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National Court of Papua New Guinea |
N2257
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
OS. 655 OF 1999
PIUS SANKIN, JIMMY LINGAU AND JAMES NUMBUNDA
Plaintiffs
PAPUA NEW GUINEA ELECTRICITY COMMISSION
Defendant
WAIGANI: KANDAKASI, J.
2002: 5th June
19th July
COSTS – PRACTICE & PROCEDURE – Taxation of costs on solicitor client basis – Each item of costs claimed must be properly pleaded with sufficient particulars – A failure to do so may preclude a party from recovering what is claimed – Each item of costs claimed must be established by appropriate evidence though not in much the same way as in a trial – A Taxing officer must act on proper evidence.
REVIEW OF TAXED COSTS - On review of taxation of costs, reviewing authority restricted to matters raised in the notice of objection and evidence put before the taxing officer – A taxing officer is obliged to record reasons for decision, especially on a seriously contested item of costs – Where there is a failure to record reasons for decisions in such a case, the taxing officer may be required to provide reasons for his or her decision, unless the parties agree as to what transpired at the taxation and the reasons for the relevant decision.
COSTS – Only costs reasonably incurred may be allowed – In case of costs ordered on a solicitor client basis, the party obliged to pay can only be liable to pay what the party entitled to has or is liable to pay his lawyers – A costs order not a basis for unjust enrichment or profiting for party entitled.
Cases Cited:
Motor Vehicles Insurance (PNG) Trust v. John Etape [1995] PNGLR 214.
Motor Vehicles Insurance (PNG) Trust v. James Pupune [1993] PNGLR 370.
Repas Waima v. Motor Vehicles Insurance Trust [1992] PNGLR 254.
Carmelita Mary Collins v. Motor Vehicles (PNG) Insurance Trust [1990] PNGLR 580.
Jack Patterson Livanai Patterson v. National Capital District Commission (05/10/01) N2145.
Philip Mamando v. Lumusa Local Level Government Council (13/9/98) N1752.
Howard v. Bougainville Copper Limited [1976] PNGLR 298.
Komboro George v. Motor Vehicle [1993] PNGLR 477.
Counsel:
Mr. G. Gileng for the Defendant/Applicant
Mr. L. Manua for the Plaintiff/Respondents
19th July 2002
KANDAKASI J: This is an application by the Defendant/Applicant ("Elcom") under Order 22 Rule 60 of the National Court Rules for a review of a taxation of the plaintiff’s bill of costs on a solicitor client basis.
Elcom claims that, the taxing officer erred in allowing 150 hours at K250, totaling K37,500.00 for taking instructions and attending on conferences with the plaintiffs. This it claims, was done without any proper regard for the proper principles on taxation of bill of costs on a solicitor client basis such as, proper and sufficient pleadings and the need to prove with appropriate evidence the items claimed. Mr. Gileng of Counsel for Elcom relies on O.22 r.35 of the National Court Rules in support of his arguments. In particular he argues that, there was no evidence of the costs being incurred, that they were reasonable and or that the plaintiffs approved those expenditures. He also argues that, the taxing officer arrived at that decision without being first satisfied that the amount of time and costs claimed were reasonable.
The plaintiff’s argue that, it was within the discretion of the taxing officer to allow the 150 hours out of a total claimed of 300 hours. This they say was reasonable having regard to the size and or the volume of the documents filed in court and the time it took the parties to resolve a number of interlocutory matters before getting to the substantive matter. They also point to the fact that, since the date of the issue of the proceedings on the 22nd of October 1999, it took almost two years to arrive at the final decision. They conceded however that, they were not able to plead each of the claimed attendance with sufficient particulars, as to date, the length of time each took, and nature or purpose of the attendance. They also concede that they did not produce the necessary evidence to establish the actual number of conferences or attendance, the length of time for each of them, the costs and what they were for. They were only able to produce some notes of attendance or conferences without any detail.
The issues for me to determine therefore are these:
The last three issues are related. I will therefore deal with them together as one.
Facts
On the 9th of August 2000, my brother, Justice Sheehan gave judgement for the plaintiffs on an action by them for judicial review of Elcom’s decision to terminate their employment with Elcom. The Court ordered the plaintiff’s reinstatement and ordered their costs to be paid on a solicitor client basis. The history of the case according to the court file leading to the judgement in chronological order is as follows:
The bill of costs consists of seven (7) pages. The item objected to, falls immediately after a description of the nature of the case and what was done. It is apparent that, this was a case of unlawful termination and question of whether reinstatement was an available remedy. It seems there was first a determination that the termination was unlawful and the parties were then asked to make further submissions specifically on the remedy. The item in question is in these terms:
"The clients: Taking instructions to sue or oppose and attend on correspondence with clients.
