Oshana v Chiminello
[2022] VMC 31
•10 November 2022
IN THE MAGISTRATES’ COURT OF VICTORIA
AT MELBOURNE
CIVIL DIVISION
Case No. J13090227
| REIMON OSHANA | Plaintiff |
| v | |
| MATT ANTHONY CHIMINELLO | First Defendant |
| & | |
| TYMANA TRANSPORT PTY. LTD. (A.C.N. 006 412 773) | Second Defendant |
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MAGISTRATE: | Magistrate J. P. Foster |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 30-31 May 2022, 1 June 2022 |
DATE OF OWN MOTION ENQUIRY: | 6, 14 June 2022 12, 19-20, 24-26 October 2022 1 November 2022 (written submissions) 2 November 2022 (oral submissions in reply) |
DATE OF DECISION: | 10 November 2022 |
CASE MAY BE CITED AS: | Oshana v Chiminello & Anor |
MEDIUM NEUTRAL CITATION: | [2022] VMC 31 |
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CIVIL PROCEDURE ACT 2010 (Vic) – Contravention of Civil Procedure Act 2010 (Vic) – s 29 Civil Procedure Act 2010 (Vic) – Obligation to act honestly – Requirement of a proper basis – Obligation not to mislead or deceive – Costs – Apportionment of costs.
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APPEARANCES: | COUNSEL | SOLICITORS |
| Hearing | ||
| Plaintiff | Mr A. Barnett | Legal Assist Pty. Ltd. |
| First and Second Defendants | Mr S. Ryan | William Roberts Lawyers |
| Own Motion Enquiry | ||
| Plaintiff | Mr D. Barton | Domantay Legal |
| First and Second Defendants | Mr S. Ryan | William Roberts Lawyers |
| The Specified Parties: | ||
| Legal Assist Pty. Ltd. | Mr G. Adelstein | Legal Assist Pty. Ltd. |
| VMC Legal Pty. Ltd. | Mr L. Howe | VMC Legal Pty. Ltd. |
| Kings Body Smash Repairs Pty. Ltd. (A.B.N. 35 320 417 406) | Mr S. Younis | In person |
| Senan Younis | Mr S. Younis | In person |
| Anytime Replacement Vehicles Pty. Ltd. (A.B.N. 96 381 189 096) | Ms R. Faraj | In person |
| Rand Faraj | Ms R. Faraj | In person |
| CME Recoveries Pty. Ltd. (A.B.N. 68 610 951 481) | Mr F. Cottonaro | In person |
| Frank Cottonaro | Mr F. Cottonaro | In person |
HIS HONOUR:
Background
Where referred to individually, the relevant people and entities in this proceeding are referred to as follows:
(a) the Plaintiff, Mr Reimon Oshana (Oshana);
(b) the First and Second Defendants (the Defendants);
(c) Legal Assist Pty. Ltd. (Legal Assist);
(d) VMC Legal Pty. Ltd. (VMC);
(e) Kings Body Smash Repair Pty. Ltd. (KBSR);
(f) Mr Senan Younis (Younis);
(g) Anytime Replacement Vehicles Pty. Ltd. (ARV);
(h) Ms Rand Faraj (Faraj);
(i) CME Recoveries Pty Ltd (CME); and
(j) Mr Frank Cottonaro (Cottonaro).
Legal Assist, VMC, KBSR, Younis, ARV, Faraj, CME and Cottonaro when referred to collectively, are referred to as the ‘Specified Parties’ for reasons evident later in this judgment.
On 5 September 2018, Oshana was involved in a car accident with Chiminello (the First Defendant).
Oshana attended at KBSR on 7 September 2018, upon the recommendation of a friend, to enquire about getting his car repaired.
On 7 September 2018, Oshana told Younis (director and manager of KBSR and the manager of ARV) that Chiminello had informed Oshana, immediately after the accident, that a third party vehicle had collided with the back of Chiminello’s car which, in turn, was shunted forward and into the rear end of Oshana’s car.
The existence of this third party vehicle, whose driver might ultimately be responsible for the damages to Oshana’s vehicle, but whose identity was unknown, was a concern for Younis. That is because any damages recoverable by Oshana may not be able to be recovered from Chiminello or the Second Defendant and Younis did not wish to be left out of pocket for any repair or hire care services which might be provided to Oshana.
It is for this reason that on 7 September 2018, Younis told Oshana that an admission of liability (presumably from Chiminello or the Second Defendant) would be necessary before KBSR could repair Oshana’s car or before a hire car could be provided to him by ARV.[1]
[1]Court Book 104 – Affidavit of Younis sworn 6 July 2022, paragraph 5 (CB).
Oshana was not asked about whether he had insurance (which he did) or given any advice by Younis about whether he should pursue a claim under Oshana’s own insurance policy.
Younis, or other employees of KBSR, arranged for Oshana to sign various documents on 7 September 2018, including:
(a) an Advice of Authority to Act for ARV and an Agreement and Authority to Act (ARV Authority to Act);[2]
(b) a rental agreement between Oshana and ARV, which recorded that a vehicle had been rented to Oshana on 7 September 2018 at 3:00pm (Rental Agreement);[3] and
(c) a claim form document produced by CME which included an Authority to Act between Oshana and CME (CME Authority to Act).[4]
[2]CB 14.
[3]CB 117-118.
[4]CB 343-344.
CME is a motor vehicle claim management company.
CME is an acronym for “claims made easy”.
The CME Authority to Act provided, amongst other things, that:
[1] I (Oshana) authorise CME Recoveries to act on my behalf as an agent.
…
[5] I acknowledge CME Recoveries’ fees and authorise the deduction and payment of those fees once any losses are recovered.
…
[8] I hereby irrevocably appoint CME Recoveries as my agent for the purposes of conducting my claim including but not limited to settling my claim without reference to me on the understanding that CME will act in my best interests at all times.
The details of these documents were not explained to Oshana. He was simply told to sign them so that KBSR and ARV could make a claim for him. Oshana was not provided with copies of these documents.
ARV advised CME of Oshana’s claim by email on 3 October 2018.[5] In that email, it was said:
Please find the attachment in this email regarding ARV documents, NEW CME ATA for REIMON OSHANA.
(This vehicle is a total loss, car rental period is ongoing).
[5]CB 158.
That email clearly indicates that Oshana was already in a rental vehicle as at 3 October 2018. That suggestion is not surprising, insofar as the Rental Agreement records that Oshana had been provided a rental vehicle on 7 September 2018 at 3pm.
However, apart from Oshana bringing his vehicle to KBSR to be inspected by Mr Costas Phivopoulos, a motor vehicle loss assessor, in late September 2018, Oshana was not provided with a hire car by ARV until 2 November 2018.
Oshana continued to drive his car until 2 November 2018, when Younis arranged for a tow truck to deliver a hire car to Oshana’s home and take Oshana’s car to KBSR.
Despite:
(a) Younis initially telling Oshana that an admission of liability (from Chiminello) would be necessary before KBSR could repair Oshana’s car or before a hire car could be provided to him by ARV; and
(b) no admission of liability being obtained from the Defendants at that time, or at any time thereafter,
Younis (as manager of ARV) arranged for ARV to hire a vehicle to Oshana on 2 November 2018.
Younis asserts that he had been informed by Cottonaro, on an unspecified date prior to 2 November 2018, that it was ok to proceed with the hire of a vehicle.
Cottonaro denies this. He asserts that he did not give any approval for the hiring of a vehicle by ARV to Oshana and would not have done so without an admission of liability from the Defendants. Cottonaro asserted that Younis (as manager of ARV) must have been under a mistaken impression that it was now fine to hire out a vehicle to Oshana. How that mistaken impression could arise, absent some authority or “go-ahead” given by Cottonaro, was never explained.
CME sent Oshana’s claim to CME Legal for action, consistent with the CME Authority to Act.[6]
[6]CB 343-344.
Oshana’s file was subsequently transferred from CME Legal to VMC.
On 21 November 2018, ARV sent a further email attaching an invoice for car hire purportedly commencing on 7 September 2018 and up to 20 November 2018.[7]
[7]CB 158-160.
This invoice showed a hire period of 81 days at $140 per day (being $11,340.00) plus other charges for Vehicle Registration Recovery, Administration Fees, Delivery and GST which resulted in a total invoice sum of $13,105.95.
That invoice was false in circumstances where the vehicle had only been hired to Oshana on 2 November 2018.
On 23 November 2018, CME instructed VMC to prepare proceedings for issuing.[8]
[8]CB 158.
On 27 November 2018, VMC instituted a complaint on behalf of Oshana in relation to damages sustained in the motor vehicle collision on 5 September 2018.[9] The complaint made, amongst other things, a claim for hire car charges (said to be ongoing) in the amount of $13,105.95 and a claim for storage charges (also said to be ongoing) in the amount of $2,361.15.
