey made yet a further request for particulars asking to who and by what means some of the payments were made. In response, on behalf of the defendants, Elvin provided the bank BSB and account number of the payee corresponding to each payment, and stated:

In response to paragraph number 2, the defendant says that all payments the defendant made to the Plaintiff listed at l(e) of the defendant's Further and Better Particulars dated 18 July 2016, with the exception of the payments in the amounts of $50, were for the plaintiff to put toward the rent that the plaintiff was liable to pay for its office at 5/198 Waterloo Road OAK PARK VIC 3046.

On 19 August 2016 Dessmann emailed to Davey an invoice for $3,850 said to be for storage of the vehicle on terms set out in the July 2015 correspondence between them. The following day Davey wrote to Elvin, stating in part:

Can you please advise which of the present three proceedings this invoice purports to relate to? It was sent with no explanation.
For the abundance of clarity, the description in said invoice 5854 are not for any services or storage ever rendered by your client. There is a real danger, we submit, that your client is presently engaging in a process of manufacturing evidence and we call upon you to clarify the meaning and relevance of said invoice. Can you please advise whether your client intends to rely on said invoice 5854 and in what context?

On 24 August 2016 Davey again wrote to Elvin, stating in part:
We have today received confirmation from [Davey’s client], that the negotiated agreement regarding the vehicle described into your client’s invoice was never put into place. That is to say, the nominated vehicle in invoice 5854 was never stored as particularised in invoice 5854. [Davey’s client] has indicated that he is prepared to provide affidavit evidence and in person testimony should the need arise to that effect.

On the same day Davey sent a further letter to Elvin in part enquiring about the vehicle invoice and three other invoices rendered to him by Dessmann for a self-inking stamp, repair of motor vehicle signage, provision and delivery of office furniture and stationery, and business signage.

On 29 August 2016 Elvin wrote to Dessmann seeking further instructions about, amongst other things, whether he had ever stored the vehicle for Davey’s client, and if not why he sent the invoice for doing so. Dessmann responded the following day, saying he had not stored the vehicle, and explaining why he rendered the invoice as follows:

Reasons well he’s been quiet [sic] blunt in forwarding invoices so i returned or forwarded all invoices as well on things he asked to do.

On 31 August 2016, Elvin wrote to Davey responding to a threatened application to strike out the defendants’ defences, stating in part:

If our clients have issued you with invoices in respect of services which they claim were gifts in their defences; this does not invalidate their defences. Their defences put forward alternative pleadings, some of which would be consistent with our clients issuing you invoices. We are confident that one of our clients’ primary or alternative pleadings will succeed.

The following day Davey responded by stating the mutual gift giving defence was untenable. On 2 September 2016, Elvin again wrote to Davey about the threatened strike out application and the invoices, stating in part:
Our clients instruct that they issued the invoices out of abundance of caution, in the event that one of their alternative pleadings succeeds. If, for instance, the court finds that you and either of our clients were in a contractual relationship, then our clients will need to quantify the value of the services that he/they provided you. Our clients believed that by issuing you with invoices would help achieve this end.
To clarify matters, we hereby advise you, on behalf of our clients, that you are not required to pay any invoices issued to you by our clients for which our clients have pleaded in these proceedings were gifts to you, until a judicial determination of the legal status of the goods and services has been made.
The findings of the Magistrate at the final hearing will determine whether or not the invoices were validly issued. In the event that a Magistrate finds that they were not validly issued, because, for instance, they were gifts, you will not be required to pay the invoices. If our clients have committed an offence by issuing the invoices in such circumstances, that will be a matter for them.

On the same day Elvin sent to Davey by way of discovery copies of transaction receipts which he said appeared to relate to payments made by the defendants to Davey. Each transaction receipt described the payment made as being for legal fees.

Elvin ceased to act for the defendants on 6 February 2017, when Silverstein took over as their legal representative.

Elvin provided copies of relevant court documents, correspondence and other material to Silverstein. Silverstein said at the time he believed his clients’ instructions were consistent with the matters pleaded in the defences prepared by Elvin. He said Dessmann told him in February 2017 that he had not garaged the vehicle, and that he issued the invoice for doing so to Davey through anger and retaliation. He said Dessmann showed him documents which recorded the registered address of the vehicle as his premises, which was done by Davey pursuant to a deal with Dessmann.

In February 2018, Silverstein filed documents in VCAT commencing a claim on behalf of Dessco against Davey for rent and outgoings on the premises. The total past and future claim was for over $68,000, including $4,468.83 arrears for the period 17 June 2015 to 30 April 2016. Rent was alleged to be payable at a rate of $400 per week. In a supporting affidavit Dessmann alleged the amounts payable by Davey under the lease were, by arrangement between them, to be paid direct to the mortgage loan account of the mortgagee of the premises. Dessmann said that on 8 January 2016 he made a direct payment of $1,500 to the mortgagee because he was advised his mortgage account was in arrears. Dessmann said:

My solicitor informed me in January 2018 that from his analysis, he formed a view that from 17 June 2015 to 30 April 2016, the Respondent failed to make regular payments of rent to the mortgagee or the Applicant. When the Respondent did pay the rent, he paid the rent to the mortgagee, but in various sums and at inconsistent durations. Furthermore, the rental payments that the applicant did pay to the mortgagee were substantially less than what was due under the terms of the lease.

Silverstein filed an amended defence for the defendants in the Magistrates’ Court proceeding in March 2018 (the two proceedings having been consolidated) in which the mutual gift giving defence was maintained unaltered. When he filed the amended defences, Silverstein did not file a proper basis certification in compliance with s 42(1) of the CPA.

On 28 March 2019, the Magistrate found in favour of Davey on the principal claim in the Magistrates’ Court proceeding. The Magistrate found Dessmann’s assertion that payments he made to Davey were to assist him to pay rent, and were not part-payment of accounts for legal services rendered by Davey to him, was at odds with documents recording the payments, and was not credible. In relation to the vehicle and the invoice for storage issued by Dessmann, the reasons record:

It is also noted that the Second Defendant, while giving evidence, withdrew the invoice by the First Defendant about the storage of a vehicle from one of the Plaintiff’s clients. Clearly, on the evidence of [Davey’s client] and the Plaintiff, the vehicle was never stored by the First Defendant. This raises serious credibility issues for the Second Defendant.

The defendants’ claim for set off against the judgment sum, which was pleaded in a further amended defence filed after judgment on the principal claim, was dismissed on 19 September 2019.

On 12 April 2019, Davey applied to the Magistrates’ Court for various orders, including that Elvin and Silverstein, had breached s 29 of the CPA, and that they pay his costs of the proceedings on an indemnity basis.

Davey’s application was heard over eight sitting days between 14 October 2019 and 19 February 2020. At the hearing on 14 October 2019, counsel for Elvin and Silverstein addressed the Magistrate on the relevance of the High Court decision in Bell to the application and any claim by Davey for professional fees in the Magistrates’ Court proceedings. Davey responded by arguing he had a contractual entitlement to professional fees pursuant to his fee agreements with the defendants, and that he would seek an order for compensation under s 29 of the CPA.

On 5 June 2020, the Magistrate delivered reasons in which he found for Davey on his claim for compensation against Elvin and Silverstein. Orders made by the Magistrate against the defendants included:

(D) THE DEFENDANTS ARE LIABLE TO COMPENSATE THE PLAINTIFF DAVEY BASED ON THE PRACTITIONERS REMUNERATION ORDER (PRO) IN RESPECT TO THE WHOLE OF THESE PRCEEDINGS [sic] AS IT RELATES TO EACH OF THEM JOINTLY AND SEVERALLY.

The Magistrate made the following orders, which are the subject of these appeals:
(E) THAT ELVIN THE SECOND RESPONDENT BE JOINTLY AND SEVERALLY LIABLE WITH DEFENDANTS FOR COMPENSATION BASED ON THE PRO FROM 10 JUNE 2016 TO 6 FEB 2017.
(F) THAT SILVERSTIEN [sic] THE FIRST RESPONDENT BE JOINTLY AND SEVERALLY LIABLE WITH THE DEFENDANTS FOR COMPENSATION BASED ON THE PRO FROM 6 FEB 2017 TO TODAY.
(G) I FURTHER MAKE THESE ORDERS UNDER PART 4.5 OF THE CIVIL PROCEDURE ACT 2010 AND IF THERE IS NO AGREEMENT AS TO THE AMOUNTS TO BE PAID BY THE DEFENDANTS AND RESPONDENTS ELVIN AND SILVERSTIEN [sic] FOR THE AMOUNT OF COMPENSATION TO BE PAID BY THEM UNDER THE RELEVANT PRO SHALL BE ASSESSED BY THE COST COURT.

The Notices of Appeal were filed on 6 July 2020.

The appeals are brought pursuant to s 109 of the Magistrates’ Court Act 1991 (Vic), which provides that a party to a civil proceeding in the Magistrates’ Court may appeal to the Supreme Court against a final order of the Magistrate on a question of law. The appellants must establish that the Magistrate acted ‘on a wrong principle of law, misapprehended the facts or made a wholly erroneous assessment of the relevant issues.’[7] Errors of law may include:
[7]Romas v Green [2015] VSC 95, [26].

