Janover v Muto
[2015] VCC 1530
•18 November 2015
| IN THE COUNTY COURT OF VICTORIA | Revised Suitable for Publication |
AT MELBOURNE
COMMERCIAL DIVISON
GENERAL LIST
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: | His Honour Judge Anderson | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 26 & 27 October 2015 | |
DATE OF JUDGMENT: | 18 November 2015 | |
CASE MAY BE CITED AS: | Janover v Muto | |
MEDIUM NEUTRAL CITATION: | [2015] VCC 1530 | |
REASONS FOR JUDGMENT
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Catchwords: Local Government – Councillor – Finding by VCAT of serious and gross misconduct – Whether councillor entitled to be indemnified by the Council for his legal costs and associated expenses of the VCAT proceedings – Whether Anshun estoppel arises – Section 76 Local Government Act 1989 (Vic) – Sections 91 and 93 Evidence Act 2008 (Vic).
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APPEARANCES: | Counsel | Solicitors |
| For the Defendant | Mr A. Kirby | Brand Partners |
| For the Third Party | Mr D. Clough | Dawes & Vary Riordan Pty Ltd |
HIS HONOUR:
1Milvan Muto was a councillor of the Greater Shepparton City Council (“the Council”) for a number of years. He was the subject of misconduct allegations which resulted in findings by the Victorian Civil and Administrative Tribunal on 10 July 2013 of “serious misconduct” and “gross misconduct”. As a consequence, Mr Muto was disqualified as a councillor for four years and his office as councillor was vacated.
2The present action was brought by a solicitor for his legal costs of acting for Mr Muto in the VCAT proceedings. By a third party notice directed to the Council, Mr Muto seeks to be indemnified in respect of the legal costs incurred by the plaintiff, and other solicitors, whilst acting for Mr Muto in the VCAT and related proceedings.
3By order of the Court dated 20 July 2015, four questions were set down for hearing as preliminary issues to be determined prior to trial. During the course of the hearing, the Court proceeded with two different questions. The amended questions were designed to resolve the following issues:
a.whether as a matter of construction of section 76 of the Local Government Act 1989 (Vic) (“the Act”), the third party claim, as pleaded and particularised by Mr Muto, must fail;
b.if the trial of the third party claim proceeded, whether evidence might be admitted of Mr Muto’s state of mind at the time he committed the acts upon which the findings by VCAT of serious and gross misconduct were based.
4The determination of these issues also involved a consideration of the following matters:
a.the extent to which the VCAT findings of serious and gross misconduct might be relied upon by the third party, particularly in light of section 91 of the Evidence Act 2009;
b.whether, by reason of the VCAT findings of serious and gross misconduct, Mr Muto was estopped from pursuing his third party claim, or it would be an abuse of process for him to do so.
History of the proceeding
5The plaintiff issued the writ on 14 November 2013. Mr Muto filed his third party notice on 6 February 2014. On 14 July 2014, His Honour Judge Lacava:
a.dismissed the plaintiff’s summary judgment application against Mr Muto;
b.directed that the third party proceeding, “on the issue as to whether the third party is able to indemnify the defendant as to the plaintiff’s claim”, precede the trial of the plaintiff’s claim;
c.set the third party proceeding down for trial;
d.directed the third party to “advise the Court whether the third party will fund legal representation for the defendant to argue the third party proceeding”.
6The Council’s solicitors on 21 July 2014 advised Mr Muto by letter that the Council was “prepared to fund legal representation for you to argue the third party proceeding”, subject to certain conditions. In about February 2015, Mr Muto engaged solicitors in accordance with the offer in the Council’s letter. Mr Muto filed an amended statement of claim in the third party proceeding on 19 June 2015. The third party proceeding was listed for trial on 22 July 2015.
7At a hearing before the Court on 20 July 2015, the trial date was vacated and four questions were set down for determination on 26 October 2015, as separate questions prior to trial. The questions were as follows:
“a. Whether, as a matter of law, a councillor’s subjective state of mind is relevant in determining whether he or she has acted in good faith within the meaning of that term in section 76 of the Local Government Act 1989.
b.Whether any of the instances of serious misconduct found by the Victoria Civil and Administrative Appeals Tribunal in proceeding B82/2012 were done in the exercise or purported exercise of any function or power conferred on the defendant as a councillor for the Greater Shepparton City Council.
c.If yes to (b) with respect to any of the said instances of serious misconduct, whether the defendant did any of those things in good faith, irrespective of his subjective state of mind.
d.If yes to (b) and (c) with respect to any of the said instances of serious misconduct, whether any of the claims brought by the plaintiff against the defendant in this proceeding are actions or claims within the meaning of section 76 of the Local Government Act 1989.”
8The Court orders on 20 July 2015 contained a direction that, “the defendant and the third party file an agreed statement of facts by 4pm on 4 September 2015. Defendant to provide a draft to the third party by 4pm on 31 July 2015. The third party to provide its comments by 4pm on 14 August 2015”. A draft “statement of agreed facts” was filed by the defendant on 20 October 2015. About one third of the document was “agreed”. The remaining two-thirds was disputed by one or other of the parties.
9At the commencement of this hearing on 26 October 2015, I discussed the questions with counsel and the utility of proceeding with the determination of those questions. Other options considered during that discussion included:
a.proceeding with revised questions prior to trial;
b.a “strike out” application by the third party in respect of the statement of claim in the third party proceeding;
c.a summary dismissal application by the third party in respect of the defendant’s third party claim;
d.a ruling in advance of trial as to the admissibility of evidence of the defendant’s state of mind, as part of the context in which the defendant performed the relevant acts upon which the VCAT findings of serious and gross misconduct were made.
10Particularly in view of the third party’s assumption of liability for the defendant’s costs of the third party proceeding, and notwithstanding the failure of the parties to file an appropriate statement of agreed facts, it was the desire of both the Court and the parties to not waste the time set aside for the hearing of the preliminary questions.
11The third party’s counsel, Mr Clough, proposed two questions. Initially, defendant’s counsel, Mr Kirby, had no instructions to agree to the first question. However, the fact that there should be two alternative questions and the form of the questions was agreed by both parties prior to the conclusion of the hearing.
12The agreed questions to be determined prior to trial were as follows:
“1. Whether an act or omission of the defendant cannot give rise to an obligation on the part of the third party to indemnify the defendant under section 76 of the Local Government Act 1989 (“the Act”), as an act or omission done:
a.in “good faith”; and
b.“in the exercise or purported exercise of any function or power conferred on the councillor” by or under the Act or any other Act
by reason only of it being an act or omission relied on by the Tribunal in proceeding numbers B87/2012 and B82/2012 (“the VCAT proceedings”) in making a finding of gross or serious misconduct within the meaning of section 81A of the Act?
