Worldwide Enterprises Pty Ltd (formerly National Food Corporation Pty Ltd) & Anor v Silberman (Civil Claims) [2008] VCAT 836

1. The Respondents' section 77 applications are dismissed.
2. No order as to costs.

1. Mr Silberman, the Respondent in matters J10 and J245/2007, is a solicitor. He acted for the first named Applicant in proceedings in the County Court. Mr Chizik, the Respondent in matter J22/2007, was counsel for the first named Applicant in those proceedings. The day to day operations of the first Applicant are controlled by the second named Applicant, Mr Goodman, a director of the company.
2. This decision deals with applications by the Respondents to strike out the proceedings in VCAT matters J10/2007, J22/2007 and J245/2007 and have the matters referred to the Magistrates' Court, pursuant to section 77 of the Victorian Civil and Administrative Tribunal Act 1998 ("the VCAT Act"), as the more appropriate forum.
3. Mr Silberman appeared on behalf of himself and Mr Chizik.
4. Mr Goodman appeared on behalf of himself and the 1st Applicant (referred to collectively as the Applicants).
5. Each of the VCAT applications arise, in one way or another, from proceedings in the County Court (proceeding No. C1-02-00848) in which the 1st Applicant was the plaintiff and Mr Silberman acted as solicitor for the 1st Applicant and briefed Mr Chizik to appear as counsel on its behalf at the hearing (the County Court case).
6. The trial of the County Court proceeding commenced on 24 October 2006 and settled on the sixth day of the trial.
7. On 3 November 2006 Mr Silberman rendered an itemised account to the Applicants for his costs and disbursements. On 15 January 2007, following several emails and items of correspondence, Mr Silberman sent a letter to the Applicants demanding payment of his account, some $42,053.90, within 7 days (see Annexure DRS1 to Exhibit R1).

1. On 16 January 2007, National Food Corporation Pty Ltd lodged Application J10/2007 in which the sum of $242,708.65 was claimed from the Respondent in respect of the way in which the Respondent conducted the County Court proceedings (referred to above) and raised various issues about the legal costs charged by the Respondent.
2. At a directions hearing on 16 April 2007 Senior Member Howell made an order joining Mr Goodman as an applicant (the 2nd Applicant).
3. On 31 October 2007 National Food Corporation Pty Ltd changed its name to Worldwide Enterprises Pty Ltd.
4. The Applicants allege that the Respondent over serviced and overcharged them, and rendered accounts for work which was not requested, authorised or done. The Applicants further allege that the Respondent made a fraudulent attempt to obtain money from them by deception. These allegations may be conveniently described as the costs dispute.
5. The Applicants also allege that the Respondent conducted the trial in a negligent manner and failed to follow instructions resulting in loss to the 1st Applicant. These allegations may be conveniently described as the pecuniary loss dispute.
6. The Respondent sought to strike out the application on the basis of advocate immunity. This application was heard by Member Butcher on 20 July 2007. By decision dated 20 December 2007 Member Butcher made the following orders:
   1. The respondent having claimed immunity from suit, the Tribunal ceased to have jurisdiction to hear and determine that part of the application relating to the claim by the applicant in respect of pecuniary loss.

2. That part of the application in respect of a costs dispute remains on foot.

1. The Tribunal does not have jurisdiction to hear and determine that part of the application relating to the claim against the applicant in the Magistrates' Court.
2. The applicant is to give security for the respondent's costs. The amount of the security is fixed by the Tribunal at $15,000. The security is to be given by 1 February 2008.
3. This proceeding as against the respondent is stayed until the security is given.
4. If security for costs is not given by 1 February 2008 the Tribunal may make an order dismissing the proceedings as against the respondent.
5. On Monday 11 February 2008, the Respondent filed an application in the Tribunal for the following orders:
   1. "The costs dispute" part of these proceedings be referred to the Magistrates Court at Melbourne pursuant to section 77 of the Victorian Civil and Administrative Tribunal Act.
   2. A correction pursuant to Section 119 of the Victorian Civil and Administrative Tribunal Act that the dismissal of the pecuniary loss claim part of these proceedings applies to both Applicants.