(a) whether the Magistrate has identified the correct legal test;

(b) whether the Magistrate applied the correct legal test;

(c) whether there is any evidence to support a finding by the Magistrate of a particular fact; and

(d) whether the facts found fall within a statute properly construed.[8]

[8]McKenzie v Healthscope Operations Pty Ltd [2020] VSC 217, [54]; Patsuris v Gippsland and Southern Rural Water Corporation (2016) 218 LGERA 167, 180 [45]; Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771, 784 [49], 805–6 [167].

The Magistrate’s reasons

The Magistrate referred to documents provided by Davey, titled ‘Plaintiff Aide Memoire: Statistics of the proceedings’ and ‘Plaintiff’s Procedural Chronology Aide Memoir to the Court’ (together, the ‘aide memoirs’), that the Magistrate said set out a summary of the statistics and key data of the Magistrates’ Court proceedings:

As at 10 February there have been some 38 court appearances and approximately 135 court orders. On any interpretation, the amount ordered in favour of the plaintiff on 28 March 2019 in the sum $81,748.29 is clearly disproportionate to the time spent in this litigation and the costs incurred by all of the parties in this proceeding. I also refer to the plaintiff’s aide memoire of the 4 February 2020 that sets out a plotted history of the proceeding and I incorporate both of those documents into this judgment.

The Magistrate noted that as a consequence of the High Court decision in Bell, Davey was not entitled to recover professional fees when he acted for himself in the Magistrates’ Court proceedings. For the same reason, the Magistrate did not allow Davey’s contractual claim for professional fees based on the terms of his fee agreements with the defendants.

The Magistrate noted that if he was satisfied on the balance of probabilities that a person had contravened any overarching obligation in the CPA he had the discretion to make any order he considered appropriate in the interests of justice under ss 29(1)(a) and (c). His Honour referred to the judgment of John Dixon J in Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (No 5) (‘Dura’)[9] as setting out many of the relevant factors to be considered in exercising the court’s discretion.
[9][2014] VSC 400.

The Magistrate found that it would be inconsistent with the decision in Bell to award costs under s 29(1)(a) in favour of a plaintiff where he is a solicitor who works for himself and seeks to recover professional costs. The Magistrate said:

In the circumstances, in properly exercising my discretion, I should not allow legal costs either under a fee agreement or at Common Law to be recovered where a solicitor acts for himself in recovery proceedings, seeking professional fees. Does it then follow that s.29.l(c) should fail for the same reasons. There is a significant distinction between the two sub-sections and there is no precedent and very little material to assist me on what compensation is meant to mean in circumstances such as these.

Referring to the concept of compensation, the Magistrate said that for a plumber this may involve a calculation of an amount for the lost opportunity for time spent in litigation when the person could otherwise have been working as a plumber, or for a nurse, the days they were not paid by their employer due to their attendances in court. The Magistrate said:

So what if the litigant is a lawyer acting for themselves in recovery proceedings? Considering Bell v Pentelow, in my view, just because Davey is a lawyer, should he be disqualified from the fundamental value of equality of all persons before the law? I also have to consider, in making any order and exercising my discretion, that it is appropriate in the interests of justice as the overriding consideration and I do see no reason per se why a lawyer should not be entitled to compensation, like anybody else who comes before the law, where there has been breach of an overarching obligation. Given I have determined that point in favour of the plaintiff I now need to consider if there has been such a breach of an overarching obligation by (a) the defendants, (b) Elvin and (c) Silverstein.

The Magistrate made findings that Dessmann contravened the obligation to act honestly in s 17 of the CPA, the proper basis obligation in s 18(d), and the obligation not to engage in misleading conduct in s 21 of the CPA.

Magistrate’s reasons – Contravention by Elvin

The Magistrate said:

I am very mindful of exercising my discretion in the context of lawyers acting for clients where cases may be unmeritorious. However I think the days of a lawyer blindly following their client’s instructions over a legal cliff are long gone. I specifically refer to Dixon J’s statement of the relevant principles at paragraphs 97 to 101 of the judgment in Dura v Hue Boutique 2004 that I referred to earlier.

The Magistrate found that the email set out in paragraph 25 above was an acknowledgement by Elvin that at the time he filed the defences his instructions were incomplete.

Referring to the same email exchange between Elvin and Dessmann, and the mutual gift giving defence the Magistrate said:

Then, from paragraph 19 onwards the mutual gift giving defence is pleaded out. This is despite Elvin forming a view that appears to be a concession by Dessmann that acknowledges owing the money.

The Magistrate made the following findings in relation to the client agreements and invoices issued by Davey:

Given what Elvin knew at the time, that Elvin was in possession of at least six of the client agreements and seven invoices, paragraph 5 of the defence appears to be inconsistent where it asserts they do not have copies of the alleged agreements in their possession. Paragraphs 6, 7 and 8 also appear to be inconsistent with Elvin’s knowledge of the case at the time, as instructed by Dessmann.

The Magistrate noted there was no reference in the defences to the text exchange set out in paragraph 26 above. The Magistrate concluded the text from Dessmann which stated ‘when my mum’s property sells I will pay you’ was a clear statement of the commercial relationship between he and Davey, and completely at odds with the defence of mutual gift giving.

On the basis of these findings the Magistrate concluded:

Elvin, in his cross-examination, at the bottom of p.18 of the transcript, acknowledges that there was strengths and weaknesses in both cases. It appears to me at this point at the filing of the defences that Elvin did not have the sufficient factual legal material available to make the claim for mutual gift giving when, on its face, Dessmann had made the above concessions which pointed to a commercial arrangement.

This appears to be the finding by the Magistrate that Elvin contravened the proper basis obligation in s 18 of the CPA.

The Magistrate then turned to the further and better particulars of the gifts alleged in the defences, which he noted did not include information from the summary of payments that disclosed the description of each payment. The Magistrate said that Elvin’s answers during cross-examination on this point had been ‘less than satisfactory’, and that:

To have disclosed the reason for the payments at that point were inconsistent with the defence filed. There was, at that point, clear evidence that Dessmann had made the payments for Davey’s legal work.

The Magistrate determined:
At this point of the time of Elvin's instructions and by Elvin filing the further and better particulars omitting the middle column, in my view, amounts to a breach of s.21 of the Civil Procedure Act by seeking to mislead what the true nature of the payments were by omitting the middle column. By not disclosing the true description of the payments in the further and better particulars either as rent or indeed Herm legal fees was, in my view, was a matter hotly contested to the end.

Grounds of appeal – Findings of contravention by Elvin

The first eight grounds relied on by Elvin are briefly stated as follows:

(a) Ground 1 — The Magistrate erred by failing to identify and apply the proper test for determining a contravention of s 18(d) of the CPA.

(b) Ground 2 — The Magistrate mistook the facts and did not properly apply the facts of this case to the principles applicable under s 18(d) of the CPA in concluding that Elvin did not have factual or legal material available to him to be satisfied there was a proper basis.

(c) Ground 3 — The Magistrate erred by not applying s 140 of the Evidence Act and the ratio of Briginshaw[10] when considering whether Elvin contravened s 18(d) of the CPA.
[10]Briginshaw (n 3) 361–2 (Dixon J).

(d) Ground 4 — There were no reasonable grounds on which the Magistrate could be reasonably satisfied for the purpose of s 29 and he erred in finding that Elvin had contravened s 18(d) of the CPA.

(e) Ground 5 — The Magistrate failed to identify and apply the proper test for assessing whether Elvin engaged in conduct which was misleading or deceptive or likely to mislead or deceive in contravention of s 21 of the CPA.

(f) Ground 6 — It was not open on the facts to find, and the Magistrate erred in applying the facts to s 21 of the CPA by finding, that by filing further and better particulars of the defendants’ defences, Elvin had engaged in misleading conduct.

(g) Ground 7 — The Magistrate erred by failing to apply s 140 of the Evidence Act and the ratio in Briginshaw when considering whether Elvin had contravened s 21 of the CPA.

(h) Ground 8 — The Magistrate erred in finding that Elvin contravened s 21 as there were no reasonable grounds on which the Magistrate could be reasonably satisfied for the purpose of s 29.

Submissions
Elvin
Ground 1: Failure to identify the proper test for construing s 18(d)

Dessmann gave Elvin oral and written instructions that he and Davey had made arrangements involving mutual exchanges of value, and provided Elvin with copies of correspondence passing between him and Davey relating to those arrangements. Elvin sought specific instructions in relation to documents which raised issues about the nature and extent of the arrangements. In the time available before filing the defences (which Davey declined to extend), Dessmann provided explanations which were consistent with his broader instructions as to the arrangements. Elvin understood and advised that there were strengths and weaknesses in the various arguments, but nevertheless formed a view that there was a proper basis, on the instructions and material that had been provided to him, for Dessmann to respond in the manner pleaded in the defences to the allegations made by Davey in the Magistrates’ Court proceedings.

The Magistrate did not refer to s 18 in making findings against Elvin. While the Magistrate did refer to the decision of John Dixon J in Dura, he did not identify the principles or test to be applied. In considering whether there had been a contravention of s 18(d) by Elvin the focus should have been the state of instructions he had received prior to filing the defence and the reasonable belief which he had derived by gathering instructions and testing them. The Magistrate’s oblique references to Dura do not fulfil the obligation to identify the principles for construing s 18(d).

