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Abai v The State [1998] PGNC 92; N1762 (24 September 1998)

Unreported National Court Decisions

N1762

PAPUA NEW GUINEA

[NATIONAL COURT OF JUSTICE]

WS 819 OF 1994
TOLOM ABAI & OS - PLAINTIFFS
V
THE STATE - DEFENDANT

Waigani

Woods J
11 May 1998
24 September 1998

LAWYERS COSTS - taxation of costs – - principles of taxation – objection to disallowance of items – on solicitor and client basis are all costs to be allowed where a third party is liable – test of reasonableness - requirement to keep records of time spent - disbursements.

Cases Cited

Jordan v Edwards [1979] PNGLR 420

In Re Marsland V Marsland [1902] St R Qd 219

Re Remnant [1849] EngR 776; 11 Beav 603 (50 ER 949)

Text Referred To

Saddington & White: Costs, Solicitor & Client

Counsel

Ms E Dirua for plaintiffs

C Makail for the State

24 September 1998

WOODS J: This matter of costs has come before the Court following an objection under Order 22 Rule 60 of the Rules of the National Court where the lawyer for the plaintiffs is dissatisfied with certain disallowances of the taxing officer. I am now reviewing the actions of the taxing officer in respect of certain disallowances.

The substantive matter here was a claim by some 766 persons against the State for certain entitlement monies owing following retrenchment from the Defence Force. Following the hearing of the claim and certain negotiations 432 of the claimants were successful and 334 persons unsuccessful. At the conclusion of the proceedings it was agreed that the State would pay the legal costs reasonably incurred by the plaintiffs on a solicitor client basis. There were two Bills of Costs raised and submitted for taxation because there had been a change in the legal practice of the lawyers involved in the proceedings. At the taxation of the Bills of Costs the Taxing officer, the Registrar of the National Court, considered a number of principles of law on the taxation of costs and taxed off certain amounts.

The Rules of the National Court in Order 22 do make a distinction between party and party costs and solicitor and client costs. (It is noted that in Papua New Guinea there are no practitioners called solicitors, the term used in the Lawyers Act is lawyer however it is accepted for the purpose of the operation of the Rules that solicitor means lawyer.) Thus Order 22 Rule 24 notes that on a taxation on a party and party basis there shall be allowed all such costs as were necessary or proper for the attainment of justice or for enforcing or defending the rights of the party whose costs are being taxed. And Rule 35 Solicitor and Client Basis:

(1) &&#160 cosls shas shall be l be allowed except as mentioned in the following sub-rules.

(2) &ـ Costs ssts shall nall not be allowed in so far as they are of an unreasonamounless mount hunt has beas been apen approved by the client.

(3) ҈& Costs ssts shall nall not be allowed in so far as they are unreasonably occurred, unless incurred with the approval of the client...

(4) ҈ thtwindutandub-ru2)-ru2) and (3) of thif this ruls rule where costs are incurred which in the circumstances of the case are of an unusual nature and such they wnot bowed on a taxation of costs on a party arty and pand party arty basis pursuant to Rule 24 of this Order the costs shall not be allowed unless it is shown - (a) that the costs were reasonably incurred; or (b) that before the costs were incurred the solicitor expressly warned the client that the costs might not be allowed on a taxation of costs on a party and party basis.

At first glance it seems that there may be a difference between the level of costs on a party and party basis and on a solicitor client basis. However that is not necessarily so and reference is made to certain statements in the case of In Re Marsland v Marsland [1902] St R Qd 219. See Griffith CJ. ‘The rule is that for the same work there must be the same remuneration on whichever basis the taxation is had but there is much properly chargeable as between solicitor and client which ought not to be allowed as between party and party. For that additional work the client is bound to pay his solicitor as proper remuneration but for the same work there should be the same measure of remuneration’. And per Real J ‘if the taxing officer has allowed in a party-party bill for all the work necessarily and properly performed, to make any extra allowance for the same work would in reality be allowing for work which has never been performed’.

It is also noted in authorities on costs that in taxing a bill of costs between a solicitor and his client it is usual to allow the costs of such steps as, in the circumstances were reasonably necessary. On the other hand it would be wrong to allow only the expense of the steps which, in the end, prove efficacious in furthering the business of the client. It may be advisable to try two or three different methods of carrying into effect the client’s desire before it can be ascertained which is most likely to produce beneficial result; all such costs should, in ordinary circumstances, be allowed against the client, although they might not all be available against his opponent upon a party and party taxation. But then also note the principle that a solicitor is expected to have a reasonable knowledge of his work and is not allowed to charge a client for work which is useless, and he is not allowed to charge a client for work performed by the solicitor in learning his own business.

