AJH Legal Group Pty Ltd v Mbachilin
[2022] VCC 1323
•19 August 2022
| IN THE COUNTY COURT OF VICTORIA AT Melbourne COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Expedited List
Case No. CI-21-02627
| AJH Legal Group Pty Ltd | Plaintiff |
| v | |
| Godwin Ikpi Mbachilin | First defendant |
| and | |
| Doom Sonia Shaakaa | Second defendant |
| and | |
| Westpac Banking Corporation | Third defendant |
| And | |
| Prospa Advance Pty Ltd | Fourth defendant |
| and | |
| Southern Cross Austereo Pty Ltd | Fifth defendant |
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JUDGE: | Woodward | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 15 August 2022 | |
DATE OF JUDGMENT: | 19 August 2022 | |
CASE MAY BE CITED AS: | AJH Legal Group Pty Ltd v Mbachilin & Ors | |
MEDIUM NEUTRAL CITATION: | [2022] VCC 1323 | |
REASONS FOR JUDGMENT
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Subject:RECOVERY OF LEGAL COSTS
Catchwords: Whether plaintiff entitled to recover legal costs and disbursements pursuant to costs agreement and disclosure statements – whether plaintiff entitled to enforce security registered by charge over client’s property – ‘fair and reasonable’ costs – requirements of legal disclosure statement and legal invoices
Legislation Cited: Legal Profession Uniform Law ApplicationAct 2014 (Vic), Schedule 1, ss172, 174, 179-180, 184, 186-187, 194; County Court Civil Procedure Rules 2018 (Vic), s55
Cases Cited: State Bank of Victoria v Parry [1989] WAR 240; Sami & Anor v Roads Corporation [2009] VSCA 44
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APPEARANCES: | Counsel | Solicitors |
| For the plaintiff | Dr M Sharpe | AJH Legal |
| For the first defendant | Godwin Mbachilin – in person | - |
| For the second defendant | Doom Sonia Shaakaa – in person | - |
| For the third defendant | No appearance | - |
| For the fourth defendant | No appearance | - |
| For the fifth defendant | No appearance | - |
HIS HONOUR:
Summary and outcome
1The plaintiff (“AJH”) sues to recover legal costs and disbursements totalling $123,664.20 that it alleges are owed to it by the first defendant (“Mr Mbachilin”) and Mr Mbachilin’s wife, the second defendant (“Ms Shaakaa”), in respect of legal professional services provided between January 2019 and June 2020. AJH further claims that the payment of the legal costs and disbursements is secured by Deed of Charge over real property, at 21 McCarthy Street, Wodonga in Victoria (“Property”), jointly owned by Mr Mbachilin and Ms Shaakaa.
2For the reasons below, I will make orders in the proceeding as follows:
(a) There is judgment for the plaintiff in the sum of $123,664.20.
(b) The plaintiff, through Wodonga Real Estate Best Agents (namely, Ms Silviya Saric), shall conduct the sale of the property located at 21 McCarthy Street, Wodonga in the State of Victoria more particularly described in Certificate of Title Volume 11361 Folio 125 (“the Property”) by public auction within 60 days from the date of this order.
(c) The first defendant and second defendant are to vacate the Property within 30 days from the date of these orders becoming effective, on the conclusion of any stay of these orders.
(d) The reserve price for the sale of the Property shall be fixed at $740,000.
(e) The proceeds of sale of the Property shall be applied (until those proceeds are exhausted) as follows:
(i)first, to all proper costs and expenses relating to the sale of the Property (including any legal costs associated with the sale on a solicitor client basis);
(ii)second, to the amount due to the third defendant pursuant to registered mortgage AN816449S;
(iii)third, to the amount due to the fourth defendant in discharge of its interest in the Property;
(iv)fourth, to the amount due to the plaintiff in discharge of its interest in the Property;
(v)fifth, to the amount due to the fifth defendant in discharge of its interest in the Property; and
(vi)sixth, to be paid to the first defendant and second defendant jointly.
(f) The commission payable to Wodonga Real Estate Best Agents in relation to the sale of the Property is fixed at 2% inclusive of GST of the sale price.
(g) The contract of sale of the Property must be in the form of the Contract of Sale of Real Estate published by the Law Institute of Victoria Limited and The Real Estate Institute of Victoria Ltd.
(h) The plaintiff is appointed to execute and transfer the Property to the purchaser(s) thereof in order to effect the sale.
(i) The first and second defendants are to pay the costs of this proceeding (including any reserved costs) to be taxed on the standard basis in default of agreement.
(j) Each of the orders above is stayed until 4.00pm on 3 October 2022.
(k) Reserve liberty to the parties to apply by email to the Commercial Division Registry ([email protected]) for further directions upon giving reasonable notice to all other parties.
3I will invite the parties by email to provide brief submissions within a fixed period as to whether and why any different or further orders to those proposed above should be made (particularly on the question of costs), failing which I will authenticate the orders above without further notice to the parties.
Factual background
4AJH is a legal practice based in Melbourne which provides legal services, including litigation and dispute resolution services. Mr Mbachilin[1] was a qualified medical doctor and has previously been engaged in medical practice but is not presently working as a doctor due to a pending investigation by the Australian Health Practitioner Regulation Authority. During 2019 and 2020, Mr Mbachilin and Ms Shaakaa incurred legal fees and disbursements with AJH in connection with proceedings in this court, described below.
[1]Mr Mbachilin informed the court before the trial commenced that he was presently not authorised to use the “Dr” honorific.
5The third, fourth and fifth defendants are joined to this proceeding because they each claim an interest in the Property. The third defendant (“Westpac”) is the registered mortgagee of the Property, registered on 10 May 2017. The fourth defendant (“Prospa”) was apparently granted a charge over the Property pursuant to an agreement entered into on 15 November 2018 between it and Mr Mbachilin and Ms Shaakaa, though it was not lodged until 9 July 2019. Similarly, the fifth defendant (“SCA”) was apparently granted a charge in its favour over the Property pursuant to an agreement entered into on 29 October 2018, though it was not lodged until 3 April 2020.