Ground 2: Mistaking the facts and error in applying the facts to the test

The Magistrate found that Elvin lacked sufficient factual or legal material having regard to the concessions which he said Dessmann had made. Although not specified, it appears that the Magistrate was referring to acknowledgements by Dessmann in the email and text exchanges (set out in paragraphs 25 and 26 above, respectively) that he owed Davey money. Dessmann gave an explanation for these acknowledgements which was consistent with his instructions to Elvin of an arrangement for exchanges of mutual benefit which embraced Davey’s legal services. The Magistrate did not give reasons evaluating the adequacy of the explanations provided by Dessmann, or apply the evidence to the principles relevant for consideration of breach of s 18(d) of the CPA. The Magistrate ought to have held that s 18(d) was not breached because Elvin held a reasonable belief (and had reasonable grounds to believe) in the circumstances that the allegations in the defence had a proper basis. Elvin’s identification of weaknesses in the defence does not preclude him from having held a reasonable belief that the allegations had a proper basis.

Ground 5: Failure to identify the proper test for construing s 21

The Magistrate did not identify the principles or test to be applied to whether Elvin breached s 21 of the CPA by engaging in conduct which is misleading or deceptive. The relevant test is identified by John Dixon J in Hudspeth v Scholastic Cleaning and Consultancy Services Pty Ltd (No 8) (‘Hudspeth’).[11]

Ground 6: Error in applying the facts to s 21

[11][2014] VSC 567. See also Bolitho v Banksia Securities Ltd (No 18) (remitter) [2021] VSC 666, [1332]–[1334] (‘Bolitho’).

The particulars provided detail of the amounts alleged in the defence to be payments to Davey as part of the mutual exchange of value. It was not the function of particulars to provide evidence bearing on the contested nature of the transactions. Under r 13.06 of the Magistrates’ Court General Civil Procedure Rules 2020 (Vic), the process of providing particulars of a defence is one which is giving definition to the allegations in the defence.

The Magistrate stated that Elvin was ‘seeking to mislead’ but such a finding as to Elvin’s state of mind has no basis on the evidence and is irrelevant to a determination under s 21.

All the transfer receipts containing the description information which had been redacted in the particulars were produced on discovery to Davey on 2 September 2016. For this reason, the filing of particulars which lacked the information did not amount to conduct which, in all the circumstances, was misleading or deceptive.

Grounds 3 and 7: Failure to apply principles for standard of proof

It is necessary for the court to have regard to the nature of the subject-matter and gravity of matters alleged when evaluating the evidence and making its determination in accordance with s 140 of the Evidence Act and Briginshaw.[12] The Magistrate erred by failing to consider the gravity or repercussions of finding that Elvin had contravened ss 18(d) and 21 when evaluating the evidence and making the determinations.

Grounds 4 and 8: No reasonable grounds

[12]Briginshaw (n 3) 361–2 (Dixon J). See also Bolitho (n 11) [1384].

There was no evidence on which the learned Magistrate could be reasonably satisfied for the purpose of s 29 that Elvin had contravened ss 18(d) or 21 of the CPA.

Davey

Elvin is seeking to agitate matters which were conceded in the court below or were not raised by him before the Magistrate. He ought not be permitted to do so. In the hearing before the Magistrate, Elvin made no submissions regarding:

(a) Ground 1: The correct or proper test for determining whether there had been a contravention of s 18(d) of the CPA.

(b) Ground 5: The correct or proper test to be applied in determining whether a party had contravened s 21 of the CPA by engaging in misleading or deceptive conduct.

(c) Ground 6: Elvin conceded in cross-examination that the false and misleading details and omissions in the further and better particulars were never removed from the Magistrates’ Court file. No submissions were made by Elvin in the Magistrates’ Court in relation to this concession.

(d) Grounds 3 and 7: The applicability of s 140 of the Evidence Act and the Briginshaw test.

By forensic election and abandonment, Elvin is prohibited from raising points in this appeal which he chose not to argue at first instance.

It is evident from the reasons that the Magistrate identified the correct test for construing s 18(d) of the CPA, and made appropriate references to relevant authorities.

Before the defences were filed Dessmann admitted to Elvin that he owed the legal fees claimed by Davey. Having regard to the evidence by Elvin in cross-examination, the Magistrate could not be said to have mistaken the facts.

The Magistrate’s recognition, by reference to Dura, of the need for caution in making an adverse finding is an answer to Elvin’s complaint based on s 140 of the Evidence Act and Briginshaw. The evidence established that Elvin had in his possession the summary of payments showing him that the facts were not as he represented in the defences he filed. In those circumstances it was incontrovertible that the proper basis obligation was breached by him.

Elvin’s conduct in editing the summary of payments to remove the description of each payment, and providing the edited information in response to the request for further and better particulars, was misleading and deceptive, or likely to mislead and deceive. Admissions made by Elvin during cross-examination in the Magistrates’ Court support the finding made by the Magistrate.

Any error by the Magistrate (which is denied), has not and was never capable of causing substantial injustice to Elvin when the totality of his conduct is taken into consideration. Further, Elvin’s conduct was so serious that there could be no grounds to overturn the decision of the Magistrate. The Magistrate’s orders are a reflection of the court’s obligation to further the objects of the CPA and to send a message to the legal profession that such conduct will not be tolerated.

Grounds 4 and 8 are without merit.

Comment on Davey’s submissions

Davey’s written and oral submissions were difficult to follow. Most often they were not directed to any specific question of law identified by the grounds of appeal. The submissions also conflated findings against Elvin and Silverstein. Davey often sought to raise and re-litigate grievances about the conduct of the proceedings that were ventilated before the Magistrate, but did not form part of the findings, and have limited, if any, relevance to the grounds of appeal.

In both appeals Davey made serious allegations of misconduct and criminality against the appellants that were not the subject of any finding by the Magistrate, had no foundation in established facts, and were irrelevant to the grounds of appeal. There was no cross-appeal by Davey. The irrelevant allegations ought not to have been made.

Davey submitted that many of the appellants’ grounds of appeal were not raised at first instance, and for that reason the appellants should be prevented from relying on those aspects of their case on appeal. In fact the material demonstrates that in most cases the subject matter of the appellants’ grounds were raised during the Magistrates’ Court proceeding. In any event, the s 29 application was to be determined in accordance with law, and the appellants should not be precluded from arguing there was a failure by the Magistrate to do so.

Analysis
Section 18(d) – Proper basis

The operation of s 18(d) of the CPA was considered by John Dixon J in Dura. In summary his Honour concluded:

(a) The overarching obligations prevail where there is an inconsistency between them and a legal practitioner’s duty to a client. When determining whether an overarching obligation has been contravened it is not relevant to consider that a solicitor was following the client’s instructions.[13]
[13]Dura (n 9) [84].

(b) The time when it is necessary to assess whether there was a proper basis is when a claim is made in a proceeding, for instance by filing a pleading.[14] The statutory obligation is not continuous or ongoing, and material which only becomes known at a later time is not relevant.[15]
[14]Ibid [88].
[15]Ibid [89].

(c) A person can discharge the overarching obligation by demonstrating a reasonable belief based on the available factual and legal material.[16]

(d) Dismissal of a claim by a trial court does not create a rebuttable presumption that the claim lacked a proper basis when it was made.[17]

[16]Ibid [87].

[17]Ibid [83].

In Dura, John Dixon J observed:

A further relevant factor is the nature of the litigation. A complex proceeding involving numerous interlocking factual and legal issues is not readily characterised as plainly unarguable whereas an interlocutory application of the kind under consideration in Steindl might be. There is a difference between purely legal points and those that depend on one or more unresolved questions of fact, because it is not the duty of the legal practitioner to assess the court’s preference between his client’s witnesses and those of the other side, where there is a likelihood of a conflict of evidence.[18]

[18]Ibid [74].

While the learned Magistrate referred generally to the judgment in Dura, the test for compliance with the proper basis obligation was not referred to or set out in the reasons.

The Magistrate’s conclusion that Elvin did not have a proper basis for the mutual gift giving defence is based on the email exchange between Elvin and Dessmann set out in paragraph 25 above, and the text exchange between Dessmann and Davey set out at paragraph 26.

There was no attempt by the Magistrate to test the content of the email and text exchanges against all of the documents and instructions Elvin had received at that time, the evidence of what Dessmann said about his instructions to Elvin at the time, and what Elvin said he understood and believed on the basis of those instructions.

The documents and instructions available to Elvin at the time he filed the defences demonstrated that there were complexities in the evidence and in the relationship between Davey and the defendants. By the time of the email exchange set out in paragraph 25 above, Elvin was aware there were weaknesses in the defendants’ case. Appropriately, he raised these matters with Dessmann in order to test his instructions. One matter on which Elvin sought further instructions related to what appeared to him to be an admission or agreement by Dessmann in some emails that he owed Davey in the range of $50,000 to $70,000. Dessmann provided an explanation to Elvin that was consistent with the mutual gift giving defence. The Magistrate’s reasons do not disclose that he took into account or analysed Dessmann’s explanation, or Elvin’s evidence about his belief based on the instructions he received.