[9]CB 299-331. The Court Book used in the original proceeding will be referred to as (OCB).
These claims are referred to as the ’hire car claim’ and ‘storage claim’ respectively.
The complaint attached a range of documents to support the claims made in the complaint. Relevantly to the hire car claim, the complaint attached the following documents:
(a) the Rental Agreement between Oshana and ARV. The agreement records that Oshana hired a vehicle from ARV on 7 September 2018 at 3pm;[10]
[10]CB 328.
(b) the ARV Authority to Act dated 7 September 2018;[11] and
(c) a Tax Invoice from ARV for rental charges between 7 September 2018 and 20 November 2018.[12]
(the documents described at (a) to (c) are hereinafter referred to collectively the Rental Documents).
[11]CB 329.
[12]CB 330.
The clear impute of the Rental Agreement, and the claim made in the Statement of Claim, was to represent that Oshana had hired a vehicle from ARV from 7 September 2018 and that the hire was ongoing.
Relevantly to the storage claim, the complaint attached an invoice from KBSR in the sum of $2,361.15 for storage charges (being 81 days at $26.50 per day) incurred from 7 September 2018 up until 26 November 2018.[13]
[13]CB 331.
As with the Rental Documents, the representation made in the storage invoice (and the Statement of Claim where the charges were said to be ongoing), was that Oshana’s vehicle was being stored at KBSR from 7 September 2018 up until the issuing of the Complaint, and that those charges were continuing at a rate of $26.50 per day.
Oshana’s Statement of Claim was amended by VMC on 22 July 2020 to include final hire and storage charges.[14] The claims maintained that Oshana hired an alternative vehicle from 7 September 2018 until 1 May 2019. A number of invoices were provided by VMC to the Defendants’ lawyers during the conduct of the proceedings.[15] Each of the invoices represented that the hire by Oshana commenced on 7 September 2018. The amended Statement of Claim also maintained storage charges had commenced from 7 September 2018. Likewise, a number of invoices were provided by VMC in support of the storage claim.[16]
[14]OCB 4-5.
[15]OCB 335-339.
[16]OCB 332-334.
The relationship between VMC, CME and KBSR became strained from early 2019.
Meanwhile, it remained Oshana’s understanding that VMC, Younis and Cottonaro were handling the claim that named him as the plaintiff.
By July 2019, Oshana had returned the hire car to ARV and purchased another car, paid for, in part, from funds provided on a without-prejudice basis (and a without admission of liability basis) by Chiminello’s insurer following an offer on 1 May 2019.[17]
[17]CB 287-288.
Oshana received a proportion of these funds ($18,309) from VMC on 25 July 2019.[18]
[18]OCB 310; CB 4, [32]; CB 353 (Direction of Payment).
On or about the date of the disbursement of those funds to Oshana, Cottonaro lodged a complaint with the Victorian Legal Services Commissioner (VLSC) in relation to VMC’s direction of this payment. The complaint arose because the payment made by VMC to Oshana did not accord with Cottonaro’s direction to VMC as to how the funds received from Chiminello’s insurer should be disbursed.[19]
[19] Contrast CB 346 (the direction of payment required by Cottonaro on behalf of Oshana) to CB 353 (actual payments made by VMC).
Cottonaro’s initiation of the complaint to VLSC revealed the depth of the divide between Mr Walters (senior partner of VMC) on the one hand and Cottonaro (for CME) on the other hand, whilst both were supposed to be acting in Oshana’s best interests.
On the one hand, it was understandable that Cottonaro (for CME) (holding the extensive agency authority that he did on behalf of Oshana) would be upset with Walters where VMC had not followed a direction for payment given by Cottonaro (for CME) as agent for Oshana.
On the other hand, it was understandable that Walters (acting in Oshana’s best interests) would take issue with the direction for payment given by Cottonaro, because Cottonaro was requiring:
(a) a payment of $440 to CME in circumstances where the CME Authority to Act only authorised the deduction and payment of CME fees once any losses are “recovered”, and the payment from the Defendants’ insurers as that time was a “without prejudice offer” made without any concession as to liability and made only for the purposes of stopping the continued accrual of hire car fees by Oshana;
(b) the payment of $1,584.00 to KBSR (for reasons which were never satisfactorily explained);
(c) the payment of $385.00 to Oshana’s Assessor; and
(d) the payment of $17,500.00 to Oshana.
The actual payments made by VMC were as follows:
(a) a payment of $1,600.00 to William Roberts Lawyers (being an outstanding cost order that Oshana was prima facie liable for); and
(b) a payment of $18,309.00 to Oshana.
Oshana’s complete trust and faith in Cottonaro is evidenced by the fact that Oshana (at Cottonaro’s behest) “took over” the status as applicant of the VLSC complaint against VMC even though the payment by VMC to Oshana resulted in Oshana receiving more money in his bank account (compared to what Oshana would have received pursuant to the direction given by Cottonaro to VMC) and protected Oshana against the payment of disbursements that ought not have been paid in July 2019, having regard to the terms of the CME Authority to Act and the ARV Authority to Act.
More importantly, the significance of the payment being made by the Defendants’ insurers on a without-prejudice (and without admission of liability) basis was never explained to Oshana by VMC, CME, Cottonaro or anyone else.
Oshana did not know that he would be liable to repay Chiminello’s insurer if his claim failed.
The failure of Oshana’s claim loomed large because of the continued denial of liability by the Defendants’ insurers and the involvement of a third party vehicle.
Oshana swore answers to interrogatories 11 March 2020.[20]
[20]OCB 23-27.
Relevantly, those answers deposed to the fact that Oshana was unable to use his vehicle ‘every day’ after the collision because his vehicle was ‘written off.’[21] In relation to the hire of an alternative vehicle the answers referred to ‘the documents annexed to the complaint.’[22]
[21]Answers 8(a) and (b).
[22]Answers 9(a), (c) and (k).
The circumstances in which those interrogatories were sworn involved an interaction of just a few minutes between Walters and Oshana outside the Craigieburn police station where the Answers to Interrogatories and the Affidavit of Documents were sworn and signed on a car bonnet.
Oshana asserted in evidence that he had no real appreciation or understanding of what answers to interrogatories he was swearing to, or the documents he was attesting to in the Affidavit of Documents.
Walters had never met Oshana before 11 March 2020. The precursor text message interactions between Walters and Oshana on 10 March 2020 are striking: [23]
[23]CB 44.
Walters:
Good afternoon
Are either of these numbers monitored?
It is imperative that we speak today or there will be a Court order against Mr. Oshana tomorrow. We only need a document signed and neither the repairer nor cmer are responding
Steve Walters
Oshana:
Hi Yes this is Reimon Oshana
I will have to assess the document with my lawyer and get back to you.
Walters:
Hello Reimon,
I am your lawyer. I am trying to protect your interests and this has to be done by tomorrow. Please just give me a call and I will explain what is happening. It will cost nothing and will save a lot of difficulty. If you prefer my office number is xxxx xxxx
Steve
Oshana:
Thanks Steve
Frank will email you soon.
Reimon.
Walters:
Hello Reimon. Have you spoken to him as I understand he may be in hospital. Not sure what he will say anyway? This is a case where we have Received money for the case but are still chasing the rental fees for Senan. If we don’t file the documents tomorrow the case will be struck out and the Court will order the costs against you personally, not frank or Senan. The other side will also try to get back what you were paid so it might cost up to $30,000 just because a document was not signed.
The documentation uncovered during this Own Motion Enquiry revealed a juxtaposition between:
(a) the events of 10 March 2020, where Walters was endeavouring to contact Oshana to get the Answers to Interrogatories and Affidavit of Documents finalised; and
(b) the ongoing VLSC enquiry which was still ongoing as at 10 March 2020.
On 10 March 2020, Oshana sent an email to Cottonaro and KBSR which contained four attachments:[24]
[24]CB 449.
(a) a letter dated 6 March 2020 from the VLSC to Oshana;[25]
[25]CB 447-448.
(b) a Memorandum of Hearing dated 4 March 2020;
(c) a draft reply to interrogatories; and
(d) a draft affidavit of documents.
The 10 March 2020 email from Oshana to Cottonaro states:
Can you please advise me of these answers before I send them back to her?
Thanks
Also Steve keeps messaging me and emailing me about a document he was me to sign. They are also attached after what should I say to him. please get back to me. Thanks
The reference to “her” in the preceding paragraph is a reference to Ms Gemma Richardson, a Senior Investigator of the VLSC.
The remainder of the email (and its attachments) clearly shows that both Oshana and Cottonaro had 1 days’ prior notice of the draft copies of the Answers to Interrogatories and the Affidavit of Documents which would ultimately come to be signed by Oshana the following day.
This email correspondence between Oshana and Cottonaro (and the prior notice of the Answers to Interrogatories and the Affidavit of Documents) tends to undermine Oshana’s evidence that he had no real appreciation or understanding of what Answers to Interrogatories he was swearing to, or the documents he was attesting to in the Affidavit of Documents.