1. On 13 March 2008 the Applicants lodged an application in the Supreme Court seeking leave to appeal out of time against the orders made by Member Butcher on 20 December 2007 and, if granted, seeking leave to appeal.
2. On 14 March 2008 Senior Member Howell made orders amending Member Butcher's orders in the following respects:
   • (a) The description of the Applicants in the title to the application is amended to "Worldwide Enterprises Pty Ltd (formerly National Food Corporation Pty Ltd) (ACN 083 154 741) and Morris Goodman".
   • (b) In paragraph one of the order the word "applicant" is amended to "applicants".
   • (c) In paragraph four of the order the words "Worldwide Enterprises Pty Ltd" are inserted after the word "applicant".
3. Senior Member Howell refused the application by the Applicants that the order made by Member Butcher on 20 December 2007 be stayed pending the outcome of an appeal to the Supreme Court.
4. As I have mentioned, the order of 20 December 2007 required the 1st Applicant to provide $15,000.00 by 1 February 2008 as security for costs. The order made it clear that if security was not provided "the Tribunal may make an order dismissing the proceedings". No security was provided by the prescribed date, with the result that the Tribunal could dismiss the costs dispute as brought by the 1st Applicant.
5. By application dated 19 February 2008, the Respondent requested, in substance, that the costs dispute brought by the 1st Applicant not be dismissed because of the failure of that company to provide security for costs. Instead, the Respondent sought an order that the costs dispute as brought by both Applicants be referred to the Magistrates' Court pursuant to s.77 of the VCAT Act.
6. Senior Member Howell referred the section 77 application to a judicial member of the Tribunal for hearing and determination.
7. In the course of his decision Senior Member Howell also dealt with an 'application' which had been lodged by the 2nd Applicant on 12 March 2008, in these terms:

A proposed application to cancel a costs agreement:

In paragraph 8 of an application lodged by Mr. Goodman on 12 March 2008, two days ago, Mr. Goodman seeks an order that the costs agreement entered into with Mr. Silberman be set aside. Several pages later, he states that the "cost retainer agreement is not fair and not reasonable", which is a ground for cancelling a costs agreement.

I was informed by Mr. Silberman that the costs agreement was entered into on 18 November 2005. If that is correct, the clients in that agreement could make an application pursuant to s.103 of the Legal Practice Act 1996 to cancel the agreement. I asked Mr. Goodman whether he intended to make such an application, and he replied in the affirmative.

I informed Mr. Goodman that the Tribunal will not regard the application lodged on 12 March 2008 (which deals with a very large number of matters) as an application to cancel a costs agreement. A separate application dealing solely with the costs agreement will need to be lodged, and a separate filing fee will need to be paid.

I pointed out that any application to cancel the costs agreement will need to be heard and determined by VCAT before the costs dispute can be heard and determined, as the basis for calculating costs is likely to change if an application to cancel a costs agreement is successful.

1. The effect of the orders made by Member Butcher and Senior Member Howell is that, among other things:-
   • that the part of Applications J10/2007 and J22/2007 dealing with the 'pecuniary loss dispute' have been struck out;
   • the 1st Applicant in Applications J10/2007 and J22/2007 has been ordered to give security for the Respondent's costs in the amount of $15,000;
   • the proceedings by the 1st Applicant against the Respondents (ie. the remaining part of applications J10/2007 and J22/2007) are stayed until the security is paid;
   • the proceedings by the 2nd Applicant against the Respondents (ie. the remaining parts of J10/2007 and J22/2007) have not been stayed because no order for security of costs was made against the 2nd Applicant.
2. The Respondent's section 77 application was referred to the Tribunal as presently constituted.