(a) Conference with clients, taking instructions, rendering advice from the 9th October 1999 up to 8th August 2001 – 300 hours at K500.00 per hour.
(b) Substantial amount of correspondence were entered into between the Plaintiffs’ lawyers and clients.
Letters out 54
Letters In 16
30 hours at K500.00 per hour."
A sum of K150, 000.00 and K15, 000.00 respectively were claimed for each of these items. The taxing officer reduced the respective hours claimed of 300 to 150 and 30 to 3. He also reduced the respective amounts claimed from K150, 000.00 to K37, 500.00 and K15, 000.00 to K750.00 working on an hourly rate of K250.
There are no reasons for the taxing officer’s decision. It is therefore, very difficult to work out independently as to how the taxing officer arrived at his decision. From the parties’ submissions, it is clear that the taxing officer arrived at the decision just by looking at the physical size of the plaintiffs’ lawyer’s file.
Mr. Manua for the plaintiffs’ submits that, despite the lack of proper pleadings with particulars and the lack of any specific proof, the taxing officer was within his discretion to arrive at the decision that he arrived at in the way he did.
On the other hand, Elcom argues that, this is where the taxing officer fell into error. It submits that the discretion that is vested in taxing officers is one that must be exercised on proper consideration and basis. These means the discretion can properly be exercised on proper evidence and on proper principles. This does not include a power or discretion to plug out a figure or arrive at a decision without proper reasoning and basis for that as a matter of law and where a decision is dependent on facts, on the basis of appropriate evidence. The taxing officer in this case, it argues did not have the proper basis in fact and in law to allow costs in the way he did.
Issue on pleadings
I now proceed to deal with the first issue, which is one of pleading. The law on pleadings in our jurisdiction is well settled. The principles governing pleadings can easily be summarized in terms of, unless there is foundation in the pleadings of a party, no evidence and damages or relieves of matters not pleaded can be allowed. This is the effect of the judgements of the Supreme Court in Motor Vehicles Insurance (PNG) Trust v. John Etape [1995] PNGLR 214 at p.221 and Motor Vehicles Insurance (PNG) Trust v. James Pupune [1993] PNGLR 370 at pp. 373 –374. These judgements re-affirmed what was always the position at common law and consistently applied in a large number of cases in our country. The list of such authorities on this is long but reference need only be made to cases like that of Repas Waima v. Motor Vehicles Insurance Trust [1992] PNGLR 254 and Carmelita Mary Collins v. Motor Vehicles (PNG) Insurance Trust [1990] PNGLR 580 at p. 582 for examples only.
This principle follows on from the objects behind the requirements for pleadings. As the judgement in Motor Vehicles Insurance (PNG) Trust v. James Pupune (supra) at p. 374 said in summary, pleadings and particulars have the object or functions of doing the following:
"1. they furnish a statement of the case sufficiently clear to allow the other party a fair opportunity to meet it;
This in turn follows on from the fact that, our system of justice is not one of surprises but one of fair play. Reasonable opportunity must therefore be given to each other by the parties to an action so as to assist them to ascertain fully the nature of the other’s case so that, if need be, a defendant can make a payment into Court or facilitate an out of Court settlement.
In so far as pleadings in a bill of costs are concerned, O. 22, r. 49 is on point. As I observed in Jack Livanai Patterson v. National Capital District Commission (05/10/01) N 2145, this rule requires a bill of costs to contain particulars of work done by a lawyer or a law clerk, any disbursements made and the costs claimed for work done. It also requires every bill of costs to separately enter each item of costs and disbursement whether paid or yet to be paid. If a bill of costs includes costs for work done by a clerk, that must be specified and the costs charged for that.
In the case just mentioned, I had regard to the judgement of His Honour, Justice Woods in Philip Mamando v. Lumusa Local Level Government Council (13/9/98) N1752, where His Honour said:
"For the purposes of the Lawyers Act and the Rules of the National Court the memorandum should contain the relevant particulars of the work done and how the costs accrue for the items similar to a Bill as rendered for taxation. The principles are quite clear that the form of a bill of costs is substantially the same whether for taxation between party and party or between solicitor and own client.
...
An analysis of this bill of fees shows that there were attendances on a total of 63 days whether it was conferences or court days or merely writing a letter, however from the round figure assessed at the end this calculates at over K3,000 per day regardless for whether it was for attendance at court or merely writing a letter.