The Magistrate did not analyse the text exchange beyond saying that in his view it was a clear statement by Dessmann of a commercial relationship between he and Davey, and was completely at odds with the defence of mutual gift giving. There is some ambiguity in the text exchange. In the first text, Davey acknowledges an understanding that there will be a set-off for signage work. In his response, Dessmann queries why they bought the building, which I infer was the premises rented by him to Davey’s firm. In response to Dessmann suggesting he should stop all work, Davey replies that he does not need to be paid, but just needs some assistance. In the final text, Davey says, ‘We need to work together’. The text messages clearly refer to a number of related arrangements between Davey and Dessmann, with each providing some benefit to the other. The basis of the mutual arrangement cannot be ascertained simply by reference to the exchanged texts, and required analysis against the evidence of Dessmann and Elvin. By themselves, the texts are not necessarily inconsistent with the mutual gift giving defence.

The findings of the Magistrate set out at paragraph 58 above are difficult to follow. As I have already stated, there were two Magistrates’ Court proceedings. Dessmann was the sole defendant in the first proceeding, in which the amount claimed exceeded $66,000. Dessco and Dessmann were defendants in the second proceeding, in which the amount claimed was just over $17,500. The Magistrate is correct to observe that when he filed the defences Elvin had received copies of at least six client agreements from Dessmann, though it appears at least one was unsigned. It is not clear whether the client agreements relate to the amount claimed in the first proceeding, or to both proceedings. The defence in the first proceeding admitted the client agreements, but alleged they were not binding because of the mutual gift giving and alternative defences pleaded. In the second defence the defendants did not admit the client agreements ‘as they do not have copies of the alleged agreements in their possession’, and denied indebtedness pursuant to the client agreements on the basis of the defences. The Magistrate’s reasons do not distinguish between the two defences, analyse whether the client agreements in Elvin’s possession related only to the first or to both proceedings, and do not further analyse how identified paragraphs of the defence were inconsistent with Elvin’s instructions.

Contrary to the submissions made by Davey in this appeal, the Magistrate was addressed on the basis that the Briginshaw principle applied to the consideration of whether there had been contravention of obligations imposed by the CPA. While the Magistrate did refer to a number of paragraphs in Dura, including paragraph 108 where John Dixon J confirms the application of the Briginshaw principle, the Magistrate did not specifically address the issue in the reasons.

Application of the Briginshaw principle required cogent evidence sufficient for the Magistrate to feel an actual persuasion of circumstances which established the contravention.[19] The Magistrate did not consider the gravity or repercussions of a finding that Elvin had contravened s 18(d) of the CPA. Nor did the Magistrate test the cogency of all relevant evidence in order to determine whether he was reasonably satisfied the contravention had occurred. Application of s 140 of the Evidence Act and the Briginshaw principle required more in these circumstances than an inference drawn from the selected emails and text exchange to which the Magistrate referred.
[19]NOM v DPP & Ors [2012] VSCA 198, [124].

I conclude grounds 1, 2 and 3 are made out.

Section 21 – Misleading or deceptive conduct

The enquiry under s 21 of the CPA begins with a consideration of what the alleged contravener did or omitted to do. It is not relevant to consider whether the alleged contravener had an intention to mislead or deceive. Further, it is unnecessary to prove that the impugned conduct actually deceived or misled anybody. The issue is whether, tested objectively, the conduct was misleading or deceptive, or likely to mislead or deceive, in the sense that it induced or was capable of inducing error.

The defences filed by Elvin pleaded material facts to make out the mutual gift giving defence. These included the allegation that the defendants had given gifts to Davey. The Magistrate did not find that Elvin’s conduct in filing the defences contravened s 21 of the CPA.

The Magistrate concluded Elvin breached s 21 of the CPA by not disclosing the description of payments that were particularised as gifts in response to Davey’s request. The Magistrate found that the description of payments in the summary as legal fees was inconsistent with the mutual gift giving defence.

There are a number of difficulties with the approach taken by the Magistrate. First, there was no attempt to set out the principles that apply to the operation of s 21 of the CPA.

Second, the breach found by the Magistrate was that Elvin sought to mislead what the true nature of the particularised payments were by omitting the description in the middle column of the summary of payments. However, s 21 is not concerned with the mental state of the person who engaged in the impugned conduct. The Magistrate did not expressly consider whether, tested objectively, Elvin’s conduct in filing and serving the further particulars of the gifts induced or was capable of inducing error.

Third, the particulars were not a pleading of material facts, or evidence to be relied on in the Magistrates’ Court proceedings. The particulars simply gave the dates, times and amounts of payments which were alleged in the defences to be gifts. Elvin was not seeking to prove any fact or matter for the defendants by providing the particulars. In fact the particulars that were provided gave Davey notice of the case he had to meet, and limited the generality of the gift allegation in the defences. This enabled Davey to take appropriate steps in preparation of his claim, including checking the payments against his own records, and obtaining discovery of relevant documents from the defendants.

Fourth, the Magistrate did not apply the Briginshaw principle to the question of proof of breach of s 21 of the CPA by Elvin. Application of the Briginshaw principle required the Magistrate to test the cogency of all relevant evidence in order to determine whether he was reasonably satisfied the contravention had occurred, including that the information not included in the particulars was available to Davey on his own records, and was produced on discovery to Davey.

I conclude grounds 5, 6 and 7 are made out.

Grounds 4 and 8 were relied on in the alternative, as a fallback position. Given the conclusions I have already reached it is unnecessary to determine these remaining grounds.

Magistrate’s reasons – Contravention by Silverstein

After concluding that Silverstein did not comply with his obligation to file a proper basis certification when he filed amended defences in the Magistrates’ Court proceedings, the Magistrate said:

In [cross-examination] Silverstein can give no plausible explanation why, on his client’s instructions, he had signed and filed defences in this court and a claim at VCAT that were inconsistent bearing in mind that the points of claim at VCAT were made in February of 2018 and the amendment to the defences in this court were in March of 2018.
In this court the payment was directly asserted as part of mutual gift giving between Dessmann and Davey, but at VCAT the same sum was claimed as a debt. Further, there are also concerns I have about the [vehicle] invoice which Silverstein considered had not been stored by Davey and yet was only withdrawn at the contest.[20]

[20]CB 60.

The Magistrate observed that the issue of rent being paid by Dessmann for Davey was critical to the mutual gift giving defence.

The Magistrate referred again to the text exchange set out in paragraph 26, which he said was on the file provided by Elvin to Silverstein, and to Silverstein’s apparent view that the defendants had an excellent defence to the claim by Davey. The Magistrate concluded:

Even if the email exchanges had not been seen by Silverstein as between Elvin and Dessmann I find it very hard to accept that under s.18D how Silverstein could have a proper basis. Even if I'm wrong on that point, I am of the view that Silverstein acted dishonestly in breach of s.17 when he prepared contrary arguments on the same facts in two different forums, being this court and VCAT.
I add to the findings also the issue on the [vehicle] invoice, that Silverstein must have known it to be wrong and was maintained still at the contest.[21]
[21]CB 61.

Grounds of appeal – Findings of contravention by Silverstein

The first three grounds of appeal by Silverstein are summarised as follows:

(a) Ground A — The Magistrate failed to apply the correct legal test for establishing dishonesty as described in Peters v The Queen (‘Peters’).[22]
[22](1998) 192 CLR 493.

(b) Ground B — The Magistrate did not satisfy himself that Silverstein acted dishonestly on the balance of probabilities having regard to the Briginshaw principle.

(c) Ground C — On the totality of the evidence, it was not open to the Magistrate to find that Silverstein acted dishonestly in breach of s 17 of the CPA.

Submissions
Silverstein
Ground A — Failure to apply correct legal test for establishing dishonesty

As explained by Toohey and Gaudron JJ in Peters, to satisfy the test of whether an act is dishonest it is necessary to:

(a) identify the knowledge, belief or intent which is said to render the act dishonest;

(b) decide whether that knowledge, belief or intent was subjectively held; and

(c) decide whether the act was dishonest ‘by the standards of ordinary, decent people’.[23]

The Magistrate made no relevant findings as to the three elements of the Peters test.

[23]Ibid 504 [18].

The Magistrate appears to have concluded that Silverstein acted dishonestly in two respects: first, inconsistency between the Dessmann parties’ positions in documents filed in the Magistrates’ Court proceeding and in a related VCAT proceeding; and second, the late withdrawal of part of the claim relating to storage costs of the vehicle. The existence of an inconsistency between the pleadings could not, without more, establish that Silverstein acted dishonestly. The Magistrate did not make findings as to Silverstein’s subjective knowledge, beliefs and intentions in filing the amended defences in the Magistrates’ Court proceedings. The Magistrate did not grapple with Silverstein’s explanation for the error, being one of innocent or careless mistake. The Magistrate’s finding that Silverstein ‘must have known’ that maintaining the vehicle claim in the defence through to trial was wrong is not a finding that Silverstein in fact had a dishonest intent consistent with Peters. Further, the Magistrate did not address whether the conduct in relation to the amended defences or the vehicle would be considered dishonest by the standards of ordinary, decent people.

