Elvin v Davey (Costs Ruling)
[2022] VSC 324
•10 June 2022
| 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: | 17 May 2022 |
DATE OF JUDGMENT: | 10 June 2022 |
CASE MAY BE CITED AS: | Elvin v Davey (Costs Ruling) |
MEDIUM NEUTRAL CITATION: | [2022] VSC 324 |
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APPEALS FROM MAGISTRATES’ COURT — Appeal successful — Whether proceeding should be remitted — Costs of appeal — Magistrates’ Court costs — Calderbank offer by appellant — Calderbank v Calderbank [1975] 3 All ER 333.
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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:
The subject matter of the appeals is a summons issued by the respondent, Davey, in a Magistrates’ Court proceeding seeking orders against the appellants, Elvin and Silverstein, for costs and compensation pursuant to s 29(1)(a) and (c) of the Civil Procedure Act 2009 (Vic) (‘CPA’). The presiding magistrate found the appellants had breached obligations owed under the CPA, and ordered that they compensate Davey under s 29(1)(c) of the Act.
I delivered judgment allowing both appeals on 2 May 2022.[1] The parties remain in dispute about what costs orders should be made on the appeals and in relation to the hearing of Davey’s application at first instance, and whether the matter should be remitted to the Magistrates’ Court, in the case of the Silverstein appeal. The appellants submit orders should be made dismissing Davey’s summons and for him to pay the costs of the summons in the Magistrates’ Court, and the costs of the appeals.
[1]Elvin v Davey [2022] VSC 214.
Davey seeks the following orders:
(a) The summons dated 12 April 2019 (’the summons’) be referred back to the learned magistrate for redetermination according to law as against Silverstein;
(b) Elvin and Silverstein pay Davey’s costs of the summons and the appeals, excluding costs for work done by the parties in the Court below that was incidental to the High Court’s decision in Bell Lawyers Pty Ltd v Pentelow (‘Bell’).[2]
[2](2019) 269 CLR 333.
In the alternative:
(c) there is no orders as to costs;
In the further alternative:
(d) Davey pay one third of the appellants’ costs of the summons and the appeals, excluding the costs of senior and junior counsel and costs for work done by the parties in the Court below that was incidental to the High Court’s decision in Bell.
Procedural history
A detailed procedural history is set out in my judgment. I note the following relevant details for the purposes of this ruling.
Between 2013 and 2016, Davey, who was then a legal practitioner, acted for Peter Dessmann and Dessco Pty Ltd (‘Dessco’).
In May and June 2016, Davey brought two proceedings in the Magistrates’ Court (the ‘proceeding’) against Dessmann and Dessco (together, ‘the defendants’) for recovery of outstanding legal fees. Davey was successful in the proceeding.
Davey acted for himself in the proceeding and on the appeals.
The appellant in proceeding S ECI 2020 02841, Elvin, is a legal practitioner who was retained to act for the defendants in the proceeding.
The appellant in proceeding S ECI 2020 02840, Silverstein, is also a legal practitioner and replaced Elvin as the defendants’ lawyer in the proceeding.
Following determination of the proceeding in his favour, Davey issued the summons against the defendants and the appellants seeking costs pursuant to s 29(1)(a) and compensation for financial loss pursuant to s 29(1)(c) of the CPA on the basis they had contravened overarching obligations imposed by the Act. Davey also applied for costs against the defendants under the Magistrates' Court General Civil Procedure Rules 2010 (Vic) and pursuant to the terms of client agreements with the defendants.
The learned magistrate found that Elvin and Silverstein had breached the proper basis obligation in s 18 of the CPA, that Elvin breached the obligation not to mislead or deceive in s 21, and that Silverstein breached the obligation to act honestly in s 17.
Relying on the decision of the High Court in Bell, the magistrate dismissed Davey’s application for costs on all grounds against all parties. The magistrate then found for Davey under s 29(1)(c) and ordered that Elvin and Silverstein compensate him based on the Practitioner Remuneration Order for the period that they each acted for the defendants in the proceeding, and for the amount of compensation to be assessed by the Costs Court in the absence of agreement (the ‘compensation order’).
Elvin and Silverstein appealed the compensation order. The appeals were heard together at a hearing commencing on 26 October 2021 and concluding on 27 October 2021.
On appeal, Silverstein did not challenge the finding that he breached the obligation in s 18 of the CPA to have a proper basis.
Submissions
Davey
The ordinary rule is that costs follow the event. However, the circumstances of this case in both the proceeding and the appeals warrant a departure from the ordinary rule.