On 14 March 2020, Cottonaro prepared and forwarded to Oshana draft answers which Oshana could on-forward to Ms Richardson in answer to her queries in the letter dated 6 March 2020.[26]
[26]CB 449-450.
Ms Richardson thanks Oshana for his response on 16 March 2020.[27]
[27] CB 451 (the actual email from Oshana to Richardson was not produced, but I infer that the email from Oshana to Richardson contained the material forwarded by Cottonaro to Oshana on 14 March 2020).
Oshana’s interactions with Walters on 10 and 11 March 2020 demonstrate how little involvement Oshana had in the proceedings:[28]
[28]CB 44-48.
(a) in his first message to Oshana’s personal number on 10 March 2020, Walters was unsure whether the number being utilised actually belonged to Oshana, and noted that “neither the repairer nor cmer” (references to KBSR and CME) were responding;
(b) Oshana did not initially recognise Walters as his lawyer;
(c) Oshana sought guidance from Cottonaro about Walters’ approaches;[29] and
(d) despite being required to urgently sign documents for filing in court, under the explicit threat of a costs order being made against him personally if he did not, the significance of those documents was not explained to Oshana by Walters (although, as noted earlier, Oshana did have 1 days’ prior notice of the Answers to Interrogatories and the Affidavit of Documents that were to be signed).
[29]CB 449.
Oshana’s interactions with Cottonaro on 10 and 14 March 2020 demonstrate how reliant and dependent Oshana was upon Cottonaro in respect of this litigation. What is also demonstrated, is that Cottonaro was asked by Oshana expressly about the Interrogatories and the Affidavit of Documents.
Cottonaro (who was supposed to be acting in Oshana’s best interests at all times, as per the CME Authority to Act) does not appear to have taken any steps:
(a) to satisfy himself that it was in order for Oshana to sign the Interrogatories or the Affidavit of Documents; or
(b) to dissuade Oshana from signing the Answers to Interrogatories or the Affidavit of Documents if Oshana was uncertain as to the accuracy of the Answers to Interrogatories and the Affidavit of Documents.
On 22 December 2020, the Defendants’ solicitors forwarded to VMC an Offer of Compromise which offered Oshana $30,000 plus reasonable costs.[30]
[30]CB 297-298.
On 6 January 2021, Walters sent an email to Cottonaro, ‘carbon copied’ to KBSR and Oshana, which said:
Dear all,
We have now received an offer in settlement of this proceeding. The defendant has offered $30,000.00 plus reasonable costs.
The offer was originally made on 22 December 2020 and was open for 7 days. We sought clarification as to whether the amount was inclusive or exclusive of the $19,909.00 already paid and they confirmed that it is inclusive. We received this advice on Monday 4 January 2021 so we regard the final day for acceptance as the 11 January 2021.[31]
Please advise your urgent instructions. We strongly recommend the offer.[32]
[31] Actual date erroneously specified in the email was 11 December 2021, but it was common ground that the 11 December 2021 date should be read as 11 January 2021.
[32]CB 342.
Cottonaro transferred Oshana’s matter to Legal Assist on 7 January 2021. Cottonaro provided a letter prepared by Mr Elmassian of Legal Assist to Oshana authorising the transfer of the file and asked Oshana to sign it, which Oshana did.[33]
[33]CB 50-53.
Whilst Oshana was copied in on the 6 January 2021 email, Oshana gave evidence that the acceptance or rejection of the offer was never discussed with him by anyone.
Mr Elmassian (principal solicitor at Legal Assist) gave evidence that he had discussions with Cottonaro in or around January or February 2021 and was instructed by Cottonaro to put a counteroffer to the Defendants, that Oshana would accept the sum of $45,000.00 plus costs.
Given the agency authority held by Cottonaro, Elmassian was entitled to receive and act upon those instructions from Cottonaro.
Cottonaro says this $45,000 plus costs offer was discussed as between himself, Oshana and Younis.
Oshana denies being involved in any such conversation, which evidence I prefer to accept.
Whilst it is easy to judge, with the benefit of hindsight, matters which occurred some time ago, it is reasonably clear to me that had Oshana been properly informed of the following matters, Oshana would have readily accepted the $30,000 plus reasonable costs offer made by the Defendants on 22 December 2020 and conveyed by VMC on 6 January 2021:
(a) as at 6 January 2021, the maximum hire car fee claimable by Oshana was $26,364.50 being:
(i) $140 per day (hire car daily rate) for 181 days between 2 November 2018 and 1 May 2019;
(ii) $4.50 per day (vehicle registration recovery) for 181 days between 2 November 2018 and 1 May 2019;
(iii) $110.00 Administration Fee; and
(iv) $100.00 (2 x $50.00 delivery fees);
(b) there was no storage fee ever claimable by KBSR because Oshana himself stated that no agreement had ever been made between himself and KBSR for storage fees;
(c) deducting $19,909 (the total loss of vehicle claim) from $30,000 leaves the sum of $10,089.00 which would be attributed to the hire car claim;
(d) the $26,364.50 maximum hire car claim less $10,089.00 available to be attributed to the hire car claim equals a $16,275.50 discrepancy;
(e) in order to recover this $16,275.50 discrepancy on the maximum hire car fees, Oshana would have to proceed to trial and put at risk of returning the $19,909.00 sum already tendered (on a without prejudice and without admission of liability basis) by the Defendants’ insurers;
(f) liability was still hotly in dispute owing to the third party vehicle which had allegedly shunted Chiminello’s vehicle into Oshana’s vehicle; and
(g) both Younis and Cottonaro were of the view that Oshana ought not have been given a hire car from ARV until such time as liability had been accepted by the Defendants. In which case the $16,275.50 shortfall on the hire car fees would never have arisen as a barrier to the acceptance of the Defendants’ offer.
The instruction by Cottonaro to Elmassian that Oshana would accept $45,000 plus costs, viewed in this context, shows that Younis and Cottonaro sought to extract the maximum hire car fees from the Defendants and their insurers without regard to the best interests of Oshana (contrary to clause 8 of the CME Authority to Act).
Oshana initially received communications from Legal Assist in February 2021 advising of the change of solicitor and requesting that he provide NAB bank statements.[34]
[34]CB 55-60.
Legal Assist filed and served a further amended Statement of Claim on 23 February 2021. Whilst the purpose of that document was to withdraw without prejudice communications, it maintained the hire car and storage claims.
Oshana did not receive further communication from Legal Assist from February 2021 until 16 May 2022.[35]
[35]CB 62.
On 24 May 2022, Mr Rahimzada of Legal Assist sent an email advising Mr Oshana that his matter had been set down for a two day hearing on 30 May 2022 and that Mr Oshana would receive a call from the barrister prior to the hearing.[36]
[36]CB 64.
Mr Oshana’s evidence was that he received a telephone call from his barrister on Sunday 29 May 2022 which was the day before the commencement of the hearing. The conversation went for 5 to 7 minutes. Mr Oshana’s evidence was that he was working at the time and that he did not have an in-depth conversation with his barrister.
At all times, the Defendants’ denied liability for the collision and maintained that an unidentified third party had shunted the Defendants’ vehicle into the rear of Oshana’s vehicle.[37]
[37]Defence at OCB 8-11.
The matter proceeded to hearing before me over 3 days between 30 May 2022 to 1 June 2022.
At the conclusion of the proceeding, I dismissed Oshana’s claim on the basis that the Defendants’ were not liable for the collision. I determined that Chiminello’s assertion, that a third party had shunted the Defendants’ vehicle into Oshana’s vehicle, had been established on the balance of probabilities.
That determination turned significantly, but not exclusively, upon my assessment of the credibility of Oshana compared to that of Chiminello.
I had significant concerns regarding aspects of Oshana’s evidence. This included the fact that Oshana freely accepted during cross examination that:
(a) he continued to drive his vehicle after the collision for approximately 2 months;
(b) he did not hire a vehicle on 7 September 2018 as claimed in the Rental Documents and Statement of Claim;
(c) his vehicle had not been stored at KBSR from 7 September 2018, as claimed in the storage invoices; and
(d) in fact, Oshana had not agreed to any storage charges, he had not seen any storage invoices and he had not had any discussions with KBSR regarding incurring a liability for storage charges.
Oshana’s evidence meant that the claim for storage and hire charges did not have a proper basis and was misleading. It also meant that the numerous documents prepared in support of those claims were incorrect in that they made false claims for charges which had not been incurred. These claims had been maintained in each iteration of the amended claim.
In addition to the above, Younis gave evidence during the hearing.