Ground B — The Magistrate did not satisfy himself that Silverstein acted dishonestly having regard to the Briginshaw principle

On the proper application of the Briginshaw principle, the Magistrate ought not to have concluded that Silverstein acted dishonestly based on an inference arising from an inconsistency between documents filed in different forums or the late withdrawal of an allegation, without evidence as to Silverstein’s subjective intent.

Ground C — It was not open to the Magistrate to find that Silverstein acted dishonestly in breach of s 17 of the CPA

Silverstein was consistent in his evidence that any inconsistency between the VCAT pleading and the amended defences filed in the Magistrates’ Court was an error, was unintentional, and was remedied by him through the filing of a further amended defence in the Magistrates’ Court proceedings (though he accepts that he failed to make a necessary amendment to one paragraph to bring it in line with the VCAT pleading). Silverstein conceded that he should have made the amendments earlier, when he filed the amended defence. Similarly, Silverstein conceded that the vehicle claim should have been withdrawn during the Magistrates’ Court hearing. There was no evidence before the Magistrate that Silverstein’s failures were anything other than unintentional or careless.

Davey

Silverstein made no submission in the Magistrates’ Court in respect of the matters raised by his appeal. By forensic election and abandonment he is prohibited from raising matters on appeal that were not argued at first instance.

The decision in Peters relates to the test for criminal dishonesty, and has no application to the question of whether there has been a contravention of s 17 of the CPA. The test is set out in the judgment of John Dixon J in Bolitho v Banksia Securities Ltd (No 18) (remitter) (‘Bolitho’).[24] In any event, given admissions made by Silverstein, there was compelling evidence of dishonesty.
[24]Bolitho (n 11).

Silverstein knew or ought to have known, based on correspondence sent to him by Davey, that Dessmann had manufactured the vehicle evidence. The vehicle invoice and pleading was not simply withdrawn, but was exposed as being fraudulent.[25]
[25]Davey Submissions [49].

At a late stage, Silverstein submitted to the Magistrates’ Court that his client wished to claim a set-off against Davey’s debt recovery proceedings. That decision lead to delay and increased costs in the proceedings. The set-off relied on certain invoices which had been issued by Dessmann to Davey as payable invoices. A short time after making the set-off application, Silverstein commenced a VCAT proceeding which sought to rely on the same invoices but asserted that the invoices were gifts from Dessmann to Davey. Silverstein’s involvement in both the Magistrates’ Court and VCAT proceedings, and his preparation of inconsistent evidence in support of those claims, ought properly be characterised as being dishonest.

Analysis

It was appropriate for the Magistrate to apply the test stated in Peters for determining whether an impugned act taken by Silverstein in the Magistrates’ Court proceedings was dishonest.[26]
[26]Legal Services Commissioner v Brereton [2011] 33 VR 126, 141 [66]; Pham v Legal Services Commissioner [2016] VSCA 256, [249]–[252] (Cavanough JA); Bolitho (n 11) [1326].

The Magistrate did not refer to Peters or other relevant authority, or state what findings were required to establish dishonesty. Having regard to the length of the hearing, and the apparent complexity of the issues, the Magistrate’s reasons for the finding of dishonesty against Silverstein are brief and do not contain an express analysis of the question of dishonesty in accordance with the test in Peters.

The Magistrate identified as relevant the act of filing the Magistrates’ Court defences and the inconsistent claim in VCAT. The reasons do not identify the knowledge, belief or intent which rendered the act of filing pleadings in the two proceedings dishonest, or determine whether Silverstein subjectively had that knowledge, belief or intent. The Magistrate did not grapple with Silverstein’s explanation that any error by him in filing documents in February and March 2018 was a mistake which he sought to remedy by filing a further amended Magistrates’ Court defence.

Beyond saying that ‘the payment’ was asserted in the Magistrates’ Court documents to be a gift, but in the VCAT documents the same sum was claimed as a debt, the reasons contain no analysis or findings in relation to what was said to be an inconsistency. In other words, the Magistrate did not analyse the facts to establish the inconsistency or grapple with the issue of what it was about filing the Magistrates’ Court and VCAT documents that was objectively dishonest.

According to Dessmann’s evidence filed in support of the VCAT claim, rent on the premises was $400 per week commencing from 17 June 2015 when Dessco became registered proprietor of the premises. On that basis, rent payable to 30 April 2016 was approximately $18,000. In the VCAT proceeding Dessmann acknowledged payments of rent had been made, and claimed arrears for that period of $4,468.83.

Paragraph 1(e) of the further and better particulars filed by Elvin in the Magistrates’ Court proceedings record payments of approximately $7,800 said to have been made by Dessmann to Davey as gifts. The particulars record that Davey used some of the funds gifted to him to make rent payments for amounts and on dates that were peculiarly within his knowledge.

It is evident from the above that in the Magistrates’ Court proceedings the defendants alleged that in the period to early 2016 they made payments as gifts to Davey, some of which were applied by him towards rent of the premises he leased from Dessco. In the VCAT proceeding the defendants alleged that in the period from 17 June 2015 to 30 April 2016 Davey paid some amounts of rent for the premises, but was in arrears of rent and outgoings in the sum of $4,468.83. Those allegations are not necessarily inconsistent.

When cross-examined about these matters in the Magistrates’ Court Silverstein said that while he initially understood there was a proper basis for Dessmann’s claim that he had paid money to Davey to assist in payment of the rent, he subsequently looked more closely at the transactions and came to the view that Dessmann was either confused about the nature of the payments, or that he had misunderstood Dessmann’s instructions, and then took steps to advance a claim in VCAT that certain rents had not actually been paid. The evidence given by Silverstein is somewhat confusing, and not entirely consistent with the above analysis of the pleadings and relevant documents. Whatever the explanation for his evidence Silverstein was consistent in maintaining that any error he made was unintentional, and that he attempted to remedy the situation by filing a further amended defence in the Magistrates’ Court proceeding in January 2019.

There is no indication in the reasons that the Magistrate turned his mind to the third aspect of the test in Peters, that the act of filing pleadings in the two proceedings was dishonest according to the standards of ordinary and decent people. In complex proceedings spanning a number of years that involved a range of claims and defences, satisfaction of the third aspect of the test in Peters required more than simply identifying that, at a point in time, a practitioner was responsible for filing what were found to be inconsistent documents in different proceedings. It was necessary that the Magistrate analyse and make findings about the nature of any inconsistency, consider the stage each proceeding had reached, whether the inconsistency in pleadings were taken to trial in each proceeding or remedied beforehand, and whether filing inconsistent pleadings reflected an attempt to obtain advantage in one or both proceedings or was more likely consistent with error.

The Magistrate’s findings in relation to the vehicle invoice are insufficient to support the dishonesty conclusion. There was no analysis of the facts relevant to the vehicle invoice, or how any act or omission by Silverstein in maintaining the invoice to trial, or failing to withdraw it at some earlier unspecified time, was objectively dishonest. The Magistrate did not identify or make any finding as to an act or failure to act by Silverstein that would be considered dishonest by the standards of ordinary, decent people. The vehicle invoice was not part of any pleaded defence filed in the Magistrates’ Court proceedings, or of the particulars filed by Elvin. In response to the threatened application to strike out the defences, Elvin referred collectively to invoices which Dessmann might rely on should parts of his defence succeed. However, there was no specific reference to the vehicle invoice. In cross-examination at the Magistrates’ Court principal trial Dessmann conceded what he had already told Elvin and Silverstein, that at no stage did he store the vehicle. However, there is evidence that Dessmann agreed to store the vehicle at Davey’s request, and that the vehicle was registered with VicRoads at Dessmann’s address by Davey pursuant to that agreement. The Magistrate’s reasons do not grapple with this evidence or, in that context, contain findings in accordance with the test in Peters.

The allegations of dishonesty against Silverstein were of a serious nature. Silverstein, a legal practitioner, would likely face significant consequences in terms of his continued legal practice from a finding that he acted dishonestly in the conduct of civil proceedings. The Magistrate did not consider the gravity or repercussions of a finding that Silverstein had contravened s 17 of the CPA. Application of the Briginshaw principle reinforces that the Magistrate’s findings were inadequate and insufficient to support the conclusion that Silverstein had acted dishonestly in the proceedings.

The only evidence which could support a finding of dishonesty were the pleadings filed by Silverstein in the two proceedings, and his explanation in cross-examination for having done so. Silverstein’s evidence was consistently to the effect that any error made by him was unintentional. The Magistrate did not refer to any evidence, other than what he concluded was an inconsistency in the pleadings, which supported a finding of dishonesty. Nor was I taken to any other relevant evidence in submissions. I conclude there is no probative evidence that would allow the finding of dishonesty to be made.

I have set out earlier in these reasons, and summarised in paragraphs 23, 31–32 and 34–35 above, the evidence relating to the vehicle, the agreement between Davey and Dessmann, and the vehicle invoice. I conclude on that evidence it was not open to the Magistrate to find Silverstein contravened s 17 of the CPA by any act or omission in relation to the vehicle invoice.

For these reasons grounds A, B and C are made out.

