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Gubon v Pacific Mobile Communications Ltd [2006] PGNC 128; N3104 (6 December 2006)

N3104

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS. NO. 20 OF 2002

BETWEEN

DR. FLORIAN GUBON Trading as GUBON LAWYERS
Plaintiff

AND

PACIFIC MOBILE COMMUNICATIONS LIMITED
Defendant

Waigani: Kandakasi, J.
2006: 10 April, 6 December

CAUSES OF ACTION – Lawyer suing for legal and consultancy fees –Whether consultancy fees legal fees – Nature of services rendered and conduct of parties relevant considerations – Nature of services rendered and use of legal firms letterhead suggest provision of legal services using legal knowledge, skills and experience to – Lawyer suing under a fee agreement - Court has power to decide whether fee agreement is fair and reasonable – No requirement for costs in taxable form and taxation unless the court orders otherwise – Reasonable cause of action disclosed – Whether fee agreement is fair and reasonable is an issue for trial – Plaintiff required to plead the factual foundation showing fair and reasonableness of the fee agreement - Sections 62 – 69 of Lawyers Act 1986 –Rule 18 (1), (2), (4) and (5) Professional Conduct Rules 1986.

CONTRACTS – Lawyers fee agreement with client – Court has power to determine whether agreement is fair and reasonable – Tests of – Equality of bargaining power, whether client informed of his right to costs in taxable form and taxation, nature and complexity of issues involved in the business or matter lawyer instructed on are amongst other relevant factors for consideration – Sections 62 -69 Lawyers Act 1986 and Rule 18 (1), (2), (4) and (5) of the Professional Conduct Rules – Sections 4, 5 of Fairness of Transactions Act 1993.

PRACTICE & PROCEDURE – A lawyer sue on a fee agreement under s. 66 of the Lawyers Act – Lawyer required to plead amongst others the factual foundation for fairness and reasonableness of the agreement – Failure may amount to a failure to plead a case that is sustainable and form the foundation for an application to apply for dismissal for failure to disclose a reasonable cause of action – Sections 62 -69 Lawyers Act 1986 and Rule 18 (1), (2), (4) and (5) of the Professional Conduct Rules – Sections 4, 5 of Fairness of Transactions Act 1993

Cases Cited:

Papua New Guinea Cases
Marsh v. Hay [1981] PNGLR 392.
Jack Livinai Patterson trading as Patterson Lawyers v. NCDC (05/10/01) N2145.
Simon Norum Trading as Simon Norum Lawyers v. Daniel Ikio and Komap Trading Pty Ltd (11/07/97) N1593.
Philip Mamando v. Lumusa Local Level Government Council (13/9/98) N1752.
Kora Gene v. Motor Vehicles Insurance (PNG) Trust [1995] PNGLR 344.
Yapao Lawyers v. Yaliman Pawe and Others and Porgera River Alluvial Miners Assocation (18/09/98) N1759.
Tolom Abai and Others v. The State (24/09/98) N1762.
Negiso Investments Limited v. PNGBC Limited (26/06/03) N2439.
Jack Livinai Patterson trading as Patterson Lawyers v. Teachers Savings and Loans Ltd (19/02/04) N2516
Sarea Soi trading as Soi & Associates Lawyers v. Imawe Kewa Land Group Inc. (10/06/04) N2560.
Edward Manu trading as Manu & Associates Lawyers v. Honiri Timber Resources Development Ltd (23/08/04) N2597.
The Papua Club Inc v. Nusaum Holdings Ltd & Ors (No 2) (03/09/04) N2603.
Bank of Papua New Guinea v. Derick Sakatea Niso (18/10/04) N2664.
Smugglers Inn Resort Hotel Limited & Ors v. Papua New Guinea Banking Corporation and Christopher Burt (24/05/06) N3062.