Younis’ evidence raised further concerns regarding:
(a) the creation of the false hire car invoice and false storage invoice documentation;
(b) the fact that amended hire car invoices had been prepared and allegedly forwarded to VMC (but not on-forwarded by VMC to the Defendants’ solicitors) well prior to the hearing on 30 May 2022; and
(c) the creation of documents sent by ARV to the Defendants’ lawyers in response to a request to inspect Oshana’s vehicle. The documents sent in response, represented that the vehicle had been repaired and sold to a Mr Yookhana[38] and was therefore not able to be inspected at ARV any longer.
[38]CB 249-253.
In response to the Defendants’ intention to seek costs of the proceeding on an indemnity basis, on 6 June 2022 I instituted an own motion enquiry pursuant to section 29(2)(b) Civil Procedure Act 2010 (Vic) (CPA).
I made orders on 14 June 2022 which relevantly provided as follows:
1.Pursuant to Section 29(2)(b) of the Civil Procedure Act 2010 (Vic), upon my own motion, I order that each of Reimon Oshana, VMC Legal Pty Ltd, Legal Assist Pty Ltd, Kings Body Smash Repair, Anytime Replacement Vehicles Pty Ltd, CME Recoveries Pty Ltd, Frank Cottonaro, Senan Younis and Rand Faraj (“the specified parties”) appear before the Court to answer an enquiry directed by the Court regarding their involvement in proceedings J13090227 (“Own Motion Enquiry”). The Own Motion Enquiry may extend as to whether any, or all, of the specified parties should contribute to any Court order that is to be made as to costs and as to what percentage the specified parties may be required to contribute as to costs.
2.Each of the specified parties are, by 5 July 2022, to file and serve on all other specified parties and the Defendants, an affidavit explaining their involvement in the proceedings and to respond, to the extent they are able to provide information and answers, to the following question as raised by the Court:
(i) In light of the Plaintiff’s evidence that he continued to drive his vehicle until at least 2 November 2018, why was the complaint instituted seeking claims for hire charges, and claims for storage, for a period commencing 7 September 2018?
(ii) If, as Mr Senan Younis said in evidence, he did prepare amended invoices for hire in July 2021 to reflect hire charges commencing from 2 November 2018 (rather than 7 September 2018):
(a)why was the Plaintiff’s claim not amended to reflect the changes? and
(b)why was the amended hire invoice(s) not provided to the Defendant’s lawyers?
(iii) Why, after the Court had ordered on 15 June 2020 that the Plaintiff provide the Defendant with a further inspection of the Plaintiff’s vehicle:
(a)was it represented that the vehicle had been sold to NSW to a Danial Yookhana for a sum of $19,500; and
(b)was an Application for transfer of registration to Mr Yookhana signed 26 September 2020 provided to the Defendant in furtherance of the above representation;
(c)was an invoice of King Body Smash Repair dated 20 August 2019 provided to the Defendant purporting to evidence that the vehicle had been repaired;
when the evidence revealed that the vehicle was never sold to Mr Yookhana nor was it repaired until at least some time after 11 June 2021 (the date when Mr Cuthbert inspected the vehicle).
(iv) Why did the Plaintiff sign off on the overarching obligations certificates when:
(a)the Plaintiff must have known upon a proper examination of the documentation then in existence, that the quantum of the Plaintiff’s claim for hire car charges and storage fees was excessive and false;
(b)there was never any agreement struck between the Plaintiff and King Body Smash Repairs concerning the Plaintiff paying King Body Smash Repairs the sum of $26.50 per day for storage (or any other sum whatsoever).
3.Each of the specified parties are, by 19 July 2022, to file and serve on all other specified parties and the Defendants, any affidavits in reply addressing any of the matters raised in any of the other affidavits filed and served pursuant to order 2 above, to the extent that such matters raised in such affidavits affect their interests or raise matters against them.
4.By 26 July 2022, each of the specified parties, and the Defendants if they wish, are to file written submissions outlining their position in respect to the questions raised in order 2 and/or any matters raised in any of the other affidavits filed by the specified parties in the matter.
5.The matter be listed for special mention before Magistrate Foster on 12 October 2022.
6.The Own Motion Enquiry is listed for hearing before Magistrate Foster on 19 October 2022 (3 day estimate). Physical in-court appearances are required of all specified parties and their lawyers and the Defendants’ lawyers.
7.Subject to any further order of the court (or any objection by any other specified party or the Defendants), at the hearing of the Own Motion Enquiry:-
a. each of the specified parties may adopt any affidavit previously filed pursuant to these orders, as that parties’ evidence in chief.
b. each of the other specified parties and the Defendants will be at liberty to cross examine any witness.
c. each of the other specified parties and the Defendants will be at liberty to make closing submissions.
Relevant Provisions
Under s 29 of the CPA, if a court is satisfied, on the balance of probabilities, a person has contravened any overarching obligation, the court may make any order it considers appropriate in the interests of justice.
Examples of any such order, include but are not limited to, those matters contained ss 29(a)-(f).
Section 10 of the CPA defines who the overarching obligations apply to.
As well as parties and legal practitioners, s 10(d) provides that the overarching obligations apply to:
(d) any person who provides financial assistance or other assistance to any party in so far as that person exercises any direct control, indirect control or any influence over the conduct of the civil proceeding or of a party in respect of that civil proceeding, including, but not limited to—
(i) an insurer;
(ii) a provider of funding or financial support, including any litigation funder.
Section 14 of the CPA provides that:
A legal practitioner or a law practice engaged by, or on behalf of, a client in connection with a civil proceeding must not by his, her or its conduct cause the client to contravene any overarching obligation.
The overarching obligations are contained in part 2.3 of the CPA and relevantly, for the purposes of this proceeding, include:
(a) section 17 – the obligation to act honestly;
(b) section 18 – the requirement of a proper basis; and
(c) section 21 – the obligation not to mislead or deceive.
Judicial Consideration
In Yara Australia Pty Ltd v Oswal[39] the Victorian Court of Appeal identified that the CPA aims to ‘improve standards of conduct in litigation’ and to expand ‘the powers of the courts in relation to costs in relation to civil proceedings.’[40] The Court said:[41]
The Court’s powers under s 29 of the Act include the power to sanction legal practitioners and parties for a contravention of their obligations as the heading to Part 2.4 indicates. In our view, these powers are intended to make all those involved in the conduct of litigation — parties and practitioners — accountable for the just, efficient, timely and cost effective resolution of disputes. Through them, Parliament has given the courts flexible means of distributing the cost burden upon and across those who fail to comply with their overarching obligations. A sanction which redistributes that burden may have the effect of compensating a party. It may take the form of a costs order against a practitioner, an order that requires the practitioner to share the burden of a costs order made against their client or an order which deprives the practitioner of costs to which they would otherwise be entitled. The Act is clearly designed to influence the culture of litigation through the imposition of sanctions on those who do not observe their obligations. Moreover, the power to sanction is not confined to cases of incompetence or improper conduct by a legal practitioner. Where there is a failure by the practitioner, whether solicitor or counsel, to use reasonable endeavours to comply with the overarching obligations, it will be no answer that the practitioner acted upon the explicit and informed instructions of the client. A sanction may be imposed where, contrary to s 13(3)(b), the legal practitioner acts on the instruction of his or her client in breach of the overarching obligations.
[39](2013) 41 VR 302 (Redlich, Priest JJA, Macaulay AJA) (‘Oswal’).
[40]Ibid 306 [8].
[41]Ibid 309 [20].
The Court noted that to date, the scope of the sanction provided for under the CPA had been under-utilised.[42]
[42]Ibid 310 [23].
The Court identified the reason for this was that there was a false perception ‘the overarching obligations do not effect any material change to the Rules and the inherent jurisdiction of the Court.’[43] The Court then went on to confirm that each court is ‘obliged to enforce these duties’ and that ‘judicial officers must actively hold the parties to account.’[44]
[43]Ibid 311 [25].
[44]Ibid 311 [26].
The overarching obligation to act honestly at all times in relation to a civil proceeding encompasses recklessness, which is a statement made not caring whether it be true or false; without an honest belief as to its truth; or an indifference to, or disregard of, whether a statement be true of false.[45]
[45]Bolitho v Banksia Securities Ltd (No 18) (remitter) [2021] VSC 666 [1325]–[1330] (‘Bolitho’).
The overarching obligation to have a proper basis for any claim made in a civil proceeding, applies equally to interlocutory relief and hearings.[46]
[46]As to the meaning of a proper basis, see Bolitho [1343]-[1345].
In Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (No 5),[47] Dixon J outlined that in circumstances where the complaint is against a solicitor, the conduct can only be judged in the context of ‘what was known or ought to be known by the solicitor at the relevant time. A court may need to take particular care to resist hindsight bias.’[48]
[47](2014) 48 VR 1 (‘Dura’).
[48]Ibid 32 [80].