The Medical Practice Proceeding and costs discussions
6Between 19 January 2019 and 4 June 2022, AJH acted for Mr Mbachilin in a County Court proceeding[2] brought against him by a colleague in respect of a medical practice that the two doctors had established together in Wodonga (“Medical Practice Proceeding”). Mr Mbachilin defended the claim against him and also made a counterclaim. The trial in the Medial Practice Proceeding was heard before his Honour Judge Macnamara in October 2019 and judgment was handed down on 12 December 2019, essentially finding against Mr Mbachilin on both the claim and counterclaim.[3]
[2]County Court Commercial Division General List proceeding CI-18-05511, Alade Abiodun Sululola v Godwin Ikpi Mbachilin.
[3] Alade Abiodun Sululola v Godwin Ikpi Mbachilin [2019] VCC 1959
7Between January to October 2019, AJH primarily undertook preparation for trial, including briefing counsel and attending mediation in June 2019. On 3 July 2019, following the failure of the proceeding to resolve at mediation, AJH met with Mr Peter Kyeleve (Mr Mbachilin’s brother) to discuss the current status of the Medical Practice Proceeding and the basis on which AJH was prepared to continue to act for Mr Mbachilin in the proceeding. At the meeting, Mr Kyeleve had informed AJH that Mr Mbachilin was not then entitled to practice medicine and no longer had a source of income from which to continue to finance the Medical Practice Proceeding.
8An email sent by AJH to Mr Kyeleve (copying in Mr Mbachilin and Ms Shaakaa), on 25 July 2019 sets out the “key points” from the 3 July 2019 meeting, including that:
“[We] informed you that in order to assist Godwin we may be prepared to enter into an arrangement where we take security over Godwin’s property and lodge a caveat to secure payment of our professional costs and disbursements for the further work that is necessary to prepare for the trial and to conduct the trial in these proceedings.”
9This arrangement was apparently confirmed by a telephone call with Mr Mbachilin the following day, in which he indicated that he was open to providing security over the Property. Over the course of the following week, AJH conducted enquiries concerning the Property and corresponded with Mr Mbachilin and Ms Shaakaa about securities affecting the Property. For example, on 17 July 2019, Ms Trower of AJH emailed Mr Mbachilin and Ms Shaakaa providing details of a title search of the Property and requesting further information.
The costs agreement and disclosure statements
10On 22 July 2019, Ms Trower of AJH provided Mr Mbachilin and Ms Shaakaa by email the following documentation:
(a) Costs Agreement and Associated Third Party Payer Costs Agreement dated 22 July 2019 (signed by Mr Mbachilin and Ms Shaakaa on 2 August 2019) (“Costs Agreement”);
(b) Amended Updated Disclosure Statement to Mr Mbachilin and Third Party Payer Disclosure Statement to Ms Shaakaa both dated 22 July 2019 (and signed by the respective recipients on 2 August 2019) (“Disclosure Statements”);
(c) Deed of Charge over the Property (signed by Mr Mbachilin and Ms Shaakaa on 2 August 2019) (“Deed of Charge”); and
(d) form of Acknowledgement (dated 22 July 2019, and signed by Mr Mbachilin and Ms Shaakaa on 2 August 2019) (“Acknowledgement”), acknowledging that AJH had advised Mr Mbachilin and Ms Shaakaa that they should obtain independent legal advice in relation to the Deed of Charge and related documents.
11In her covering email, Ms Trower noted the following:
“We have been informed that Godwin is presently unemployed due to temporary suspension of his entitlement to practice medicine. Because of this reason, Godwin is presently unable to pay our professional fees and disbursements outlined in our Updated Disclosure Statement dated 25 June 2019.
To assist Godwin given his present situation, we are willing to continue to work on this matter subject to the following conditions:
1) that Godwin and his wife, Doom Sonia Shaakaa, provide us with a charge over their property located at 21 McCarthy Street, Wodonga VIC 3690 as security payment of our professional fees and disbursements outlined in our Amended Updated Disclosure Statement dated 17 July 2019;
2) that Godwin and Sonia enter into the Associated Third Payer Party Costs Agreement and Associated Third Party Payer Disclosure Statement with our firm;
3) that Godwin will continue to keep us informed in relation to his entitlement to practice medicine;
4) that Godwin will immediately commence making reasonable payments towards our professional fees and disbursement as soon as he is entitled to practice medicine; and
5) that we reserve our rights to review or alter this arrangement as soon as Godwin is entitled to practice medicine.
We advise that if Ms Doom Sonia Shaakaa signs the Associated Third Payer Party Costs Agreement, Associated Third Party Payer Disclosure Statement, and the Deed of Charge, she will also be liable to pay our professional fees and disbursement as an associated third party payer.
We advise that Godwin and Sonia should seek independent legal advice before signing [the documents].”
12In the following days, Mr Lee of AJH provided further clarification regarding the arrangement to Mr Kyeleve, Mr Mbachilin and Ms Shaakaa, outlining what steps will be required ahead of the trial and how these steps translated into costs for Mr Mbachilin. On 1 August 2019, apparently at Mr Mbachilin’s request, AJH re-sent the attachments to its 22 July 2019 email to Mr Mbachilin and Ms Shaakaa. On 2 August 2019, Mr Mbachilin emailed to AJH signed copies of each of the documents sent the previous day. On 7 August 2019 AJH lodged a caveat over the Property pursuant to the Deed of Charge.
13The Disclosure Statements included terms to the effect that:
(a) AJH’s legal costs would be fixed in the amount of $66,000 including GST, for the work in relation to the preparation for the trial and attendance at the trial for three days, including counsel fees;
(b) the fixed costs only apply to the work outlined in paragraph 3 of the Disclosure Statements;
(c) any additional work or disbursements will constitute a variation to the fee agreement; and
(d) any variation or additional work will be charged in accordance with AJH’s hourly rates as set out in the disclosure statement.
14AJH continued to act for Mr Mbachilin in the Medical Practice Proceeding up to and including the trial in October 2019. In the lead up to trial, AJH provided to each of Mr Mbachilin and Ms Shaakaa two updated disclosure statements for works not provided for in the 22 July 2019 disclosure statement, as follows:
(a) disclosure statements dated 13 September 2019 for work associated with preparing, filing and serving five additional subpoenas and other related matters, estimated at $3,600; and
(b) disclosure statements dated 7 October 2019 relating to the preparation of the court book and court book index for the trial, estimated at $16,500.