Overseas Cases:
Blomley v. Ryan [1956] HCA 81; (1956) 99 CLR 362.
Lloyds Bank Ltd v. Bundy [1974] 3 All ER 757.
Commonwealth Bank of Australia v. Amadio [1983] HCA 14; (1983) 151 CLR 447.
Hart v. O’Conner [1985] UKPC 1; [1985] All ER 880; (1985) AC 1000.

Counsel:
Mr. J. Brooks, for the Defendant/Applicant.
Mr. T. C. Waisi, for the Plaintiff/Respondent.

6 December, 2006

1. KANDAKASI J: By notice of motion filed on 10 March 2006, the defendant is seeking a dismissal of the plaintiffs claim pursuant to O. 12 r. 40 and O.12 r.1 of the National Court Rules (the Rules). The applicant relies on the affidavits of Tiffany Nonggorr sworn on 9 and filed 10 March 2006, three affidavits of Steven Ovia sworn on 16th , 21st, 27th, and filed 15th, 22nd, and 30 March 2006 and three affidavits of Chris Vihruri sworn 16th, 27th, and filed on 17th, 28th, and 5 April 2006.

Factual Background

2. In his statement of claim, the plaintiff claims that the defendant contracted his services to act as a broker in negotiating, facilitating and securing in the defendant’s favour, an international financing facility in the sum of US$12 million. That was to finance the defendant’s proposed GSM digital cellular network project in the country. The plaintiff also alleges that, it utilized its knowledge skills and experience to secure the kind of financing facility he was contracted for and secured a "Letter of Intent" from Reciprocal Trade International Limited. Further, the plaintiff claims that he forwarded the Letter of Intent to the defendant for its acceptance. However, the defendant failed to accept the Letter of Intent. This the plaintiff alleges resulted in considerable loss and damage to him. He claims K50, 000 as a debt owing for fees, a loss of 1.5 percent of the US$12 million in brokerage fees, bills for expenses and further not particularized loss and damages.

3. The defendant filed its defence to the claim against it to deny the plaintiff’s claim and pleads that there is no cause of action against it because the plaintiff has not informed it of its right to have the plaintiff’s costs taxed, the plaintiff has not put his fees in a taxable form and such costs have not been subjected to taxation pursuant to Sections 62 - 65 of the Lawyers Act 1986. Then on those bases, the defendant is seeking a dismissal of the plaintiff’s claim for failure to disclose a reasonable cause of action. In support of its application, the defendant refers to and relies upon a number of decisions of this Court including my own decision in Jack Livinai Patterson trading as Patterson Lawyers v. NCDC[1] and my sister Davani J.’s decisions in Sarea Soi trading as Soi & Associates Lawyers v. Imawe Kewa Land Group Inc.[2] and Edward Manu trading as Manu & Associates Lawyers v. Honiri Timber Resources Development Ltd[3] and Jack Livinai Patterson trading as Patterson Lawyers v. Teachers Savings and Loans Ltd.[4]

4. In response, the plaintiff says he is suing on the basis of an agreement he has entered into between himself and the defendant. He argues that the provisions of s.62 to s.65 and therefore the Lawyers Act do not apply for two reasons. First, he argues that the agreement is not necessarily an agreement concerning legal costs but costs for the provision of consultancy services. This he submits regardless of the fact that he is suing as a lawyer trading as Gubon Lawyers and having used his law firm’s letterhead. Secondly, he argues in furtherance or in the alternative that the agreement he is suing upon was entered into pursuant to the provisions of s. 66 of the Act by reason of which s. 69 of the Act applies. In the premises, the plaintiff argues that it has a reasonable cause of action and as such his claim should not be dismissed. The defendant denies the alleged agreement and argues in any event that the alleged agreement is null and void and therefore unenforceable because the plaintiff failed to inform it of its rights under the Lawyers Act.

Relevant issues

5. The arguments advanced by the parties present in my view the following main issues for this Court to determine:

(a) What is the nature of the plaintiff’s contract with the defendant?