His Honour observed:[49]
Section 18 of the Civil Procedure Act expresses the overarching obligation to operate more broadly than the proper basis certification requirements under s 42 of the Act. When a substantive document is filed, a legal practitioner making a proper basis certification must certify that on the factual and legal material available each allegation of fact, each denial, or each non-admission in a document has a proper basis. The legal practitioner’s determination for the purposes of a proper basis certification must be based on a reasonable belief as to the truth or untruth of an allegation or denial or, in the case of a non-admission, that the legal practitioner does not know, and therefore cannot say, whether a fact alleged or denied is true or untrue. Ultimately, whether a claim has a proper basis is a question for the court. A person discharging the overarching obligation can do so by demonstrating a reasonable belief based on the factual and legal material available at the time. If that is done, the obligation is discharged.
[49]Ibid 34 [87].
His Honour also noted that the proper basis obligation provision is addressed to the moment in time when a claim is made or responded to. That is, it does not expose a legal practitioner to an ongoing duty.[50] A court still has a discretion within the ‘wasted cost jurisdiction’ to exercise its discretion with respect to wasted costs by reason of a legal practitioner’s failure to act with reasonable competence.[51]
[50]Ibid 35 [89]
[51]Ibid 40 [101]. See Order 63 Magistrates’ Court Civil Procedure Rules 2020.
The obligation not to mislead or deceive includes an obligation to act and speak up if others are contravening the overarching obligations.[52] The interpretation of the duty is informed by jurisprudence on s 18 of the Australian Consumer Law, a cognate provision in the context of conduct in trade or commerce.[53] An intention to mislead or deceive is irrelevant.[54] The issue is whether, tested objectively, the conduct induces or is capable of inducing error.[55] There is no requirement that the conduct alleged actually induced error, although that may be relevant. The conduct should be construed objectively with the question asked being whether the impugned conduct was capable of inducing error.[56]
[52]Garlick v Kerbaj & Ors [2022] VSC 336 [73].
[53]Bolitho [1332].
[54]Ibid [1333].
[55]Ibid [1333].
[56]Ibid [1334]. See also generally [1331]–[1337].
In Hudspeth v Scholastic Cleaning and Consultancy Services Pty Ltd & Ors (No.8),[57] Dixon J rejected a submission that a legal practitioner is required to knowingly mislead or deceive in order to breach the overarching obligation not to mislead or deceive.[58] As his Honour explained, courts have always expected that they will not be accidently misled or deceived in any respect by legal practitioners.[59]
[57][2014] VSC 567 (‘Hudspeth’).
[58]Hudspeth [176]-[194].
[59]Ibid [181].
Application of the Overarching Obligations to the Specified Parties
VMC, Legal Assist and Oshana are participants under s 10 of the CPA.
In addition, the evidence in the enquiry established that all of the Specified Parties, with the exception of Faraj, exercised either direct or indirect control over the proceedings and are therefore participants as defined by s 10(d) of the CPA.
Both Cottonaro and Younis attended the mediation, gave instructions in relation to any offers and Younis provided an indemnity to Oshana in regard to any legal costs.
Assessment of each party and contentions put by each party
Oshana
Prima facie, Oshana has breached the overarching obligations. The evidence revealed:
(a) Oshana’s claim insofar as it related to the hire car charges and storage charges had no proper basis and was misleading and deceptive;
(b) Oshana signed the 4A overarching obligations certificate in circumstances where aspects of his claim had no proper basis;
(c) Oshana swore Answers to Interrogatories which were false; and
(d) Oshana swore an Affidavit of Documents making reference to documents which were false on their face.
Notwithstanding the above, the following matters are relevant:
(a) Oshana freely admitted during cross examination in the original hearing that he did not hire a replacement vehicle on 7 September 2018, but rather some time in November 2018. This part of Oshana’s evidence was so against his own interest, it lends support to the thrust of Oshana’s contention, through his Counsel at this Own Motion Enquiry, that he was not shown any of the documents which formed the basis of his claim and if he had been shown such documents he would have pointed out to his lawyers that the claim for hire and storage charges was wrong;
(b) the evidence revealed that Oshana had very limited input into the proceeding with instructions and documents coming largely from Younis, KBSR, ARV, Cottonaro (in his capacity as director and manager of CME);
(c) there appeared a lack of consultation with Oshana on most matters including offers of compromise and the risk of rejecting such offer of compromise in light of the Defendants’ denial of liability;
(d) there was little attempt by Younis, KBSR, Cottonaro or CME to explain the significance of Oshana signing the various documents at KBSR on 7 September 2018; and
(e) there was a level of naivety or trust by Oshana in signing documents with significant legal importance without understanding the nature and effect of those documents or requesting clarification as to their meaning and significance. For instance, Oshana appears to have signed the overarching obligations certificate without having any details as to what was being claimed, and he swore answers to interrogatories in circumstances where he freely admitted during the enquiry that the answers were wrong.
Although Oshana, in pursuing a claim which was in breach of the overarching obligations, must share some responsibility, Oshana was largely kept in the dark regarding what was being claimed and what offers had been made, he was not properly advised as to the nature of the claim and his duties under the CPA and that the hire car and storage documents that conveyed the misleading and deceptive representations were created without his knowledge or involvement. Those matters are addressed further below.
A further matter to be contemplated by this Court, says Oshana, is whether any of the CPA breaches by Oshana are a result of the conduct of VMC and/or Legal Assist in contravention of s14 of the CPA, or by reason of the fact that the standard of legal representation provided to Oshana fell below what was expected of a prudent lawyer who specialises in motor vehicle claims.
Oshana submits that:
(a) Younis and the companies under his control (KBSR and ARV) are responsible for the incorrect dates in the initial claim, for delays and costs incurred by the Defendant in seeking further discovery and inspection of the vehicle, for not disclosing the amended invoices (if they did in fact exist in July 2021), and for not using reasonable endeavours to resolve the dispute.
(b) Cottonaro and CME did not take steps to check the hire car and storage period dates after receiving the Cuthbert Report, despite Cottonaro having been made aware of it and having sought comment from Phivopoulos about it.[60] Cottonaro did not use reasonable endeavours to resolve the dispute in connection with the 22 December 2020 offer.
(c) VMC similarly failed to confirm the accuracy of the start dates for the hire car and storage fees – both initially and after receiving the Cuthbert Report – and to comply with agreements with the Defendant’s representatives for the provision of (further) answers to interrogatories. These failures necessitated further applications to the court (by both the Defendants and VMC), incurring avoidable costs and delays. Getting Oshana to sign the answers to interrogatories and affidavit of documents in March 2020, without explaining their importance or verifying their accuracy (or enabling Oshana to do so), meant the false dates on the invoices and the incorrect quantum of claims remained before the court.
(d) Legal Assist contravened the CPA largely through its failures to contact Oshana after being instructed to act by Cottonaro and by its acquiescence to Cottonaro’s instructions, with the result that the claim did not settle in January 2021, further costs were unnecessarily incurred, and misleading information about the hire car and storage claims remained before the court.
[60]CB 386-388.
The conduct and contraventions in the preceding paragraph, Oshana submits, extended the Original Proceedings considerably and caused the Defendants in the Original Proceedings to incur significant avoidable costs. They also gave rise to the Own Motion Enquiry, for which both the Defendants and Mr Oshana incurred substantial legal costs.
Oshana submits, with respect to contributing to the costs of the Original Proceedings and/or the Own Motion Enquiry, that:
(a) Oshana was told prior to proceedings being issued that KBSR (as the repairer) had indemnified him and that he would not have to pay anything.[61]
[61]CB 143 – being the file note of a conversation Oshana had with an employee of VMC whereby the employee of VMC asserted that the repairer (KBSR) fully indemnified Oshana.
(b) Oshana was inadequately advised by Younis, Cottonaro, VMC and Legal Assist as to his obligations and responsibilities as a plaintiff, in circumstances where each of those Specified Parties were obliged to act in his interests (whether under the CME ATA or the ARV ATA, or as his solicitors).
(c) In their purported actions as Oshana’s agents that contravened any overarching obligations or the paramount duty, and particularly in refusing the 22 December 2020 offer to settle, Younis and Cottonaro acted outside the scope of their authority and not at Oshana’s direction or in his interests.
(d) Oshana was not in a position to correct errors in the KBSR and ARV invoices or the affidavit of documents and answers to interrogatories signed on 11 March 2020, having been denied documents and opportunity to verify their contents.
(e) Oshana has acted honestly and gave honest evidence at both the Original Proceeding and the Own Motion Enquiry. That evidence has been largely uncontested and borne out by the documentary evidence before the court.
(f) Section 14 of the Act obliged VMC and Legal Assist not to cause Oshana to contravene any overarching obligation.
