Update: 17 January 2008 VCAT has re-heard this case, and has made different findings of fact from some of those recounted below. See He v A & Co Pty Ltd [2008] VCAT 3.
Original post
(This is part 2 of the post about He v A & Co Pty Ltd [2006] VSCA 150; [2006] VSCA 235. Part 1 is here.)
Mr He had a dispute with the insurer of the negligent driver who caused the collision which damaged his car. The insurer accepted its driver was at fault. The dispute was only about how much compensation Mr He was legally entitled to. Whatever a court would order the negligent driver to pay, the insurer would pay Mr He, at least in theory. Most “crash and bash cases”, as lawyers call them never get to court. His did. The insurer said his car was only worth $800 at the time of the accident, and since repairs would cost $4,000, they would take his car and sell it for scrap, and pay him its value. They said it was an economic write off.
Mr He thought it was worth more, and he consulted a Mr Michael Bakhaazi of A & Co. Mr He says Bakhaazi entered into a no-win no-fee arrangement, in which the only money he had to pay was the cost of the expert witness’s report. He says the solicitors’ fees were to be payable only if he won, and were to be no more than what the court ordered the insurer to pay him by way of reimbursement for legal costs. (A google search reveals that a Mr Elias Michael Bakhaazi, probably the same person, was operating under limitations on his right to practice at that time pursuant to previous orders of the Legal Profession Tribunal. It had heard a misconduct prosecution against him not long before, and there was at the same time separate litigation about Bakhaazi involving a claim of $107,000 on the fidelity fund which pays victims of solicitor dishonesty. One must therefore assume that he had already come well and truly to the attention of both the Law Institute and the Tribunal by the time Mr He complained about him.)
The solicitors commenced Magistrates’ Court proceedings on Mr He’s behalf claiming $1900 (the amount an expert retained by them said was the pre-accident value of the car, less the $50 for which the wreck could be sold to a salvage merchant) plus the cost of his expert’s report, a grand total of $2,026.50. Many months later, Mr He would be advised to settle the case against the other driver for $1,425 plus costs, and that is what happened. He got the $1,425 one year and three months after the accident, and the solicitors kept the money paid by the negligent driver towards his legal costs. The settlement was for 70% of his original claim, but when interest to which he would have been entitled is taken into account, it was only about 63% of his claim (apparently a win for the purposes of the no-win no-fee agreement), and he had lost two days’ wages, a total of $400, as a result of adjournments for which he was not compensated. Meanwhile, his solicitors had pocketed $650 in costs they had negotiated for themselves in relation to a court hearing they did not attend.
There were a couple of hiccups along the way. The case was settled in November. The first time the Court listed it for trial was in May. On that occasion, the insurer requested an adjournment and agreed to pay costs. Without seeking instructions from Mr He, his solicitors agreed to the request so long as the insurer agreed to pay $650 in costs allegedly wasted by virtue of the adjournment. They did not tell Mr He for several days, until the day of the trial. By then he had already taken annual leave, and no doubt suffered a deal of stress. The solicitors did not ask the insurer to compensate Mr He for his loss of earnings, though it seems such a claim was open, since such an order was made on a later adjournment. It is not clear whether there was any good reason for the request for an adjournment, or whether the solicitors bothered to find out. In any event, neither Mr He’s solicitors nor the barrister turned up at court, and the Court of Appeal seems to have been very suspicious of exactly what legal work was wasted by virtue of the adjournment to justify a bill of $650. The solicitors pocketed the money, but according to Mr He, did not tell their client for 10 months that the insurer had agreed to pay it, or that they had received it. Later, as we will see, they claimed that Mr He owed them $650 and justified appropriating compensation awarded to Mr He by the court for loss of earnings occasioned by a subsequent adjournment on the basis of that indebtedness.
In June, the insurer offered to settle for $1,600 (79% of the claim) plus costs. It seems that either litigation or the intervention of the independent expert retained by the solicitors (at a cost of $126.50) had achieved the doubling of what the insurer was prepared to pay. It seems the solicitors advised Mr He to accept it, but he instructed them not to. Solicitors on no-win no-fee retainers can get very upset when this kind of impudence is engaged in.
In July, the insurer and the negligent driver just did not turn up to the adjourned trial. The trial was adjourned a second time, and the insurer was ordered to pay the barrister’s cancellation fee, plus $200 loss of earnings because Mr He had had to take a day off work for nothing. On this occasion, the solicitors did not get anything.
In September, the expert retained by the solicitors did not turn up to the trial. Mr He’s barrister said he rang the expert who said he had told the solicitors several days earlier that he could not be at court that day. Perhaps they had not sought his attendance sufficiently far in advance. In any event, Mr He claimed that the solicitors tried to convince him to accept the insurer’s then settlement offer which had by then been decreased to $1,175 plus costs (58% of his claim) on the basis that otherwise, Mr He was responsible for the other side’s costs of the adjournment which would be necessitated by the unavailability of the expert, which amounted to $794 (39% of his claim). But Mr He demonstrated a wholly unusual resolve and held out for 4 hours at which point the solicitors accepted responsibility for the costs of the adjournment (which was either very generous or effectively an acknowledgment that it was in fact their fault), and the matter was adjourned for a third time.
The fourth trial date, in November, ended in settlement for an amount less than he could have settled for had he followed his solicitors’ earlier advice. The insurer was at that time offering $1,425 (70% of the claim) plus costs. Mr He claims his solicitors told him that the Magistrate would probably simply take the midpoint between the two sides’ experts ($1,375) and award that. If that were true, it would mean that the litigation would have been a waste of time, a process which achieved nothing. One would wonder why the solicitors would not have simply advised him to split the difference with the insurer and get his money straight away. Mr He claims he asked them to reduce their advice to writing but they refused. Mr He held out for another four hours, but it was at this point that his resolve was overcome. He says his solicitors told him that if he did not pay $95 to procure the ongoing attendance at court of his expert witness, the expert would leave, the case would have to be adjourned a fourth time, and he would have to pay the costs of the adjournment. Since he did not have $95 on him, he claims he settled the case reluctantly, deprived of his day in court, saying at that moment that he would be lodging a complaint with the Legal Ombudsman.