(b) What is the effect of Sections 66 and 69 on the requirements under Sections 62 to 65 of Lawyers Act? and

(b) Depending on the answer to the second issue, is there a cause of action for the plaintiff to pursue against the defendant?

First Issue – Nature of the Plaintiff’s contract

6. I will consider each of these issues in the order presented. Accordingly, I start with a consideration of the first issue first. As earlier noted, the plaintiff claims that the defendant contracted his services to act as a broker in negotiating, facilitating and securing in the defendant’s favour, an international financing facility in the sum of US$12 million. The plaintiff also claims that he utilized his knowledge, skills and experience to secure the kind of financing facility he was contracted for and secured a "Letter of Intent from the Reciprocal Trade International Limited which the defendant refused to acceptance, resulting in considerable loss and damage to him in terms of K50, 000 in debt owing for fees, a loss of 1.5 percent of the US$12 million in brokerage fees, bills for expenses and further not particularized loss and damages.

7. There is nothing in the pleadings or the evidence before me that shows that the plaintiff has qualifications, skills, knowledge and experience in a profession or capacity other than and independent of his training, qualification and experiences as a lawyer. The overall import of the plaintiff’s pleadings and the evidence before me suggests that the plaintiff’s alleged contract was secured in his capacity and because of his training, experiences, skills and knowledge as a lawyer. Indeed most of the correspondence regarding this matter was on the plaintiff’s law firm’s letterhead. It seems clear to me therefore that the plaintiff secured the alleged contract in his capacity as a lawyer. His claim for costs and commission or brokerage fees, costs and disbursements are thus his legal fees. Accordingly, I find that the relevant provisions of the Lawyers Act as well as the Professional Conduct Rules apply in this case.

Second Issue - Effect of sections 66 and 69

8. I now turn to a consideration of the second issue. There is unanimity in the case law concerning the requirements under Sections 62 to 65 of the Lawyers Act. I accept the defendant’s submission on the import (in part) of the case law on point that: (1) under s. 62 of the Act, and O. 22 r. 22 of the National Court Rules a bill of costs must always be in taxable form; (2) the lawyer must advise his client that the client can apply to have his costs taxed; (3) the bill of Costs must first be taxed if the client refuses to pay; (4) the lawyer can only then commence legal proceedings to recover his taxed costs; and (5) unless requirements (1) to (4) have been met, no cause of action accrues to a lawyer to sue for his costs against his client. These principles emerge clearly from a long line of cases, starting with Marsh v. Hay[5] and ending with the Manu & Associates Lawyers case.[6] The earlier case started to bring out these principles and the later ones adopted and applied them.

9. The above principles apply in cases where there are no agreement as between a client (s) and a lawyer in relation to his costs for the provision of his services. Where there is an agreement as to a lawyers costs, Section 66 to 69 applies. The first provision allows for a lawyer to enter into an agreement with his client as to the lawyer’s fees for the provision of his services. Sections 67 and 68 provide as to what becomes of a fee agreement when there is a death or incapacity of a lawyer or there is a change in lawyers. Section 69 then provides:

"69. Exclusion of taxation by agreement.

Subject to Sections 67 and 68, the costs of a lawyer in a case where an agreement has been made under Section 66 are not subject to taxation, or to the preceding provision of this Part with respect to the signing and delivery of the lawyer’s bill." (Emphasis supplied)

10. In her decision in the Manu & Associates Lawyers case,[7] Davani J., effectively held that since s.69 was in the same part has s.62 – s.66, it must be read subject to s.62 and s.63. Her Honour then under took a discussion of what she considered was the position and concluded as follows:

"I make the following conclusions as a summary of my discussions and findings. These conclusions apply to a lawyer/client relationship where there is a written agreement on payment of bills and one without a written agreement. These are;

1. A lawyer must always advise his client that he is entitled to have his bills of costs taxed, if he is not in agreement;

2. That after taxation, if the client still refuses to pay, that the lawyer can then file court action seeking recovery of the taxed costs;

3. Where there is a retainer agreement, that the lawyer must always advise his or her client that his costs can be taxed if he is not in agreement and that will then follow by the issuing of bills of costs. If the client is aggrieved by it, then he can refer the bill to taxation;

4. That it is advisable to include a clause on taxation of costs in the retainer agreement.

5. If the client ceases to instruct midway during the term of the agreement, that a lawyer cannot issue a bill for the remainder of the period of the agreement, if he or she, has not done any work for the client."