Oshana submits that it would not be in the interests of justice for Oshana to be ordered to bear the costs of the Original Proceeding or his legal costs for the Own Motion Enquiry where:
(a) Oshana was fundamentally misled and under-informed about his obligations and role in the Original Proceedings as the named Plaintiff;
(b) the Own Motion Enquiry was ordered as a result of contraventions of the overarching obligations by other Specified Parties;
(c) Oshana’s conduct (that might be argued to have contravened one or more overarching obligations) was the consequence or result of representations and/or actions by Younis, Cottonaro, VMC and/or Legal Assist, all of whom owed duties to act in Oshana’s best interests in connection with the Original Proceeding at the relevant times; and
(d) it would be appropriate for the court to make orders under s 29 of the CPA for each of Younis, Cottonaro, VMC and Legal Assist to contribute to the costs of the Original Proceeding and the Own Motion Enquiry, according to the court’s assessment of the seriousness and impact of their contraventions of the overarching obligations and paramount duty under the Act.
Legal Assist
Legal Assist took over the conduct of claim on or about 7 January 2021.
Aspects of the conduct of Legal Assist which warrant scrutiny include:
(a) Mr Elmassian gave evidence that he was very experienced in conducting motor vehicle litigation;
(b) after requesting the file from VMC, Legal Assist did not respond to the VMC request to provide them with a signed authority from the client or pay their legal bill. Accordingly, Legal Assist continued to act for Oshana without the file from VMC, which Mr Elmassian accepted may have included important information;
(c) despite the limitations above, Legal Assist did not contact Oshana in relation to the claim, save and except for some conversations regarding bank documents. Legal Assist conducted no due diligence in relation to the accuracy of the amounts claimed. That is, Legal Assist did not have any conversations with Oshana regarding what happened in the collision, his hire claim or his storage claim;
(d) the evidence of Oshana regarding preparations for the hearing fell well short of what one would expect from an experienced motor vehicle law firm;
(e) the $30,000 offer which Walters contended was open for acceptance until 11 January 2021[62] was not discussed with Oshana despite it clearly having the ability to affect his interests. Instead the offer was discussed only with Cottonaro and CME;
(f) despite the Proposch affidavit of 21 January 2021 clearly flagging the odometer readings of the two assessments, which suggested the hire and storage claims could not be correct, no effort was made to clarify the hire and storage claims with Oshana;
(g) despite filing and serving a further amended Statement of Claim,[63] the amended claim or supporting documents were not provided to Oshana. Although the amendments simply struck out without prejudice statements from the pleading, it did restate the misleading hire and storage claims. The restatement of these misleading claims was due to Legal Assist failing to speak to Oshana to obtain instructions from him on the claims. Oshana gave evidence that had his lawyers asked the question, he would have told them that the dates for hire and the claims for storage were not correct. Oshana’s assertion is believable given the evidence he gave against his own interest at the hearing.
[62]CB 342.
[63]OCB 06-08.
In light of Dixon J’s observations in Dura, that the proper basis obligation is to be assessed at the time the claim is made and is not an ongoing duty, Legal Assist could not be responsible for such a breach.
However, the further amended Statement of Claim did repeat the misleading and deceptive representations in the original claim and it is open for this court to find that the obligation not to mislead and deceive has been breached. The failure by Legal Assist to seek instructions from Oshana contributed to the cause of the misrepresentation which was only uncovered during cross examination of Oshana at the hearing. It is irrelevant that Legal Assist did not knowingly mislead or deceive.[64]
[64]Hudspeth.
In addition, pursuant to s 132 of the Magistrates Court Act 1989 the Court has a wide discretion and power to make costs orders against legal practitioners where the legal practitioner’s conduct fell below the standard expected of a competent practitioner.[65] To this end, the failure by Legal Assist to seek instructions from Oshana, brief Counsel with sufficient materials, consider the $30,000 offer properly and the failure to make enquiry of Oshana after Mr Proposch put them on notice of the odometer anomaly are all matters relevant to the court’s discretion whether or not to award costs against a legal practitioner.
[65]Dura.
The evidence of Younis that he believes the amended hire invoice was sent to Legal Assist is rejected.[66] The evidence of Younis was unreliable and not credible. Both VMC and Legal Assist denied receiving amended invoices and Younis was not able to produce any documentation verifying that the amended invoices had been sent.
[66]During the original hearing, Younis asserted that the amended invoices were prepared by him and sent to VMC. During the Own Motion Enquiry, Younis asserted that amended invoices had, in fact, been sent to Legal Assist.
The most probable inference to be drawn from the totality of the evidence, is that Younis did not attempt to send any such amended invoice to any lawyer. Instead, I find that the amended hire invoices were prepared for the purposes of the hearing for the reasons set out below.
Legal Assist submits that, at the original hearing, the fundamental failure of Oshana’s case rested on Oshana in the way in which he gave evidence and the fact that his evidence was not accepted by the Court. It was Oshana’s evidence, including his evidence regarding quantum, that led to the Court coming to the view, that weight should not be attached to the Plaintiff’s version of events. That meant that this case was not one where the Plaintiff’s legal advisors had the opportunity to abandon the case at a time when it became apparent that there was no viable legal premise upon which the case could be brought.
Legal Assist also points to various authorities which establish that the Courts have taken a cautious approach as to when to exercise its jurisdiction to make cost orders against legal practitioners which needs to be exercised with care and discretion and only in clear cases – see Lemoto v Able Technical Pty Limited.[67]
[67] (2005) 63 NSWLR 300, 320-321 [92].
Furthermore, says Legal Assist, the onus of establishing the requisite misconduct lies with “the Applicant”. In this case there is no Applicant but rather the Court, itself. However in considering misconduct by a law practice and because of the serious nature of the allegations, tests in Briginshaw v Briginshaw[68] apply, whereby the Court must have a comfortable satisfaction rather than it being merely on the balance of probabilities to enliven the jurisdiction.
[68](1938) 60 CLR 336, 362.
This reasoning has been adopted in Nadarajapillai v Naderasa (No 2).[69] The New South Wales Court of Appeal noted the tension between public interest in maintaining and nurturing a legal professional that provides vigorous representation to litigants uncompromised by fear of personal sanction for failure against the overriding purpose provisions set out in s 55 to s 60 of the New South Wales Civil Procedure Act.
[69] Nadarajapillai v Naderasa(No 2) [2015] NSWCA 209 [9]-[10].
In Bolitho,[70] His Honour Justice John Dixon referred to the English decision of Ridehalgh v Horsefield.[71] That case provided insight to the legal profession within England on how wasted cost could be visited on lawyers.
[70]Bolitho [1319].
[71][1994] Ch 205.
Under the heading “The Wasted Costs Jurisdiction”, the English Court of Appeal set out five fundamental propositions:[72]
[72]See Dura 20 [52].
(a) The Courts jurisdiction to make a wasted costs order against a solicitor is quite distinct from the disciplinary jurisdiction exercised over solicitors;
(b) Whereas a disciplinary order against a solicitor requires a finding that he has been personally guilty of serious professional misconduct, the making of a wasted costs order does not.
(c) The Courts jurisdiction to make a wasted costs order against a solicitor is founded on breach of the duty owed by the solicitor to the Court to perform his duty as an officer of the Court in promoting within his own sphere the cause of justice.
(d) To show a breach of that duty, it is not necessarily to establish dishonesty, criminal conduct, personal obliquity or behaviour such as would warrant striking a solicitor of the roll. While mere mistake or error of judgment would not justify an order, misconduct, the default or even negligence is enough if the negligence is serious or gross.
(e) The jurisdiction is “compensatory and not merely punitive”.
Legal Assist submits that if the Court is of the view that a wasted costs order against a solicitor is to be contemplated than the Court set out a three state tests as follows:
(a) has the legal representative of whom complaint is made acted improperly, unreasonably or negligently?
(b) if so, did such conduct cause the Applicant to incur unnecessary costs?; and
(c) if so, is it in all the circumstances, just to order the legal representative to compensate the Applicant for the whole or any part of the relevant costs?
VMC
VMC were responsible for instituting the complaint and making the claim for hire and storage charges which were false. In assessing whether VMC had a proper basis for making such claims, and by applying the principles set out by Dixon J in Dura, one must assess what VMC knew or ought to have known at the time.
The evidence revealed that Younis, KBSR or ARV had informed CME on 3 October 2018 that Oshana’s car was a ‘total loss’ and the ‘car rental period is ongoing.’[73] VMC were then provided with hire documents and storage documents which were clearly false. Viewed in the context of these documents alone, it is arguable that VMC had a proper basis to issue proceedings for the claimed amounts.
[73]CB 158.
However, as a legal representative for Oshana, VMC had an obligation to obtain instructions from him regarding the hire and storage claims. VMC ought to have known the claimed amounts were false because a conversation with Oshana would have revealed as much. The failure to clarify the dates upon when Oshana hired the replacement vehicle was important information which was available to VMC at the time of making the claim. It is information which therefore ‘ought’ to have been known to VMC.
Further, the claimed amounts and documents attached to the complaint in support of them, were misleading and deceptive. It does not matter that VMC did not intend to mislead or deceive. One must look objectively at the representations made and assess whether they were misleading or deceptive.