Order 22 Rule 35 by making reference to the concept of unreasonable amount is clearly giving the authority to a taxing officer and the court to consider reasonableness of amounts charged when the costs come to a taxation. Where it is submitted that the client has agreed to an unreasonable amount it must still be open to the taxing officer and an officer of the court or to the court itself to look at the agreement with the client and ascertain the reasonableness of the amount charged under ordinary taxation principles. And further where the client is not himself going to pay the amount but a third party is, for whatever reason, going to pay the amount then it must be incumbent on the court and officers of the court to consider the reasonableness of the amounts in the bill. A client cannot agree to unreasonable or unnecessary costs where the client knows that a third party is to bear those costs.

As noted under Order 22 Rule 49 any Bill of Costs must still contain particulars of the work done by the lawyer, his servants and agents, and the costs claimed for the work done. Therefore a bill must be in substantially in the same form whether for taxation between party and party or between solicitor and client. It is a misconception to think that a solicitor and client bill can be in more general terms with less detail, rule 49 applies equally to any bill of costs.

The Objection is as follows:

On the Dirua Bill of costs there are objections to the disallowance of certain amounts under

1. ҈ I60; Item 12 Prepar tionTror Trial Bill costed at K329,800.00

Taxed off K250,450.00

2. & Payments to o hers Bill coll costed a5,291>

off 77,991.36

On the Howard and Diru Dirua Bila Bill of l of Costs there is an objection to:

Item 5 Preparation for Trial Bosted735,5

Taxed offd off K560 K560,350.,350.00

The main thrust of the submission on the objections is the import of rule 35 that on a solicitor and client basis all costs shall be allowed and there is no scope to tax off costs more particularly where the client has agreed to the costs. However I have already stated that where a third party is to bear the client costs then the client cannot agree to unnecessary or unreasonable costs. Rule 35 does not state as a blanket rule that all costs shall be allowed, the test of reasonableness is always there, see the Rule stated above. And I must specifically find as I have already stated that the test of reasonableness must be applied where a third party is to pay the solicitor and client costs.

On the Howard & Dirua Bill the main thrust of the objection in the preparation for trial is that the Taxing Officer was unreasonable and failed to exercise any discretion when requiring evidence of dates and time spent. The objection seems to refer in particular to that part of the Bill of Costs under Part 6 item 12 (14) ‘A’ EPD for the time spent between February 1994 and February 1995 of 363 days translated into 2,677 hours when the lawyer states that she was spending all her time on the case. The Taxing Officer said ‘there are no other time costing diary notes or any other information before me to show how this was compiled’. And the Taxing Officer taxed off the bulk of the claim on the basis of lack of evidence of diary notes and time sheets, namely an amount of K560,350.00 from the figure claimed of K669,250.00 It is submitted that he failed to consider the lengthy explanation on the nature of the work done, the location of where the work was done and who did the work and how and why time sheets were not kept.

However the principles of charging costs are clear.

As is stated on a leading text on costs Saddington & White; Costs, Solicitor and Client. at page 23 on “The most important matter to which attention must be given is the keeping of written or typewritten entries of details of the work done. Solicitors should realise that they must keep such entries for their own protection as well as for convenience and profit. The actual system to be used will probably vary with the nature and extent of the solicitor’s practice. The essential is that whatever the system may be, the result should be a full and complete written record of: (a) the work actually done; (b) the dates upon which it was done; (c) the times occupied thereon. Most important of all, such a record must be entered up substantially at the time of doing the work, otherwise it is of very little value.

I must fully endorse the above statement and principles and confirm that a lawyer should have and keep such a record for use for their internal accounting purpose and especially for the preparation of charges and costs statements. And I must find that the failure of a lawyer to keep such records means that there is no evidence to support any later claim for costs for time spent.