15Subsequent correspondence from AJH to Mr Mbachilin explained that the work in relation to the court book index and court book was not covered by the 22 July 2019 disclosure statements because it had then been anticipated that this work would be done by the plaintiff in the Medical Practice Proceeding, as is the standard practice for trials in the Commercial Division of this court. However, the plaintiff had failed to prepare the court book index and court book in accordance with the relevant court orders, and there was a risk that Mr Mbachilin’s case for trial would not be adequately prepared in time unless AJH prepared a court book.
16The trial of the Medical Practice Proceeding commenced on 14 October 2019. It had originally been estimated to run for three days but ultimately ran for six. The additional days were 17, 18 and 25 October 2019. On 16 October 2019, AJH sent updated disclosure statements to Mr Mbachilin and Ms Shaakaa for the first two additional days, together with an updated disclosure statement from counsel. Disclosure statements for the third additional day were sent on 22 October 2019. I note, because it is relevant to a matter raised during the hearing before me by Mr Mbachilin, that the estimates for these additional days were $7,500 per day (including GST) for AJH and $2,550 per day (including GST) for counsel.
17After the trial had concluded, AJH invited Mr Mbachilin on two occasions to provide a “reasonable proposal for regular payments towards our outstanding accounts” and required he “immediately commence making reasonably payments towards our outstanding accounts and [counsel’s] fees”.
18Following the trial, Mr Kyeleve contacted AJH by email and indicated that Mr Mbachilin and Ms Shaakaa were dissatisfied with the final total, which was higher than that agreed under the fixed costs agreement in July 2019. On 10 November 2019, Mr Kyeleve emailed Mr Lee of AJH indicating that: “The invoice you have provided is insufficient”, but that Mr Mbachilin and Ms Shaakaa agreed with:
(a) “your professional fees from $66,000 which is $41,775.00”;
(b) counsel fees of $29,248.50; and
(c) the disbursements.
19In relation to a payment proposal, Mr Kyeleve stated in his email that Mr Mbachilin could put aside $200 per fortnight to commence repayments, but was hopeful his suspension from medical practice would soon end and a (presumably different) plan for the repayment of fees could be reached. On 12 November 2019, AJH provided further copies of the invoices, with considerable additional detail of each attendance covered by each invoice, including a handwritten annotation of the lawyer that had undertaken each of the attendances.
20On each of 14 November and 6 December 2019, AJH issued further updated disclosure statements for work not previously provided for, namely, for the preparation and finalisation of (respectively) legal submissions on the statute of frauds that had been requested by the court and in relation to costs orders following the delivery of judgment by his Honour Judge Macnamara.
21During November and December 2019, the parties (and Mr Kyeleve on behalf of Mr Mbachilin and Ms Shaakaa) engaged in lengthy and detailed email correspondence concerning the AJH disclosure statements and invoices. Notably:
(a) In an email of 6 November 2019 to AJH, Mr Kyeleve stated (errors in original):
“If you wish to go after their house to recover fee owned to now that is your prerogative. What we want to talk to you about for example is, you have charge $7,500 per day of trail (equivilent of 19.5 hours of work of your time) while [counsel’s] fee is 2,550 per day comparatively. [Counsel] fees is in line with his hourly rate. Is your fees based on sometheing else?”
(b) In an email dated 2 December 2019, Mr Kyeleve stated (errors in original):
“We did our research and we knew this case in its entirety was going to cost all up around $100,000 including fees and disbursements. Your firms earlier disclosure statement was in-line with this and so staying with your firm was Dr Godwin’s only feasible choice of having representation on this matter giving his lost of income and you willing to take security and be paid later.”
22In an attempt to resolve the dispute over the final figure owed, the parties met at AJH’s office on 7 January 2020. At this meeting, as submitted by AJH and outlined in Mr Lee’s email the following day, it was apparently agreed that Mr Mbachilin would pay $91,813.58 to AJH, plus the sum of $34,392 for counsel’s fees (“Agreement”). The figure of $91,813.58 represented a discount of $3,300 on the total of the outstanding disclosure statements and invoices – AJH agreed not to charge the $3,300 covered by the 14 November 2019 disclosure statements.
23On 3 January 2020, before the meeting had occurred, Mr Mbachilin had filed a legal complaint with the Victorian Legal Services Board and Commissioner (“VLSBC”), complaining of the amount of the legal bill and the conduct of AJH While AJH submits that Mr Mbachilin informed it that he would withdraw the complaint, it appears he did not. Regardless, on 10 February 2020, the VLSBC wrote to both AJH and Mr Mbachilin noting that the VLSBC was unable to determine the complaint as it exceeded its jurisdictional limit of $10,000 and outlined the parties’ other avenues to pursue the complaint.
24On 10 January 2020, AJH emailed Mr Mbachilin and Ms Shaakaa setting out (among other things) a proposal in relation to engagement of new counsel to appear at the costs hearing before his Honour Judge Macnamara on 26 February 2020. Ms Shaakaa replied later that day (copying in Mr Mbachilin and Mr Kyeleve) stating: “Hi Wei, We are happy to go ahead with this”.
25In an email dated 28 February 2020 to Mr Mbachilin and Ms Shaakaa, AJH summarised the outcome of the costs hearing and noted the possible avenues of appeal. AJH also referred to the terms of the agreement about costs reached on 7 January 2020 and requested again that Mr Mbachilin and Ms Shaakaa immediately put forward a reasonable proposal for regular repayments. AJH noted that AJH’s rights were reserved in relation to the security over the Property and the liens held by AJH. Finally, AJH confirmed that despite the irregular repayments of $250 by Mr Mbachilin, AJH had not agreed to enter into a payment arrangement for payment by instalments of $250.
26In a response to this email dated 6 March 2020, Mr Mbachilin stated (errors in original):
“Dear Wei
Thanks for your last correspondence on Friday 28/02/20 regarding your outstanding charges. If you have any suggestion as to what you will consider reasonable let me know. As per our conversation on 7th. I have agreed to pay whatever you have charge me but lets be clear I have not agreed with the charges.”
27AJH and Mr Mbachilin spent the month of March 2020 attempting to negotiate a suitable payment plan, with Mr Mbachilin continuing to suggest $250 per fortnight and AJH suggesting $9,799.48 per month. The communication between the parties became increasingly difficult during this time, with AJH outlining its intention to enforce its legal rights over the Property.
