Janover v Muto
[2017] VCC 811
•22 June 2017
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-13-06038
| LEWIS ALLEN JANOVER | Plaintiff |
| v | |
| MILVAN MUTO and GREATER SHEPPARTON CITY COUNCIL | Defendant Third Party |
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JUDGE: | HER HONOUR JUDGE MARKS | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 6-10 & 13-17 February 2017 | |
DATE OF JUDGMENT: | 22 June 2017 | |
CASE MAY BE CITED AS: | Janover v Muto & Anor | |
MEDIUM NEUTRAL CITATION: | [2017] VCC 811 | |
REASONS FOR JUDGMENT
CONTRACT – Where Council offered to fund the defendant’s costs of being represented in the third party proceeding against the Council – Whether contract was entered into – Whether intention to into legal relations – Whether there was consideration – Meaning of “third party proceeding in context” – If contract exists, whether it has been fully executed.
PRACTICE AND PROCEDURE – Where application to amend statement of claim to raise new causes of action at start of trial – Where application to amend earlier orders in relation to amendments to pleadings under R. 36.07 of the County Court Civil Procedure Rules 2008 (the ‘slip rule’).
PRACTICE AND PROCEDURE – Application for recusal of judge on basis of bias – Whether a reasonable perception of bias.
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APPEARANCES: | Counsel | Solicitors |
| For the defendant | Self-represented | |
| For the third party | Mr D Clough | Dawes & Vary Riordan Lawyers |
HER HONOUR:
1 Mr Muto was an elected councillor of the Greater Shepparton City Council (the Council) from 2008. His time there ended in acrimony, and various proceedings in the Victorian Civil and Administrative Tribunal (VCAT) were brought against him arising out of his actions as a councillor.
2 Mr Lewis Janover (the plaintiff) was one of Mr Muto’s lawyers in VCAT proceedings and related criminal proceedings. In this County Court case, he sued Mr Muto for legal costs incurred on behalf of Mr Muto in representing him in the VCAT proceedings and the criminal proceedings. In turn, Mr Muto sued the Council, joining it as a third party to this case.
3 The case between Mr Janover and Mr Muto has been discontinued. The trial before me was the case between Mr Muto and the Council.
4 Mr Muto claimed initially in this case that the Council should pay all legal costs he incurred or will incur, which arose from him being a councillor. He relied on sections in two different Acts in making these claims:
· S46F VCAT claim: this is based on s46F of Schedule 1 of Victorian Civil & Administrative Tribunal Act 1998 (VCAT Act);
· S76 LGA claim: this is based on s76 of Local Government Act 1989 (LGA).
5 The s46F VCAT claim is as follows. Normally in VCAT, parties bear their own costs unless the Tribunal orders otherwise: s109(1) of the VCAT Act. S46F of Schedule 1 of the VCAT Act applies in certain circumstances where matters arising under the LGA are heard in VCAT. Mr Muto says that s46F has the effect that the Council should pay his costs of the VCAT proceedings. Relevantly, prior to 31 October 2012, s46F stated: "Despite s109 the Council is to bear the costs of the proceeding unless: … (b) VCAT otherwise orders." After 31 October 2012, s46F stated:“(1) Despite s109, the Council must bear the costs of the proceeding if: (a) the Council is a party to a proceeding, referred to VCAT under s81J(1)(b) of the Local Government Act 1989; or (b) the Council applies to VCAT for review under s81Q(2) of the Local Government Act 1989. (2)The Council is not required to bear the costs of the proceeding under sub-clause (1) if VCAT otherwise orders."
6 The s76 LGA claim seeks indemnity from the Council for all costs Mr Muto has incurred, or will incur, arising from this time as councillor. S76 of the LGA states:
“A Council must indemnify and keep indemnified each Councillor, member of a Council committee, member of Council staff and any person exercising any function or power on behalf of a Council against all actions or claims (whether arising during or after the term of office or employment of that Councillor or member) in respect of any act or thing done or omitted to be done in good faith in the exercise or purported exercise of any function or power conferred on the Council or Council committee or any Councillor, member of the Council committee or member of Council staff by or under this or any other Act.”
7 After Mr Muto filed his Statement of Claim against the Council, setting out his s46F VCAT claim and his s76 LGA claim, there was a complicated series of further pleadings, hearings, and orders of the Court before the case came on to trial before me. In the course of the first week of the trial, it became clear there was significant confusion and disagreement between the parties as to what issues were supposed to be being dealt with in the trial. Mr Muto also applied to amend his Statement of Claim to bring further claims. On day five of the hearing, I gave a ruling about these matters and then made orders that flowed from that. I gave oral reasons. I set out my reasons for that ruling in writing below.
8 On day seven of the trial, Muto made an application for me to recuse myself on the grounds of bias. I refused the application and continued to hear the trial. I said I would give written reasons. My reasons are below.
9 By the end of the trial, one principal issue needed to be decided by me. It is whether the Council is required to pay for Mr Muto’s legal representation in relation to appeals he has brought, or wants to bring, in relation to the VCAT proceedings he was involved in, and in relation to future hearings in this case and appeals arising from decisions made in this case (the funding issue). Answering the funding issue involves construing a letter given on behalf of the Council to Mr Muto on 21 July 2014 offering to fund his third party proceeding (the funding letter), and contractual issues arising from it.
10 In my judgment below, I set out relevant aspects of the history of this matter including proceedings relating to Mr Muto’s conduct as councillor, and the complex interlocutory background to this County Court case. I then deal with the issues ruling and the bias ruling. Finally, I deal with the funding issue.
Proceedings relating to Mr Muto’s conduct as councillor
11 In November 2008 Mr Muto was appointed as a councillor of the Council. As a result of his conduct as a councillor, proceedings were brought against him in VCAT under various provisions of the Local Government Act 1989. In his pleadings Mr Muto refers to the proceedings as:
§ The misconduct proceeding;
§ The serious misconduct proceeding; and
§ The gross misconduct proceeding.
12 Mr Muto was found to have engaged in misconduct, serious misconduct and gross misconduct. He appealed unsuccessfully from the misconduct finding (the misconduct appeal). After the finding of gross misconduct, he was disqualified as a councillor for four years and his office as councillor was vacated. Relevantly to his claims in this case, he appealed the decision in the misconduct proceeding.
13 Mr Muto also had criminal charges brought against him relating to his conduct as councillor, initially for blackmail (this charge was later dropped) and then a criminal charge of perverting the cause of justice (of which he was found guilty, and for which he went to jail) (the criminal proceedings).
14 As a result of him being charged with blackmail, proceedings were brought under s29(4) of the VCAT Act, applying for an order that he take leave of absence from his role as councillor until the proceedings in respect of that charge were determined (the s29(4) VCAT proceedings).
15 The Council paid for Mr Muto’s representation in the misconduct proceedings, but did not pay his legal costs associated with any of the other proceedings, including costs of the appeal from the decision in the first misconduct proceeding.
County Court proceeding
16 The matters that took place between Mr Muto bringing his initial Statement of Claim against the Council and this matter coming on for hearing before me are complicated. A great deal of time in the trial was spent canvassing them, and dealing with the different views of the Council and Mr Muto as to what had happened before trial, and what the effect of earlier orders made in this case was. I set out below a summary of the most relevant aspects of this history. The important aspects are discussed later, but this will give some context.
6 February 2014 Third party Statement of Claim by Mr Muto against Council (initial Statement of Claim) – costs claimed regarding serious misconduct proceedings and gross misconduct proceedings under s76 LGA and s46F VCAT. A handwritten list of costs was attached as an annexure. (Mr Muto was self-represented at this time).