The magistrate found Silverstein’s breach of s 18(d) of the CPA altered the trajectory of the proceeding. As a consequence Silverstein is disentitled to an order for costs of the summons and this appeal.
Silverstein had a material interest in the outcome of both the proceeding and this appeal. It was therefore inappropriate that he continue to act for the defendants in the proceeding in relation to the summons and to initiate an appeal in this Court on their behalf, when he was also a party to the summons. In R v Silverstein [No 2] (‘R v Silverstein’),[3] the Court of Appeal held that Silverstein’s direct personal interest in resisting the appeal meant it would be inappropriate for him to seek fees from the defendants for representing them on the application.
[3][2020] VSCA 251.
Each party should bear their own costs of the amended summons as they relate to reframing the summons following the High Court’s decision in Bell. The timing of that decision, which was handed down during the hearing of the amended summons, and the costs incurred as a result were no fault of the parties.
There has been duplication and over-representation in the appeals as between Elvin and Silverstein which is inconsistent with the CPA. In group proceedings, leave must first be obtained for multiple counsel and solicitors to represent parties that have a common interest, except when a conflict of interest arises between group members. If there was a basis for separate representation, the appellants never applied for leave. There was no conflict of interest between Elvin and Silverstein because they each represented the defendants at different times. In fact, they had a common interest. The volume of material filed in these appeals was excessive. The court book was not properly consolidated and included duplicate material and material in relation to an appeal brought by Dessco which had been discontinued. At a minimum, there should be a proportionate reduction in the costs of Elvin and Silverstein to reflect these matters.
The summons, as it relates to Silverstein’s breach of s 18(d), should be remitted to the Magistrates’ Court for redetermination of the appropriate orders flowing from that breach. The orders available under s 29(1)(c) do not only go to compensation, and may have a disciplinary purpose. Whether disciplinary orders should be made was not expressly considered by the magistrate. If the matter is not remitted and this Court declines to make any consequential orders then the effect is that no orders flow from Silverstein’s breach of the CPA.
Silverstein
Four offers to settle the proceeding were communicated to Davey during the hearing of the summons and on the day prior to the hearing of the appeal.[4] These offers are relevant to the exercise of the discretion of the Court in considering costs liability and are not relied on for the purpose of seeking indemnity costs.
[4]The offers were made to Davey on 9 September 2019, 7 October 2019, 22 October 2022 and 25 October 2022.
The initial Calderbank v Calderbank (‘Calderbank’)[5] letters were sent in September and October 2019 and set out the clear and insurmountable hurdle to Davey’s application, being the decision of the High Court of Australia in Bell. Ultimately, this Court agreed that the Bell decision prevented Davey from obtaining an order for ‘compensation’ for his costs. Prior to the hearing of the appeal, offers of substantial amounts of money were made to Davey to settle the proceeding in circumstances where Davey had all of the relevant material on the appeal.
[5][1975] 3 All ER 333.
Davey’s submissions in relation to disentitling conduct should be rejected. It would lead to the perverse result that Silverstein is denied his legal costs on the basis that he did not seek to appeal a point on which he may not have been successful, but would otherwise be entitled to his costs based on the overwhelming success of his appeal grounds.
The appeals were two separate proceedings, initiated by separate notices of appeal, filed on behalf of two individual appellants on separate findings made against them by the magistrate. Davey previously applied, amongst other things, to have the appeals consolidated. His application was refused but it was ordered the appeals be heard together.[6] In any event, Elvin and Silverstein had separate, possibly conflicting interests, and therefore required separate legal representation. The appellants took steps to avoid duplication in the separate appeals, including by filing a joint court book and advancing any similar grounds of appeal between Elvin and Silverstein during the oral hearing in a way that avoided repetition. The appropriate context for an assessment of the reasonableness of costs incurred in the separate appeals is during taxation of those costs.
[6]Dessco Pty Ltd v Davey [2020] VSC 696, [102] (‘Dessco’).
If the Court is satisfied of two matters — whether there is evidence of compensable loss, and whether evidence on compensable loss is closed — there will be nothing left in the summons for redetermination by this Court or on remitter. It is clear from this Court’s judgment that there was no evidence of compensable loss and Davey was on notice of the problems with the evidence he relied on to prove his loss. Davey was given a further opportunity to put on additional evidence which he elected not to do. In those circumstances, the Court should be satisfied that evidence is closed, and there is nothing left for determination.