28On 27 March 2020, Mr Mbachilin informed AJH that he had approached ANZ to discuss the possible refinancing of the Property. Several months’ later, on 5 June 2020, he advised AJH that he had been informed by a finance broker that it was unlikely that a bank would agree to refinance the loan as:
(a) his existing home loan was in arrears by approximately $18,500;
(b) he was only paying $570 a month when the repayments were $2,155; and
(c) Ms Shaakaa’s income was not sufficient to apply for refinance.
29On 9 June 2020, AJH filed a formal Notice of Ceasing to Act and served it on Mr Mbachilin, outlining the outstanding fees, including the outstanding fees of counsel.
30For the remainder of the year of 2020 and early 2021, Mr Mbachilin continued to make unilateral and irregular payments of $250 or $350 into AJH’s trust account, which AJH continued to apply to counsel fees, advising Mr Mbachilin at each occasion it did so.
31On 3 April 2021, the SCA lodged a caveat over the Property pursuant to “charge contained in an agreement” dated 29 October 2018. On 27 April, the solicitors of AJH conducted a title search which revealed this new caveat.
32That month, AJH received further communication from counsel’s clerk outlining that counsel was seeking full payment of his fees and “should there be no confirmation that full payment is forthcoming, we will have no option but to seek counsel’s instructions to pursue this matter through external solicitors to recover this debt”. When approached by AJH about Mr Mbachilin and Ms Shaakaa’s proposal to pay, Mr Mbachilin responded;
“It is unfortunate that I am still not earning any income at the moment. Still on Centrelink and hoping AHPRA will finish its investigation soon and I go back to work and start paying all my bills. Life has not been easy for me with 5 kids and a wife without any income.”
33AJH later commenced making inquiries with local Wodonga real estate agents for a kerbside appraisal of the Property. Silviya Saric of Wodonga Real Estate Best Agents advised that the Property would reach a listing price of $690,000–$750,000. In her email on 11 May 2021, Ms Saric noted it was a “very sellable property with a high interest that would be generated from out of area investors, as well as an influx of people moving to the region”.
34In May and June 2021, AJH corresponded with each of Westpac, Prospa and SCA seeking confirmation of the amounts they were respectively owed and whether they objected to AJH seeking orders from this Court to sell the Property. Westpac, Prospa and SCA confirmed as follows:
(a) Westpac did not object to the orders sought by AJH but did not propose to participate in the proceeding. Further, the balance of Mr Mbachilin and Ms Shaakaa’s loan under the home loan agreement was $466,012.17 as at 22 June 2021.
(b) Prospa’s payout figure was $44,542.29 and that while Prospa was not taking steps to sell the Property, its solicitors advised it did not object to AJH doing so on the basis the Property be sold by public auction and the proceeds be paid first to Westpac, then to Prospa as the first chargee of the Property and then to AJH as the second chargee of the Property.
(c) The amount secured to SAC pursuant to the charge over the Property was $10,588.49 and it held the view its equitable interest took priority over those of Prospa and AJH.
35AJH commenced proceedings in this Court for the recovery of the amount owed by Mr Mbachilin and Ms Shaakaa on 28 June 2021.
Conduct of the trial
36By email sent to the parties in advance of the trial, the parties were notified as follows:
“His Honour has read the pleadings in the proceeding and the plaintiff’s outline of opening submissions (“Plaintiff’s Outline”). Based on that material and having regard to the amount in dispute in the proceeding and the importance of ensuring that costs are commensurate with that amount, his Honour proposes to proceed as follows:
· The Plaintiff’s Outline will be taken as read and each document in the court book that is referenced in the Plaintiff’s Outline will be taken as tendered, unless objected to by the defendants.
· For the benefit of the defendants who are self-represented, this means that the documents so referenced and tendered will be treated as authentic and become part of the evidence in the proceeding, unless you can identify a proper basis for objecting to the tender. This may include that one or more of the documents is forged or fraudulent or is not what it purports to be, or is irrelevant to any issue in the proceeding.
· The defendants will be expected to identify any such objections including the basis for the objection at the commencement of the hearing on Monday.
· Subject to the above, the plaintiff will not be called upon to provide any oral opening statement, except to the extent that:
o it considers that there are documents in the Court Book not referenced in the Plaintiff’s Outline, or
o there is oral evidence that the plaintiff proposes to adduce,
that the plaintiff must prove in order to make out its case (noting that this does not include matters the plaintiff considers it may need to prove in answer to the defendants’ defence). In that event, the opening will be limited to identifying and seeking to tender each of those documents, dealing with any further objection from the defendant and identifying any witnesses and briefly summarising the evidence they are expected to give.
· The defendants will then be given the opportunity to make a brief statement explaining their defence, identifying any documents on which they rely and identifying any witnesses they propose to call and briefly summarising the evidence they are expected to give.
· If the plaintiff indicates that it does not seek to adduce any oral evidence to prove its case as noted above, the defendants will next call any oral evidence on which they will rely, including cross-examination on that evidence.
· Once the defendants’ evidence concludes, the plaintiff will then have the opportunity to call such responding evidence as it considers appropriate.
· The evidence will be followed by brief oral closing submissions first by the defendants and then by the plaintiff, which will be limited to 30 minutes each unless his Honour otherwise indicates at the close of evidence.
His Honour’s expectation is that, so structured, the trial can be concluded within a day.”
37The trial proceeded more or less along the lines proposed in the email. Before the trial commenced, AJH had produced a list of a court book page references for each of the documents it sought to tender, by refence to the outline of opening submissions, the chronology and one additional document. I asked Mr Mbachilin and Ms Shaakaa whether they had any objection to these numbered documents being tendered and forming part of the evidence in the proceeding. They did not. The documents in the list were then formally tendered as exhibit P1.
38So far as oral evidence was concerned, counsel for AJH, Dr Sharpe, indicated that she did not seek to adduce any evidence to supplement the tender, subject to any evidence adduced on behalf of Mr Mbachilin and Ms Shaakaa. I next heard from Mr Mbachilin and Ms Shaakaa about the nature of the defences they relied on and then Dr Sharpe responded. Finally, I gave Mr Mbachilin an opportunity to respond. It soon became apparent that Mr Mbachilin was seeking to refer to events not covered by the tender, and so I arranged for him to take an oath before continuing his submissions and evidence from the bar table. I indicated that if Dr Sharpe wished to cross-examine Mr Mbachilin, I would require him to move to the witness box. Dr Sharpe did not seek to cross-examine Mr Mbachilin.