14 July 2014 Order – Judge Lacava [CB105-6]
4. The trial of the Third Party proceeding precede the trial of the statement of claim on the issue as to whether the third party is able to indemnify the defendant as to the plaintiff’s claim.
5. The third party proceeding be adjourned for trial to 28 July 2014 as a Cause before Judge Lacava on the basis that the proceeding will take ½ a day.
6. Adjourn the third party proceeding for directions until Monday 21 July 2014 …at which time the third party will advise Court whether the third party will fund legal representation to the defendant to argue the TP proceeding.
21 July 2014 Funding Letter from Council’s solicitors to Mr Muto – Council said it would fund legal representation to argue the Third Party proceeding until its determination subject to specified terms.
29 January 2015 Order – Judge Anderson - prior to the adjourned directions hearing, the Council engage solicitors pursuant to the terms of the funding letter. (A copy of the funding letter attached to order).
19 June 2015 Amended Statement of Claim (drafted by Counsel for Mr Muto engaged by Brand Partners, solicitors). Seeks indemnity for costs of misconduct proceedings appeal, serious misconduct proceeding and gross misconduct proceeding under s76 LGA; and an order that the Council pay the costs of the serious misconduct proceeding under s46F to Schedule 1 of the VCAT Act.
26, 27 October 2015 Hearing before Judge Anderson – Heard s76 LGA claim raised in Amended Statement of Claim as a preliminary question. (Mr Muto was represented by solicitor and counsel).
15 December 2015 Reasons – Judge Anderson – 2015 VCC 1530 – in summary held re s76 LGA claim that the Council was not obliged to indemnify Mr Muto for his legal costs under s76 LGA. He struck out that part of Mr Muto’s Statement of Claim.
18 November 2015 Order – Judge Anderson – re s 76 LGA claim -
1. Questions heard as preliminary questions prior to trial answered as follows:
1. Where acts or omissions have been relied on by VCAT in making findings of serious or gross misconduct within the meaning of section 81A of the Local Government Act 1989, these acts or omissions cannot give rise to an obligation on the part of the Council to indemnify Mr Muto under s76 LGA as being in respect of an act or omission done in good faith in the exercise or purported exercise of any function or power conferred on the council or a councillor.
2 …
2. Mr Muto’s third party claim be struck out so far as it relates to an indemnity under section 76 of the Act.
3. By 2 December, 2015 lawyers must consult re future conduct re claim under clause 46F VCAT Act.
4. Any application by Mr Muto to amend his amended statement of claim dated 19 June, 2015 re S46F claim be made by 9 December, 2015.
24 November 2015 The Council applied to VCAT in the serious misconduct proceeding that it was not required to bear Mr Muto’s costs in that proceeding.
9 March 2016 Order - Judge Anderson – a further directions hearing be fixed on defendant’s application after he files a note of the orders he will seek.
24 March 2016 Email from Mr Muto to Court and Council –
…Seeking orders under liberty to apply –including
1. Order Council or DVR pay for my proper legal representation of this application for liberty to apply as application is still part of 3rd party proceeding, given letter of 21 July, 2014.
2. Include original statement of claim when I was unrepresented
3. Order that Council pay for legal representation for appeal out of time due to Riordan letter.
4. Order all decisions in these proceedings are ultra vires.
5. Order CEO of Council Gavon Cator, and Robert Crow of DVR be charged with professional misconduct
6. Order Council, Crow, Cator pay all costs and damages of these proceedings due to fraudulent misrepresentation of Council
15 April 2016 VCAT order – Senior Member Byard in serious conduct proceeding granted Council’s costs application. Ordered: There be no order as to costs of the serious misconduct proceeding. Said: “Pursuant to clause 46F of Schedule 1 of the VCAT Act, the Council…is not required under that clause to pay or indemnify Mr Muto for his costs in relation to the proceeding.”
18 May 2016 Proposed Further Amended Statement of Claim filed by Mr Muto. He was representing himself from this point forward in this County Court case changes to the Amended Statement of Claim not marked up by underlining or otherwise to make clear what they were. Paragraph 20 re s46F VCAT claim remains (with words “Prior to 31 October 2012” deleted). Adds reference in paragraphs 9(c) and 10 and in prayer for relief to 29/4 proceeding and criminal proceeding; makes changes to quantum claimed.
27 May 2016 Order – Judge Anderson – gives leave to plaintiff to discontinue proceeding against defendant. Strikes out Paragraph 20 of Amended Statement of Claim. Gives leave to Mr Muto to file Further Amended Statement of Claim in the form of the document dated 18 May 2016 with new paragraphs 21, 22 and paragraph of prayer for relief (raising claims arising from funding letter). Sets matter down for trial on 29 August.
30 May 2016 Further Amended Statement of Claim – Similar to the Proposed Further Amended Statement of Claim, adds paragraphs 21 and 22, and Paragraph H of the Prayer for Relief. Paragraph 20 re s46F VCAT claim remains (with words “Prior to 31 October 2012” deleted).
Conduct of trial
17 This case was listed as a three to five day trial to commence on Monday, 6 February 2017. It took ten days.
18 Almost all of the first week was taken up with submissions as to what matters are actually in issue in this trial, or ought to be in issue given the previous history of the proceeding, or about whether leave should be given now to amend to raise further claims or alter the present claims. The complex procedural history of the matter needed to be carefully considered.
19 Mr Muto was self-represented during this hearing. He was previously represented in this proceeding from at least the time of the filing of the Amended Statement of Claim on 19 June 2015 until at least 18 November 2015. I found him to be intelligent, honest, and impassioned in putting his case. He was sometimes confused about different aspects of the history of the proceeding or the related proceedings, but given its complexity (as set out above) this was understandable. However, he was also rambling and repetitive in making his submissions and giving evidence. He seldom was able to answer questions directly, or to on topic, in the course of the trial. He told me he suffers from depression and anxiety and was affected by medication. I endeavoured to clarify and explain what was required in relation to legal concepts he was relying on, or which were being put against him. However, it was necessary for me repeatedly, to remind him of the issues in the case, and limit the commentary he wanted to make, about all the ways he feels hard done by arising out of his dealings as councillor and what has transpired since then.
20 Evidence was given by Mr Crow and Mr Cator on behalf of the Council. Mr Crow gave evidence of the circumstances in which he was advised of the matters that had arisen at the hearing on 14 July 2014 and his recommendation to the Council to provide funding to Mr Muto. Mr Cator gave evidence of the Council’s intention in providing that funding.
21 Mr Muto gave evidence of being handed the funding letter on 21 July 2014 whilst he was in the cells, of seeking to choose his own representation and being afforded the opportunity to do that and of the fact that he had said that if he did not get representation he would seek to adjourn the hearing of the third party proceeding and the appeal further. He also gave evidence that “I could’ve paid from my own pocket” for the hearing that took place before Judge Anderson on 26 and 27 October 2015 or an appeal:
“I can ask plenty of people for money but I do not like to. I decided not to ask anyone else for funding. Maybe my mum would’ve given me funding if I sought an adjournment, it would’ve been because I did not have legal representation.”
ISSUES RULING
22 I now turn to the issues ruling I made on day five of the trial. When the trial commenced before me, the relevant pleadings were the Further Amended Statement of Claim filed by Mr Muto on 30 May 2016 and the Amended Defence filed by the Council on 10 June 2016. In the normal course, the judge and the parties can look at the present version of the pleadings, and from them be aware of what the issues in that proceeding are. That was not so in this case.