11. It seems no one else appears to have considered the effect of s. 69. It is clear however that, agreements under s. 66 have been considered by the Court as to the reasonableness of the terms and claims under such agreements. In the Yapao Lawyers case,[8] per Kapi DCJ (as he then was) the Court considered an agreement in which Messrs Yapao Lawyers’ client said:

"I agree that, unless the legal fees for Messrs Yapao Lawyers are further negotiated they will be paid 10%, of once only compensation package, at settlement which shall be calculated from backdated payment including, the initial lump sum payments as agreed by the Porgera River Alluvial Miners Association."

12. That was in the context of the law firming making a claim for K246, 855.03, being the agreed 10 percent of a total compensation package of K1.52 million. The Court held that the claim was unreasonable and directed the plaintiff to have his costs taxed. Before arriving at that decision the Court noted that:

"It is clear from s.66 (2) (a) that it is permissible to enter into a contingency fee arrangement in an agreement. Such a fee is subject to the supervisory power of a Judge who may inquire into whether the fees are unfair or unreasonable (s. 66 (3)). A client may by motion bring the matter before a Judge to determine this issue. In the present case, the defendants have not made such an application."

13. The Court then considered the question of whether the Court can enquire into the reasonableness of the lawyer’s costs. Effectively, the Court answered that question in the affirmative by referring to the decision of Lenalia AJ., (as he then was) in the Simon Norum & Co. Lawyers case.[9] There, Lenalia AJ applied the provisions of s. 66 (3) and held that the plaintiff lawyer’s legal costs claim pursuant to a fee agreement was unreasonable.

14. Davani J, arrived at her conclusions having regard to the decision in Simon Norum & Co. Lawyers case[10] and the one in the Yapao Lawyers case as well as the other earlier decisions. However, none of those earlier cases specifically consider the effect of s. 69. In my view the provisions of s. 69 are very clear. They clearly provide as to "the costs of a lawyer" that "where an agreement has been made under Section 66" they "are not subject to taxation, or to the preceding provision of this Part with respect to the signing and delivery of the lawyer’s bill." (My Emphasis ).

15. There is nothing in s.69 that suggests that its provisions are subject to the earlier provisions of s. 62 or s. 63 or indeed any other provision except for s. 67 and s.68 which are specifically referred to in the opening line. To suggest otherwise, would amount to an amendment of the clear wording in s. 69, which is within the prerogative of Parliament. The Courts are duty bound to interpret and apply the law as it is, and be careful not to legislate in the guise of interpreting and applying the law. Accordingly, I do not with respect, agree with Davani J.’s view in the Manu & Associate Lawyers case,[11] that s. 69 should be read together with s.62 and s.63 and the view that s. 69 is subject to those provisions. It follows therefore, that I do not agree with her Honour’s conclusion as to the effect of s. 69.

16. The question then is, what do I consider is the effect of s.69? That section makes it clear in unambiguous terms that, where a lawyer enters into an agreement with his client under s. 66 as to his costs; the costs are not subject to taxation or the preceding provisions of Part VI. The preceding provisions are s.62 to s.68. Out of these provisions, s.69 provides that its provisions are made subject to s.67 and s.68 only. Clearly, therefore, in my view, the requirements as to taxation and before that, rendering of a bill of costs in taxable form and allowing for a lapse of one month before suing a former client for his costs by a lawyer does not apply. Instead s. 66 governs what should happen in relation to the issue of costs as between a lawyer and his client or a third party who is required to pay a client’s costs where there is an agreement in relation to costs under s. 66.