Mr Mbachilin and Ms Shaakaa’s defence
39As noted by Dr Sharpe in her written opening submissions, in their defence dated 7 September 2021 (which they prepared themselves) Mr Mbachilin and Ms Shaakaa admit that they “willingly” entered the Costs Agreement and Disclosure Statements. Dr Sharpe submits that they also appear to admit that they willingly executed the Deed of Charge which was provided to them and signed at the same time as the documents described above. However, in my view, Mr Mbachilin and Ms Shaakaa’s defence is less clear on the matter of the Deed of Charge, so I proceed on the basis that this has not been admitted. Having said that, no basis for it being held to be unenforceable is raised in the pleadings, nor (as discussed below) was it raised in the course of the trial.
40In her written opening submissions, Dr Sharpe’s summary of the matters raised by Mr Mbachilin and Ms Shaakaa in their defence (which I accept) continues as follows:
“In their Defence, the First and Second Defendants have only joined issue with the ‘subsequent Disclosure Statement and Costs Agreement’ (the Updated Disclosure Statements). The First and Second Defendants contend that they were ‘coerced’ into agreeing with these agreements before being provided with copies of same.
The First and Second Defendants also contend:
(a) that their request for itemised invoices of AJH’s fees was denied; and
(b) they had been paying the debt owed to AJH by fortnightly instalments.”
41For convenience, I will adopt Dr Sharpe’s definition of “Updated Disclosure Statements” (namely, as referring to the seven updated disclosure statements referred to in sub-paragraphs (d) to (e) of the particulars to paragraph 5 of the statement of claim).
42On the question of coercion, Dr Sharpe submits that it is unclear what matters Mr Mbachilin and Ms Shaakaa rely on to establish any coercion. Further, she notes that Mr Mbachilin continued to provide instructions to AJH in the Medical Practice Proceeding until the conclusion of that proceeding and well after the service on him of the Updated Disclosure Statements. I agree that the conduct of Mr Mbachilin in continuing to instruct and engage with AJH in the Medial Practice Proceeding throughout the relevant period, belies any suggestion of coercion.
43In any event, Mr Mbachilin made clear in the course of the trial that he and Ms Shakkaa no longer pressed any argument based on coercion. Ms Shaakaa likewise did not raise it as a basis for opposing AJH’s claims. It is therefore not necessary for me to consider it further. It was also not clear whether Mr Mbachilin and Ms Shaakaa were continuing to press an argument based on the failure to provide itemised invoices or any agreement to pay by fortnightly instalments, but I will proceed on the basis that they were.
44Given that Mr Mbachilin and Ms Shaakaa have had no legal representation throughout the proceeding, including at trial, I took the opportunity to ask each of them about matters that might point to additional defences.
45In the course of his submissions, Mr Mbachilin raised two matters in opposition to AJH’s claims, which were essentially allegations of overcharging by AJH. First, he said that AJH should not have charged for the preparation of the court book index and court book in the Medical Practice Proceeding. Second, he argued that the daily fee rendered by AJH ($7,500) compared unfavourably to the equivalent fee charged by counsel ($2,550). He added that, at the hourly rate of the solicitor primarily responsible for the conduct of the proceeding ($385 per hour including GST), this daily charge translated to 19.5 hours, which was clearly not sustainable.
46In relation to potential defences available to Ms Shaakaa, despite the formal Acknowledgement that AJH had advised Mr Mbachilin and Ms Shaakaa that they should obtain independent legal advice, Ms Shaakaa had not done so. It also seemed that Ms Shaakaa had been given the documents she signed by her husband Mr Mbachilin. Further, apart from arranging through Mr Mbachilin for Ms Shaakaa to sign the Acknowledgment and other documents, there was no evidence that AJH had taken any steps to ensure Ms Shaakaa had read and understood those documents and, in particular, appreciated that failure to pay AJH’s legal costs could result in her losing her home. In those circumstances, I was concerned to identify whether Ms Shakkaa might have any defence to AJH’s claims based on unconscionability.
47Ms Shaakaa attended the trial by Zoom from her home in Wodonga, except for a short period in the afternoon when she had to leave to collect some of her children from school. Ms Shaakaa’s attendance by Zoom had been arranged by the court despite AJH’s request that the hearing occur in person, because Ms Shaakaa had responsibility for the care of her five young children, at least one of whom was home and unwell. Despite these difficulties, Ms Shaakaa participated actively in discussions during the course of the hearing. Indeed, on a number of occasions, Ms Shaakaa used the “raise hand” function in Zoom to make statements clarifying Mr Mbachilin’s submissions.
48It was apparent to me from this that Ms Shaakaa was intelligent, articulate and had a good grasp of English. Her comments were astute and measured. Further, after the case against Mr Mbachilin and Ms Shaakaa had been outlined by Dr Sharpe and I had heard from Mr Mbachilin about the issues he wished to raise by way of defence, I had the following exchange with Ms Shaakaa:
“HIS HONOUR: All right. Ms Shaakaa, can you hear me okay and are you able to just deal with a couple of questions that I have about your position? You have heard, I hope, and I appreciate you're obviously dealing with some issues with your kids, so I appreciate you being able to be present, but I just wanted to double‑check in with you whether there were any further issues that you want to raise in relation to the case that is being pursued against you and your husband for these legal fees.
MS SHAAKAA: No, Your Honour.
HIS HONOUR: The one particular issue I was interested to know about you, you seem to have been reasonably ‑ from the material that I've read, you seem to be reasonably involved in the process of assessing the accounts and in relation to the legal proceedings that your husband was involved in and you seem to have a fairly good idea of what was going on. Is that the case?
MS SHAAKAA: Yes, Your Honour.
HIS HONOUR: And did you ‑ there's reference in the material to you being encouraged to get independent legal advice about that but I don't recall seeing any reference to you getting legal advice about that. Did you get legal advice about what you were signing with those documents?
MS SHAAKAA: No, Your Honour.
HIS HONOUR: Do you feel as though you nevertheless understood the responsibility that you were taking on with those documents or what they meant?
MS SHAAKAA: Yes, Your Honour.