23 Counsel for the Council, Mr Clough, said at the outset of the hearing that some parts of the Further Amended Statement of Claim were not properly part of the issues in the case. He said they had already been the subject of decisions of this Court or of orders striking them out. He said others had been included by Mr Muto by way of an amendment in the Further Amended Statement of Claim , without the Court making an order that the amendment be allowed on the basis of any application to make the amendment supported by any material in support of that application or submissions in support and without the Court deciding to allow leave after considering material of that nature.
24 Mr Muto did not agree with Mr Clough's analysis. He said he he could bring the disputed claims. He submitted that he had been given leave to do so by the order of Judge Anderson on 27 May 2016.
25 On the second day of the trial, Mr Clough made an application under the slip rule to amend the order of Judge Anderson of 27 May 2016 (the order Mr Muto relied on as giving him leave for these changes to the Statement of Claim).
26 As the hearing continued, it became clear that there were amendments he wanted to make to the Further Amended Statement of Claim, if his claims were not already part of it (which he submitted some of them they were). He made detailed submissions as to the amendments he wanted to make to the amended Statement of Claim at the beginning of day two of the trial. Amongst other amendments, Mr Muto wanted to raise an ultra vires claim and various claims related to the conduct of the Council generally, and in bringing the VCAT and related proceedings against him. These claims are not set out in the Further Amended Statement of Claim, however Mr Muto said that he thought it was one of the issues to be decided in this case. He referred to various times he had raised, in one way or another, an allegation of ultra vires, either in a general way with the Council or in interlocutory proceedings in this matter in Court.
27 Objection was taken to some of those further amendments Mr Muto sought to make but not others. The new claim he sought to raise of ultra vires and related matters was objected to.
28 Mr Muto also said he had further amendments he wanted to make relating to quantum; as at day three of the trial he had not yet finalised what these were. The extent of them depended on what claims were proceeding in this trial. The parties agreed that it would be appropriate to deal with questions of quantum after liability had been determined. I agreed with this, and if necessary, would have made an order that the trial be split and the trial on quantum proceed after liability has been determined.
29 There was dispute about the extent to which amendments contained in the Further Amended Statement of Claim were clearly raised before the Court previously and whether they had been the subject of judicial consideration before, in particular at the hearing before Judge Anderson on 27 May 2016. There was dispute about what was covered or intended to be covered by the orders made that day. Transcript of that day had to be obtained and was received at the end of day three of this trial. Submissions were made as to the effect of that on day four of this trial.
30 On the first day of the hearing the procedural steps that occurred in the matter were briefly referred to before me. At that stage I had only a limited understanding of the steps that had already occurred in this matter and in the related proceedings in VCAT. On the basis that I then was of the view that it would mean getting to the real issues in dispute more quickly, I made orders giving leave to Mr Muto to rely on certain parts of the Further Amended Statement of Claim in relation to which objection had been taken by the Council. As the hearing progressed and I was taken to the detail of the procedural history of this case, it became clear that it was not appropriate for that leave to continue. The leave would not have been given at all had I been taken in detail to the previous history of pleadings and court hearings in this matter. My issues ruling therefore deals with matters as well as the other pleadings issues raised.
Issue 1 – s46F Schedule 1 VCAT Act
31 I will deal first with whether or not Mr Muto can bring his s46F of claim in relation to the costs of the serious misconduct claim.
32 At issue is whether Mr Muto can rely on paragraph 20 of the Further Amended Statement of Claim. It states:
"Further or alternatively, to the extent that the defendant's costs of the serious misconduct proceeding were incurred, the Council is obliged to bear them pursuant to clause 46F, Schedule 1, to the Victorian Civil and Administrative Tribunal Act 1988."
33 In his initial Statement of Claim (which he drafted himself) Mr Muto claimed to be entitled to costs under s46F. Subsequently, when he was represented and an Amended Statement of Claim was filed by him on 19 June 2015, his claim under s46F was set out in paragraph 20 of that pleading. Subsequently, Senior Member Byard of VCAT having considered s46F on 16 April 2016 made no order as to the costs of the serious misconduct proceedings. He determined that the Council was not required to under that clause to pay for or indemnify Mr Muto for his costs.
34 Judge Anderson struck out paragraph 20 of the Amended Statement of Claim at the hearing on 27 May 2016. Three days later, when Mr Muto filed the Further Amended Statement of Claim, he included paragraph 20 (without the words “prior to 31 October 2012”). It is in the same form as the draft Further Amended Statement of Claim dated 18 May 2016, that was considered by Judge Anderson at the hearing on 27 May 2016.
35 The difference in the two versions is that the words "prior to 31 October 2012" occur in the Amended Statement of Claim and do not occur in either the Proposed Further Amended Statement of Claim or the Further Amended Statement of Claim.
36 Mr Muto said in this trial that he understood that paragraph 20 was still part of the case for trial. He said that, although Judge Anderson had ordered paragraph 20 be struck out, that was in relation to the earlier version of the paragraph and he thought he was allowed to put it back in the different form that was contained in the Proposed Further Amended Statement of Claim .
37 Initially, he said the reason he “agreed” to it being struck out on 27 May was that, at that time, the version of the paragraph referred to costs being sought “prior to 31 October 2012.” He thought he could still include the paragraph without those words. He said that the relevance of that is that what he was entitled to claim the Council should indemnify him for was, at one stage, limited to costs prior to 31 October 2012, but as a result of changes to clause 46F, that date was no longer relevant by the time of the hearing in front of Judge Anderson or now.
38 Subsequently, after seeing the transcript of the hearing before his Honour Judge Anderson, Mr Muto said that he had not raised that question of the date of 31 October 2012 before Judge Anderson and he had been confused when he made that assertion.
39 I have looked carefully at his Honour Judge Anderson's order, at all the pleadings that were before him, at his Reasons, and at transcript from that hearing. I find that Judge Anderson struck out paragraph 20 of the Amended Statement of Claim due to the fact that the VCAT Order of 15 April 2016 had dealt with the s46F claim. His order at paragraph 4 then gave leave to Mr Muto to file a further amended statement of claim "in the form of the document dated 18 May 2016 together with additional paragraphs 21 and 22." The document of 18 May was the Proposed Further Amended Statement of Claim, which included paragraph 20 in its present form.
40 The transcript provided of the hearing before Judge Anderson records that when Mr Clough applied to strike out paragraph 20 because the VCAT order had dealt with the costs under s46F, Mr Muto said, "I'm happy to let paragraph 20 go out of the Statement of Claim. I don't know whether I'm being sucked in or not, but anyway I'm happy to do it because it's being handled somewhere else." The reference to "somewhere else" was a reference to the Supreme Court appeal Mr Muto had instituted from VCAT's decision not to order costs against the Council in the serious misconduct proceeding of 15 April 2016. There was no mention by him, or anyone else, of paragraph 20 coming back in some other way in the next version of the statement of claim. It simply was not discussed.
41 I accept that Mr Muto thought that the order of Judge Anderson giving leave for the filing of a document in the form of the Proposed Further Amended Statement of Claim of 18 May 2016 (with the addition of new paragraphs 21 and 22), meant he was entitled to leave paragraph 20 in.
42 I have reviewed the versions of s46F, both before and after 31 October 2012. Whichever version is looked at, there is no longer any basis for the s46F claim to be raised in this proceeding. VCAT has considered s46F, dealt with the question of whether the council is obliged to bear Mr Muto's costs of the serious misconduct proceeding. I therefore ordered that paragraph 20 of the Second Further Amended Statement of Claim be struck out.