The misleading and deceptive conduct was repeated in Oshana’s Answers to Interrogatories which were prepared by VMC. The evidence of Mr Walters did not adequately explain how the answers were prepared, but Oshana accepted that some of the answers were not true. The evidence relating to the swearing of the answers indicated there was a lack of diligence in ensuring the answers were correct prior to the document being sworn by Oshana.
The evidence does not support a finding that Younis sent an amended hire invoice to VMC. The evidence of Younis on this issue was not credible for the reasons set out below.
VMC submits that it should not be required to contribute to any costs orders as a breach of the overarching obligations is not established. Even if the Court was to find a breach of the overarching obligations on the part of VMC, it would be unjust to order costs against it in circumstances where:
(a) VMC’s involvement in the proceeding finished approximately 15 months prior to trial;
(b) VMC had no knowledge of what occurred following ceasing to act on behalf of Oshana;
(c) VMC has paid costs orders incurred on behalf of the Plaintiff during its involvement in the proceeding; and
(d) the breaches of the CPA by Legal Assist effectively supplanted VMC’s breaches of the CPA and resulted in a more significant detrimental effect on the conduct of the case.
VMC further submits that it is appropriate that the Court make orders pursuant to s 29(1)(b) ordering that KBSR and ARV pay the most significant portion of costs given both parties’ egregious breaches of their overarching obligations. It is further appropriate, asserts VMC, that CMER/Cottonaro, Legal Assist and to a lesser extent Oshana contribute towards any cost order for breaches of the overarching obligations on its own part.
There is substantial merit in those costs submissions put by VMC, especially when one considers that VMC ‘strongly recommended’ settlement of the proceeding based on the Defendants’ 22 December 2020 Offer of Compromise for $30,000 plus reasonable costs.
It would seem much of the costs of the proceeding incurred thereafter arose as a direct result of the desire by Cottonaro and Younis (without reference to Oshana) to keep pushing for a greater settlement offer from the Defendants, notwithstanding the risk this had to Oshana in circumstances where liability was still in issue.
Had the strong recommendation of VMC been acted upon, Oshana would have been compensated for his damaged motor vehicle and the matters that have been the subject of this Own Motion Enquiry would not have even come to light.
Younis, KBSR & ARV
Younis was the director of KBSR at all relevant times. In addition, he gave evidence that at all relevant times he was the manager and controlling mind of ARV. Faraj (Younis’ wife) became the director after the relevant hire was completed and she played no active role in the business. Likewise, Younis’ brother was director at the relevant time, but had a limited role in the running of the business.
By reason of the operation of s 10(d) each of Younis, KBSR and ARV were participants for the purposes of the CPA.
Each of Younis, KBSR and ARV breached the overarching obligations to act honestly and not to mislead and deceive. They breached the overarching obligations in the following ways:
(a) preparing the rental agreement, rental invoices and storage invoices for amounts which they knew or ought to have known were false.
(b) when providing CME with the initial claim form, ARV advised that the rental period was “ongoing” at a time when Oshana had not yet even hired a vehicle.
(c) ARV then provided a hire agreement and invoice which represented that Oshana had hired a vehicle from 7 September 2018 and had stored Oshana’s vehicle from this date also. Both facts were untrue.
(d) ARV then provided further invoices which represented the same untrue facts. KBSR did the same on subsequent storage invoices.
(e) the hire questionnaire form[74] appears to be in same handwriting as the ARV forms, and represents, inferentially, that Oshana left his vehicle at Kings on 7 September 2018. Oshana did not complete the contents of that form. Someone from ARV did.
[74]CB 151-153.
(f) the number of occasions upon which the untrue facts were stated supports a finding that Younis, KBSR and ARV knew of the untrue facts or at least were indifferent as to whether or not they were true. I make this finding paying due regard to the Briginshaw principles.
(g) the first time the amended hire invoices[75] were produced were by Mr Younis in his evidence during the original hearing.
(h) Younis’ evidence during the Own Motion Enquiry, that a staff member happened to discover the error, was implausible when put to scrutiny. Younis could not adequately explain how ARV’s employee, Ms Afram, had discovered the hire car invoice error, given she was not employed at the time the documents were created and there was nothing within the documents themselves that would provide notice of such an error to her. Younis gave evidence that Afram was still employed but Afram did not provide any evidence, whether by affidavit or orally, at this Own Motion Enquiry. It was not adequately explained by Younis how Afram allegedly sent the amended invoice to Oshana’s lawyers at the time, or why she would do so given all other correspondence was sent by KBSR and ARV to CME who onforwarded it to Oshana’s lawyers. It further remained unexplained why Afram or Younis did not follow up Legal Assist after not receiving a reply, particularly given the importance of the amended document that had been sent. Finally, it is noted that if Afram had discovered the error and intended to create amended invoices to properly correct the mistake, the amended invoices were themselves incorrect in that the return of the hire was said to be 13 June 2019 (not 1 May 2019);
(i) the explanation by Younis that the email sent to Legal Assist attaching the amended hire invoice could not be recovered due to a burglary at his premises 2 days after he gave evidence in the original proceeding, was implausible and unreliable. It was not explained adequately why the email would not be recoverable given the businesses’ email address was from a web based domain (Hotmail). No expert IT evidence was led by Younis despite the importance of the issue.
[75]CB 188-189.
The totality of the evidence supports a conclusion that the amended hire invoice was not sent to VMC (as initially alleged during Younis’ evidence in the original proceeding) or to Legal Assist (as alleged by Younis during the Own Motion Enquiry).
I am satisfied, in fact, that the amended hire invoice was manufactured for the purposes of covering up the significant issue (as to the hire start date) that had arisen during the original proceeding upon Oshana giving his forthright evidence as to when he collected a hire car. This, of course, constitutes a serious finding of dishonesty against Younis, in breach of the CPA. I make this finding paying due regard to the Briginshaw principles.
In response to a request to provide an inspection opportunity of the subject vehicle, ARV sent an email to the Defendants lawyers dated 27 November 2020 attaching a purported KBSR repair invoice for repairs effected to the vehicle and a transfer document purporting to evidence the sale of the vehicle to Danial Yookhana.[76] In evidence during the enquiry Mr Younis could not recall the purpose for sending the documents. The overwhelming inference from the documents and email is that Younis/KBSR/ARV were representing to the Defendants’ lawyers that the subject vehicle had been repaired and sold (“the repair and sale representation”). In my view, the repair and sale representation was false.
[76]CB 249-253.
The vehicle at all times remained in the possession of ARV. Indeed, the subsequent inspection opportunity conducted by Graeme Cuthbert in June 2021 revealed that the vehicle had not been repaired, as claimed, and was still in its damaged state. I find that the repair invoice was dishonestly produced by Younis for the purposes of dissuading the Defendants from inspecting the vehicle. I make this finding paying due regard to the Briginshaw principles.
Under cross examination during the enquiry Younis continued to claim that the vehicle had been repaired at the time Cuthbert inspected it in June 2021. Younis’ evidence did not stand to scrutiny under cross examination. Younis could offer no explanation as to why number plates would be removed (as they were), if the vehicle had been left by another hiring party just 24 hours prior to the Cuthbert inspection. His explanation that the battery had been disconnected was implausible given the car was to be left only for a short period of time until inspected by Cuthbert. Moreover, Cuthbert’s photos showed clearly that the damage was still present when he inspected in June 2021.
Younis produced photos he claimed were taken by the roadworthy inspector. The photos were date stamped 23 August 2019.[77] The author of the photos was not called and the purported device which took the photos was not available for inspection so that the meta data could be verified. As I have determined that (at the time of Cuthbert’s inspection) the damage to the vehicle had not been repaired, it necessarily follows, in the absence of any other plausible explanation by Younis, that the photographs provided by Younis to the Own Motion Enquiry were not taken at the time of the date stamp, but rather at a time after Cuthberts inspection. To this end, it is noted that the vehicle in the photos produced by Younis has a ‘Jet Car Rentals’ sticker on the rear windscreen. The sticker is absent on all of Cuthberts photos (in both his reports).
[77]CB 359-363.
By reason of the matters referred to above, Younis, KBSR and ARV have each breached the overarching obligations to act honestly and not mislead and deceive.
Younis’ brief closing oral submission to this extensive matrix of evidence levelled against him, KBSR and ARV, was simply that VMC and/or Legal Assist were at fault for not having properly checked the documents.
Cottonaro & CME
Cottonaro accepted during cross examination that he was acting as agent of Oshana. He accepted that he had direct control of the proceedings which extended to providing instructions to lawyers, attending the mediation, directing payments, advising as to which barrister was to appear and providing instructions on offers. By reason of Cottonaro’s involvement he was a participant in the proceedings as contemplated by s 10(d) of the CPA.