2. Whether evidence is admissible at the trial of the third party proceeding of the defendant’s subjective state of mind, in relation to any acts or omissions relied on by the Tribunal in the VCAT proceedings in making a finding of serious or gross misconduct, as relevant to the issue of whether the defendant’s acts or omissions were done or omitted to be done “in good faith” for the purposes of the application of section 76 of the Act?”
The VCAT Proceedings
13By the third party claim, Mr Muto seeks that the Council “indemnify him against all costs and disbursements paid or payable by him” to three sets of solicitors (including the plaintiff) and the “out of pocket expenses incurred by him in attending conferences with solicitors and counsel and instructing and appearing at hearings”, in respect of or in connection with the following proceedings:
a.VCAT proceeding no. G518/2010 (“the first VCAT proceeding”);
b.the appeal from VCAT proceeding no. G518/2010 to the Court of Appeal in appeal no. 25/2013 “the appeal from the first VCAT proceeding”);
c.VCAT proceeding no. B82/2012 (“the second VCAT proceeding”);
d.VCAT proceeding no. B87/2012 (“the third VCAT proceeding”).
14VCAT proceeding no G518/2010 was commenced by the Secretary to the Department of Planning and Community Development (“the Departmental Secretary”) alleging gross misconduct by Mr Muto as a member of the Council. Mr Muto had been elected as a councillor in November 2008. The allegations in the first VCAT proceeding related to the period December 2008 to July 2010. Thirteen instances of misconduct were finally relied upon. They were particularised in a notice dated 3 March 2011. On 3 March 2011, Mr Muto admitted each of the 13 allegations, gave certain undertakings and consented to the orders made by Ross J, constituting VCAT.
15Ross J made findings of misconduct in respect of the 13 allegations, reprimanded Mr Muto and required him to make a public apology to a council meeting and to take leave of absence as a councillor for one month. For a further period of 5 months, Mr Muto could only perform restricted functions as a councillor.
16The appeal from the decision in the first VCAT proceeding was determined on 12 April 2013 – Muto v Department of Planning and Community Development [2013] VSCA 85. Apart from a minor aspect of the orders made by Ross J, the appeal was rejected.
17The second VCAT proceeding and the third VCAT proceeding were heard together and decided on 10 July 2013. The second VCAT proceeding was brought against Mr Muto by six persons who were all the other councillors apart from Mr Muto, when the proceeding was commenced. The Departmental Secretary was later joined as a party. The proceeding alleged “serious misconduct” on the part of Mr Muto.The third VCAT proceeding was brought by the Departmental Secretary against Mr Muto and alleged “gross misconduct” by him.
18In the second VCAT proceeding, the Tribunal was satisfied that there had been “serious misconduct” by Mr Muto constituted by, first, “the contravention of the Councillor Conduct Principles” and, secondly, by “a previous finding of misconduct by this Tribunal within the last four years”. On the basis of “the finding of serious misconduct”, Mr Muto was suspended from his office as a councillor for six months and was ineligible to hold the positions of mayor or as a chair of a special committee of Council for four years.
19In the third VCAT proceeding, the Tribunal was satisfied that there was “gross misconduct” on the part of Mr Muto demonstrated by the evidence which established that he was “not of good character” and was “not a fit and proper person to hold the office of councillor”. On the basis of “the finding of gross misconduct”, Mr Muto was disqualified as a councillor for a period of four years and his office as councillor was vacated.
20The 13 instances of Mr Muto’s conduct admitted by Mr Muto and found by the Tribunal to be “misconduct” in the first VCAT proceedings are set out in schedule A to Mr Muto’s statement of claim in the third party proceeding. The conduct of Mr Muto alleged against him and relied upon by the Tribunal in reaching its findings of “serious misconduct” and “gross misconduct” in the second and third VCAT proceedings are set out in Schedules B and C to Mr Muto’s statement of claim.
21In the second VCAT proceeding, Mr Muto’s conduct was first considered by a Councillor Conduct Panel (under Division 1B of Part 4 of the Act). The Panel reported that, “with one exception, Cr Muto accepted that the words claimed to have been used by him were the words that he used. Though accepting that he used those words, he asserted that the words quoted in the application and subsequent application had been taken out of context”.
22The issue of the “context” of Mr Muto’s conduct, and the relevance of the matters he has raised in the further and better particulars of his statement of claim in the third party proceeding, will be considered in detail at a later part of these reasons.
23At the hearing of the second and third VCAT proceedings, evidence was given by a number of witnesses in support of the claims against Mr Muto. Mr Muto was refused applications to have the proceedings adjourned and that the Tribunal disqualify itself on the ground of bias. Mr Muto does not appear to have participated in the hearing in the sense of being involved in the testing and leading of evidence.
24The specific acts of Mr Muto considered by the Tribunal in the second and third VCAT proceedings comprised his conduct at meetings, the content of emails he sent and the public displays on a large electronic sign located on the hotel he operated. At meetings, Mr Muto made frequent interjections and interruptions which included insulting and offensive remarks. The remarks were said by the Tribunal to have impugned the “competence, honesty and morality (including sexual morality) of other individual councillors and council staff including senior and ordinary staff".
Evidence of the VCAT proceedings and the appeal
25The VCAT decisions on 4 March 2011 and 10 July 2013 and the Court of Appeal decision on 12 April 2013 are in evidence together with the Councillor Conduct Codes adopted by the Council on 28 September 2009 and 16 April 2013.
26The use to which the VCAT decisions and the Court of Appeal decision might be put was a matter of debate in the hearing, including the effect of sections 91 and 93 of the Evidence Act 2008 (Vic).
27Section 91 of the Evidence Act provides as follows:
“(1) Evidence of the decision, or of a finding of fact, in an Australian or overseas proceeding is not admissible to prove the existence of a fact that was in issue in that proceeding.
(2)Evidence that, under this Part, is not admissible to prove the existence of a fact may not be used to prove that fact even if it is relevant for another purpose”.
28Section 93 provides, relevantly, that:
“This part does not affect the operation of –
…
(c) the law relating to res judicata or issue estoppel”.
29Mr Clough submitted that the VCAT decisions were admissible evidence of the fact that the decisions, and the findings of serious and gross misconduct involved in the decisions, were made.
30It was not the underlying facts (the acts or omissions alleged to constitute misconduct) but the findings of serious and gross misconduct which were sought to be relied upon. He further submitted that the findings in the earlier proceedings, rather than going to “prove the existence of a fact in a later proceeding,” may be relevant for extended purposes. He referred to cases in which evidence of earlier findings of fact by a Court were found to:
a.be persuasive in establishing that allegations by a party in a later proceeding were false (Ainsworth v Burden [2005] NSWCA 174 at paragraph 109);
b.establish that there were reasonable grounds for finding proved allegations of the existence of fraud in a later proceeding (Talacko v Talacko [2014] VSC 328 per Elliot J at paragraph 75).