All people have access to diary books, and it must be a simple matter to note in a daily diary of what one does and for how many hours and in a case like this that a certain named plaintiff was interviewed for whatever length of time. The diary would also note the venue and the time taken to get to the venue. Such a diary would also be used for forward planning purposes with appropriate entries. It is axiomatic that all lawyers would keep some sort of diary of work done or appointments made. In this case the lawyer stated that ‘she could not keep diary sheets because she was at Murray Barracks for 6 months to inspect men’s files...’ But this just does not make sense, it must be very simply to carry a compact diary book with entries for arriving and leaving the venue and who was interviewed for how many hours or whose files were inspected and for how long. Such a diary book would also note who was to be interviewed in future days by way of forward planning entries. There is no argument that work had to be done, and such work would include interviewing of plaintiffs and the examining of their files. But Order 22 Rule 24 in stating that there shall be allowed such costs as were necessary or proper for the attainment of justice still requires that there be evidence to support these costs that were necessary. A mere assertion that so much time was spent is not sufficient. And it is the job of the taxing officer to be satisfied that the evidence supports the time and the calculation noted in the bill by the lawyer. The lawyer here admits that she did not keep diary entries or time sheets. And there were further admissions that ‘it has been difficult to remember exactly how many hours were worked’, and ‘the time spent has been averaged rather than being exact’. A taxing officer who allowed amounts for time claimed when there was no supporting material would be negligent and clearly in error.

The lawyer refers to the discretion to be applied based on the complexity of the matter, see O 22 Rule 36 (3). However I cannot anywhere find any analysis of the complexity of this case or how special skill was required. There is an explanation of Difficulty on pages 6,7,8, of the Bill of Costs however all that seems to highlight is the volume of the case because of the multiple plaintiffs. Much of the work seemed to be mechanical being an analysis of the pay status of each individual plaintiff and the calculations required, looking at the Schedules to the Writ, for items like leave entitlements, furlough leave, repatriation expenses, interpretation of certain NEC decisions, and the relationship with the Defence Force Retirement Benefits Fund amounts. So surely once the status of one plaintiff was ascertained and a formulae was worked out then it just becomes a matter of calculation on the same principles for all the other plaintiffs. There was no fresh analysis of legal principles for each plaintiff, merely a fresh outline of the status and then calculations.

In so far as there was a complexity it was purely because of the volume of documentation for so many plaintiffs, volume which was repetitive.

In the analysis of the Taxing Officer there appears to be a lot of concessions for costs even though there was an absence of detailed time sheets and diaries, and I refer here to page 23 of the Judgement of 9^th April. So even though there were no supporting material for the work claimed, there was little room for any exercise of a discretion after allowing for concessions made and the lack of real complexity. At page 15 it is noted that the taxing officer was allowing all costs where detailed information was provided and where the work was necessary.

As part of the objection it is submitted that the taxing officer erred in applying a principle that it was necessary to keep costs as low as possible, as stated in Jordan v Edwards [1979] PNGLR 420 however the approach taken by the taxing officer in this taxation seems to be solely on the basis of lack of material to support the time spent and the test of reasonableness.

In connection with the objection to the Bill called the Howard and Dirua Bill I find that the taxing officer has made no errors in the application of proper principles for costs payable between a lawyer and a client and I find that a client cannot agree to the levying of unreasonable amounts of costs where a third party is to pay those costs. At all times the principle of reasonableness should be applied to all agreements and claims for costs for legal services and this principle was applied here by the taxing officer, in some areas following concessions by the State.

The objections to the Bill called the Dirua Bill covered two areas. Firstly there was objection to the disallowance in Item 12 Preparation for Trial. The main problem raised by the Taxing Officer here was that there were no time sheets produced. I can only refer to what I have said above in considering the principles to be applied in taxation that whilst it is usual to allow the costs of such steps as in the circumstances are reasonably necessary it is of critical importance that a lawyer keep a record of the time spent on a case and as the authorities say there must be the proper keeping of written or recorded entries of details of the work done, the dates upon which it was done, the times occupied thereon and such entries must be made at the time the actual work is done. There were clear admissions here by the lawyer that proper records were not kept. So I must reiterate what has been said before that a taxing officer who allows costs where there is no supporting evidence would be guilty of negligence and clearly in error.

I reiterate what I have said above on the operation of Order 22 Rule 35 which states that all costs are to be allowed but this is regulated by the principle of material evidence to support the costs and reasonableness. I must agree that there can be no agreement by a client on lawyer client costs which forces a third party who may end up being liable for those costs to have to pay an unreasonable amount. I find that there were no instances in the taxing of the costs where the taxing officer went further than the principle of reasonableness and reduced costs to ‘as low as possible’.