To the extent that Davey wishes to press an application to seek relief other than the costs or compensation sought, quantified, considered and determined in the Court below, it is unnecessary for this Court to revisit that question and remittal on this issue is of no utility. Remittal would invite further hearing, argument and potentially evidence in an application which has already occupied numerous hearing days below and on appeal. Remittal would relieve Davey of the consequence of his forensic decisions at the hearing and provide him an opportunity to re-agitate matters that he has already had the opportunity to ventilate.
Elvin
The seriousness of the magistrate’s findings with respect to Elvin’s standing as a legal practitioners, which were sought to be overturned by this appeal, and the quantum of Davey’s claim, which was in excess of $600,000, justified retaining senior and junior counsel.
An order carving out costs relating to the Bell issue ought not be made. Firstly, costs should not be awarded issue-by-issue. Secondly, Davey’s original claim prior to the Bell decision was framed as a claim for costs under s 29(1)(a). Following Bell, the claim was reframed as seeking compensation by reference to s 29(1)(c). There was no real significance in that issue and there is no reason for Elvin to be disentitled to the costs incurred by him in respect of that stage of the application.
Analysis
The power to award costs, and to determine by whom and to what extent they are to be paid, is in the discretion of the court.[7] Ordinarily costs follow the event[8] and when an appeal is allowed, the costs order below is set aside and the successful appellant is awarded costs in both the appellate court and in the court below.[9]
[7] Supreme Court Act 1986 (Vic) s 24.
[8]Vucadinovic v Lombardi [1967] VR 81, 87 (Pape J); Quinn v Law Institute of Victoria Ltd (No 2) [2007] VSCA 132, [13] (Maxwell P, Chernov and Nettle JJA).
[9]Protec Pacific Pty Ltd v Steuler Services GmbH & Co KG (No 2) [2015] VSCA 123, [44] (Tate, Santamaria and Kyrou JJA).
The Court’s discretion to make orders following the determination of an appeal is unfettered.
Section 109(6) of the Magistrates’ Court Act 1989 (Vic) provides:
After hearing and determining the appeal, the Supreme Court may make such order as it thinks appropriate, including an order remitting the case for re-hearing to the Court with or without any direction in law.
Costs on appeal
Consolidation was previously raised by Davey in an application heard by Judicial Registrar Keith, who held it was not appropriate:
The respondent seeks orders that the three proceedings in this Court be consolidated or heard together and invokes the power of the Court in Rule 9.12. The respondent also relies upon provisions of the CPA: s 9, with powers to promote the overarching purposes; s 47, providing for judicial powers of case management; and s 53, to the effect that s 47 does not limit any other power of the Court. The Court is enabled to give directions and manage litigation to ensure efficiency and expedition.
The conditions specified in Rule 9.12 are satisfied, as there are common questions of law and the issues arise from the same factual background. There is a need to avoid duplication and to manage the litigation with a view to ensuring the common issues are dealt with at a single hearing.
The appellants submit the three appeals should be heard together but not consolidated. There should be a common appeal book prepared rather than the need for a complete book of documents in each of the three appeals.
I am satisfied there should be a direction for the three proceedings to be heard together, in order to promote efficiency and to avoid duplication. I do not consider consolidation is appropriate. There are common issues but there are also issues on which the separate appellants may have different positions and possibly conflicting positions. It is appropriate the three proceedings remain separate, but they be heard and determined together, subject to any further directions of the judge who may hear the appeals.[10]
[10]Dessco (n 6) [99]–[102] (citations omitted).
Given Elvin and Silverstein’s different positions and the real potential for those positions to come into conflict, separate representation was entirely appropriate.
The parties clearly took steps to avoid duplication of material where that was possible. A common appeal book was provided to the Court which contained minimal duplication. The parties were also clear about which sections of the court book were to be disregarded as they related to discontinued proceedings or proceedings effectively overtaken by the hearing of these appeals.
There is no basis for a proportionate reduction in the appellants’ costs of appeal on the basis that they were separately legally represented.
Any remaining questions as to the reasonableness of costs, including with respect to unnecessary duplication or counsels’ involvement, can be determined by the Costs Court on assessment. However, I note the appeal was factually complex, concerned serious breaches of the CPA found against the appellants, and involved a claim for significant compensation by Davey.