1. On 17 January 2007 Mr Goodman filed a civil claim on behalf of the 1st Applicant against Mr Sam Chizik. Mr Chizik was the 1st Applicant's barrister in the County Court proceedings referred to earlier. The claim seeks the sum of $24,708.65 in damages in respect of losses said to arise from Mr Chizik's contravention of the Fair Trading Act 1999 in the course of his conduct of the County Court proceeding.
2. By decision dated 20 December 2007 Member Butcher made an order in respect of matter J22/2007 in the same terms as the order he made in respect of J10/2007, which is set out at paragraph 13 of this decision.
3. On 19 February 2008 Mr Silberman, on behalf of the Respondent, filed an application seeking to have this matter struck out and transferred to the Magistrates' Court pursuant to section 77 of the VCAT Act.

1. On 8 October 2007 Mr Goodman filed an application on behalf of himself and the 1st Applicant against Mr Silberman. The claim seeks the sum of $5625.46 in damages in respect of alleged breaches of the Fair Trading Act 1999. The issue in dispute appears to relate to payment for the cost of the transcription services associated with the County Court proceedings referred to earlier.
2. On 11 February 2008 the Respondent filed an application seeking to have this matter struck out and transferred to the Magistrates' Court pursuant to section 77 of the VCAT Act.

1. On 24 January 2007 Mr Silberman filed a complaint in the Melbourne Magistrates' Court (No. WOO195585) seeking his costs and disbursements in relation to the County Court proceeding.
2. At the time he filed the complaint in the Magistrates' Court Mr Silberman says that he was unaware that the Applicants had made any claim against him in the Tribunal (see para 13 of Exhibit R1).
3. On 21 February 2007 orders in default of defence were made in the Magistrates' Court against both Applicants for Mr Silberman's claim, costs and interest totalling $42,738.39.
4. The Applicants made application in the Magistrates' Court for a rehearing to set aside the default orders and on 14 March 2007 that application was adjourned until 28 March 2007 to enable the Applicants to show what defence there was to the complaint. At the hearing of the application on 18 April 2007 the Magistrate found that section 111 of the Fair Trading Act 1999 applied to the complaint. His Honour set aside the original orders, stayed the complaint until further order and reserved costs.[1]
5. Section 111 of the Fair Trading Act 1999 is in the following terms:
   1. Exclusion of other jurisdiction
      • (1) Once an application has been made to the Tribunal in accordance with the Victorian Civil and Administrative Tribunal Act 1998 in respect of a consumer and trader dispute or in respect of any other matter in respect of which the Tribunal has jurisdiction under this Act, the issues in dispute are not justiciable at any time by a court unless -
        • (a) the proceeding in that court was commenced before the application to the Tribunal was made and that proceeding is still pending; or
        • (b) the application to the Tribunal is withdrawn or struck out for want of jurisdiction; or
        • (c) the Tribunal refers the proceeding to that court under section 77 of the Victorian Civil and Administrative Tribunal Act 1998.
      • (2) Sub-section (1) applies to all the issues in dispute, whether as shown in the application or emerging in the course of the proceeding in the Tribunal.
6. On 25 September 2007 Coadys Solicitors served a letter of demand for $5625.46 on Mr Silberman on behalf of CRS Wordwave Pty Ltd (Wordwave) with respect to outstanding invoices for transcript services in the County Court case. The sum claimed by Wordwave is part of the disbursements claimed by Mr Silberman in his complaint (WOO195585) against the Applicants.
7. Magistrates' Court complaint WO2876212 was issued by Wordwave's solicitors on 18 October 2007 and served on Mr Silberman on 22 October 2007. Mr Silberman filed a defence on 12 November 2007 and filed a Third Party Notice on 19 November 2007. Mr Goodman served a defence to the Third Party Notice on 13 December 2007 and Mr Silberman filed and served his reply to that defence on 17 January 2008.[2]
8. Complaint WO2876212 was the subject of a pre-hearing conference on 4 December 2007 but the matter was not settled and the proceeding was set down for hearing on 2 April 2008.
9. On 1 February 2008 Mr Goodman served Mr Silberman with an application to stay the Third Party proceeding (in WO2876212) on the ground that VCAT Application J245/2007 filed on 8 October 2007 took precedence over the Third Party proceeding pursuant to section 111 of the Fair Trading Act 1999.
10. On 8 February 2008 his Honour Magistrate Lauritsen stayed the Third Party proceedings until further order and adjourned the Third Party application to 19 March 2008.