Magistrate’s reasons – Compensation

The Magistrate dealt with causation of loss resulting from contraventions of the overarching obligations by Elvin as follows:

Looking at Elvin’s affidavits sworn on 19 August 2019 together with exhibits, his cross-examination, his examination-in-chief and taking into account the caution to be applied, as noted by Dixon J in Dura and based on the submissions by Davey and Mr Mueller at the time of the filing of the defences Elvin did not have, in my view, factual or legal material available to him to have a proper basis. I also note that save for a number of amendments made by Silverstein for his client adding matters the defence filed by Elvin in large part were taken to contest unaltered. For this reason the contravention by Elvin materially contributed to any financial loss to be suffered by Davey.

In relation to causation by Silverstein, the Magistrate found:

I am also of the view that the matters outlined above materially contributed to the length and the complexity of this case. I have come to this conclusion after considering all of the evidence, the submissions by Silverstein, his lawyers and Davey.

The Magistrate addressed the question of compensation as follows:

Now that I have made findings on the breaches by the defendants and Elvin and Silverstein, how do I make an order for compensation? It appears, as I have ruled earlier, that Davey should be compensated for his time and efforts that he has taken to prove his claim and to defeat the defendant's set-off. I have also ruled that he should not be entitled to claim his legal fees under his client agreements. In the interests of justice it appears that an appropriate method and a reasonable way of calculating Mr Davey's time and effort in this proceeding is to apply the practitioner's remuneration order as a reasonable way of compensating Davey for his time and efforts and in the interests of justice.

The Magistrate expressed his conclusion as to the liability of Elvin and Silverstein as follows:

As to Elvin, that he jointly and severally be liable with the defendants for compensation based on the practitioner's remuneration order from 10 June 2016 to 6 February 2017. And further that Silverstein be jointly and severally liable for compensation with the defendants from 6 February 2017 to today. I further make these orders under part 4.5 of the Civil Procedure Act. And if there is no agreement as to the amounts being paid by the defendants and the respondents, Elvin and Silverstein, then the amount of the compensation to be paid by them under the relevant practitioner’s remuneration order shall be assessed by the Costs Court.

Grounds of appeal – Compensation

Elvin’s remaining grounds of appeal are briefly stated as follows:

(a) Ground 9 — The Magistrate erred in exercising the court’s power to make an order under s 29 of the CPA by failing to consider whether to exercise the discretion and whether making such an order would be in the interests of justice.

(b) Ground 10 — It was not open to the Magistrate on the evidence to determine, and he erred in failing to apply the facts when determining, that Davey suffered any financial or other loss within the operation of s 29(1)(c) of the CPA.

(c) Ground 11 — The Magistrate failed to identify and apply the proper test with respect to an order to compensate Davey for any financial or other loss.

(d) Ground 12 — The Magistrate failed to properly apply the facts to whether Elvin’s contraventions of the overarching obligations (as found) materially contributed to financial or other loss suffered by Davey.

(e) Ground 13 — The Magistrate erred by considering and relying on the aide memoirs compiled by Davey but that were not agreed or in evidence. Further, the Magistrate failed to consider whether Davey’s conduct had exacerbated the time absorbed and costs incurred by the proceedings.

(f) Ground 14 — The Magistrate had no reasonable grounds on which to make an order against Elvin under s 29 of the CPA, including because Davey was not entitled to recovery of costs under the Magistrates' Court Act or otherwise, or legal fees under his client agreements.

(g) Ground 15 — The Magistrate erred by failing to accord natural justice or procedural fairness in ordering that compensation be paid by Elvin without notice to or hearing from him as to compensation being based on the PRO.

(h) Ground 16 — The Magistrate erred in making orders under Part 4.5 of the CPA. The Magistrate’s exercise of power miscarried by: first, failing to accord natural justice or procedural fairness; second, failing to construe properly the court’s power under Part 4.5 to make orders as to costs; third, failing to properly take into account relevant considerations including that Davey was not entitled to recover costs and the compensation order under s 29(1)(c) of the CPA was not an order as to costs within the meaning of Part 4.5 of the CPA.

Silverstein’s grounds of appeal in relation to compensation are:

(a) Ground D — The Magistrate wrongly concluded that Davey ought to be compensated for his ‘time and effort’ in the proceedings and not, instead, for any relevant ‘financial loss or other loss’ within the meaning of s 29(1)(c) of the CPA.

(b) Ground E — The Magistrate made an order compensating Davey for his costs of the proceedings, which was an order that was not open to him to make under s 29(1)(c) and would otherwise fall within s 29(1)(a) of the CPA, but could not be made in favour of Davey by reason of the operation of the principle in Bell.

(c) Ground F — There was no evidence upon which the Magistrate could have been satisfied that Davey suffered ‘a financial or other loss’ within the meaning of s 29(1)(c) and/or that any relevant breach by the Silverstein ‘materially contributed’ to that loss.

(d) Ground G — The Magistrate failed to consider whether, on finding a breach of an overarching obligation, the court should exercise its discretion to make an order against Silverstein. Further, the Magistrate failed to consider, amongst other things, Davey’s conduct and whether that contributed to any loss suffered, the relationship between the Dessmann parties’ conduct in the proceeding and Silverstein’s alleged breaches and whether it was in the interests of justice to make the order.

(e) Ground H — The Magistrate erred in making the compensation order referable to the PRO in circumstances where no claim in respect of financial loss or other loss based on the PRO had been pleaded, no evidence was adduced, or submissions made, as to why the PRO was a proper measure of compensation and the PRO does not apply to legal services provided in connection with litigious matters pursuant to s 94 of the Legal Profession Uniform Law Application Act 2014 (Vic) (‘LPULAA‘).

(f) Ground I — repeats Ground E.

(g) Ground K — The Costs Court does not have the power to enforce an order for compensation made pursuant to s 29(1)(c) of the CPA.

Submissions
Elvin
Ground 9: Failure to consider exercising discretion and interests of justice

After finding contravention of ss 18(d) and 21 by Elvin, the Magistrate presupposed that an order for compensation was required and did not consider whether an order was appropriate in the interests of justice. Exercise of the discretion under s 29 is a two stage process as confirmed in Hudspeth and Bolitho. The discretion is broad and largely unfettered save for the context of the CPA. The Magistrate ought to have undertaken a full examination of Elvin’s dealings as well as Davey’s conduct in refusing an extension of time for filing of the defences.

Ground 10: Failure to apply the facts to determining financial or other loss

The Magistrate did not make a finding of financial or other loss by Davey. The finding that Davey ought to be compensated ‘for his time and efforts’ was not a finding that Davey had suffered financial or other loss. Davey submits that the value of his time and efforts fulfil the criteria under s 29(1), however the Magistrate did not follow any path or reasoning to identify how or whether that might be so. Had the Magistrate done so, the exercise would have been unsuccessful, as Davey has not been able to establish any characteristic of loss. No evidence was adduced by Davey of a lost opportunity that he could have otherwise exercised working as a lawyer. The burden of Davey’s application was directed to recovering profit from carrying out legal work in the proceedings, rather than loss as a result of being unable to carry out other work.

Section 29(1)(c) is directed to something other than the costs of the proceeding (which is the subject of s 29(1)(a)). The effect of the Magistrate’s finding, which is to award Davey his professional remuneration as a lawyer for the time he spent in litigation, is inconsistent with the decision in Bell. The degree of profit seeking evident in Davey’s compensation claim is equally inconsistent with the reasoning of the court in Bell.

In Bolitho, John Dixon J considered loss by reference to a counterfactual, namely, what would have been different if the contravention had not taken place?[27] No such alternative scenario was identified by the Magistrate in this proceeding.
[27]Bolitho (n 11) [1798]–[1799], [1805].

The Magistrate failed to consider whether the compensation he ordered was referable to loss caused by Elvin’s contravention of the CPA. Section 29 provides for a test of material contribution.[28] It is a two-step process: firstly to analyse the impact of Elvin’s breach on the course of the proceedings; secondly to analyse what that led to in terms of compensable loss.

Ground 11: Failure to identify and apply proper test as to an order to compensate

[28]Bolitho (n 11) [1775]–[1792].

The Magistrate failed to identify the proper test, or determine what was required to put Davey in the position he would have been in absent Elvin’s contraventions of ss 18(d) and 21 of the CPA. By finding that Davey should be compensated for his time and efforts in proving his claim against the defendants, the Magistrate rewarded Davey for work carried out in the proceedings, effectively allowing him to recover legal costs, rather than compensation for any proven loss.

Ground 12: Failure to apply facts to causation

The Magistrate erred by applying the PRO when making orders compensating Davey for his time and efforts by failing to identify loss and causation and instead making orders by reference to work carried out in the proceedings.

Ground 13: Irrelevant considerations and ignored considerations

The Magistrate erred by considering and relying on the aide memoirs. Further, the Magistrate failed to consider whether Davey’s conduct had exacerbated the time absorbed and costs incurred by the proceedings. Such conduct was directly relevant to an evaluation of the impact of the breaches found against Elvin, and to whether the discretion should be exercised in the interests of justice.

Ground 14: No reasonable grounds

In all the circumstances, there were no reasonable grounds on which the Magistrate could decide to make an order in the interests of justice against Elvin under s 29.