HIS HONOUR: Okay. And did you understand that by signing that ‑ apart from the issues that your husband has raised about concerns about itemisation and particular items being charged, you appreciated, by signing the charge, you were giving what's known as a ‑ a bit like a mortgage but not a mortgage, but giving permission to the plaintiff in this case to have an interest in your home, in your property in Wodonga, you knew that ‑ did you understand that's what was happening when you signed those documents?
MS SHAAKAA: Yes, Your Honour.
HIS HONOUR: Okay. All right. And are there any other things that you wanted to raise with me about the claim that's been made against you?
MS SHAAKAA: We acknowledge that, yes, we owe AJH money and we acknowledge they did some work for us and, yes, because they did some work, we have to pay them, but like where the disagreement comes in is how much is the end bill because like the first disclosure statement we signed with AJH was about 60 something thousand and at the end of the court case that doubled, like it was double the figure.
HIS HONOUR: Yes.
MS SHAAKAA: So, yeah, that's ‑ yeah.
HIS HONOUR: Did you understand ‑ the original disclosure statement, did that include or allow for the fees for the barrister?
MS SHAAKAA: Yes, Your Honour.
HIS HONOUR: It did. Okay. Do you ‑ as I understand it, the case that AJH is making is that they did provide that first disclosure statement but they then later provided updated disclosure statements which showed further charges were going to be levied. Do you recall receiving those updated disclosure statements?
MS SHAAKAA: Yes, Your Honour.
HIS HONOUR: So what do you say about the fact that they then provided further information that showed that more charges would be ‑ more charges than the $60,000 would be incurred?
MS SHAAKAA: Sorry, Your Honour, can you ask your question ‑ ‑ ‑
HIS HONOUR: So as I understand it, the case that's made against you is, yes, the original disclosure was for the $60,000‑odd but then as the case progressed you received updated disclosure statements which showed that the amount was going to be increased, so I'm just wondering what you say about the updated disclosure statements which showed that there was going to be more than the original 60,000.
MS SHAAKAA: Sorry, Your Honour, I'm not sure the right way to answer your question.
…
HIS HONOUR: Right. Can you see that document [at page 366 of the Court Book], Ms Shaakaa, where there's an additional amount of 3,600 that's shown on that updated disclosure statement?
MS SHAAKAA: The documents were sent to me, Your Honour, but it's not an excuse, I know ‑ well, yeah. The documents were sent to me. I tried as much as possible because I'm someone ‑ I stress a lot and I try as much as possible just ‑ ‑ ‑
…
HIS HONOUR: I understand, but just so we're on the same page, what AJH Lawyers are saying is, yes, the original disclosure statement was for a smaller amount but then each time it became apparent that further fees were going to be incurred, they sent you an updated disclosure statement like this one.
MS SHAAKAA: Yeah.
HIS HONOUR: But that, in effect, kept adding to the original quote, so that's what they say about that issue; that is, that they did update the information and this is just one example. So ‑ and I think you say you did receive them but you had trouble keeping track of them; is that the issue?
MS SHAAKAA: Yes, Your Honour.
…[Discussion with Dr Sharpe concerning the disclosures and invoices]
HIS HONOUR: No, no, I understand that. All right. So that deals with ‑ I think deals with the disclosures, Ms Shaakaa. Are there any other matters that you want to bring to my attention in relation to the claim that you say might be a basis for refusing payment?
MS SHAAKAA: We are not refusing payment, Your Honour, we are not refusing payment at all. We don't just, you know ‑ how can I say this? What we think is ‑ we can't ‑ we've spoken with the plaintiff before and we've gone through mediation in this matter and there are no ‑ like we've given our payslips. Godwin is not working. I am working. I earn maybe about ‑ I don't know ‑ maybe about 7,000 a month and the plaintiff were asking if we can pay 10,000 a month and that is not just tenable because we've got five other kids, we've got ‑ yeah, so ‑ ‑ ‑
HIS HONOUR: See, what ‑ okay. I understand that. So you're saying to me, essentially, that you're not ‑ there are some aspects of the accounts that you're disputing but you're not saying you don't have to pay, you're just saying you can't pay, basically, at the moment. That's the difficulty. You can't pay it all at once and the instalment payments that they're seeking from you, you just don't have enough funds to make payments of those amounts?
MR MBACHILIN: Can I ‑ ‑ ‑
HIS HONOUR: Just let Ms Shaakaa ‑ is that, essentially, what you're saying, that you can't meet the payments they're demanding?
MS SHAAKAA: We can't meet the payments they are demanding and we are also disputing some part of the bill. We are happy to pay like ‑ yeah, we are happy to pay, but like the points Godwin has pointed out, like, you know, the court book and, you know, charging 19 hours somewhere per day for I don't know, yeah.
…
HIS HONOUR: Is there anything else that you wanted to raise first, Ms Shaakaa?
MS SHAAKAA: I'm not trying to bring, you know, personal lives, you know ‑ our personal lives into the court or whatever, you know. We are all humans and we've got five young kids and, you know, selling our house, it's going to basically make us homeless because in the area we are in at the moment, it's impossible to get a house for rent, like some people wait for 20 months or like apply for so many houses and you don't get any house to rent and we are not saying we are not going to pay the bills. Yes, we are going to pay, you know, we're going to pay our bill and we are hoping that Godwin goes back to work. If he goes back to work, these bills are not going to be an issue. But unfortunately, his matter as well has taken a lot more time and we're just asking ‑ I know AJH, they've waited a long time and we are really grateful for that, but we're just asking for compassion in our case.
HIS HONOUR: All right. Thank you. I'm sure they've heard you say that and they have indicated they're prepared to put a hold for a reasonable time on any action that I might say they're entitled to take, but I need to make clear there are limited options for me to have regard to the matters that you've raised in relation to the claim. I can only deal with what the legal rights of the parties are.”
49I accept that a number of my questions above were leading and a number of Ms Shaakaa’s responses may, on paper, seem rote. Further, I am conscious of the need to be astute as to whether cultural factors are affecting a witness’s approach to answering questions, particularly when those questions come from a person apparently in authority. However, I did not detect from Ms Shaakaa any reticence in her responses to my questions. This was reinforced by the fact that she seemed comfortable about seeking clarification and, where necessary, to offer longer responses and unsolicited explanations of her position. I also have regard to her directly engaging with AJH by email dated 10 January 2020, approving their proposal for the conduct of the costs argument before his Honour Judge Macnamara referred to above.