31Mr Clough submitted that the admissibility of the fact of the findings of serious and gross misconduct in the earlier proceeding did not mean that the task of deciding issues in a later proceeding would be “abdicated in favour of the determination of some other body” in the earlier proceeding. In this regard, he submitted that the decision of the Court of Appeal in Daunt v Daunt [2015] VSCA 58 (“Daunt”) was distinguishable.
32In Daunt, a finding by VCAT upon an application pursuant to the Guardianship and Administration Act 1986, that it was “not satisfied” that the proposed represented person [Mrs Daunt] had a disability, could not be used in a later Supreme Court proceeding relating to the validity of a transfer of land. The VCAT finding of fact was not admissible evidence on the question of whether Mrs Daunt “was under some special disability or disadvantage vis-à-vis Michael [her son], such that there arose a presumption of unconscientious conduct”.
33These matters will be discussed further below in the context of the consideration of the principles of issue estoppel and abuse of process.
Construction of section 76 Local Government Act 1989
34Section 76 of the Local Government Act 1989 reads as follows:
“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”.
35Mr Clough submitted that, as a matter of construction of section 76, Mr Muto was not entitled to be indemnified by the Council in respect of his legal costs or personal expenses of the VCAT and associated proceedings.
36Mr Clough relied upon two submissions:
a.the words, “all actions or claims” in section 76 did not extend to the provision of an indemnity by the Council in respect of the legal costs incurred by a councillor in defence of misconduct proceedings under Division 1B of Part 4 of the Act;
b.the section cannot operate to entitle a councillor to an indemnity in respect of proceedings under the Act where a finding of serious or gross misconduct is made against the councillor.
37These submissions raise issues of statutory interpretation which I am asked to determine as a separate question prior to trial. In these circumstances, the following principles are relevant:
a.in the absence of an agreed statement of facts, I must have regard to the matters pleaded by Mr Muto in the amended statement of claim and the further and better particulars of the pleading;
b.effectively, the Council can only succeed if it were to show that, on the facts relied upon by Mr Muto, he would not be able to bring himself within the operation of section 76;
c.the section must be construed by careful consideration of all the words used and the purpose of the section in the context of the particular legislation.
38I reject Mr Clough’s first submission. It is not difficult to envisage factual situations where it might reasonably be argued that a councillor participating in the defence of claims of serious or gross misconduct under the Act would be entitled to be indemnified by the Council for the legal costs and other expenses of the defence.
39For example, the mayor or another councillor whilst chairing a council or committee meeting, might be accused quite unfairly and unjustifiably by a political opponent of acting improperly or even corruptly in the way the meeting was chaired, it being alleged that this impacted on the other councillor’s ability to participate in the meeting. If these allegations had no basis and were ultimately withdrawn, or dismissed by VCAT, the Council might expect that, in those circumstances, it would be required to indemnify the innocent councillor in respect of the legal costs and other expenses incurred, in the event that they were not met by the applicant in the proceeding.
40Mr Clough’s second submission was that, in all proceedings where a finding had been made by VCAT of serious or gross misconduct, section 76 can have no application so as to require the Council to indemnify the councillor whose conduct is so impugned.
41The purpose of section 76 is to provide an indemnity to councillors who are carrying out their duties appropriately. Although the words of the section must be read as a whole, it is necessary in construing the section to have particular regard to the following matters:
a.the indemnity is mandatory – the Council has no discretion as to its application;
b.the indemnity is offered “against all actions or claims”;
c.the breadth and nature of the councillor’s duties covered;
d.the consideration of the propriety of the councillor’s conduct by the requirement of “good faith”.
42It is appropriate to examine both dictionary and legal definitions of the words “indemnity” and “indemnify”:
a.the Macquarie Dictionary, revised 3rd edition (2001) includes in its definitions, the following:
i.indemnity: “…4. legal protection, as by insurance, from liabilities or penalties incurred by one’s actions. 5. Legal exemption from penalties attaching to unconstitutional or illegal actions, granted to public officers or other persons…”
ii.indemnify: “1. to compensate for damage or loss sustained, expense incurred, etc…”
b.the Australian Oxford Dictionary (1999) includes the following definitions:
i.indemnity: “…1a compensation for loss incurred. b. a sum paid for this…2 security against loss. 3 legal exemption from penalties etc incurred…”
ii.indemnify: “…1…protect or secure (a person) in respect of harm, a loss, etc. 2…secure (a person) against legal responsibility for actions. 3…compensate (a person) for a loss, expenses, etc…”
c.in contractual matters, the law draws a distinction between a “guarantee” and an “indemnity”. In O’Donovan and Phillips, The Modern Contract of Guarantee, 3rd edition (1996), the authors state that, “The contract of indemnity, therefore, is ‘a contract, by one party to keep the other harmless against loss, and is not dependent on the continuing liability of the principal debtor”. This statement was adopted by the New South Wales Court of Appeal in Canty v PaperlinX Australia Pty Ltd [2014] NSWCA 309 at paragraph 39. However, the principle has little application to the present task.
43Both counsel referred me to a number of authorities dealing with statutory protection for public officers. From those cases, it is apparent that the language used in the particular statute is critical in determining the scope of the protection offered.
44In Board of Fire Commissioners of New South Wales v Ardouin (1961) 109 CLR 105 (“Ardouin”) the High Court held that the Board was not protected from an action in negligence arising when a motor cycle was struck by a fire truck on its way to a fire. This was notwithstanding that by section 28 of the Fire Brigades Act 1909–1956 (NSW), “a fire brigade, upon alarm of fire, shall notwithstanding any provision to the contrary in the Act, proceed with all speed to the place where the fire is”.
45The Court held that the protection by section 46 to the Board, whilst it was “exercising any powers conferred by this Act”, meant that it would “not be liable for any damage caused in the bona fide exercise of such powers”. However, as Dixon CJ said at page 110, “section 46 is not concerned with the use of a highway by fire brigade vehicles to reach the site of a fire and does not exclude a liability for negligence in the course of carrying out that duty or function”.
46Kitto J, at page 116, noted that as section 46 was “removing the otherwise inherent limit of due care provided only that the exercise is really for the purpose for which the power exists, the question remains, in what cases does it apply”. Kitto J considered that “a most strict interpretation of its words is plainly demanded. The consequences for the property, the health, the lives, of individuals affected by a negligent exercise of power under the Act may be the most serious; yet the section takes away all remedy, if only good faith exists. And the Act, be it noted, makes no provision of its own for compensation”.
47In Webster v Lampard (1993) 177 CLR 598 (“Webster”), the High Court considered section 47A of the Limitation Act 1935 (WA) which provided that “no action shall be brought against any person…for any act done in pursuance or execution or intended execution of any Act or of any public duty or authority”.
48The majority (Mason CJ, Deane and Dawson JJ), at page 605-6, stated that, “Even in the absence of any explicit qualifying adjective such as ‘intended’ (as in section 47A of the Limitation Act) or ‘purported’, the defence under such statutory provisions is not confined to the case where the defendant’s conduct was actually justified as being in pursuance or execution of some statutory provisions or in the discharge of some public duty or office. If it were, the protection which such provisions provide to those acting bona fide in the course of public duty would be illusory”.