Davey’s reliance on the Court of Appeal’s decision in R v Silverstein in support of a reduction to Silverstein’s costs is misguided. In those proceedings, Silverstein represented himself as the first named respondent in the appeal and acted pro bono for the defendants who were the second and third named respondents. Before the trial judge, Davey sought orders that Silverstein and the defendants be found guilty of seven charges of contempt of the Magistrates’ Court. The trial judge dismissed the proceeding and made orders that Davey pay the costs of the defendants. On appeal, the Court of Appeal held:
In summary, [Silverstein] had a direct personal interest in resisting the appeal. The arguments that he presented to the Court may have enured also to the benefit of [the defendants], but they were necessary to protect his own position. Further, five of the seven grounds of the application for leave to appeal were concerned with the conduct of [Silverstein] which was the basis of the contempt proceeding. Any liability of [the defendants], for those contempts, would have derived directly from the liability of [Silverstein] for the same contempts.
For those reasons, it would be quite inappropriate for [Silverstein] to seek fees from [the defendants] for representing them on the application for leave to appeal. In effect, by doing so, he would be asking his clients to pay to him a fee for defending himself and for protecting his own position. We would therefore expect that the first respondent would not claim such fees from his clients.[11]
[11]R v Silverstein (n 3) [10]–[11] (Kyrou, Kaye and McLeish JJA).
The Court of Appeal was dealing with different facts in R v Silverstein. In the appeal before me, Silverstein did not act for himself while representing the defendants. The magistrate’s findings that the defendants and Silverstein had contravened obligations in the CPA were distinct, and they had different interests on appeal. It may be those differing interests gave rise to the possibility of conflict, and that in those circumstances it was not appropriate that Silverstein acted for the defendants on appeal. However, there was no prejudice to Davey from him doing so, and no reason why Silverstein should be disentitled to his costs on appeal as a consequence.
For the above reasons, I will order that Davey pay Elvin and Silverstein’s costs on appeal.
Costs in the Magistrates’ Court
For the reasons already given in respect of the appeal costs, there can be no justification to reduce Elvin’s costs at first instance. I will order that Davey pay Elvin’s costs of the summons in the Magistrates’ Court.
The magistrate found that Silverstein’s breach of s 18(d) of the CPA materially contributed to the length and complexity of the proceedings. That finding is relevant to Silverstein’s costs of the summons in the Magistrates’ Court in the following ways.
First, it is a measure of success by Davey on the summons against Silverstein.
Second, it is a finding that contravention by Silverstein of CPA obligations contributed to the length and complexity of the proceeding.
Contravention by Silverstein of s 18(d) of the CPA is relevant to the discretion in relation to the costs of the summons in the Magistrates’ Court. Further, it is a matter that can be taken into account under s 29(1)(f) of the CPA.
Silverstein made offers to Davey to settle the summons on 9 September 2019 and 7 October 2019, and to settle the summons and the appeal on 22 and 25 October 2021.
The first and second offers were expressed in clear terms, explained in detail the weaknesses of Davey’s application, and were made in accordance with the principles in Calderbank[12] and Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2).[13]
[12]Calderbank (n 5).
[13](2005) 13 VR 435.
The first offer, which was to pay Davey $32,500, was open for 14 days. Davey did not respond to the offer.
The second was a walk-away offer, and was open for five days.
The third and fourth offers, both for significant amounts of money, were made shortly before the hearing of the appeal. The offers were not made in accordance with Calderbank principles, did not explain the weaknesses of Davey’s position, and did not set out all relevant terms. Each offer was only open for a number of hours on the day it was made.
In Lonergan v Trustees of the Sisters of Saint Joseph & Anor (Costs Ruling),[14] I set out the principles and objectives relevant to Calderbank offers:
[14][2021] VSC 717, [19]-[20].
The critical issue, when considering what consequences should flow from the failure to accept a Calderbank offer, is whether non-acceptance of the offer was unreasonable in the circumstances. In Hazeldene’s, the Court of Appeal stated that matters relevant to that issue would ordinarily include:
(a) the stage of the proceeding at which the offer was received;
(b) the time allowed to the offeree to consider the offer;
(c) the extent of the compromise offered;
(d) the offeree’s prospects of success, assessed as at the date of the offer;
(e) the clarity with which the terms of the offer were expressed;
(f) whether the offer foreshadowed an application for an indemnity costs in the event of the offeree’s rejecting it.
Depending on the circumstances of the case there may be other matters which are also relevant to whether it was reasonable to reject an offer.