Ground 15: Failure to accord natural justice or procedural fairness

The PRO was not mentioned at the hearing, in submissions or evidence for the purpose of calculating any compensation ordered. Elvin was denied the opportunity to be heard as to whether the PRO was an appropriate instrument for the calculation of loss. The PRO is entirely inapposite to act as a measure of loss, as it deals with fees for solicitors acting on transactions, such as transfers of land, but not in litigation.

Ground 16: Error in making orders under Part 4.5

The Magistrate made the orders under Part 4.5 of the CPA in circumstances where Davey had not made an application for orders under that part and no relevant submissions had been made. In so determining, the Magistrate erred in failing to accord Elvin procedural fairness and natural justice. Further, the order is incompatible with the determination that Davey was not entitled to an order for costs.

Silverstein

I will not set out Silverstein’s submissions to the extent they repeat those made by Elvin.

Grounds D, E and F — Compensation for time and effort, not financial loss

A submission was made directly to the Magistrate that Davey had suffered financial or other loss within the meaning of s 29(1)(c).

The Magistrate appears to have concluded that had Davey not been conducting the proceedings, he would have spent an equivalent amount of time doing other work, such that every hour he spent on the proceedings represented an hour of lost income. Further, the Magistrate appears to have assumed that if the alleged contraventions of the overarching obligations had not occurred, the proceeding would not have taken place. There was no evidence before his Honour capable of supporting either of these conclusions.

Ground H — The Magistrate erred in making a compensation order referable to the PRO

The PRO is a measure of legal costs and necessarily incorporates an element of profit. It is a proxy for the income that may properly be earned by a legal practitioner in carrying out certain types of legal work, expressly excluding litigation work. The PRO could not be a proper measure of loss in circumstances where Davey’s time spent working on the proceedings could be considered as providing legal services to himself in relation to litigious matters.

Ground K — Order beyond jurisdiction

The compensation order is beyond the jurisdiction of the Costs Court. The jurisdiction of the Costs Court is established by Part 2, Division 2B of the Supreme Court Act 1986 (Vic) (‘Supreme Court Act’). There is no legislative provision, in that Division or elsewhere, giving the Costs Court jurisdiction to assess compensation under s 29 of the CPA. While the Costs Court has the jurisdiction to assess costs in Magistrates’ Court proceedings, there is no authority for the proposition that costs (as defined in s 3(1) of the Supreme Court Act) includes compensation for financial or other loss within the meaning of s 29(1)(c) of the CPA.

Davey

The appellants made no submission to the Magistrate regarding various matters that are now the subject of the grounds of appeal. This includes the applicable basis for exercise of the discretion in s 29 of the CPA by the court, the correct legal test for determining financial or other loss, causation of loss, and the relevance of Davey’s conduct to an award of compensation and the jurisdiction to make orders under Part 4.5 of the CPA. Having made that election, the appellants should be precluded from relying on grounds going to those issues.

The Magistrate correctly identified the test under s 29. If satisfied on the balance of probabilities that a person has contravened any overarching obligation the court may make any orders it considers appropriate, including to compensate under s 29(1)(c) for financial or other loss materially contributed to by the contravention. As the judgment of John Dixon J in Bolitho demonstrates, once the causal link has been established there is a reverse onus on the respondent to show that it did not in fact contribute to any loss suffered.

Other aspects of the judgment in Bolitho are important. The assessment of loss is based on equitable principles. The purpose of the overarching obligations is to protect the administration of justice and to prevent the court’s processes from being used in ways which are improper. Because there is a disciplinary dimension to orders which may be made, the court is not constrained by whether loss to an applicant has been proved, and an order remediating a breach need not be purely based on loss. The correct starting point is not the opportunity cost suffered by Davey as a result of his necessary involvement in the Magistrates’ Court proceedings.

The evidence demonstrated that the conduct of Elvin and Silverstein materially contributed to the disproportionate costs and the delays experienced in the Magistrates’ Court proceedings.

The decision in Bell is not relevant to an award of compensation pursuant to s 29(1)(c). The only basis on which compensation could be awarded was the employment that Davey was engaged in at the time. The invoices provided by Davey to support a claim for compensation were a minute-by-minute description of time he spent on the litigation. It would be an error to conclude that did not form a reasonable basis for the Magistrate to award compensation for contraventions of the overarching obligations.

No submissions were made by the appellants in the Magistrates’ Court as to the appropriate scale for assessment of compensation. In those circumstances there can be no complaint about the adoption of the PRO by the Magistrate. Alternatively, if it was an error to use the PRO, this court should consider an appropriate scale or basis for assessment of compensation rather than remit the matter.

Pursuant to rr 63.35 and 77.01 of the Supreme Court (General Civil Procedure) Rules2015, the Costs Court has jurisdiction to determine the matter referred to it by the Magistrate. Any lack of jurisdiction by the Magistrate to make that referral should now be remedied by an order by this court.

Analysis
Section 29 discretion

Having concluded that there were contraventions of overarching obligations imposed by the CPA, the Magistrate was required to consider whether it was in the interests of justice to make an order under s 29(1)(c) of the CPA, and if so, what order should be made.[29] The discretion conferred is not defined by grounds on which it is to be exercised. In those circumstances it is appropriate to consider the scope, purpose and real object of the provision.[30] Relevantly s 8 of the CPA provides that in the exercise of any of its powers a court must seek to give effect to the overarching purpose of the CPA, that is to facilitate to the just, efficient, timely and cost-effective resolution of the real issues in dispute, and s 9 sets out objects the court must have regard to in making any order. In Gippsreal Ltd v Kenny & Another, the Court of Appeal said:

As the making of an order under s 29 of the CPA is discretionary, the circumstances of a particular case may give rise to particular issues that need to be considered in the proper exercise of the discretion. The weight to be given to any particular matter, including the merits of a party’s claim which is sought to be impugned on the basis of delay, may vary from case to case.[31]

[29]Hudspeth (n 11) [255].

[30]Klein v Domus Pty Ltd (1963) CLR 467, 473.

[31](2016) 52 VR 149, [60] (Whelan, Priest and Kyrou JJA).

Early in the ruling the Magistrate stated the test in terms of s 29(1) of the CPA, that he had the discretion to make an order he considered appropriate in the interests of justice.

The Magistrate expressly considered whether it was appropriate in the interests of justice that Davey, as a legal practitioner representing himself in the proceeding, should be entitled to be compensated for time he was required to spend on the litigation. It was not argued this was an irrelevant consideration for the Magistrate to have taken into account. Given the breadth of the discretion conferred by s 29(1) of the CPA it is difficult to see how such an argument would succeed.

Given that the Magistrate referred to the discretion to be exercised, and considered a relevant matter, it cannot be said there was a complete failure to exercise the discretion. Elvin’s ground 9 is not made out.

The Magistrate found the contraventions by Elvin and Silverstein materially contributed to the length and complexity of proceedings, and to any financial loss suffered by Davey. However that causation finding was expressed in a summary fashion.

The Magistrates’ Court proceedings were factually complex, and the litigation hard fought. Davey’s claim was defended on a number of bases. Only the mutual gift giving defence was impugned by the contraventions by Elvin and Silverstein found by the Magistrate. There was no consideration by the Magistrate of the course the litigation would have taken if the contraventions by Elvin and Silverstein did not occur.

The Magistrate did not consider whether and how Davey’s conduct exacerbated the time absorbed and steps taken in the proceeding, for example, in the seven months when Elvin represented the defendants, Davey filed five requests for further and better particulars, four notices to admit facts, three notices to produce and a summons for strike out and summary determination.

The circumstances of the Magistrates’ Court proceedings required that in exercising the discretion in s 29(1)(c) of the CPA the Magistrate evaluate the relative impact of the impugned conduct of the defendants Elvin and Silverstein, and of Davey’s own conduct, on the proceedings and loss suffered by Davey. The Magistrate was required to consider whether, in light of that evaluation, the interests of justice were best served by making the compensation order against Elvin and Silverstein, some other order, or no order at all.

I conclude the Magistrate erred in exercising the discretion in s 29(1)(c) of the CPA by failing to have regard to relevant considerations. On that basis, Elvin’s ground 13 and Mr Silverstein’s ground G are made out.

The Magistrate relied on the plaintiff’s aide memoires as setting out the procedural history of the Magistrates’ Court proceedings. The documents were not relied on to establish any fact which could not be determined from the court file. The Magistrate was not in error by relying on the documents. To that extent Elvin’s ground 13 and Silverstein’s ground G are not made out.

Finding of financial or other loss

Davey filed an affidavit in the Magistrates’ Court application, affirmed on 28 October 2019, in which he said:

(a) he was at all material times a sole practitioner, and with the exception of some contract work his legal practice had been the sole source of his income since 2012;

(b) two documents that he produced itemised and particularised his compensation claim, which he relied on for his claim under s 29 of the CPA;

(c) the quantum of his claim was $364,286.45, of which $13,334.30 is claimed as disbursements.

The documents relied on by Davey were itemised invoices addressed to Dessmann for legal fees for work performed by Davey and other persons in his firm, and disbursements incurred by Davey, in the Magistrates’ Court proceedings.

Davey claimed legal costs against Dessmann in the Magistrates’ Court proceedings in the same sum relying on the same invoices.