49At pages 606 to 607, the judgment noted that, “Where a statutory defence is available in respect of acts having some such designated connexion with the actual or intended course of official duty, the general onus of establishing that connexion will, in the absence of some identified contrary legislative intention, rest on the defendant who invokes the defence”.
50The judges considered that, in the case before them, “the general onus of establishing that [the police officer’s] alleged acts had, for the purposes of section 47A of the Limitations Act 1958, been ‘done in pursuance or execution or intended execution’ of the Police Act or of his public duties or authority as [a police officer] rested upon him as the defendant claiming the benefit of the defence under the section”.
51In Webster, the Court also considered the protection offered by section 138 of the Police Act 1982 (WA), incorporating paragraph H of the Interpretation Act 1918 (WA) which provided that, “No action shall lie against any … officer of police … on account of any act, matter, or thing done … in carrying the provisions of [the Police] Act into effect again[st] any parties offending or suspected of offending against the same, unless there is direct proof of corruption or malice”.
52At page 606, the judgment stated in relation to section 138 of the Police Act that, “subject to an important qualification, it usually suffices for the purposes of such a provision that the person invoking the defence genuinely but mistakenly believed that he or she was acting within the limits of the authority expressly or impliedly conferred by the relevant statutory provision or office. The qualification is that, notwithstanding such a genuine but mistaken belief, the defence under such protective provisions is not available to defeat a plaintiff’s otherwise well-founded claim if it appears that the defendant was, in fact, ‘actuated solely or predominantly by a wrong or indirect motive’, as for instance the satisfaction of personal malice or the gaining of some other benefit or objective ‘entirely outside statutory justification’, such as a corrupt benefit”.
53At page 607, the judgment referred to the burden of proof in the situation where, “the prima facie inference from the conceded or proven facts is that the defendant was genuinely, albeit mistakenly, purporting or intending to act in pursuance of statutory authority or duty but it is alleged by the plaintiff that the defendant was really actuated ‘not … by an honest desire to do his [or her] duty’ but by some impermissible purpose or motive. In that situation, the onus of establishing that the defendant’s ostensible pursuit of public duty was pretended rests only upon the plaintiff as the party who asserts it. As has been indicated, however, that stage will not be reached unless and until the defendant prima facie brings himself or herself within the words of the relevant statutory requirement”.
54In Mid Density Developments Pty Ltd v Rockdale Municipal Council (1993) 44 FCR 290 (“Mid Density”), the Full Federal Court considered section 582A of the Local Government Act 1919 (NSW) which provided that, “A council shall not incur any liability in respect of any advice provided in good faith”, and other legislation in similar terms. At page 298, the Court said, “‘Good faith’ in some contexts identifies an actual state of mind irrespective of the quality or character of its inducing causes; something will be done or omitted in good faith if the party was honest, albeit careless…On the other hand, ‘good faith’ may require that exercise of caution and diligence to be expected of an honest person of ordinary prudence”. It was held that, whilst not dishonest, the council had not acted in good faith.
55In Bankstown City Council v Alamdo Holdings Pty Ltd (2005) 223 CLR 660; [2005] HCA 46 (“Bankstown”), the High Court considered the meaning of “good faith” in section 733(1) of the Local Government Act 1993 (NSW). By section 733(1), “a council does not incur any liability in respect of:
a.any advice furnished in good faith by the council relating to [the likelihood and extent of land flooding], or
b.anything done or omitted to be done in good faith by the council” [relating to a similar purpose].
56Sub-section (4) deemed a Council to have acted in good faith, if it had acted “substantially in accordance with the principles contained in the relevant manual”, and “unless the contrary is proved”.
57The majority judgment, Gleeson CJ, Gummow, Hayne and Callinan JJ at paragraphs 50 and 51, referred to Mid Density and the “various examples in the law where ‘good faith’ is used as a criterion requiring some state of mind or knowledge other than the personal honesty and absence of malice of the relevant actor”. The judgment continued, “moreover, given the range of advice, acts and omissions to which section 733(1) may apply, what is required for something to be done or omitted in good faith may vary from one case to the next. This makes it unwise, if not impossible, to place a definitive gloss upon the words of the statute…Here something more than negligence is necessary because, unless negligence were present, there would be no liability for protection against which section 733(1) was required by the Council”.
58In State of Victoria v Horvath (2002) 6 VR 326; [2002] VSCA 177 (“Horvath”), the Court of Appeal construed section 123 of the Police Regulation Act 1958. The section provided as follows:
“(1) A member of the force…is not personally liable for anything necessarily or reasonably done or omitted to be done in good faith in the course of his or her duty as a member of the police force…
(2) Any liability arising from [such] an act or omission…attaches instead to the State…”
59The Court of Appeal, at paragraph 47 considered that in section 123(1), “an Act or omission not in good faith could hardly be described as necessarily or reasonably done, or not done, in the course of duty” and that, “The interdependence of the notions underlying these expressions, acknowledging that as a matter of statutory interpretation proper effect must be given to each of the words used, makes it apparent that the expression anything necessarily or reasonably done or omitted to be done in good faith in the exercise of his or her duty should be read as a whole”. As a result, “clearly conduct not undertaken in good faith could not be regarded as being relevantly linked to the performance of the member’s duty”.
60At paragraphs 48 and 49, the Court of Appeal was satisfied that “there is no sensible reason for construing the provision in a narrow or restrictive fashion” as there “can be no doubt that Parliament intended that [responsible police members] should be afforded immunity from civil suit”, as otherwise “the mere making of a mistake by the member as to the content of the obligations, however well intentioned, and whatever the circumstances in which the mistake was made, would remove the statutory protection from the member”.
Conclusions on the construction issue
61Actions or claims: In section 76, a councillor is entitled to be indemnified “against all actions or claims” and to be kept indemnified even though the actions or claims may arise after the person ceases to be a councillor.
62In the context of the section, “actions” would refer to legal proceedings and “claims” to demands, which if not fulfilled, might lead to the initiation of proceedings. As earlier referred to, I consider that the proceedings in VCAT to determine whether the conduct of Mr Muto amounted to serious or gross misconduct would come within the phrase “actions or claims” in section 76.
63Extent of the indemnity: The indemnity sought by Mr Muto, in the third party proceeding, is in respect of the legal costs of his solicitors and the costs and expenses he incurred personally. However, it is obvious that the indemnity provided by section 76 cannot extend to protection from the misconduct processes included in Division 1B of Part 4 of the Act. Although the processes apply to councillors, clearly section 76 cannot be relied upon as a bar to action being taken under the Act in respect of a councillor’s misconduct.
64Similarly, this logic would apply to any penalties imposed in respect of a finding of misconduct. In relation to findings of serious or gross misconduct, penalties might include suspension or disqualification from the office of councillor or from the performance of certain functions of a councillor.