43 If necessary, I would have made an order under the slip rule amending the order of Judge Anderson to make it clear that Mr Muto did not have leave to rely on paragraph 20 in the slightly different form in the Further Amended Statement of Claim. It was not brought to Judge Anderson's attention that there was paragraph 20 in some different wording in the Further Amended Statement of Claim and I find that he intended to strike out the claim in relation to s46F in its entirety. I am satisfied that such an order falls within Order 36.07 of the County Court Civil Procedure Rules 2008 (the slip rule). See James George Hodgson v Amcor Limited, [2012] VSC 162 where Vickery J said:
(a) A court’s order which has consequences which were not intended by the judge making that order, as objectively determined, can constitute an “error” within the meaning of the slip rule;
(b) Carrying into effect the actual intention of the judge making the order, and making sure that the order did not have a consequence which the judge clearly intended to avoid, falls within the natural and ordinary meaning of the word “correct” in the slip rule, particularly as understood in the light of the overriding purpose of the rules of court as set out in s 7 of the Victorian CP Act, and such rule will apply to correct an order which extends too far by resolving matters that were not in issue;
(c) Where a court’s order arises from an accidental slip or omission, it matters not that such characterisation may be explained by either inadvertence or inefficiency on the part of the legal representatives.
Issue 2 – s76 LGA claims
44 After a two day hearing on 26 and 27 October, 2015, on 18 November, Judge Anderson answered a preliminary question in relation to s76. As a result of answering that question he ordered that the third party claim be struck out so far as it relates to an indemnity under s76 of the Act. At the time the matter was before him, s76 was relied on in seeking costs in relation to the misconduct proceeding appeal, the serious misconduct proceeding and the gross misconduct proceeding. Judge Anderson handed down his decision on 18 November 2015. Mr Muto was represented by Brand Partners, Solicitors. They had been engaged by the Council at Mr Muto’s request. Although the funding letter did not refer to Mr Muto having a choice in his representatives, in fact he was given that choice. Mr Muto was also represented by junior counsel, who he had had the opportunity to agree to, briefed by Brand Partners.
45 I have considered the reasons given by Judge Anderson, the clear words of the order that he made on 18 November, and compared it to the Statement of Claim he was considering at that time. It is clear that his Honour was of the view that all s76 matters before him had been dealt with, they had been struck out and the matter was no longer to include anything going forward in relation to those claims. Mr Muto agreed that that was the effect of Judge Anderson's order of 18 November when I raised that with him on day 4 of the trial before me.
46 Accordingly, I ordered that a number of paragraphs of the statement of claim which related to the S76 claims before Judge Anderson be struck out.
47 It is clear that the s76 proceeding so far as it related to the costs of the appeal of the misconduct proceeding, the serious misconduct proceeding and the gross misconduct proceeding is not continuing. That was dealt with by Judge Anderson in his ruling of 18 November.
48 The next question is whether or not new claims for costs under s76 LGA relating to the s29(4) proceeding and the criminal proceeding are able to proceed in this trial. I say new claims, as they were not part of the claim when Judge Anderson heard the s76A claims on 18 November 2015.
49 On 18 May 2016, Mr Muto included in the Proposed Further Amended Statement of Claim references at paragraphs 9 and 10 to the 29(4) proceeding were the criminal proceeding; he also included those references in the prayer for relief.
50 The changes that he sought were unfortunately not marked up on that document so that the Council and the Court could clearly see what was proposed to be added, As I have already indicated in the course of this trial, no finger of blame is pointed at Mr Muto in terms of not having done that. He is a self-represented litigant and he did not appreciate that needed to be done.
51 However, that circumstance led to confusion in the course of the directions hearing on 27 May 2016 over what was contained in that proposed pleading and led to Judge Anderson making an order allowing for that document to form the basis of a further amended statement of claim without him being fully aware of the changes contained in it. That was aided by the fact that the discussion in the course of the directions hearing that occurred on that morning did not include an application by Mr Muto to the effect of, "Your Honour I would now like to raise a NEW s76 claim, in relation to two different proceedings than you have already ruled on, I want to raise it in relation to the 29(4) proceeding and the criminal proceeding."
52 I accept that Counsel for the Council did not see the proposed new pleading until during the course of the directions hearing. Because the document did not clearly show what the additions were, and what the changes were by either underlining or marking it up in some other way, it meant that the Court and the Council were not aware of all the changes proposed and could not consider their effect.
53 In fact, there were a number of changes in the Proposed Further Amended Statement of Claim that were not adverted to in the hearing. As well as the ones I have dealt with so far in this judgment, it included changes to quantum being claimed and some other minor amendments to the pleading. It also included an attachment of the initial handwritten Statement of Claim (which Mr Muto apparently intended to be incorporated back in).
54 Mr Muto says that Judge Anderson was made aware on 27 May 2016 of the proposed introduction of the s29(4) proceeding and criminal proceeding references. However, having reviewed the transcript, it is apparent that in the course of a lengthy directions hearing about what matters remained in issue, there was no more than a passing reference by Mr Muto to the fact that referring to these words were included at the end of the pleading. The conversation then diverted to other matters and the effect of those changes was never debated.
55 Strictly, the order of Judge Anderson of 27 May gives leave to Mr Muto to rely on the version of the statement of claim filed 18 May, which includes references to the criminal proceeding and the s29(4) proceeding. However, those matters were not raised before Judge Anderson, and I find that the attention of the Court and of the Council was not brought to them.
56 The initial Statement of Claim referred only to seeking costs of the serious misconduct and gross misconduct proceedings. Mr Muto says that the handwritten list of costs attached also included the costs of the 29(4) hearing and the criminal proceeding. However, that is not apparent on the face of the document. I accept that he believes it is included, but it was not apparent to anyone else. It is not how the matter progressed before Judge Anderson in any event.
57 At the time of the filing of the Amended Statement of Claim, Mr Muto was represented by solicitors and counsel. He had the benefit of their assistance and the opportunity to give them instructions. At that time the Amended Statement of Claim the s76 LGA claim referred only to the appeal from the misconduct proceedings, the serious misconduct and the gross misconduct proceedings.
58 There was then a two day hearing relating to the S76 claim. It was the subject of the decision of Judge Anderson given on 18 November 2015. In detailed reasons for judgment, Judge Anderson indicated that the s76 claim as it was set out could not proceed as a matter of law. He made an order striking that out as I have indicated.
59 Some six months later in that document that is the Proposed Amended Statement of Claim , Mr Muto inserts the s29(4) and the criminal proceedings, claiming costs under S76 LGA relating to them.
60 Mr Muto stated in Court in support of his application to include these new claims, that he wanted to include them, but his barrister and solicitor did not include them at the time they drafted the Amended Statement of Claim and refused to include them. When they stopped acting for him he decided to reinsert it. However, that barrister and solicitor were representing him at that time. He gave them instructions. They took that course representing him, and the Council and the Court acted on the basis of that course being taken, and had the s76 hearing on 18 November 2015.
61 I am not satisfied that Mr Muto wanting to take a different course that occurred at the time he was represented, after there has been a two day hearing on the S76 issue then before the Court, is sufficient for him to be given leave to amend at this trial to include the new S76 LGA claims in this proceeding.