I find that the whole memorandum of fees presented here as the basis of the claim is grossly excessive and does not comply with the Lawyers Act and the Rules of Court."
Similarly, I found a purported bill of costs to the NCDC in the Patterson (supra) case, unsatisfactory for the purposes of the Lawyers Act and the National Court Rules. In the end, I ruled that the plaintiff did not have a cause of action for failing to setout the plaintiff’s bill of costs in the manner and with the kind of details the Rules require.
The position, in my view is no different to the position on the requirements for pleadings in substantive cases. The object or the reason for that requirement in my view is the same. The point can be illustrated by reference to the particular part of the bill in question in this case, which has been set out above.
The relevant part of the bill fails to set the relevant particulars such as, how many attendance or conferences there was with the clients, when those took place, how long for and what for, who with, whether with a lawyer or a clerk and what is the charge for each of the attendance or conferences and whether or not the amount claimed was approved for the purposes of O.22, r.35. It was necessary for such particulars to be set out to enable Elcom to determine whether or not to settle out of court. At the same it was necessary to plead with such particulars so as to enable the taxing officer as to exactly what costs the plaintiffs were claim and indicate the kind of evidence he would have to look for in the event of no out of court settlement. The pleadings in question failed to do that.
The plaintiff’s had the opportunity to meet the deficiency in their bill of costs by amendment. Order 22 Rule 49(6) of the Rules do allow for that. The law on amendment of pleadings is also clear. Amendments are readily granted at any stage of the proceedings but before judgement, as long has the amendment sought is not going to result in any serious prejudice to the other side. For examples of authorities on point see Howard v. Bougainville Copper Limited [1976] PNGLR 298 and Komboro George v. Motor Vehicle Insurance (PNG) Trust [1993] PNGLR 477.
Going strictly by to rules and the law on pleadings, the plaintiff was precluded from recovering costs that were not pleaded properly with the necessary particulars. Nevertheless, that is not the end of the matter. The law also allows for recovery of damages or the attainment of a relief if there is a bare minimum foundation in the pleadings and the opposite party does not object to evidence being led on matters not pleaded. The Supreme Court judgements in the James Pupune (supra) and John Etape (supra) cases make this very clear. So the question then is, did the relevant pleadings in this case provide the bare minimum foundation and Elcom by its conduct, allowed evidence to be led on a matter that were not fully pleaded with sufficient particulars?
In my view, the pleadings in the item in question provided only a bare minimum foundation for an allowance of costs covered by that item. There is no evidence of what exactly happened at the taxation hearing. It is therefore not clear whether Elcom objected to evidence and the eventual allowance of the costs in question. During arguments before me, Elcom concedes that, it was necessary to conduct some conferences for initial and further instructions but could not have been all that the plaintiffs claimed for without any particulars to assist in a determination of whether the costs were necessarily and reasonably incurred.
Also, Elcom says, that is not the only problem with the costs allowed and in issue before me now. It says no evidence was presented to form the foundation for an allowance of the costs in question. This leads to a consideration of the second and the other remaining issues.
The plaintiffs’ conceded that they did not provide any specific evidence of the number of attendance or conference claimed. They only provided some evidence of some of the attendance but nothing more than that. The taxing officer merely looked at the file with its thickness and some general records of a few conferences and arrived at his decision.
As noted earlier, there is no record of what transpired at the taxation and how the taxing officer decided to arrive at the amounts he allowed. I consider it good practice on the part of a taxing officer to record his decision and reasons for decision in writing, especially in cases where there is a serious issue and there is indication of an application for review. This should be done as a matter of course. A party dissatisfied with a decision of a taxing officer should assist in that process by indicating its intention to apply for a review. On the filing of an application for review, the taxing officer would become aware of a challenge to his decision. He or she should therefore immediately provide a written reason for his or her decision. To expedited that process, it would be appropriate to serve a copy of the application for review on the relevant taxing officer if the filing of such an application is not with him or her or he or she is not in a position to become aware of it. A failure to provide any reason for a decision on a seriously disputed item may have the effect of the decision being arrived at without any good reason.
It is settled law that, a discretion that is vested in a decision-maker in a democratic society such as ours must be exercised on proper consideration as to the relevant facts and the law. There is no such a thing as unfettered discretion. Good reasons must be given for an exercise of discretion. A failure to do so may leave open the floodgate for all sorts of allegations, including allegations that the discretion was exercised for ulterior motives. For examples of authorities on this point, see The Application of Moge Enga and Kuipi Group in the Matter of a Decision of the Minister for Lands Concerning Section 30 Allotment 7 Mt. Hagen [1995] PNGLR 246 and An Application of the NCDIC [1987] PNGLR 339.