65It is noted that “gross misconduct” is defined in section 81A to include behaviour that contravenes “a section of this Act, the contravention of which has a penalty of at least 60 penalty units” [currently one unit = $151.67]. It is clear that section 76 does not provide statutory protection to a councillor in relation to the many offences councillors may commit if they contravene particular provisions of the Act or that they should be indemnified by the Council in respect of any penalty imposed or the legal costs incurred in relation to such proceedings.
66Exercising any function or power: The indemnity in section 76 is available to a councillor, and other persons, “exercising any function or power on behalf of a Council”. It is clear that this is a broad protection as it –
a.extends not only to councillors, but also to a “member of a Council committee, member of a Council staff and any person exercising any function or power on behalf of a Council”;
b.relates to actions or claims “arising during or after the term of office” of a councillor or committee member “or employment” of a member of Council staff;
c.relates to “the exercise of any function or power”;
d.the relevant function or power may be “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”.
67The following provisions of the Act are critical to determining the scope of the operations of a Council and defining its “powers” and “functions”:
a.the purpose of local government is stated in section 3A of the Act to be the provision of “a system under which Councils perform the functions and exercise the powers conferred by or under this Act and any other Act for the peace, order and good government of their municipal districts”;
b.the Council, by section 3B, consists of “democratically elected” councillors;
c.the objectives of a Council are set out in section 3C, and primarily involve endeavouring “to achieve the best outcome for the local community having regard to the long term and cumulative effects of decisions”;
d.Section 3D of the Act states that, “a Council is elected to provide leadership for the good governance of the municipal district and the local community”;
e.the powers of a Council are generally set out in section 3F of the Act which provides that “a Council has the power to do all things necessary or convenient to be done in connection with the achievement of its objectives and the performance of its functions”. These powers may be subject to limitations or restrictions or the conferral of further specific powers by the Act or any other Act;
f.specific functions of a Council are set out in section 3E of the Act.
68In summary, councillors are democratically elected to constitute the Council. The Council has responsibility for the good government of its municipal district and its powers are to be exercised and its functions carried out in the best interests of the local community. The Council, including through its councillors, carries out these tasks by exercising a variety of powers and functions, and with the assistance of Council staff.
69Good faith: The exercise of the powers and functions of the Council through its councillors and staff are subject to external review and, if necessary, intervention, for example pursuant to Part 10 of the Act. Councillors and Council staff are subject to codes of conduct. In the case of councillors, there are extensive provisions in the Act relating to their conduct and the investigation of misconduct.
70Section 81A of the Act provides definitions of “misconduct”, “serious misconduct” and “gross misconduct”. The level of misconduct increases in severity from “misconduct” to “gross misconduct”. A finding of “gross misconduct” attracts the most significant penalties. Whilst allegations of “misconduct” might be dealt with by a Councillor Conduct Panel, “serious misconduct” and “gross misconduct” can only finally be dealt with by VCAT.
71It is likely, that most allegations against a councillor of misconduct (of each of the three levels of severity) would arise, in a general sense from the “exercise or purported exercise” of the relevant functions or powers conferred on a council. However, the section must be read as a whole, and in particular the requirement that the councillor’s acts or omissions must be “done in good faith in the exercise or purported exercise of any function or power”.
72In regard to the phrase “good faith”, as French J said in Bropho v Hreoc (2004) 204 ALR 761 at paragraph 84, the term “has been described as ‘protean’ in character with ‘long standard usage in a variety of statutory and …common law contexts’…A search of Commonwealth statues discloses 154 Acts in which the terms is used. Its applications are diverse and reflected in a variety of constructions according to its particular applications”.
73In this regard, the extracts quoted previously from the judgments in Webster, Mid Density, Bankstown and Horvath make it clear that the context in which the expression “in good faith” appears in a statutory provision may significantly affect the construction of the provision.
74Counsel also referred to the history of section 76 and other provisions in the Act where the phrase “good faith” is used. Little assistance was to be gained from the Explanatory Memorandum or the Parliamentary debates in relation to the amending legislation. Similarly, the use of the phrase “good faith” in other parts of the Act, including sections 216, Schedule 5 clause 13, Schedule 9 clause 1, and sections 95A(5), 110(3), 228(1) and 229(4) suggest that the phrase must be construed having regard to the context and purpose of the relevant provision.
75In most cases, there is a significant difference in the wording used which would make it difficult to find a common meaning for the phrase “good faith” as it appears in different parts of the Act. Section 228(1) is in similar terms to section 76 and provides an indemnity to the Minister and the Secretary to the Department of Planning and Community Development. It is unlikely, in my view, that section 228(1) would be interpreted inconsistently with the construction I have adopted.
76In regard to section 76, I consider that the expression “good faith” requires “that exercise of caution and diligence to be expected of an honest person of ordinary prudence”(Mid Density) and that Mr Muto’s conduct insofar as it formed the basis for findings of serious or gross misconduct was “clearly not undertaken in good faith [and] could not be regarded as being relevantly linked to the performance” of Mr Muto’s functions or powers as a councillor (Horvath). Notwithstanding the statement in Bankstown, that what is “done or omitted in good faith may vary from one case to the next”, conduct which had been the basis for a finding of serious or gross misconduct could not, in my view, found a claim for indemnity under section 76.
77I consider, that the Act would never have had in contemplation that a Council would be required to indemnify a councillor in respect of misconduct proceedings brought under the Act and in which findings were made by VCAT against the councillor of serious or gross misconduct.
78The reasons for reaching that conclusion are, in summary, as follows:
a.the indemnity is sought in respect of legal costs and Mr Muto’s personal expenses related to the VCAT proceedings and the appeal arising from the first VCAT proceeding;
b.each of the VCAT proceedings was a proceeding taken pursuant to the disciplinary processes set out in the Act;
c.in relation to the first VCAT proceeding, Mr Muto had admitted each of the 13 allegations of misconduct in respect of which findings were made by VCAT;
d.in the second VCAT proceeding, the finding of misconduct in the first VCAT proceeding was a relevant basis for the finding of “serious misconduct”;
e.in the third VCAT proceeding, the finding of “gross misconduct” was based on the Tribunal being satisfied that Mr Muto:
i.was “not of good character”; and
ii.was “otherwise not a fit and proper person to hold the office of councillor”;
f.it is likely that a similar conclusion, as set out in paragraph 77, might be reached as to the obligation by a council to indemnify a councillor in relation to any misconduct finding by VCAT under the Act, including findings based on other parts of the definitions in section 81A of the three types of misconduct. It is unnecessary, however, to decide that broader issue in the context of the present case;
g.the protection offered by section 76 is mandatory and must be applied without the exercise of any discretion by the Council;
h.section 76 clearly does not offer protection in respect of the many provisions in the Act where contravention carries significant monetary penalties. For those provisions with maximum penalties in excess of 60 penalty units (the contravention may also be the basis for a finding of “serious misconduct”;
i.it is also clear that the powers the Tribunal might exercise (including suspension and disqualification) upon misconduct, would not be affected by the protection given to councillors by section 76;
j.the processes in the Act for dealing with misconduct by councillors, and particular for serious or gross misconduct, should not be affected by the protection offered to councillors by section 76;
k.the protection given to a councillor should be limited so that its operation does not adversely affect the performance of a Council’s powers and functions and the achievement of its statutory objective;
l.section 76 must be construed so that the breach of the obligations of councillors not to misconduct themselves, particularly where this would result in a finding of serious or gross misconduct, would take them outside any protection offered.