62 If it had been made plain before Judge Anderson that this was an attempt to raise an additional s76 claim, but in relation to different pleadings, Judge Anderson would have required argument in relation to it and I am of the view that the same matters would have been raised in opposition as were raised by the Council before me. That included the risk of there being different findings on facts or otherwise in relation to s76 LGA matters by another judge in the same proceeding.
63 It is necessary at all times in the course of proceedings for the parties to consider the overarching purpose of the Civil Procedure Act2010 (Vic) and the rules of the Court in relation to civil proceedings, and that is to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute.
64 It is not appropriate that Mr Muto now be given the opportunity to amend to raise matters that could have been dealt with when there was a two-day hearing on s76 LGA issues. I am satisfied, from the matters that were put by Mr Clough, that if that was to proceed, there would be significant additional evidence required and significant legal argument following from it, and I am satisfied that it is not appropriate for that matter to be dealt with in this trial. That is particularly so as the quantum sought for these additional claims is relatively minor (some $15,000 according to Mr Muto).
65 It is clear from Judge Anderson's reasons and the transcript of 27 May that, at that time, the one substantive issue that it was thought would be proceeding after that day was the funding issue: the question of whether or not there should be orders relating to the funding letter from the council . The Council has come to Court on that basis in this trial.
66 I did not allow the amendment.
67 I therefore ordered that the references to s29(4) and the criminal proceedings be struck out. That left no s76 LGA claim.
Issue 3 – ultra vires claim
68 There is no ultra vires claim raised in the Further Amended Statement of Claim. On the first day of trial, however, Mr Muto indicated he thought it was one of the matters to be determined in the trial. He referred to the fact that, on 9 March 2016, an order had been made to the effect that a further directions hearing would be fixed once he filed and served written notice of the orders that he would seek from the Court and the basis of those orders. He referred to an email he sent the Court on 24 March 2016. It dealt with various matters he would be seeking orders about: one related to amending the statement of claim to include reference to the letter signed by Dawes & Vary Riordan Lawyers.
69 At paragraph 4 there, it seeks:
“Orders that all decisions in these proceedings are ultra vires by reason that Robert Crow or Dawes & Vary Riordan did not have proper authority to deny me natural justice or procedural fairness by denying me indemnity under s76 of the Local Government Act 1989 or s6F of Schedule 1 of the VCAT Act at the commencement of these proceedings. By reason it has only recently come to my attention that Robert Crow of Dawes & Vary Riordan and Gavin Cator CEO of Shepparton City Council at the commencement of these proceedings have in fact colluded without authority from Shepparton City Council and without any resolution from the said council as their decision not to indemnify me according to law."
70 After Mr Muto sent that email in which he sent out amendments he would like to make to the then statement of claim, Judge Anderson set down a date for the directions hearing and the 18 May 2016 the Proposed Further Amended Statement of Claim was filed.
71 No leave has been given for Mr Muto to rely on a claim of ultra vires. Whilst an aspect of it was mentioned in the subsequent hearing before Judge Anderson, it is patently not part of the Proposed Further Amended Statement of Claim dated 18 May 2016, nor was any application made to rely on ultra vires in the claim against the Council before Judge Anderson. Mr Muto did seek to say that Mr Clough as Counsel did not have authority to act for the Council, and Judge Anderson refused to deal with that submission without notice and an affidavit in support being filed.
72 It was at that directions hearing that the form of the next version of the Proposed Further Amended Statement of Claim was very clearly being considered.
73 Mr Muto seeks to amend to raise the question of ultra vires. I asked him to indicate exactly what he is seeking to include and, on day two of the trial, he raised twenty-two different matters which he said he wants to raise in relation to ultra vires and, on day three, he said he wanted to raise an additional one.
74 Mr Muto says that: The CEO, Gavin Cator, failed to accord Mr Muto procedural fairness in making the decision to deny him indemnity contrary to s76 of the Local Government Act; the CEO conducted himself in such as a way as to give rise to a reasonable apprehension of bias; the CEO made the decision to deny indemnity to Mr Muto when he clearly had a conflict of interest and no authority to do so; the CEO's decision was ultra vires in failing to comply with s76(a) and s76 of the Local Government Act; the CEO gave the defendant no opportunity to make written submissions in relation to a denial of indemnity; the CEO and Robert Crow disregarded the advice of the Municipal Association of Victoria and misrepresented it, contrary to their model litigant obligations and the Local Government Act; the CEO acted ultra vires by reasons of resiling from the email of 16 March 2012 regarding the Council's liability; the Council denied procedural fairness by reason of not providing discovery as ordered by Judge Anderson and Judicial Registrar Burchell; the Council denied Mr Muto natural justice by not indemnifying him, contrary to law; the Council denied the defendant natural justice by failing to comply with s46F Schedule 1 of VCAT; s76 and 76A of the Local Government Act are non-delegable sections of the Act and can only be changed by Parliament, to diminish them is to act ultra vires and contrary to council and Cator's duty of care to Mr Muto; order that Crow and Cator colluded in bad faith to deny Mr Muto his rights under s76F and s76 from 4 June 2012 to now in these proceedings without authority to do so; order that Crow and Cator be charged with unconscionable conduct, misfeasance in office, and gross misconduct for misrepresenting the Council and the people of Shepparton and deceiving the courts; order that Cator arranged payment for Crow without authority, without delegation and without invoices; order that all proceedings after 4 June 2012 are infected with an error by reason of Crow and Cator acting in bad faith in unlawfully applying a Government Act of Parliament; an order that Cator acted beyond power and ultra vires in denying Mr Muto's statutory rights; an order that Cator and Crow be charged with professional misconduct by reason that they fabricated evidence and fraudulently proceeded with these proceedings in bad faith and have misrepresented the Council; an order that Mr Muto was denied natural justice by reason of an unauthorised decision of Cator; an order Mr Muto was denied procedural fairness by reason of an unauthorised decision of Mr Cator; an order that the Council and Crow and Cator pay all costs and damages in all proceedings from 4 June 2012 by reason that they had fraudulently conducted these proceedings; a declaration that the Council acted without authority to deny Mr Muto natural justice; a claim under the Australian Consumer Law and the tortious claim of deceit relating to the Council, Crow and Cator.
75 Mr Clough objected to Mr Muto amending his claim now to raise an ultra vires claim.
76 The first point put was that it had already been rejected before Judge Anderson at the directions hearing on 27 May 2016. I am not satisfied, having reviewed the transcript, that a formal application to amend was made previously and rejected. Rather the question of Mr Clough not having authority to act for the Council was raised and Judge Anderson refused to deal with it.
77 The next point of objection was that there is no evidentiary basis for the allegations. No affidavit has been filed in support of an application to amend, seeking leave and setting out the evidentiary basis. This is one of the matters that is required under the Rules so that, in all fairness, each party is aware of what is being sought in an application to amend.
78 The Council next objects that the claim is made far too late and on complicated facts and is unclear and it fails the tests required under the Civil Procedure Act and Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 principles in relation to an application to amend.
79 Mr Clough says the nature of claims, which include allegations of fraud and misfeasance in public office are very serious; claims are made about the invalidity of decisions because of the decisions of the CEO, and this calls not just for ephemeral evidence, but very strong evidence. He says he would need an adjournment to answer those points.