17. Does this mean that, simply because a lawyer has an agreement with his client, the protection accorded to a client under the provisions of s.62 and s.63 of the Lawyers Act are precluded? I do not think so. Section 66 whilst allowing a lawyer to enter into an agreement with his client as to the lawyer’s costs, that is not made absolute. Subsection (3) of s. 66 provides for a mechanism through which a client could invoke the supervisory powers of the Court as to the fair and reasonableness of the costs a client is required to pay pursuant to a fee agreement. That provision stipulates:

"(3) If on motion by the client it appears to a Judge that the agreement is unfair or unreasonable, he may—

(a) reduce the amount agreed to be payable under the agreement; or

(b) direct that the costs of the business done by the lawyer be ascertained by taxation."

18. In paragraph 9 to 11 above, I already noted what the then Deputy Chief justice, now Chief Justice said in the Yapao Lawyers case,[12] where there was a fee agreement under s. 66 of the Lawyers Act which the lawyer sought to enforce. His Honour referred to and relied on the decision in the Simon Norum & Co. Lawyers case.[13] I note that the Court in the Simon Norum & Co. Lawyers case[14] did not have any specific regard to the provisions of s. 66 (3) but held that, even in cases where a fee agreement exists, the client is entitled to a bill of costs in taxable for the work actually done by the lawyer for the client in order to enable the client and if need be, the Court to determine whether the costs charged are reasonable. His Honour had regard to the requirements of r. 18 (1), (2), (4) and (5) of the Professional Conduct Rules of 1986 and requirements of the Lawyers Act and held that these requirements are there to ensure that lawyers costs are fair and reasonable, considering the usual criterions such as the complexity of the matter, the amount of work involved, the time, the importance of the issues to the client and the normal scale of charges. Accordingly, the Court was of the view that, where there is a valid fee agreement, the fees actually charged and sought to be recovered must be fair and reasonable having regard to the matters just mentioned.

19. In the case before Lenalia J., the relevant fee agreement allowed for a 25 percent interest in the damages to be recovered in the client’s claim against the State. It also provided for the lawyer to keep any interests and cost recovered from the State. The client recovered a sum of K398, 000.00 plus interest and costs after a trial. Pursuant to the fee agreement, the agreed 25 percent to the amounts recovered by the client translated to about K99,500, plus interest worked out at K35,940 with costs yet to be calculated and added. The Court found this was unfair and unreasonable and directed that the lawyer’ costs be ascertained by taxation.

20. The only other case on s. 66 (3) of the Lawyers Act is the Soi & Associates Lawyers case[15], a decision by her Honour Davani J. In that case, the plaintiff issued proceedings seeking a payment of his outstanding legal costs in the amount of K491, 644 together with interest at 8 percent per annum. In making that claim, the plaintiff relied on a written agreement between his clients and himself for payment of the lawyer’s legal fees at K250.00 per hour. The client also agreed to pay the lawyers legal costs and disbursements of K868, 000. After paying part of the agreed fees and disbursements the client further agreed to pay a balance of K491, 644 by a payment of 10 percent instalment from certain payments due to the client at every point of payment until the full amount of the legal costs and disbursement were paid.

21. In support of his claim the lawyer argued that his agreement with his former client was an agreement under s. 66 so as to avoid the requirements of s.62 and s.63 of the Lawyers Act. The Court asked two questions and answered them as follows:

"Even if there is an agreement to pay, should the client still pay where the lawyer has not yet issued a bill in taxable form or where the client was not advised by his lawyer that his bill can be taxed and that this avenue is available to him? S. 66 (3) (b) of the Lawyers Act is on point in that it provides that if it appears to a judge that the agreement is unfair or unreasonable, he may direct that the costs of the business done by the lawyer be ascertained by taxation."