“Anshun” Estoppel / Abuse of process
79Mr Clough submitted that Mr Muto was prevented from re-litigating the issues determined in the VCAT proceedings by his third party claim. Mr Clough said that to permit Mr Muto to do so would be to infringe the principles of Anshun estoppel, and would also amount to an abuse of process.
80Section 91 of the Evidence Act 2008 (Vic) does not allow evidence of the decision or of findings of fact in the VCAT proceedings “to prove the existence of a fact that was in issue” in those proceedings. However, section 93 provides that section 91 “does not affect the operations of ... the law relating to res judicata or issue estoppel”.
81In Tomlinson v Ramsey Food Processing Pty Ltd [2015] HCA 28; (2015) 323 ALR 1, the High Court considered whether a worker [Mr Tomlinson], claiming damages for personal injuries sustained in a workplace accident against a particular defendant [Ramsey Food Processing] as his employer, could proceed with the claim where, in earlier proceedings, the Fair Work Ombudsman had issued against a different company [Tempus Holdings] as the respondent employer, in relation to the termination entitlements of employees, including Mr Tomlinson.
82It was held that Mr Tomlinson was not estopped from alleging that Ramsey Food Processing was his employer in the damages claim, as the Fair Work Ombudsman had brought the earlier proceeding against Tempus Holdings in the exercise of a statutory power and not as a representative of Mr Tomlinson.
83At paragraph 22, in the judgment of four of the five judges, (French CJ, Bell, Gageler and Keane JJ), the three forms of estoppel “recognised by the common law of Australia as having the potential to result from the rendering of a final judgment in an adversarial proceeding”, were discussed. The three forms of estoppel are “cause of action estoppel”, “issue estoppel” and “Anshun estoppel”. The judgment described Anshun estoppel as precluding “the assertion of a claim, or the raising of an issue of fact or law, if that claim or issue was so connected with the subject matter of the first proceeding as to have made it unreasonable in the context of that first proceeding for the claim not to have been made or the issue not to have been raised in that proceeding”.
84The judgment, in paragraph 24, sought “to explain the relationship between the doctrine of estoppel and the doctrine of abuse of process as it has since come to be recognised and applied in Australia”. The judges stated that, “The doctrine of abuse of process is informed in part by similar considerations of finality and fairness. Applied to the assertion of rights or obligations, or to the raising of issues in successive proceedings, it overlaps with the doctrine of estoppel. Thus, the assertion of a right or obligation, or the raising of an issue of fact or law, in a subsequent proceeding can be simultaneously: (1) the subject of an estoppel which has resulted from a final judgment in an earlier proceeding; and (2) conduct which constitutes an abuse of process in the subsequent proceeding”.
85In paragraph 25, the judgment continued: “Abuse of process, which may be invoked in areas in which estoppels also apply, is inherently broader and more flexible than estoppel. Although insusceptible of a formulation which comprises closed categories, abuse of process is capable of application in any circumstances in which the use of a court’s procedures would be unjustifiably oppressive to a party or would bring the administration of justice into disrepute. It can for that reason be available to relieve against injustice to a party or impairment to the system of administration of justice which might otherwise be occasioned in circumstances where a party to a subsequent proceeding is not bound by estoppel”.
86Counsel also referred to the decisions of Solak v Registration of Titles [2011] VSCA 279; (2011) 33 VR 40, and Redowood Pty Ltd v Link Market Services Pty Ltd [2007] NSWCA 286. These were cases where appeal courts had considered the applicable principles of Anshun estoppel where the parties in the earlier and later proceedings were different. In the Victorian decision, reliance upon Anshun estoppel (by the Registrar of Titles) failed, essentially because the second proceeding did not involve “the estopped plaintiff attempting to assert in the second proceeding some proposition inconsistent with the judgment in the first proceeding”. Accordingly, there was little “risk of inconsistent judgments” and it had not been established that it had been “unreasonable” for the plaintiff in the first proceeding to have refrained from raising the cause of action (against the Registrar of Titles) in the first proceeding.
87In Kermani v Westpac Banking Corporation [2012] VSCA 42, Robson AJA, with whom the other members of the Court of Appeal agreed, listed in paragraph 97 the principles to be applied when considering whether a proceeding should be stayed as an abuse of process, including in circumstances where an earlier proceeding had determined similar issues.
88A number of the matters listed by Robson AJA have application to Mr Muto’s third party claim, in circumstances where findings of serious and gross misconduct were made in the second and third VCAT proceedings, and particularly as:
a.there was a significant overlap of issues and similarity of subject matter in the proceedings;
b.Mr Muto had had the opportunity to fully litigate the issues relating to his misconduct in the VCAT proceedings.
89In the circumstances, Mr Clough submitted that:
a.Mr Muto should not be permitted to re-litigate issues relating to the acts and omissions determined to be the basis for findings of serious or gross misconduct in the VCAT proceedings;
b.a re-examination of the evidence of misconduct in the third party claim would give rise to the possibility of inconsistent findings in the proceedings;
c.this would have the tendency to bring the administration of justice into disrepute.
90Essentially, these arguments have the same foundation as those advanced by Mr Clough in support of the construction of section 76 for which he contends. His submission was that it is inconceivable Parliament intended that Mr Muto should be able to seek an indemnity for his conduct, supposedly done in good faith in the exercise or purported exercise of functions or powers on behalf of a council, where that conduct has been found by application of the disciplinary processes set out in the Act to amount to serious or gross misconduct demonstrating that Mr Muto was not of good character or was otherwise not a fit and proper person to hold the office of councillor.
91I consider, however, that if (contrary to the conclusions I have reached) it is not the proper construction of section 76 that a councillor against whom a finding of serious or gross misconduct is made, would not be entitled to be indemnified by the Council under section 76, that it would not be appropriate, at this stage of the proceeding, to stay Mr Muto’s third party claim or to dismiss it, as an abuse of process.