1. Section 77 empowers a judicial member of the Tribunal to make an order striking out all or part of a proceeding (other than a review proceeding) if the member considers that the subject matter of the proceeding would be more appropriately dealt with by another body. The power is discretionary and must be exercised judicially.[3] The obligation to act rationally and reasonably; to pay regard to material considerations and to ignore irrelevant considerations; and to make findings of fact based on probative material, are all incidents of the duty to act judicially.[4] A further incident of the duty to act judicially is the duty to hear a party and allow him or her a reasonable opportunity to present his or her case and, coupled with that duty, is the duty to consider the case put. These matters are also dealt with in sections 97 and 98 of the VCAT Act.
2. In support of the section 77 applications the Respondents advanced five broad lines of argument:
   • (i) Related proceedings have commenced in the Magistrates' Court (in particular Complaint WOO195585), giving rise to a risk of conflicting decisions.
   • (ii) A 'lot of work' has already been done in respect of Complaint WOO1955585.
   • (iii) The matters could be heard much more quickly in the Magistrates' Court and if they remain at the Tribunal it will result in additional costs, delay and inconvenience.
   • (iv) The more structured environment provided by the courts would be more appropriate for the management of these matters. In this context reference was made to the fact that the Tribunal is not bound by the rules of evidence.
   • (v) The 2nd Applicant has made allegations that Senior Member Howell and Member Butcher are biased against him and such circumstances support the transfer of the proceedings to the Magistrates' Court.
3. I propose to deal briefly with each of the points advanced in support of the applications.
4. As to the first and second matters I am not persuaded that there is a real risk of conflicting decisions. Mr Silberman's complaint (WOO195585) seeking his costs and disbursements in relation to the County Court proceeding has been stayed pursuant to section 111 of the Fair Trading Act 1999. Even if I were to grant the section 77 applications that matter is not yet ready for trial; no defence has been filed and there may be other interlocutory steps to be taken. The Respondent's contention that 'a lot of work' had been done in respect of the matter is far from determinative. The work done in respect of that matter will not be wasted in the event that all matters are retained at the Tribunal, it can be relied upon by Mr Silberman in defending the claims made against him.
5. The other matter in the Magistrates' Court is at a more advanced stage in relation to the principal parties, but the Third Party proceedings have been stayed. Even if the dispute between Wordwave and Mr Silberman was heard and determined in the Magistrates' Court it is unlikely to give rise to a risk of conflicting decisions. Given the current stay, the Magistrates' Court will not determine the liability of the Applicants to pay Mr Silberman in respect of the work done by Wordwave.
6. In relation to the third point I am not persuaded that the matters could be heard more quickly and with less expense and inconvenience if they were transferred to the Magistrates' Court. Indeed, such transfer may well result in additional expense, particularly insofar as the Applicants are concerned.
7. The essence of the fourth point is that the determination of these matters would be facilitated by a more structured approach to their management. I agree with the general observation and say something about this latter, but such an approach may be readily provided by the Tribunal and there is no need to transfer the proceedings on that basis.
8. Nor does the fact that the Tribunal is not bound by the rules of evidence support the transfer of the matters in the circumstances of this case. The Tribunal's procedural flexibility is an advantage in dealing with matters such as these and despite the terms of section 98(1)(b) the Tribunal acts on the basis of rationally probative evidence.
9. The last point advanced by the Respondent is devoid of merit. A party is entitled to submit that a member ought not hear a matter because of bias (real or apprehended) and to have that submission heard and determined. The Applicants put such a submission to Senior Member Howell who dismissed it and proceeded to deal with the matter. Such a step ought not prejudice the Applicants in the context of these proceedings.
10. In the circumstances of this case I am not persuaded that the subject matter of the proceedings would be more appropriately dealt with by the Magistrates' Court. In reaching this conclusion I have had regard to the following matters:
    1. The Tribunal is well equipped to deal with applications pursuant to the Fair Trading Act 1999 and section 111 of that Act supports the general proposition that the Tribunal may be described as the 'first port of call' for such applications.[5]
    2. I am not persuaded that there is a real risk of duplication of proceedings.
    3. The Applicants have recently sought to file an application pursuant to section 103 of the Legal Practice Act 1996 seeking the cancellation of the costs agreement between the Applicants and the Respondent dated 18 November 2005 (see Annexure MG1 to Exhibit A1). The Form 2 application is yet to be filed but it is clear that the Applicants intend to make an application to cancel the costs agreement. Such an application can only be determined by the Tribunal, pursuant to section 8.1(3) of the Legal Profession Act 2004. Further, as Senior Member Howell mentioned in his decision of 14 March 2008:

"... any application to cancel the costs agreement will need to be heard and determined by VCAT before the costs dispute can be heard and determined, as the basis for calculating costs is likely to change if an application to cancel a costs agreement is successful."

As the foreshadowed application to cancel the costs agreement will be dealt with by the Tribunal and may canvass some issues which are relevant to the other matters it will be more convenient for all of these matters to be heard by the one body, namely the Tribunal.

1. In all the circumstances I do not consider that the subject matter of the proceedings would be more appropriately dealt with by the Magistrates' Court and accordingly I dismiss the Respondents' applications.

1. The Applicants submitted that if I dismissed the section 77 applications, I should order that the Respondents pay the Applicants' costs in respect of the proceedings.
2. The general rule in the Tribunal is that each party bears their own costs (section 109(1)). There is no presumption, or general practice, whereby costs follow the event. Section 109(2) empowers the Tribunal to order that a party pay all or a specified part of the costs of another party in a proceeding. But such an order may only be made if the Tribunal is satisfied that it is 'fair to do so' having regard to the matters set out in section 109(3). The matters set out in section 109(3) include the nature and complexity of the proceeding; the relative strengths of the claims made by the parties and the way in which the proceeding was conducted.
3. The words "having regard to" in section 109(3), require that the matters specified, so far as they are relevant in a particular case, be taken into account and given weight as fundamental elements in determining whether or not to order costs.[6] But the expression connotes primacy not exclusivity[7] and an order may only be made if the Tribunal considers it "fair to do so".
4. None of the matters specified in section 109(3) are enlivened in this case. Having regard to that fact and the circumstances of this case, I am not persuaded that it would be fair to make an order for costs. Accordingly, I dismiss the Applicants' application for costs.

1. The Applicants have instituted a number of proceedings in the Tribunal directed against Messrs Silberman and Chizik. Each of these applications arise, in one way or another, from the County Court proceedings to which I have referred. In my view there is a strong case for the consolidation of all these proceedings, pursuant to section 82 of the VCAT Act. However, the parties have not been given the opportunity to make submissions in respect of that issue and so I make no such order.
2. I will, however, take steps to ensure that all of these matters are dealt with by the one member and that a directions hearing takes place as soon as practicable so that the matters may be appropriately managed.

[3] Carrigans Agricultural Repairs Pty Ltd v Viticulture Technologies (Aust) Pty Ltd [2003] VCAT 2036 at [15].

[4] Australian Broadcasting Tribunal v Bond [1990] HCA 33; (1990) 170 CLR 321 at 367 per Deane J; Re Australian Bank Employees Union; Ex parte Citicorp Australia Ltd [1989] HCA 41; (1989) 167 CLR 513 at 519.

[5] See Dragon Image Pty Ltd v NP Distribution Pty Ltd [2005] VCAT 448 (16 March 2005); Geopec Pty Ltd v Ausbuild Constructions Pty Ltd [2005] VCAT 2708 (20 December 2005).

[6] R v Hunt; Ex parte Sean Investments [1979] HCA 32; (1979) 180 CLR 322 at 329 per Mason J; R v Toohey; Ex parte Moreling Station [1982] HCA 69; (1982) 158 CLR 327 at 333.

[7] In a different statutory context see Rathborne v Abel (1964) 38 ALJR 293 at 301 per Kitto J.