The policy objectives underlining the principle in Calderbank were identified in Gill v Gill (No 2) (‘Gill’) by Derham AsJ as including:
(i) That it is in the interests of the administration of justice that litigation should be compromised as soon as possible and so save both private and public costs;
(ii) To indemnify an offeror whose offer is later found to have been reasonable against the costs thereafter incurred. This is considered reasonable because from the time of rejection of the offer the real cause of the litigation is the offeree’s rejection of the offer;
(iii) To this end, a party in receipt of an offer of compromise should have some incentive to consider the offer seriously. That incentive is the prospect of a special order as to costs;
(iv) It is nevertheless important not to discourage potential litigants from bringing their disputes to the Court;
The second offer was derisory and did not represent a genuine compromise of the summons. The third and fourth offers were made at a time when Davey had already obtained a compensation order in his favour. Neither offer explained why the appeal of the compensation order would succeed, and Davey’s position was weak. Having regard to the complexity of the appeal, the time allowed to consider the offer was insufficient. The offers were not expressed in terms of Calderbank principles.
I conclude that only the first offer is relevant to the question of Silverstein’s costs at first instance.
The first offer was made only days after the High Court delivered its judgment in Bell. However, the offer was open for 14 days, which was more than adequate time for Davey to understand the decision and the implications it had for his application. The offer was made a little over a month before the hearing of the application commenced. Further, no evidence was tendered by Davey in response to the High Court’s decision and the need for him to prove loss in accordance with s 29(1)(c) of the CPA.
The amount offered was not insubstantial, particularly having regard to the lack of evidence of loss.
I conclude Davey’s non-acceptance of the first offer was unreasonable in the circumstances.
Davey’s application was heard over eight sitting days between 14 October 2019 and 19 February 2020. The real reason the application proceeded, and substantial costs were incurred by Silverstein, was Davey’s non-acceptance of the first offer.
I conclude that despite Silverstein’s ultimate success in having Davey’s summons against him dismissed, and consideration of the first offer as discussed above, it is appropriate that some account be taken on the issue of costs of the finding of Silverstein’s breach of the CPA. I will order that Davey pay Silverstein’s costs of the summons in the Magistrates’ Court reduced by 25%.
Bell v Pentelow
In response to the judgment of the High Court in Bell delivered on 4 September 2019, Davey reframed his application as seeking compensation by reference to s 29(1)(c) of the CPA. Davey had the opportunity to lead evidence responding to the decision in Bell and to the requirement to prove loss in accordance with s 29(1)(c), but did not do so. I accept Elvin’s submissions as to this issue. I conclude there is no justification for a reduction in the award of costs on account of the decision in Bell.
Remitter
I accept Silverstein’s submissions as to this matter.
Davey sought compensation for financial or other loss under s 29(1)(c) of the CPA. However, there was no evidence before this Court or the Court below upon which it could be concluded that Davey suffered a compensable loss which was materially contributed to by Silverstein’s contravention of s 18(d) of the CPA. Despite having the opportunities to do so Davey led no evidence of loss in the Magistrates’ Court. It was a matter for Davey to decide what evidence to lead on the summons against Silverstein. He was put on notice by the respondents to the summons that he could not be awarded his legal costs, and had led no evidence of financial or other loss. Having elected to proceed as he did, Davey should not now be afforded a further opportunity, after a successful appeal against him, to reopen his case with a view to leading evidence to establish loss.
I reject Davey’s submission that there should now be consideration, either by this Court or on remitter, of an order in his favour against Silverstein other than for compensation, and of a disciplinary nature. I understood Davey to be submitting that such an order could be made under s 29(1)(c) of the CPA. In Bolitho v Banksia Securities Ltd (No 18) (remitter),[15] John Dixon J held the following in respect s 29 of the CPA:
Questions of whether to grant further orders of a punitive nature do not arise where the compensatory order has a sufficiently appropriate impact. Exemplary damages should only be considered after assessment of the finalised compensatory damages if the court takes the view that the quantum of compensatory damages is inadequate for the court to express its condemnation of the conduct. In this case, I was not persuaded that exemplary damages should be awarded.
[15][2021] VSC 666, [1783].
In the absence of an order for compensatory damages, it is not open to this Court or the Court below to make disciplinary or punitive orders in the nature of exemplary damages under s 29(1)(c) of the CPA.
Further, Davey did not articulate, either in the Magistrates’ Court on the hearing of the summons or in this appeal, what order he now seeks of a disciplinary or punitive nature against Silverstein, where precisely the power to make such an order resides, or what evidence was led on the summons that justified making such an order. There is no basis for further consideration of this issue.
Conclusion
Orders will be made reflecting these reasons and other matters agreed following my substantive decision on the appeals.
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