92In regard to the submission based both on Anshun estoppel and abuse of process:
a.the second and third VCAT proceedings were disciplinary processes brought under the Act alleging misconduct on the part of Mr Muto. The present claim seeks an indemnity pursuant to section 76 in respect of the legal and other costs and expenses incurred in defending the misconduct proceedings;
b.the issue for determination in the second and third VCAT proceedings was whether Mr Muto’s conduct constituted serious or gross misconduct as those terms are defined in the Act. The issue in the third party claim is whether Mr Muto acted in good faith in the exercise of functions or powers on behalf of the Council, and should therefore be indemnified by the Council;
c.the parties in the second VCAT proceeding were the other councillors (and the Departmental Secretary) as applicants and Mr Muto as respondent. In the third VCAT proceeding the applicant was the Departmental Secretary and Mr Muto was the respondent. In the third party proceeding, Mr Muto is the claimant and the Council is the respondent.
93If, despite the findings against Mr Muto in the second and third VCAT proceedings, it were possible for him to bring himself within the requirements of section 76, it would be difficult to conclude that the risk of (apparently) inconsistent decisions would be of such a nature that the third party proceeding should not be permitted to proceed.
Admissibility of Mr Muto’s state of mind
94The parties wished to have an early determination of the issue of the admissibility of Mr Muto’s state of mind as relevant to whether his acts or omissions were done “in good faith”. It seems the parties hoped that answering the question would involve both the construction of section 76 and would give an indication of the scope of the evidence which would be permitted at trial.
95By paragraph 14 of the amended statement of claim in the third party proceeding, it is pleaded as follows:
“14. The conduct of the defendant the subject of: [the VCAT proceedings] consisted of acts of things done or omitted to be done in good faith in the exercise or purported exercise of his functions of powers as a councillor or member of a council committee”.
96Mr Muto was asked to provide further and better particulars of paragraph 14 including:
a.the details of each act or omission;
b.Mr Muto’s good faith with respect to each act or omission;
c.how the acts or omissions involved the exercise or purported exercise of the functions or powers as a councillor.
97Mr Muto provided further particulars as follows:
a.the acts or omissions were those set out in Schedules A, B and C to the amended statement of claim. Schedule A is a copy of the “particulars of misconduct” alleged in the first VCAT proceeding. The reasons in the second and third VCAT proceedings set out these particulars directly from “the Tribunal Book”. Schedules B and C appear to also quote directly from the allegations made by the applicants in the second and third VCAT proceedings;
b.Mr Muto’s “good faith” is said to arise from matters of factual context further to the particulars of the acts and omissions particularised in Schedules A, B and C, as follows:
i.for schedule A, the further contextual matters are raised in relation to items 4, 7, 8, 9, 11 and 13, or six of the 13 allegations;
ii.for Schedule B, each of the meetings, emails and signs is dealt with by the further particulars, which it is alleged provide context to Mr Muto’s conduct;
iii.for Schedule C, of the seven items, subparagraphs 1.1, 1.2 and 1.5 provide further matters of context;
c.Mr Muto says that his performance of functions and duties as a councillor is implicit from the particulars provided.
98It is appropriate to provide some specific examples of the conduct and the context for that conduct, where Mr Muto has, and where he has not, provided further particulars of his “good faith”, particularly where the further matters alleged relate to his “state of mind”.
99In Schedule A:
a.Paragraph 1.2 alleges that on 8 December 2009, Mr Muto “pleaded guilty to the unlawful assault” of a council parking inspector on 15 January 2009. No further particulars were provided as to how this conduct was “done in good faith”;
b.Paragraph 4.1 alleges that on 18 May 2009, Mr Muto called the Council’s Sustainable Development General Manager “a liar without any foundation for the accusation” which it said breached a number of sections of the Act including section 76BA(c) which provides that “a councillor must … treat all persons with respect and have due regard to the opinions, beliefs, rights and responsibilities of … council staff”. Mr Muto alleged in the further particulars that this conduct was done in good faith by reason of the following matters:
i.Mr Muto was a member of a council committee responsible for “a program to attract people to the Shepparton City Centre”;
ii.“the conduct occurred in the context of a disagreement between [Mr Muto and the council officer as to whether, as the officer claimed] a special resolution of Council was required to authorise publication of a parking voucher in the local newspaper as part of the program, or the cost of the vouchers could be met from the program’s budget”.
100In Schedule B:
At a special council meeting on 29 November 2011, Mr Muto made a comment in relation to council parking officers that, “This Council seems to be worried about 5 car parking employees that seem to have some mental issues”. When asked to withdraw by the chair, Mr Muto replied, “Special health issues”. Mr Muto in his further particulars (paragraph 2(p)) gave as background to his remarks, that:
a.“At the time of the conduct businesses in the Shepparton City Centre were experiencing very difficult trading conditions”;
b.Mr Muto “moved a motion to allow free parking in the Shepparton CBD during the holiday period to encourage retail trade”;
c.the motion was opposed by other councillors “on the basis that parking officers were unhappy with the idea and that it would send a message to the public that Shepparton had a parking problem”.
101In Schedule C:
a.At a council briefing on 6 December 2011, Mr Muto referred to a development contribution as being in another councillor’s “backyard”. He also used a “loud and aggressive tone” when speaking to the (female) councillor, “with the result that she excused herself from the briefing”. Mr Muto stated in the further particulars (paragraph 2(w)) that his conduct was done “in good faith,” by reason of the following matters:
i.on about 20 September 2011, the acting CEO of the Council advised councillors that the Victorian Government had given the Council a $2 million grant under the Local Government Infrastructure Program, which she described as “money for jam”. During discussion, the female councillor, to whom Mr Muto later addressed remarks, proposed the “grant be used to build infrastructure in the Mooroopna West Growth Corridor”. The “consensus of the meeting was to allocate the grant funds to consolidated revenue”;
ii.the female councillor “owned or was financially interested in property within that corridor and stood to benefit financially by her proposal”;
iii.neither at the time she made the proposal or at later meetings or at any time did the councillor “declare a conflict of interest in relation to the proposal or absent herself from discussion of her proposal”;
iv.in the later part of November 2011, Mr Muto learned that the acting CEO, without a council resolution to do so, had written to the Victorian Government asking that the entire $2 million grant be available for the Mooroopna West Growth corridor;
v.Mr Muto had “concluded that the allocation of the grant to the Mooroopna West Grown Corridor was improper” because the Council had not resolved to request that the grant be applied in that way and the acting CEO had no delegated authority to make the request;
vi.at the council meeting on 28 November 2011, Mr Muto had pointed out, in response to a council manager’s assertion that “free parking could only be offered in the city centre if a special resolution of council was passed”, that this was an “absurd” argument “in relation to $2 parking fees when the council was apparently able to commit $2 million which indirectly benefitted [the female councillor] without any such resolution”.
b.On 6 December 2011, outside the council offices and following a council meeting, Mr Muto stated, “mole, slut” and “she’s nothing but a fucking slut” when the female councillor walked past. Mr Muto offered no further context of “good faith” in relation to these remarks.
102Mr Clough submitted that the question of whether Mr Muto’s conduct was “done in good faith in the exercise or purported exercise of any function or power conferred on the council”, was to be determined objectively and without reference to Mr Muto’s subjective state of mind.