The other part of the taxation of costs objected to was under the disbursements. The taxing officer firstly considered whether these items were strictly disbursements. He referred to the text on Costs already referred to above namely Saddington & White, Costs Solicitor and Client at page 20 where he noted under Disbursements the statement from Re Remnant [1849] EngR 776; 11 Beav 603 (50 ER 949):

“The payments properly regarded as disbursements to be includethe bill are those which have been made in pursuance of thef the professional duty undertaken by the solicitor, which he is bound to perform, or such as have been sanctioned as professional payments by the general practice and custom of the profession. It is noted that such disbursements are to include fees paid to counsel, court fees, and witness expenses and agent’s charges which are covered by the same rules as the costs of the principal.

The Taxing Officer noted that the amounts for salaries for clerks are not strictly disbursements but are to be considered as part of the profit costs incurred in a matter. With this I must agree. The allowance of time spent by a lawyer and the charge out rate for a lawyer is also to cover the general expenses of running an office, the so-called capital costs of an office and also the costs of secretarial and clerical staff. It is noted here that in his discretion the Taxing Officer did allow a limited sum against the claim for clerks however I must rule that that was purely a discretion exercised in favour of the lawyer and not the normal principle for the cost of clerical and secretarial assistance. I find that this discretion of the Taxing Officer was an appropriate exercise of a discretion because of the apparent volume of the work involved by way of the multiplicity of clients. Under the item payment to others an amount of K115,791.36 was claimed however the taxing officer taxed off the sum of K77,991.37. Part of that was for the salaries for clerks which I have already covered above. There was also an amount of K48,271.36 taxed off on the basis that the taxing officer had no knowledge from the evidence as to how this amount could possibly be spent as claimed. This was apparently for some work by a Mr Musial. Again of course the costs of back-up staff and even expert assistance is normally part of the profit costs of a lawyer and not separately chargeable as disbursements. The taxing officer did exercise his discretion in view of the need for a computer assistance to allow a certain amount for Mr Musial and I would agree that such was an appropriate exercise of discretion in view of the volume of calculations required in such a case with a multiplicity of plaintiffs however I can find no error in the disallowance of the K48,000 amount. I have been presented with no sustainable submissions for the allowance of these payment to others apart from the submission that all costs are to be allowed which principle I have already repeated is subject to the test of reasonableness.

The matter of the 3% tax to the National Capital District Commission has been covered by the National Court in the decision of Doherty J and I cannot take it any further in so far as it may be of relevance here, which it may not be.

I summarise the principles of taxation of costs.For the same work there must be the same measure of remuneration. In taxing a bill of costs between a lawyer and a client a taxing officer can only allow the costs of such steps as in the circumstances were reasonably necessary. A lawyer is expected to have a reasonable knowledge of his work and is not allowed to charge a client for work which is useless and he is not allowed to charge a client for work performed by the lawyer in learning his own business.

Order 22 Rule 35 gives the taxing officer and the court the authority to consider reasonableness of amounts charged. Wherlient has agreed to anto an unreasonable amount it is still open to the taxing officer and the court to look at the agreement wie client and ascertain the reasonableness of the amount charged under ordinary taxation prin principles.

A client cannot agree to unreasonable or unnecessary costs where the client knows that a third party is to bear those costs. Under Order 22 Rule 49 any Bill of Costs must still contain particulars of the work done by the lawyer, his servants and agents and the costs claimed for the work done. A bill must be in substantially the same form whether for taxation between party and party or between lawyer and client. Lawyers should keep proper entries of the work done which should include a complete written or otherwise documented record of the work actually done, the dates upon which it was done, and the times occupied thereon and such should be entered up at the time of doing the work.

Disbursements are those payments which have been made in pursuance of the professional duty undertaken by the lawyer, which he is bound to perform, and include fees paid to counsel, court fees, witnesses expenses and agents charges (which are covered by the same rules as the costs of the principal). Amounts for salaries and clerks are not strictly disbursements but are part of the costs of the lawyer (ie part of the overhead or profit costs) but subject to the discretion of the taxing officer or the court in Order 22 rule 36.

In considering the objections made by the applicant and applying all the above principles I dismiss the objections.