Taxing officers are vested with the discretion under the Rules, particularly, Order 22, either to allow or disallow an item of costs claimed. When exercising that discretion, a taxing officer is duty bound to give good reasons for his decision. Where there is a serious dispute over a bill of costs or a part of it, it is incumbent on the taxing officer to record his reasons for making a decision on that in writing. This is to assist in the event of an application for a review of his decision and to avoid any suggestion of the discretion being exercise without any good reason.
A taxing officer could be requested to provide reasons for his decision, where there is none and there is an application for a review of his decision. Taking that course would unnecessarily delay a prompt hearing and decision on the review. Also, it may more importantly, give an opportunity to the taxing officer to justify his decision by providing reasons that may not have been the reasons for his or her decision at the first place. If however, parties agree as to what happened and how the decision was arrived at, it may not be necessary to require the taxing officer to furnish his or her reasons for his or her decision, as in this case. Hence, I allow myself to be guided by the agreement of the parties. Thus, it is not necessary to request the taxing officer to provide reasons for his decision.
In the case of a taxation of costs on a solicitor and own client basis, as was ordered in this case, the provisions of Order 22, Rule 35 provides limits to a taxing officer’s discretion to either allow or disallow a whole or part of a bill of costs. The Rule provides that all costs are to be allowed unless they are unreasonable and or that even if they are unreasonable the client approved the amounts claimed.
Elcom argues and I accept that, a person who is entitled to recover costs on a solicitor client basis must prove by appropriate evidence that the hourly rate claimed was agreed to or accepted by the client. This is not a difficult thing to do. Usually, all lawyers are duty bound to discuss the issue of their costs with their client before undertaking any work for a client. Most lawyers get their clients to sign fee agreements with them and make a deposit into their trust account. I alluded to the need to have a definite contract on the provision of legal services in the Patterson (supra) case at pages 9-10, which I need not repeat here. A copy of the fee agreement could easily be produced at a taxation hearing in support of a bill of costs without going to the usual process of calling of witnesses and their cross-examination as in a substantive trial.
Furthermore, in my view, an order for costs is not an order for the party entitled to it to profit from. Instead, it is merely an order for that party to recover what it may have been forced to incur on account of the litigation to which the order relates. As I said in Canisius Karingu v. Papua New Guinea Law Society (09/11/01) SC674 at pages 4-5, "solicitor client costs":
"Comprises of the proper remuneration payable to a lawyer by his client for legal work performed by the lawyer for his client. It includes disbursements necessarily and reasonably incurred by the lawyer on behalf of his client in the course of his employment."
It follows therefore that, as of necessity, prove of the party entitled’s actual costs he or she has paid or is liable to pay must be produced and correspond the amounts claimed in his or her bill of costs. This is not a difficult thing to do. Copies of bill(s) of costs already paid or must be paid, could be produced before the taxing officer, again, without the need to call witnesses and their cross-examination as in a substantive trial. The totality of such bills should correspond with the total amount claimed against the party obliged to pay the other’s costs on a "solicitor client costs." I consider this very important to show that the amounts claimed is in fact a reimbursement of the costs the party entitled has incurred in either defending or prosecuting a claim against the other, and is not a claim for profiting at the expenses of the other party.
Still further, Elcom argues and I accept that, the plaintiffs were obliged to produced evidence of each of the attendance or conferences claimed, how long they were for, when they were held, who with and what they were for. Yet again this was not a difficult thing to do. All that the plaintiffs could do without calling any witnesses, is to produce the records of each of the attendance or conference and let them speak for themselves. Such records should show the date of the attendance or conferences, who with, the time taken and what was the reason or subject of the attendance or conferences. The production of such evidence could have formed the foundation to determine whether the costs were necessarily and reasonably incurred. When such evidence was lacking, there was no discretion in the taxing officer to award costs in the amounts claimed or at the amount he eventually awarded. He was only entitled in my view, to allow a reasonable amount of costs to reflect the fact that some conferences or attendance were still necessary for the receiving of initial instructions and any further instructions that may have been necessitated by the various interlocutories.
Without providing any good reasons, the taxing officer allowed costs in the sum of K37,500.00 and K750 in the disputed items, despite the lack of proper foundation in the pleadings. Going by the submissions of the parties, I note that the taxing officer made his decision merely by looking at the physical size of the plaintiffs’ file. No specific evidence was produced as to any agreement on fees between the plaintiffs and their lawyer, the number of attendance or conferences, their dates, what they were for and who with. There was also no evidence of what was the plaintiffs’ actual bill of costs.