50I am therefore satisfied that the matters raised by Mr Mbachilin and Ms Shaakaa in my summary above constitute a complete statement of the defences on which they can reasonably rely in the proceeding.
Analysis
What is the basis for AJH’s claims?
51AJH claims from Mr Mbachilin and Ms Shaakaa legal costs and disbursements (including counsel’s fees) totalling $123,664.20, pursuant to the Costs Agreement, the Disclosure Statements and the Invoices. Claims for legal costs and disbursements are governed by the Part 4.3 of Legal Profession Uniform Law, at Schedule 1 to the Legal Profession Uniform Law ApplicationAct 2014 (Vic), (“LPUL”). The relevant provision of the LPUL are as follows:
“172 Legal costs must be fair and reasonable
(1)A law practice must, in charging legal costs, charge costs that are no more than fair and reasonable in all the circumstances and that in particular are—
(a) proportionately and reasonably incurred; and
(b) proportionate and reasonable in amount.
(2)In considering whether legal costs satisfy subsection (1), regard must be had to whether the legal costs reasonably reflect—
(a)the level of skill, experience, specialisation and seniority of the lawyers concerned; and
(b)the level of complexity, novelty or difficulty of the issues involved, and the extent to which the matter involved a matter of public interest; and
(c) the labour and responsibility involved; and
(d)the circumstances in acting on the matter, including (for example) any or all of the following—
(i) the urgency of the matter;
(ii) the time spent on the matter;
(iii)the time when business was transacted in the matter;
(iv)the place where business was transacted in the matter;
(v)the number and importance of any documents involved; and
(e) the quality of the work done; and
(f)the retainer and the instructions (express or implied) given in the matter.
(3)In considering whether legal costs are fair and reasonable, regard must also be had to whether the legal costs conform to any applicable requirements of this Part, the Uniform Rules and any fixed costs legislative provisions.
(4)A costs agreement is prima facie evidence that legal costs disclosed in the agreement are fair and reasonable if—
(a)the provisions of Division 3 relating to costs disclosure have been complied with; and
(b)the costs agreement does not contravene, and was not entered into in contravention of, any provision of Division 4.
174 Disclosure obligations of law practice regarding clients
(1) Main disclosure requirement
A law practice—
(a)must, when or as soon as practicable after instructions are initially given in a matter, provide the client with information disclosing the basis on which legal costs will be calculated in the matter and an estimate of the total legal costs; and
(b)must, when or as soon as practicable after there is any significant change to anything previously disclosed under this subsection, provide the client with information disclosing the change, including information about any significant change to the legal costs that will be payable by the client—
together with the information referred to in subsection (2).
(2) Additional information to be provided
Information provided under—
(a)subsection (1)(a) must include information about the client's rights—
(i)to negotiate a costs agreement with the law practice; and
(ii)to negotiate the billing method (for example, by reference to timing or task); and
(iii)to receive a bill from the law practice and to request an itemised bill after receiving a bill that is not itemised or is only partially itemised; and
(iv)to seek the assistance of the designated local regulatory authority in the event of a dispute about legal costs; or
(b)subsection (1)(b) must include a sufficient and reasonable amount of information about the impact of the change on the legal costs that will be payable to allow the client to make informed decisions about the future conduct of the matter.
(3) Client's consent and understanding
If a disclosure is made under subsection (1), the law practice must take all reasonable steps to satisfy itself that the client has understood and given consent to the proposed course of action for the conduct of the matter and the proposed costs.
179 Client's right to costs agreement
A client of a law practice has the right to require and to have a negotiated costs agreement with the law practice.
180 Making costs agreements
(1) A costs agreement may be made—
(a)between a client and a law practice retained by the client; or
(b)between a client and a law practice retained on behalf of the client by another law practice; or
(c)between a law practice and another law practice that retained that law practice on behalf of a client; or
(d)between a law practice and an associated third party payer.
(2) A costs agreement must be written or evidenced in writing.
(3)A costs agreement may consist of a written offer that is accepted in writing or (except in the case of a conditional costs agreement) by other conduct.
(4)A costs agreement cannot provide that the legal costs to which it relates are not subject to a costs assessment.
184 Effect of costs agreement
Subject to this Law, a costs agreement may be enforced in the same way as any other contract.
186 Form of bills
A bill may be in the form of a lump sum bill or an itemised bill.
187 Request for itemised bills
(1)If a bill is given by a law practice in the form of a lump sum bill, any person who is entitled to apply for an assessment of the legal costs to which the bill relates may request the law practice to give the person an itemised bill.
(2)A request for an itemised bill must be made within 30 days after the date on which the legal costs become payable.
(3)The law practice must comply with the request within 21 days after the date on which the request is made in accordance with subsection (2).
194Restriction on commencing proceedings to recover legal costs
(1)A law practice must not commence legal proceedings to recover legal costs from a person unless a bill has been given for the legal costs and the bill complies with the requirements of this Law and the Uniform Rules.
(2)A law practice must not commence legal proceedings to recover legal costs from a person who has been given a bill until—
(a)where the legal costs are the subject of a costs dispute before the designated local regulatory authority—the authority has closed or resolved the dispute; and
(b) at least 30 days after the later of—
(i) the date on which the person is given the bill; or
(ii)the date on which the person receives an itemised bill following a request made in accordance with section 187.”
52Having reviewed the documents relied on by AJH and, in particular, the Disclosure Statements and the Updated Disclosure Statements, I am satisfied that AJH has complied fully with all of its obligations under part 4.3 of the LPUL. I note that Mr Mbachilin and Ms Shaakaa have in substance submitted that certain aspects of AJH’s costs were not fair and reasonable, and I will return to that shortly. In the meantime, I am satisfied in particular that:
(a) the Disclosure Statements and Updated Disclosure Statements satisfied the requirements of ss174(1) and (2) of the LPUL – indeed, they struck me as very detailed and were sent with surprising efficiency given the pressures the relevant AJH staff must have been under at the time in dealing with the Medical Practice Proceeding;
(b) in relation to the Disclosure Statements, s174(3), relating to consent and understanding, was satisfied by securing Mr Mbachilin and Ms Shaakaa’s signatures to those documents;
(c) while the Updated Disclosure Statements were not signed by either Mr Mbachilin or Ms Shaakaa, I am nevertheless satisfied that s174(3) was satisfied by the process of emailing these documents to Mr Mbachilin and Ms Shaakaa and further engaging with them about these by email;
(d) further to (c) above, I note that Ms Shaakaa accepted in my discussions with her that she received the Updated Disclosure Statements, and neither she nor Mr Mbachilin seek to rely on inadequate disclosure as a ground for resisting payment of AJH’s costs; and
(e) the Costs Agreement complied with s180 of the LPUL;
Were the costs fair and reasonable?