80 Mr Clough also submitted that there was a risk of there being an overlap with the Supreme Court claim that was presently the subject of a reserved judgment in the Supreme Court regarding the breadth of allegations of misconduct by Messrs Cator and Crow and the lack of delegated authority. Mr Clough handed up a copy of Mr Muto's Statement of Claim in that matter in the Supreme Court which clearly deals at length with ultra vires issues. Mr Muto said that at the hearing before Justice Keogh, he was not in fact allowed to raise those issues and, if he is allowed to raise them in the Supreme Court, he would not raise them in this Court. (I note that the decision in that case has been handed down subsequent to the hearing before me: Milvan Frank Muto v Shepparton City Council [2017] VSC 210.).
81 Finally, if the amendment were allowed, it would also be necessary to join Mr Crow and Mr Cator as parties to the proceeding as Mr Muto wants to make claims against them.
82 I accept the submissions put by the Council. It is not appropriate that this amendment be permitted at this stage. If it were to be permitted, proper pleadings would have needed to be filed, there would have been a need to adjourn, there would be a need to join other parties, and there would be very extensive associated further costs. Other than broad brush allegations being made at some length, it is not at all clear how the ultra vires claim is put, or what consequences flow from it. It also is not clear how it would affect the funding issue which Mr Muto maintained he wanted determined: if the Council had acted ultra vires then even the offer contained in that letter might not have been made in power.
83 What is clear is that any such claim is entirely different claim to the claim presently in the trial before me, which is relation to the effect of the funding letter.
84 Given all of that, I did not give leave to amend. I ruled that the trial proceed, dealing only with the funding issue.
85 The Second Further Amended Statement of Claim was then filed, and the Second Further Amended Defence. These made clear the issues to be determined in the balance of the trial.
BIAS RULING
86 On the afternoon of the seventh day of the trial, Mr Muto made an application for me to recuse myself on the grounds of bias. Mr Clough, Counsel for the third party, submitted that there was no basis for the application as a matter of law and evidence.
87 Following the issues ruling, Mr Muto opened his case, gave evidence, and was cross examined. Evidence was then called on behalf of the Council.
88 In opening his case and in giving evidence and in cross-examining witnesses, Mr Muto continually sought to raise matters that had to do with matters I had ruled were not part of the case to be determined in this trial. He wanted to give evidence and cross-examine about matters relating to the ultra vires and malfeasance claims. He also wanted to cross-examine in relation to other issues of importance to him but not related in any way to the issues to be determined in this case.
89 I limited the range of issues about which evidence was given so that only issues of possible relevance to the claim to be decided in this case were the subject of evidence and cross-examination.
90 Mr Muto relied on many matters in his bias application. The transcript of it runs for 27 pages. It begins at T749/L7 of the transcript of the trial, and ends at T761/L11. The application was refused at T761/L15-16 of the transcript. The points which Mr Muto said indicated bias principally fall within the following categories:
·Matters already dealt with in the issues ruling, including my refusal to let Mr Muto amend his claim to raise the issue of ultra vires and other related claims;
·my refusal to let Mr Muto give evidence and cross-examine on the matters not relevant to the determination of the issues in this case, including those related to ultra vires and other allegations he made in the course of the trial; and
·case management decisions.
91 The rule against bias is that “justice should be both done and be seen to be done”: Ebner v Official Trustee in Bankruptcy. (2000) 205 CLR 337, [6] (Gleeson CJ, McHugh, Gummow and Hayne JJ). The rule requires that the decision-maker is not actually biased in reaching their determination and there is no basis for a reasonable perception of bias on the part of an outside observer (apprehended bias).
92 Actual bias is rarely alleged, and difficult to prove. Allegations must be “distinctly made and clearly proved”. Minister for Immigration and Multicultural Affairs v Jia Legeng (2001) 205 CLR 507, [69] (Gleeson CJ and Gummow J).
93 The relevant principle for apprehended bias, as stated in Ebner v Official Trustee in Bankruptcy, is whether the fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial mind to the resolution of the question upon which the judge is to decide.
94 Application of the principle involves two steps:
·identifying “what it is said might lead a judge … to decide a case other than on its legal and factual merits”; and
·articulating “the logical connection between the matter and the feared deviation from the course of deciding the case on its merits.” (2000) 205 CLR 337, [6] (Gleeson CJ, McHugh, Gummow and Hayne JJ).
95 Reasonable apprehension of bias in relation to pre-judgement must be “firmly established”. R v Commonwealth Conciliation and Arbitration Commission; Ex parte Angliss Group (1969) 122 CLR 546, 553-554; R v Watson; ex parte Armstrong (1976) 136 CLR, 262. A predisposition to a particular view is not necessarily pre-judgement. Minister for Immigration and Multicultural Affairs v Jia Legeng (2001) 205 CLR 507, [71]-[72] (Gleeson CJ and Gummow J, with whom Hayne J agreed), referring to actual bias. A reasonable apprehension of bias does not arise merely because the judge expressed a provisional view on an issue. R v Commonwealth Conciliation and Arbitration Commission; Ex parte Angliss Group (1969) 122 CLR 546. In fact, the tenets of natural justice may require the judge to provide, at appropriate stages, provisional views.
96 The following passage in Johnson is relevant, in explaining the nature and atmosphere of modern litigation:
“Whilst the fictional observer, by reference to whom the test is formulated, is not to be assumed to have a detailed knowledge of the law, or of the character or ability of a particular judge, the reasonableness of any suggested apprehension of bias is to be considered in the context of ordinary judicial practice. The rules and conventions governing such practice are not frozen in time. They develop to take account of the exigencies of modern litigation. At the trial level, modern judges, responding to a need for more active case management, intervene in the conduct of cases to an extent that may surprise a person who came to court expecting a judge to remain, until the moment of pronouncement of judgment, as inscrutable as the Sphinx.” Johnson v Johnson [2000] HCA 48; 201 CLR 488, [13] (Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ). (citations omitted)
97 None of the matters raised by Mr Muto in his application that I recuse myself on the basis of bias establish any bias, whether considered singularly or cumulatively. They were part of case management of the trial.
98 Accordingly, I refused the application.
FUNDING ISSUE
99 I now turn to deal with the principal issue in this case.
100 Mr Muto alleges, at paragraph 21 of the Second Further Amended Statement of Claim, that by letter of 21 July 2014, sent by Dawes & Vary Riordan Lawyers, the Council agreed to fund the legal representation for Mr Muto to argue the third party proceeding until its determination, subject to certain terms set out in that letter.
101 Mr Muto’s claim (at paragraph 22 of the Further Amended Statement of Claim) is that the Council:
“has refused [to fund legal representation] in breach of the contract/agreement between the Party’s [sic] to fund Legal Representation for the Defendant for an Application for Leave to Appeal from the decision of Judge Anderson made on 18 November 2015 on one Preliminary Question and the Application (made by the Council’s Solicitor) before Senior Member Byard at the Victorian Civil and Administrative Tribunal on 8 February 2016 and has also failed in breach of contract/agreement to fund the Defendants Legal Representation to this application as a step in the Third Party Proceedings.”
102 Mr Muto seeks damages, interest pursuant to statute, costs, such further or other orders or relief as this Honourable Court deems meet, and:
“[a]n Order that the Shepparton City Council pay the Defendant’s Proper Legal Representation until the Determination of the Third Party Proceeding including an Appeal from the Orders of Judge Anderson of 18 November 2015, and an appeal from the trial division of the Victorian Supreme Court if the current appeal in matter SCI-2016-01760 is unsuccessful.”
103 The funding letter states, relevantly:
“21 July 2014
M Muto
…
HAND DELIVERED
Dear Sir
Lewis Allen Janover -v- Milvan Muto
Greater Shepparton City Council - Third Party
County Court Proceeding Cl-13-06038We refer to the above matter and to the Orders of His Honour Judge Lacava made on 14 July 2014 (‘the Orders").