103Alternatively, Mr Clough submitted that, if subjective matters were relevant, “good faith” could never be established where there had been a finding of serious or gross misconduct. In my view, this alternative formulation was simply a restatement of the statutory construction submissions which I have already dealt with.
104If the construction of section 76 which I have adopted is not correct, the Court determining Mr Muto’s third party proceeding would need to adopt a less narrow view than I have articulated in these reasons. In those circumstances, it is likely that the Court would need to examine all evidence relevant to the issue of whether Mr Muto brought himself within the operation of section 76.
105The issue is one of relevance. Questions of onus of proof and whether the test of what was done “in good faith” is wholly objective or subjective or partly both, would have little part in determining relevance. There is no doubt that Mr Muto must bring himself within the terms of the section. The words of the section must be read as a whole. Mr Muto carries the burden of proof and must establish that the indemnity he claims is in respect of conduct “done in good faith in the exercise or purported exercise of any function or power conferred on the Council... or any Councillor”.
106Mr Clough, correctly in my view, submitted that as well as Mr Muto needing to establish “good faith” objectively that, if there were also a subjective element, Mr Muto would still carry the onus, overall, of satisfying the requirements of the section.
107However, questions of whether the onus has been satisfied are, if a broader construction of section 76 were adopted, matters for submission after the evidence has been admitted. Generally, I would consider, in those circumstances, that the evidence might also include matters of context, including subjective matters such as Mr Muto’s state of mind.
108The conduct of Mr Muto included a number of elements. For the purposes of the “misconduct” proceedings at VCAT, these elements included the following:
a.the conduct generally consisted of words – spoken at meetings or written in emails or displayed on electronic signs;
b.matters of context were regarded as significant – where and when and to whom the words were addressed; whether the words were part of a broader exchange or followed earlier incidents;
c.previous findings of misconduct were part of the basis for the proceedings alleging “serious misconduct”, (it being part of the definition in s. 81A).
109Generally the allegations of misconduct, repeated from the VCAT proceeding in Schedules A, B and C, include these matters of “context”. This context assisted the Tribunal determine whether Mr Muto’s acts of omissions should be regarded as misconduct. Usually, the determination is simply an objective response to the contextual matters alleged. Occasionally, the context included matters involving the subjective reaction of the person to whom Mr Muto’s remarks were addressed, for example the fact that the female councillor had “excused herself” from a meeting as a consequence of what Mr Muto had said, or the mayor’s capacity to control Mr Muto during a meeting had been compromised by his conduct.
110Mr Muto had given reasonably contained and precise further particulars of the matters of context which he says explain his conduct sufficiently to demonstrate that he acted in good faith in the exercise or purported exercise of a function or power of the Council or a councillor.
111In my view, those matters might be admissible as evidence of the circumstances in which Mr Muto’s conduct occurred. On occasions, this may include evidence of Mr Muto’s state of mind in relation to separate facts, for example, the further matters alleged by Mr Muto in Schedule C item (a) concerning discussions of the State government grant of $2m and the allocation of the money to build infrastructure in the Mooroopna West Growth Corridor.
112However, I propose to decline to answer question 2. Whilst I consider that many of the matters raised by Mr Muto in his further particulars would be likely to be relevant at the trial, ultimately issues of relevance and admissibility should be determined by the trial judge in the usual way, and not in advance of trial.
113Further, I do not consider that the issue requires determination at all as, in my view, Mr Muto’s third party proceeding must fail as he could never satisfy the requirements of s. 76. The legislation does not contemplate that an indemnity would ever be granted “in respect of” conduct which has been the basis of a finding by VCAT of serious or gross misconduct.
Proposed orders
114The questions heard as preliminary issues to be determined prior to trial are answered as follows:
Question 1: “Whether an act or omission of the defendant cannot give rise to an obligation on the part of the third party to indemnify the defendant under section 76 of the Local Government Act 1989 (“the Act”), as an act or omission done:
a. in “good faith”; and
b.“in the exercise or purported exercise of any function or power conferred on the councillor” by or under the Act or any other Act
by reason only of it being an act or omission relied on by the Tribunal in proceeding numbers B87/2012 and B82/2012 (“the VCAT proceedings”) in making a finding of gross or serious misconduct within the meaning of section 81A of the Act?”
Answer:Where acts or omissions by Mr Muto have been relied upon by the Victorian Civil and Administrative Tribunal in proceeding numbers B87/2012 and B82/2012 in making findings of serious or gross misconduct within the meaning of s.81A of the Local Government Act 1989, those acts or omissions cannot give rise to an obligation on the part of the Council to indemnify Mr Muto under s. 76 of the Act 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.
Question 2:“Whether evidence is admissible at the trial of the third party proceeding of the defendant’s subjective state of mind, in relation to any acts or omissions relied on by the Tribunal in the VCAT proceedings in making a finding of serious or gross misconduct, as relevant to the issue of whether the defendant’s acts or omissions were done or omitted to be done “in good faith” for the purposes of the application of section 76 of the Act?”
Answer:Declined to answer, as the issue would only be relevant if the third party action were to proceed to trial, contrary to the answer given to question 1. In that event, all questions of the admissibility of evidence should be determined by the trial judge.
115The defendant’s third party claim be struck out insofar as it relies on an indemnity under section 76 of the Act.
116On or before 2 December 2015, the lawyers for the defendant and the third party must consult about the future conduct of the proceeding limited to the claim under clause 46F of Schedule 1 to the Victorian Civil and Administrative Tribunal Act 1998. In particular, the parties should consider:
a.the appropriateness of the third party seeking that VCAT make an order other than it bearing Mr Muto’s costs of the second and third VCAT proceedings;
b.whether, if such an application is made by the Council to VCAT, the defendant will submit that the Court in this proceeding is the more appropriate forum for the resolution of that matter;
c.whether the defendant’s foreshadowed application for leave to further amend his amended statement of claim dated 19 June 2015 against the third party in relation to his claim under clause 46F of Schedule 1 to the Victorian Civil and Administrative Tribunal Act 1998 and the third party’s foreshadowed application to dismiss or strike out the defendant’s third party claim should be deferred until the parties have determined whether an application by Council to VCAT should first be made.
117Any application by the defendant for leave to amend his amended statement of claim dated 19 June 2015 against the third party in relation to his claim under clause 46F of schedule 1 to the Victorian Civil and Administrative Tribunal Act 1998 be made on or before 9 December 2015.
118Any application by the third party to dismiss or strike out the defendant’s third party claim to be made on or before 16 December 2015.
119The costs of and incidental to the determination of the preliminary questions, including any related reserved costs and the costs of the hearing today are reserved.
120Reserve liberty to apply.
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Certificate
I certify that these 30 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 18 November 2015.
Dated: 18 November 2015
Olivia Bramwell
Associate to His Honour Judge Anderson
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