53As a general observation, I confirm that the parties had a costs agreement in place and s172(4) of the LPUL provides that a costs agreement is prima facie evidence that legal costs disclosed in an agreement are fair and reasonable, if (relevantly) the costs disclosure provisions have been complied with. Thus, given my findings above about the Costs Disclosures, I am satisfied that s172(4) of the LPUL is engaged and AJH’s costs and disbursements are prima facie fair and reasonable. Thus any matters raised by Mr Mbachilin and Ms Shaakaa must be sufficient to rebut that presumption.
54As noted above, Mr Mbachilin raised two issues arguably going to the reasonableness of AJH’s costs. The first issue concerned the charges for the court book prepared for the purposes of the Medical Practice Proceeding. AJH explained in some detail the circumstances in which this occurred in an email to Mr Mbachilin and Ms Shaakaa (among others) dated 20 November 2019, forming part of the tender. In particular, this email confirmed that AJH had met with Mr Mbachilin on 4 October 2019, explained the issues relating to the court book and advised him that it would be in his interests to prepare his own court book. I infer that this advice was accepted. On 7 October 2019, AJH provided a detailed updated disclosure to Mr Mbachilin and Ms Shaakaa in relation to the work on the court book.
55In my view, there is nothing in the circumstances giving rise to the preparation of the court book or the relevant updated disclosure or invoices, to support a finding that AJH’s costs for preparing the court book were not fair and reasonable. Further, I am satisfied that it was not covered by the Disclosure Statements setting the fixed fee and therefore fell outside the fixed fee. I also note that it was part of the total figure of costs and disbursements apparently agreed to by at least Mr Mbachilin at the meeting on 7 January 2020. Mr Mbachilin and Ms Shaakaa have not taken me to any matters that might otherwise operate to rebut the prima facie position referred to above.
56Turning to the second matter relied on by Mr Mbachilin as a basis for a finding that AJH’s costs were not fair and reasonable, I accept Dr Sharpe’s explanation for this. Dr Sharpe submitted that in making this complaint, it seemed that Mr Mbachilin and Ms Shaakaa were repeating a matter raised in correspondence by Mr Kyeleve, that AJH was purporting to charge $7,850 for a day of Mr Lee’s work at $385 per hour. However, what this overlooks is that AJH’s estimate of $7,850 per day for the additional days of trial was not covering only Mr Lee’s time. It covered a number of AJH staff both attending court and undertaking other attendances (for example, in relation to written submission and the like) on each additional day of the trial.
57Having reviewed the relevant updated disclosure and invoices, I am once again satisfied that AJH’s charges for these additional trial days were fair and reasonable, particularly having regard to the prima facie effect of the Costs Agreement discussed above.
Did AJH provide itemised invoices?
58In my view, the allegation in Mr Mbachilin and Ms Shaakaa’s defence that AJH failed to provided itemised invoices as required by s187 of the LPUL, is without substance. The itemised invoices are part of the tender, and self-evidently give a detailed description of each attendance by the various solicitors and other staff at AJH. A further copy of these supplied by AJH on 12 November 2019 has been annotated to add the initials of each staff member involved. However, even without these annotations, I am satisfied that AJH has complied with its obligations under s187 of the LPUL.
Was there any agreement on an instalment arrangement?
59It is not clear whether Mr Mbachilin and Ms Shaakaa press this issue as a basis for resisting AJH’s claims. However, for completeness, I agree with Dr Sharpe that the court book is replete with emails in which AJH has:
(a) requested a firm repayment proposal;
(b) expressly rejected suggestions by or on behalf of Mr Mbachilin and Ms Shaakaa that AJH agreed to accept sums of around $250 each fortnight; and
(c) confirmed that AJH’s acceptance of unilateral ad hoc payments of around $250 did not constitute agreement to any instalment arrangement.
60Certainly there is nothing in the tender or in Mr Mbachilin’s evidence to support the existence of any agreement by AJH to an instalment arrangement – as noted, all the evidence points the other way. Accordingly, any defence based on the existence of any instalment agreement is rejected.
What orders is AJH entitled to?
61With some modifications, I am satisfied that I should make the orders to the effect sought by AJH in the proceeding. In particular, I am satisfied that the Deed of Charge is effective to confer a valid and subsisting charge over all of Mr Mbachilin and Ms Shaakaa’s right, title and interest in the Property as security for payment of AJH’s the legal costs.
62Further, I am satisfied that AJH is entitled to orders for the sale of the Property pursuant to order 55.03 of the County Court Civil Procedure Rules 2018 (Vic), and directions as to the manner of the sale pursuant to order 55.04 of those Rules.
63I will therefore make the orders in the form set out above. However, I will stay those orders for a period of time, to allow Mr Mbachilin and Ms Shaakaa to continue to explore with AJH whether they can reach an arrangement which will avoid a sale of the Property, or at least accommodate a sale within a timeframe that will reduce the hardship that Mr Mbachilin and Ms Shaakaa and their family will otherwise undoubtedly suffer.
64I accept (as submitted by Dr Sharpe) that a party who obtains a judgment is generally entitled to have it enforced without delay.[4] However, the court nevertheless retains a discretion to order a stay in appropriate circumstances. I consider that the impact of a sale of the Property on Mr Mbachilin and Ms Shaakaa and their family as referred to by Ms Shaakaa in the extract of transcript above, justifies a stay of my orders in this case. As to the period of the stay, in my view, the 90 days sought by Mr Mbachilin is too long. I will instead order a stay of 45 days.
[4]State Bank of Victoria v Parry [1989] WAR 240 at 244, cited in Sami & Anor v Roads Corporation [2009] VSCA 44 at [25]
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Certificate
I certify that these 28 pages are a true copy of the judgment of his Honour Judge Woodward delivered on 19 August 2022.
Dated: 19 August 2022
Claire Findlay
Associate to his Honour Judge Woodward
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