We note that pursuant to the Orders, our client as the Third Party to the proceeding, is required to advise the Court at the Directions Hearing scheduled for 21 July 2014, whether our client will fund legal representation to you to argue the Third Party proceeding.
We advise that our client is prepared to fund legal representation for you to argue the Third Party proceeding (but for no other purpose), strictly subject to the following:
1. Our client will pay for the reasonable costs of a solicitor and junior Counsel (“Your Representatives”) to appear on your behalf only in regard to the determination of the Third Party proceeding;
2. Your Representatives will be selected and engaged on your behalf by our client, with their costs to be paid pursuant to the scale contained in Appendix A to the County Court Civil Procedure Rules 2008-Effective 1.1.2014 to Date;
3. Despite being selected and engaged on your behalf by our client, Your Representatives shall act for you and not for our client, as if you had engaged them yourself, such that you are in fact their client;
4. In respect to payment of the costs of Your Representatives, our client shall be an “associated third party payer” for the purposes of the Legal Profession Act 2004 (Vic); and
5. Our client's agreement to fund your costs of the determination of the Third Party proceeding as set out above is strictly without prejudice to our client's right to argue that it is not obliged to indemnify you in regard to this or any other legal proceeding (which it will in fact argue).”
104 After the letter was sent, Mr Muto said he wanted to choose his own representatives, and the Council agreed to this. The Council provided funding for legal representation by Brand Partners and counsel engaged by them. It funded costs of preparing for and running the hearing before his Honour Judge Anderson on 26 and 27 October 2015, including drafting the Amended Statement of Claim.
105 Mr Muto argues that he has a contract with the Council. He says it entitles him to have his legal representation paid for relating to every possible step he may seek to take in his ‘third party proceeding’, which he says includes any appeals to the Supreme Court and to the High Court that he wants to bring, and includes appeals from the related VCAT matters.
106 Although it is not pleaded, by his closing submissions, Mr Muto argued that he had accepted the offer contained in the letter by entering into a costs agreement with Brand Partners in April 2016. The Council agreed to be the third party funder in that agreement.
107Mr Muto said his agreement with the Council started on 16 March 2015, then that it was confirmed by the Council on 20 March and signed by Mr Muto on 15 April 2015. It is not clear why he refers to these dates as being part of the contract he alleges, but it seems to relate to the costs agreement with Brand Partners.
108However, I find that the funding letter was simply notification to Mr Muto that the Council would fund his legal representation on certain terms. It was unilateral, akin to a gift. Mr Muto was not required to give or do anything of value in order to receive its benefit. The Council provided gratuitous funding, analogous to a government subsidy such as in Australian Woollen Mills Pty Ltd v The Commonwealth (1954) 92 CLR 424 per Dixon CJ, Williams, Webb, Fullagar and Kitto JJ. Mr Muto was given funding for legal representation that he otherwise would have had to fund himself, or do without.
109The costs agreement later entered into with Brand Partners was entered into because of that gratuitous funding offer. It was not part of an agreement that included the funding letter.
To succeed on his contract case, Mr Muto must show that the Council’s funding letter was intended to give rise to a legal obligation to fund Mr Muto’s legal representation: Australian Woollen Mills (1954) 92 CLR 424 at 457. It is the essence of a contract that there is a voluntary assumption of a legally enforceable duty. Mr Muto says that there was such an assumption. However, I find that the situation is analogous with Australian Woollen Mills, where it was held that the Commonwealth subsidy scheme was “perfectly consistent with a mere announcement of policy”: (1954) 92 CLR 424 at 462 and see also 461. For the same reasons I find that there was no agreement, I also find that there was no intention to enter into legal relations. The Council’s funding letter was “an announcement of intention, which is not capable to leading to a contract” (Australian Woollen Mills (1954) 92 CLR 424 at 463). Quite apart from that being clear on its terms, it is telling that Mr. Muto was simply handed the letter, and was not involved in negotiating the extent of the funding offered.
111Mr Muto argued that because he was given some say in relation to who was appointed as his solicitor and possibly his Counsel, this amounted to him “giving consideration” for the offer in the letter. However, this is not consideration as a matter of law. An enforceable contract requires a contractual promise to be given in exchange for something of value. The item of value is known as consideration. An essential element of consideration is that there must be some detriment to the promisee or benefit to the promisor: Currie v Misa (1875) LR 10 Ex 153 at 162. Mr Muto obtained a benefit from the Council as a result of the letter without having to give anything up or anything in return. The benefit was that he had legal representation in order to prepare for and argue a complicated legal issue at the two day hearing before his Honour Judge Anderson.
112Mr Muto also said that if he had not been granted the legal representation he would have sought further adjournments of the hearing that ultimately occurred before his Honour Judge Anderson. However, his assertion that he said on 14 July that unless he received funding he would seek adjournment of the third party proceeding and, in separate Supreme Court proceedings, by any means necessary for as long as he could until he got out of jail, does not provide the necessary consideration.
113Under cross-examination, Mr Muto could not state any legitimate grounds for any adjournment. He ultimately said that the sole ground for an adjournment was that he did not have legal representation. Whether an adjournment was granted or not would not have affected the outcome.
114If I am wrong, and there was a contract, and consideration had been provided, it is necessary to consider whether there has been any breach of the funding letter.
115The legal principles applicable to the construction of commercial contracts, are well-established. They were summarised by French CJ, Nettle and Gordon JJ in Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited (2015) 256 CLR 104
“[46] The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose.
[47] In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.
[48] Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.
[49] However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding “of the genesis of the transaction, the background, the context [and] the market in which the parties are operating”.It may be necessary in determining the proper construction where there is a constructional choice…
[50] Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties’ statements and actions reflecting their actual intentions and expectations.
[51] Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption “that the parties … intended to produce a commercial result”. Put another way, a commercial contract should be construed so as to avoid it “making commercial nonsense or working commercial inconvenience”.
[52] These observations are not intended to state any departure from the law as set out in Codelfa Construction and Electricity Generation. We agree with the observations of Kiefel and Keane JJ with respect to Western Export Services Inc v Jireh International Pty Ltd.” (citations omitted)
116 The Council submits that the words in the letter, and specifically the words “third party proceeding” are clear.
117The funding letter refers to the “Third Party proceeding” by reference to “County Court proceeding CI-13-06038”. It states that the Council:
“…is prepared to fund legal representation for [Mr Muto] to argue the Third Party proceeding (but for no other purpose), strictly subject to the following:
…
5. [The Council’s] agreement to fund [Mr Muto’s] costs of the determination of the Third Party proceeding as set out above is strictly without prejudice to our client’s right to argue it is not obliged to indemnify you in regard to this or any other legal proceeding (which it will in fact argue).”
118The funding letter also refers to the order of his Honour Judge Lacava of 14 July, which referred to the third party proceeding. Patently, the third party proceeding to which the funding letter relates is Mr Muto’s claim against the Council in matter CI-13-06038.
119As a matter of construction, the Council says that the letter could only have offered the opportunity for the matters then set out as part of the third party proceeding claim to be determined.
120In circumstances where his Honour Judge Lacava’s orders had referred to that third party proceeding being determined before the hearing of the principal proceeding, the Council says a reasonable business person would not understand the third party proceeding to mean that every possible amendment that might later be raised by Mr Muto to raise additional claims as also having funding proffered by the Council.