The application was listed for hearing for two days in November 2019. The first day was taken up with legal argument. Davey gave evidence on the second day. His substantive evidence in chief was limited to affirming and tendering his affidavit. He was cross-examined about background and liability issues by counsel for Elvin, during which problems arose as to the state of particulars of loss Davey had provided.

When the application returned to court on 9 December 2019 each of the respondents made submissions objecting to the adequacy of the particulars provided by Davey. Silverstein, representing the defendants, submitted Davey had not provided any evidence in support of causation or financial loss. He noted Davey had produced the invoices, but no tax returns or accounting evidence upon which the court could arrive at a proper conclusion as to what financial compensation might be awarded. Silverstein concluded:

There is no way known how this court can gauge what the financial compensation is. They can gauge what the legal costs are; they can gauge the disbursements. But this court is being asked to create a precedent, and to give, basically, a judgment in a financial compensation claim where there’s no affidavit material before this court.

Davey was given a further opportunity to provide further particulars later that day, which he did. However, the evidence in relation to loss remained limited to his affidavit.

Later in the proceeding, counsel for Silverstein submitted:

So we say here what Mr Davey would have had to do to make out a claim for compensation is establish his loss of opportunity to do other paying legal work while he was otherwise engaged in this matter. He has not put on any evidence of any loss of legal work, how his practice is structured, his tax returns, no expert opinion about what that may have been. That's the sort of evidence that would have been required to establish compensation and loss, in our submissions.
…
The plaintiff has not put on any evidence relating to quantum, other than the “invoices”. In those circumstances, the proper characterisation of the plaintiff's claim is one for legal costs and not compensation and/or the plaintiff has failed to prove his claim for “compensation”.

On that evidence the Magistrate ordered that the appellants compensate Davey based on the PRO for the whole of these proceedings.

The PRO is an order which may be made by the Legal Costs Committee under s 94 of the LPULAA with respect to the costs that may be charged by law practices for providing legal services other than in relation to litigious matters. Section 94 is found within Part 6 of the LPULAA, which deals with legal costs.

The effect of the compensation order was to compensate Davey for his time and effort spent as a lawyer representing himself in the Magistrates’ Court proceedings, in other words his legal costs, without identifying any financial or other loss suffered by him.

A self-represented litigant is not entitled to be recompensed for the value of their time spent in litigation.[32] The exception to the rule that a self-represented litigant who happens to be a solicitor may recover their professional costs of acting in litigation was removed by the decision in Bell.[33] The effect of the order made by the Magistrate was to award Davey recompense for the value of his time spent in the Magistrates’ Court proceedings, contrary to the authority of Cachia v Hanes[34] and Bell.
[32]Cachia v Hanes (1994) 179 CLR 403, 410–11; Bell (n 1) [1] (Kiefel CJ, Bell, Keane and Gordon JJ).
[33]Bell (n 1) [3] (Kiefel CJ, Bell, Keane and Gordon JJ).
[34](1994) 179 CLR 403.

The Magistrate correctly concluded that, because of the principle established in Bell, an award under s 29(1)(a) could not be made to Davey for the legal costs of representing himself in the proceeding. Yet that was the effect of the compensation order. By conflating legal costs with financial or other loss the Magistrate misconstrued the test to be applied under s 29(1)(c).

In Bolitho, John Dixon J concluded equitable principles should guide determination of the measure of compensation under s 29(1)(c) of the CPA:

Having regard to the context and purpose of s 29 of the Civil Procedure Act, equitable principles are a better source of guidance when selecting a measure of compensation that conforms to both the remedial purpose of the statute and to the justice and equity of the case. The principles of general law to be contemplated when assessing compensation extend to the principles of equitable compensation.[35]

[35]Bolitho (n 11) [1785].

The measure of equitable compensation is the sum necessary to restore a person to the position they would have been in had the breach of equitable obligation not occurred.[36]
[36]Bolitho (n 11) [1791]; GM & AM Pearce & Co Pty Ltd v Australian Tallow Producers [2005] VSCA 113, [65] (Warren CJ) (‘GM’).

There is power under s 29(1)(c) to make orders of a punitive nature where a compensatory order does not have a sufficiently appropriate impact or to consider whether exemplary damages are necessary to express the court’s condemnation of the contravening conduct.[37] These issues were not considered by the Magistrate and do not arise on appeal. There is nothing in the Magistrate’s reasons to suggest that he was performing a disciplinary function when he made the compensation order.
[37]Bolitho (n 11) [1783].

The assessment of loss requires consideration of a hypothetical counterfactual, namely what position would the person have been in but for the impugned act or omission.[38] Compensation is to be assessed at trial with the full benefit of hindsight and with speculation against the interests of the person compensated.[39] The CPA provides for compensation for loss that was ‘materially contributed’ to by a contravention affecting the proper administration of justice and is not restricted to loss of which the contravention was the sole cause.[40]
[38]Bolitho (n 11) [1789]–[1790]; Lewis v Australian Capital Territory (2020) 94 ALJR 740, 753 [35], [37] (Gageler J), 783 [178] (Edelman J).
[39]Bolitho (n 11) [1791]–[1792]; GM (n 36) [65] (Warren CJ).
[40]Bolitho (n 11) [1717].

The evidence did not identify the position Davey would have been in had the contraventions found against Elvin and Silverstein not occurred. No counterfactual analysis was undertaken by the Magistrate. Such an analysis required consideration of the likely course of the litigation but for the impugned conduct of the appellants, and what that led to in terms of compensable loss. The Magistrate erred in failing to undertake an analysis of loss in these terms. Had the analysis been performed the inevitable conclusion would have been that Davey’s evidence did not establish compensable loss.

If an applicant for orders under s 29(1)(c) leads evidence supporting findings of causation and loss an evidentiary onus may shift to the respondent to demonstrate that part or all of the loss would have been suffered in any event.[41] The evidence relied on by Davey was simply an assessment of the legal costs of acting for himself in the Magistrates’ Court proceedings. There was no evidence upon which it could be concluded that the assessment of costs represented a loss to Davey for which justice required that he be compensated by Elvin and Silverstein on the basis they materially contributed to it. In the circumstances, the onus did not shift to Elvin and Silverstein to disprove loss.
[41]Bolitho (n 11) [1728]–[1730], [1811].

Elvin’s grounds 10, 11, 12 and 14, and Silverstein’s grounds D, E, F and H are made out.

The PRO

The invoices relied on by Davey were not an assessment of costs under the PRO. There was no evidence led or submission made by Davey that loss should be assessed by reference to the PRO.[42]
[42]The PRO was mentioned solely as the basis for assessment of certain disbursements.

There was nothing to indicate to Elvin and Silverstein that they were required to meet a case of loss assessed under the PRO, and no opportunity for them to lead evidence or make submissions on the matter.

The Magistrate gave no reasons for applying the PRO to the assessment of loss. The PRO is a measure of legal costs in non-litigious matters. There is nothing to indicate why the PRO was an appropriate instrument for calculating loss.

Natural justice required that the appellants be given an opportunity to be heard on this matter.

I conclude Elvin’s ground 15 and Silverstein’s ground E are made out.

Part 4.5 of the CPA and the Costs Court

Davey made no application for orders under Part 4.5 of the CPA, and the appellants had no opportunity to make submissions as to the jurisdiction to make or appropriateness of such an order. In the circumstances the Magistrate failed to afford the appellants natural justice.

Part 4.5 of the CPA provides for the court’s powers as to costs. The order made by the Magistrate is incompatible with the determination that Davey was not entitled to an order for his costs of the Magistrates’ Court proceedings.

Elvin’s ground 16 is made out.

The Costs Court, established under Division 2B of Part 2 of the Supreme Court Act is a statutory court with limited jurisdiction. Under s 17 of the Supreme Court Act the Costs Court has jurisdiction to hear and determine the assessment, settling, taxation and review of costs in the courts and tribunals specified, including the Magistrates’ Court.

Costs are defined in s 3(1) of the Supreme Court Act:

costs includes fees, charges and disbursements;

The Magistrate determined Davey was not entitled to an order for costs under the rules of the Magistrates’ Court, pursuant to the fee agreements and under s 29(1)(a) of the CPA. The compensation order made under s 29(1)(c) was not an order for costs as defined under the Supreme Court Act, and the Costs Court does not have jurisdiction to undertake the assessment for which the orders provided.[43]
[43]Owerhall v Bolton & Swan [2015] VSC 417, [9] (Bell J).

Rule 63.35 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic), on which Davey relied, deals with the powers of the Costs Court on a taxation of costs. The effect of the compensation order was to refer the assessment of compensation orders under s 29(1)(c) of the CPA to the Costs Court, not a taxation of costs. In the circumstances, r 63.35 did not operation to extend the jurisdiction of the Costs Court as Davey contended.[44]

Conclusion

[44]Ibid.

Given the conclusions I have reached on Elvin’s contraventions grounds, and on both appellants’ compensation grounds, the compensation order made in the Magistrates’ Court should be varied by deleted orders (E) and (F), and by removing reference to Elvin and Silverstein from order (G). I will hear from the parties as to the form of the orders and any consequently matters, including costs.

[2022] VSC 214

2 May 2022