The highest the plaintiffs can take their case to is that, they did hold some conferences and attendance and therefore did incur some of the costs claimed. They therefore argue that an allowance of K35,000.00 could be reasonable. Accordingly, they ask for an order that the taxing officer’s determination be varied to allow under the item in question up to that amount only.
On the other hand, Elcom argues that, on the worse end of the scale the plaintiffs should not be awarded any costs under the disputed items for two reasons. The first is that, there is a lack of proper pleadings, which has not been rectified by any amendment. Secondly, there is no evidentiary foundation for the award of the costs in question. The total effect of this is that the taxing officer was left with no legal or factual basis to find in terms of Order 22 Rule 35, that the amounts he was allowing were reasonable and or if not reasonable, they were approved by the plaintiffs. Nevertheless, it argues in the alternative that, if this Court is minded to rule that the plaintiffs are entitled to some costs under the disputed item, then such costs should not exceed K10,000.00. This is to allow for the fact that some conferences or attendance were inevitable for initial instructions taking and any further instructions necessitated by the various interlocutories.
I have already covered Elcom’s argument regarding the pleadings. In relation to evidence, let me say a few things. First in our system of justice he who alleges has the evidentiary burden of proof. The plaintiffs were therefore under an obligation to produce evidence of each item of costs claimed in their bill of costs, including the disputed item apart from the issues on pleading.
Secondly, the lack of the taxing officer’s reasons for decision is very critical. That absence means he had no good basis to be satisfied with the requirements of reasonableness or approval of the costs by the plaintiffs if the taxing officer found the costs claimed unreasonable in order to allow them or even to allow costs above what was reasonable. I consider it was necessary for the taxing officer to arrive at such a decision first because his discretion is governed by the requirements of O. 22, r. 35. The fact that the plaintiffs’ are themselves conceding to a reduction of the amounts allowed by the taxing officer to K35,000.00, confirms or gives support to the argument that, the costs allowed by the taxing officer were unreasonable and or not approved by them for the purposes of coming within the provisions of O.22, r.35.
Thirdly, I consider the fact that Elcom allowed the plaintiff’s to produce some evidence on the particular item of costs in issue, and its preparedness to argue for an award of not more than K10,000.00, although in the alternative to its main argument, is an acknowledgement of some conferences were inevitable is an important consideration. Given these, I consider an allowance of costs in the vicinity of K10,000.00 to K35,000.00 reasonable.
In the absence of any direct and clear evidence as to the exact number of conferences and or attendance and the necessity for them, I am disinclined to accept the plaintiffs’ submission, which is more than the amount Elcom is prepared to allow. The basis for this is that, it was inevitable that some conferences and attendance were necessary for receiving of initial instructions and further instructions necessitated by the various interlocutory applications and possibly one or two more conference just before trial to reconfirm instructions on the issues for trial. All of these in may view could have been achieved at costs not exceeding K10,000.00. If the actual costs exceeded such amounts, than the plaintiffs were duty bound to produce the necessary evidence and come within the provisions of O. 22, r. 35 and produce the kind of evidence I have mentioned in the foregoing.
The only remaining aspect in this case is the objection to item (b) under the same part of the bill also at page 6. Although it is part of the objection counsel did not take that up in arguments before me in any way. I am therefore, disinclined to upholding that objection. Further, even if these were argued before me, I would not have upheld this objection. The reason for this is simply that the taxing officer allowed 3 hours at K250.00, which was a substantial reduction from a total 30 hours claimed for at K500.00. This was claimed as costs for doing 54 letters and considering 16 incoming correspondence. Given the period of time it took to resolve both the substantive and the interlocutory steps that were taken in this case, I consider a substantial amount of correspondences to and from the parties and third parties were inevitable. The onus was however, on the plaintiff’s to show the number of correspondence, when they were entered into, the time it took and that they were necessary and reasonable. They failed and the Registrar reduced their claim to 3 hours at K250.00. This in my view was reasonable.
In the end therefore, I answer the issues raised as follows:
In the upshot, I uphold the objection to the allowance of cost of K37,500.00 for costs for attendance and conference and order in
its stead a sum of K10,000.00. I also order costs of this application in favour of the Applicant/Defendant.
_______________________________________________________________________
Lawyers for the Defendant/Applicant: Blake Dawson Waldron
Lawyers for the Plaintiffs/Respondent: Harricknen Lawyers
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