The breadth and degree of CME’s agency is made clear by clause 8 of CME’s purported authority to act, which irrevocably authorises CME to act as agent for the purposes of conducting Oshana’s claim, including but not limited to settling the claim without reference to Oshana.
CME provided the instructions to VMC in relation to Oshana’s claim. When cross examined as to what due diligence CME or Cottonaro did to ensure that the documents and instructions provided to VMC were correct, Cottonaro contended that he ‘left that to the lawyers’.
The overarching obligations are non-delegable.[78] They apply to each participant. Accordingly, it is not open for Cottonaro to delegate responsibility. Each participant to a civil proceeding has an overarching obligation to ensure there is a proper basis for a claim and that they do not mislead or deceive. Cottonaro’s evidence during cross examination amounted, in effect, to a delegation of his and CME’s duties to ensure that the instructions they gave to VMC were not in breach of the overarching obligations. He conceded he made no enquiries whatsoever as to whether or not the hire and storage charges were accurate despite his acknowledgement that CME were effectively running the claim for Oshana. This is so despite Cottonaro being in the best position to investigate the veracity of the claims given he was in contact with both Oshana and Younis.
[78]Bolitho [1321].
Cottonaro’s brief closing oral submission to the evidence levelled against him and CME was that he was being made ‘a scapegoat’ and that it was ‘all VMC’s fault for not having properly checked the documents’.
Findings
By reason of the foregoing matters I am satisfied, on the balance of probabilities, that:-
(a) Oshana has breached the overarching obligations.
(b) Much of the cause of the breaches by Oshana is due to the conduct Younis, KBSR, ARV, Cottonaro, VMC and to a lesser extent Legal Assist.
(c) VMC have breached the overarching obligations by making a claim without a proper basis.
(d) VMC ought to have known the true facts relating to the hire and storage had they asked the required questions of Oshana. The hire car and storage claims were also misleading and deceptive. Although VMC had no intention to mislead or deceive, intent or knowledge is not a requirement for misleading and deceptive conduct to be established.
(e) Legal Assist have not breached the overarching obligation relating to proper basis as the basis of the claim is to be assessed at the time it is made.
(f) Legal Assist’s maintenance of the hire and storage claim in the further amended Statement of Claim on behalf of Oshana was misleading and deceptive even though Legal Assist had no intent to mislead. The failure to obtain instructions from Oshana in relation to the basis of the claims made meant Legal Assist maintained the misleading claims in the further amended claim.
(g) Legal Assist’s preparation for hearing also fell short of that expected of competent motor vehicle litigators and it is open for the Court to exercise its discretion as to costs pursuant to s 132(1) of the Magistrates’ Court Act 1989, but it is not necessary for me to do so, pursuant to that section, in this case.
(h) Younis, KBSR and ARV have breached the overarching obligations which required them to act honestly and not to mislead and deceive;
(i) Cottonaro and CME have breached the overarching obligations relating to proper basis and not to mislead and deceive. These obligations are non-delegable and so Cottonaro’s evidence that he made no enquiries, because it was up to the lawyers to do so, does not absolve him from liability for breach.
Defendants’ Claim for Legal Costs
The Defendants seek their costs of the original proceeding and of the Own Motion Enquiry.
Having succeeded entirely in defending the claim, no sensible submission could be made that the Defendants are not entitled to their costs of the original proceeding.
None of the concerning conduct which caused the instigation of the Own Motion Enquiry relates to the Defendants. No sensible submission could be made as to why the Defendants should not be paid their costs of the enquiry.
The following matters are advanced as to why the Defendants costs should be paid on an indemnity basis:
(a) The authorities establish that an order for indemnity costs may be appropriate where the case involves some relevant delinquency on the part of a party to the proceedings: Oshlack v Richmond River Council.[79] In this context, some “relevant delinquency” means delinquency bearing a relevant relation to the conduct of the case: White Constructions (ACT) Pty Limited (In Liquidation) v White and Ors;[80]
[79](1998) 193 CLR 72, 89 [44].
[80][2004] NSWSC 303 [10]–[11].
(b) As McMillan J outlined in Rees v Rees (No 2):[81]
[81][2016] VSC 579 [10].
“a contravention of an overarching obligation under the Civil Procedure Act 2010 (‘the CP Act’) may also affect a court’s exercise of discretion in relation to the costs of a proceedings. A contravention of the CP Act activates s 28 which provides, without limiting the Court’s inherent discretion as to costs, the Court may take any contravention of the overarching obligations into account in exercising it powers;[82]
(c) The own motion enquiry has involved considerable cost in circumstances where the Defendants conduct was not under scrutiny but rather the Defendants’ lawyers acted as a quasi-contradictor and for the assistance of the Court. This extended to tasks such as creating Court Books for the enquiry. In the circumstances the Defendants’ should not be out of pocket; and
(d) the Plaintiff’s unreasonable refusal of the Defendants’ Calderbank offers.[83] The Defendants refer to the principles set out in Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority.[84]
[82]See also Quigley J in Sambucco v Registrar of Births, Deaths and Marriages & Anor [2021] VSC 193 [18].
[83]CB 287-298. (CB298 containing the Defendants’ Offer of Compromise to the Plaintiff in the sum of $30,000 plus reasonable costs).
[84](2005) 13 VR 435, 441-442 [23]-[27].
The Plaintiff, nor any other Specified Party, made any submission to the contrary to the submissions identified in the preceding paragraph.
Orders for Costs and Apportionment of Costs
I determine that the Defendants’ should have its costs:
(a) on the appropriate scale in Appendix A of the Magistrates Court General Civil Procedure Rules 2020 (Vic) (the Rules), from the commencement of the proceeding to 11:00am on 5 May 2019 (being the second business day after the offer of compromise for $20,000 plus reasonable costs was served on 1 May 2019);[85]
[85]See r 26.08(3) of the Rules insofar as an Offer of Compromise (served 1 May 2019) was bettered by the Defendants at the hearing. A Calderbank offer was also served on 1 May 2019 but in my view, that Calderbank offer (CB 287-288) was somewhat confusing and I would consider that it was not unreasonable for the Plaintiff to reject that offer.
(b) on the appropriate scale in Appendix A of the Rules, plus a 25% uplift, from 11:00am on 5 May 2019 until 1 August 2019 (being the date upon which a further Calderbank offer was served);[86] and
(c) from 2 August 2019 and thereafter, through to the conclusion of this Own Motion Enquiry, on an indemnity basis.
(the Defendants’ Costs)
[86]CB 291-292.
Having carefully assessed and weighed the relevant proportions of responsibility as between Oshana and the Specified Parties, I determine that:-
(a) Oshana is responsible for 5% of the Defendants’ Costs;
(b) Legal Assist is responsible for 5% of the Defendants’ Costs;
(c) VMC is responsible for 5% of the Defendants’ Costs;
(d) Younis, KBSR; ARV are jointly and severally responsible for 65% of the Defendants’ Costs;
(e) Cottonaro and CME are jointly and severally responsible for 20% of the Defendants’ Costs;
(f) Younis, KBSR; ARV are jointly and severally responsible for 80% of the Plaintiff’s costs, on a full indemnity basis, of the Original Proceeding after 7 January 2021[87] and the Own Motion Enquiry;
(g) Cottonaro and CME are jointly and severally responsible for 20% of the Plaintiff’s costs, on a full indemnity basis, of the Original Proceeding after 7 January 2021 and the Own Motion Enquiry;
[87]7 January 2021 being the last date upon which the proceeding would have settled, in my view, had Oshana been properly involved in the consideration of the Offer of Compromise made by the Defendants on 22 December 2020 (CB 297) and been able to accept the same. I have determined that Cottonaro and Younis did not involve Oshana in the consideration of the 22 December 2020 Offer of Compromise whatsoever. The proceeding (after 7 January 2021) was being essentially run for the benefit of Younis, KBSR and ARV.
Oshana must bear all his own costs of the Original Proceeding up to 7 January 2021. By reason of the orders made in the preceding paragraph Oshana will be fully indemnified in respect of his own costs of the Original Proceeding after 7 January 2021 and fully indemnified in respect of his own costs of the Own Motion Enquiry.
Legal Assist, VMC, Younis, KBSR, ARV, Faraj, Cottonaro and CME must each bear their own costs of the Own Motion Enquiry.
I will hear from the parties as to the structure of the costs order to be made in favour of the Defendants, namely whether such costs should be ordered to be paid to the Defendants’:
(a) by the Plaintiff at first instance, with the Specified Parties subsequently indemnifying the Plaintiff in the respective proportions identified in the preceding paragraphs; or
(b) by each of the Plaintiff and the Specified Parties in the respective proportions identified in the preceding paragraph.
Such costs and the structure of any payment, are to be agreed between the parties and filed with the court, by 4:00pm on 16 November 2022 failing which the costs and structure of payment will be determined and fixed at a further costs hearing before me at 10:00am on 17 November 2022.
Magistrate J. P. Foster
10 November 2022
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