121At the time of the funding letter, the claim that is now the subject of this decision was not part of the third party proceeding. It only arose when, after the letter was sent, and funding had been provided for the dispute in relation to the issues that were part of the third party proceeding at the time of the funding letter, the Council refused to fund an appeal. The Council says the words “third party proceeding” cannot reasonably be construed to incorporate subsequent causes of action added to the proceeding after 21 July 2014.
122 Further, the Council says that the words “third party proceeding” do not include any appeal from the judgment of his Honour Judge Anderson made on 18 November 2015. Mr Muto argued that “proceedings” can include appeals as well and he cited various dictionary definitions. Muto referred to the Webster’s definition of “proceeding” meaning up to and including final judgment.
123 I agree with the Council’s submissions. It is true that in general language when people talk about court proceedings and whether they are continuing they can, on occasion, refer to appeals as well as the initial proceeding. However, ordinarily, the filing of a Notice of Appeal or an application for Leave to Appeal amounts to the commencement of a “legal proceeding” (and therefore not the continuation of a legal proceeding unless it is a step within the same court): Kay v The Attorney-General (2000) 2 VR 436 at [27], Chernov JA (with whom Ormiston and Batt JJA agreed). An appeal from the County Court gives rise to a separate legal proceeding in the Court of Appeal in the Supreme Court. It would allocate its own proceeding number. It could not be characterised as a step in the third party proceeding in proceeding number CI-13-06038.
124The fact that the letter states that the representatives to be selected and engaged are to have their costs pursuant to the scale in the County Court Civil Procedure Rules 2008 (Vic) – effective 1 January 2014 to date, would also be considered by the reasonable person in deciding that what was be proffered was simply legal representation for the determination of the issues that were then in the third party proceeding.
125If I am wrong, and the words third party proceeding are ambiguous in the funding letter, then reference can be had to determining the genesis of the funding letter. The evidence was that the funding letter was brought into existence after the hearing before his Honour Judge Lacava on 14 July 2014. Mr Muto put into evidence a memorandum by Mr Daniel Clough of Counsel about the 14 July hearing, sent to the Council after the hearing on 14 July 2014. Mr Muto adopted it with specific exceptions and tendered it. Mr Cator said the purpose of the funding letter was to respond to his Honour’s comments and orders on that date, as relayed to Mr Cator by Counsel and Mr Crow, and thus avoid the prospects of an appeal (on the basis that Mr Muto was not represented).
126His Honour ordered the third party dispute be set down for trial on an estimate of half a day, two weeks from that date. Although the length of the trial and the date of it was subsequently altered, the matter to be determined did not change in that time. There is nothing in the surrounding circumstances of the genesis, background, or context of the funding letter to indicate the words “determination of the third party proceeding” mean anything other than the trial of the limited matters referred to by his Honour Judge Lacava. This was (a) the s76 issue that was determined by the Judgment of his Honour Judge Anderson on 18 November 2015; and (b) the s46 issue, which fell away when VCAT itself dealt with the question of the costs of the serious misconduct proceeding before it. His Honour Judge Anderson dismissed that part of the third party proceeding in May 2016.
127Mr Muto also referred to the fact that he had always appealed judgments against him in the past and that he raised in correspondence and hearings the fact that he wanted to appeal from the decision of his Honour Judge Anderson subsequently. He said this alerted the Council to the fact that the cost of the appeal was being sought. In fact, I think it likely that the fact that he had repeatedly appealed earlier decisions may give some background to why the letter itself was expressly confined to funding the determination of the third party proceedings then in existence in this County Court proceeding.
128I find that the funding letter did not extend to offering to fund any representation other than that required to deal with, in the County Court proceeding then underway, the claims that were part of the third party proceeding at the time of the letter. I find that even if the funding letter is legally binding on the Council, by its terms it is fully executed. The Council provided funding until all the matters the subject of the third party proceeding at the time 21 July 2014 had been determined in that proceeding.
OTHER ISSUES
129In the course of the trial, Mr Muto referred to orders of his Honour Judge Anderson made at a directions hearing on 29 January 2015 suggesting they imparted some obligation on the Council to comply with the funding letter However, that order at paragraph 3 provides:
“Prior to the adjourned hearing, it is expected that the third party will have engaged solicitors pursuant to the terms of the letter from the third party to the defendant, attached to these orders.”
130The order is an expression of his Honour’s expectation of the timing of the Council’s engagement of solicitors for Mr Muto for the purpose of a timetable comprised in other orders for directions. It is not an order compelling the Council to comply with the funding letter or extending the terms of the funding letter.
131Mr Muto argues the funding letter ought to be read contra proferentum in his favour to construe the words “third party proceeding” to include an appeal from the decision of his Honour Judge Anderson made on 18 November 2015. However, the contra proferentum construction applies where there is an exclusion clause, which there is not in this case. There is no basis for extending the words “third party proceeding” to mean something not contained in the letter itself nor that a reasonable business person in considering the circumstances in which it was entered into would think it ought cover.
132 At no time has Mr Muto’s various statements of claim pleaded estoppel. However, since Mr Muto referred to it in passing in the hearing, I make the following points.
133To establish promissory estoppel, Mr Muto would have to prove that:
“The creation or encouragement by [the Council] in [Mr Muto] of an assumption that a contract will come into existence or a promise be performed or an interest granted to the defendant by [the Council], and reliance on that by [Mr Muto], in circumstances where departure from the assumption by [the Council] would be unconscionable.” (Austotel Pty Ltd v Franklins Self-Serve Pty Ltd (1989) 16 NSWLR 582 at 610, Priestley JA, referring to the Judgment of Brennan J in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387).
134Mr Muto would have to show the Council knew or intended that he would act or abstain from acting in reliance on the assumption he had adopted (Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 423, Brennan J). That reliance would have to have given rise to some significant disadvantage (Commonwealth v Verwayen (1990) 170 CLR 394 at 444, Deane J).
135There is no evidence, nor was it ever submitted based on any material fact, that Mr Muto acted, or refrained to act, in reliance on the funding letter to his significant detriment. He had an advantage he otherwise would not have had by being funded, and of having legal representation in the
136At the time of making his final submissions, Mr Muto sought to put a bundle of documents into evidence. Some of them he had previously sought to cross-examine on, but I had ruled they were not relevant to the issue in dispute. Going through each of them one by one took some time. I therefore allowed them into evidence on the basis there was an objection raised as to the relevance of all of them. I have carefully considered all these documents.
137In his final submissions, Mr Muto referred to the documents in the bundle. They dealt with:
·The circumstances in which the legal representatives whom the Council funded after 21 July 2014 letter were engaged to act;
·The agreement between the Council and those legal representatives as to payment, and subsequent correspondence relating to that;
·The circumstances in which those legal representatives later stopped acting;
·Documents relating to the discovery issues in the proceeding, including what documents had been discovered or not by the Council involving issues relating to the ultra vires issue;
·Documents relating to interlocutory steps and hearings in the County Court proceedings.
138None of the documents are relevant to the issue to be determined.
Conclusion
139Mr Muto has been unsuccessful on the claim he brought that he is entitled to further funding due to the funding letter. I have found that it did not give rise to a contract, and even if it had, that contact has been fully executed.
140I will give judgment for the third party on the third party claim.
141I will hear the parties on the question of costs.
Certificate
I certify that these 39 pages are a true copy of the reasons for decision of her Honour Judge Marks, delivered on 22 June 2017.
Dated: 22 June 2017
Liz Main
Associate to Her Honour Judge Marks
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