22. As noted, the decisions in the Yapao Lawyers[16] and Simon Norum & Co. Lawyers[17] were cases in which the lawyers sought to enforce their respective agreements. In both cases, the respective lawyer’s former clients put little or no challenge and the hearings proceeded ex parte. The Court took it upon itself to review the fairness and or reasonableness of the terms of the fee agreement pursuant to s. 66 (3) of the Lawyers Act as elaborated by r. 18 (1), (2), (4) and (5) of the Professional Conduct Rules and held against their fairness and or reasonableness following which the Court directed the respective lawyers costs to be ascertained through taxation.

23. The provisions of s. 66 (3) and r. 18 (1), (2), (4) and (5) of the Professional Conduct Rules are not alone on calling for fairness and or reasonableness in the terms of an agreement. Other legislation such as Fairness of Transactions Act 1993 also provide for fairness in all transactions or contracts that are economic or commercial in nature that have not been renegotiated within three years from the date of the original transaction. A legal fee agreement entered into between a lawyer and a client under s. 66 is in my view an economic or a commercial agreement because a lawyer provides a service which the client pays for. Section 4 (1) of that Act in relevant parts defines the concept of fairness in these terms:

"... the concept of fairness relates to the principle of the just and equitable distribution to and among parties to a transaction of the rights, privileges, advantages, benefits and duties, obligations and disadvantages of the transaction in proportion and relative to a party's standing in or contribution to the transaction, and according to business principles and practices appertaining to the particular transaction in question ...

24. The next subsection (2) of s.4 provides that in order to determine:

"... the fairness or otherwise of a transaction, the circumstances of the parties existing before, at and after the entering into of the transaction shall be taken into account."

25. Section 5 (1) of the Act then gives a court the power to review a transaction to which the Act applies on the application of any party and if the Court is satisfied that the transaction was not genuinely mutual or was manifestly unfair to that party. Subsection (2) provides for four circumstances in which a transaction may be deemed unfair and not genuinely mutual, unless the parties are on equal footing. The first is where the party applying for the review "did not understand the transaction and no genuine effort was made to explain its terms to him prior to entering into the transaction." The second is where "the other party to the transaction was in such a predominant position, (whether economically, socially, personally or otherwise), that an ordinary person with the background of the applicant was not likely to exercise a true freedom of choice in relation to the transaction." The third is where "the other party had or should have had at the time of entering into the transaction or immediately thereafter information affecting the fairness of the transaction which was not disclosed to the complainant." The final circumstance is where the applicant "was mistaken in or had miscalculated the likely consequences of the mistake or miscalculation to such an extent adverse to his interests that he could not reasonably be held responsible for such consequences."

26. The Act expressly states that, its aim is not to depart drastically from the rule of law and of the right of the parties to contract. Rather, s.1 provides amongst others that the aim of the Act is to "ensure the overall fairness of any transaction" in cases where the parties are not on equal footing "for reasons of economic or other advantage" and where one of the parties is "predominant and the other is not able to exercise a free choice." Even if the parties are on equal footing, the aim of the Act is also to ensure that the transaction is not otherwise manifestly unfair or not genuinely mutual.

27. This was in fact a codification of what has always been the law at common under the principles of inequality of bargaining powers and unconscionable conduct, which could undo a contract or transaction.[18] The case of Lloyds Bank Ltd v. Bundy[19] succinctly puts the position in this way:[20]

"Gathering all together, I would suggest that through all these instances there runs a single thread. They rest on ‘inequality of bargaining power’. By virtue of it, the English law gives relief to one who, without independent advise, enters into a contract on terms which are very unfair or transfers property for a consideration which is grossly inadequate, when his bargaining power is grievously impaired by reason of his own needs or desires, or by his own ignorance or infirmity, coupled with undue influences or pressures brought to bear on him by or for the benefit of the other."

28. These principles were effectively adopted and applied in our country pursuant to Schedule 2.2 of the Constitution. One of the earliest cases on point is the decision of Wood’s J in Kora Gene v. Motor Vehicles Insurance (PNG) Trust.[21] In that case the plaintiff an unsophisticated illiterate person signed a deed of release, releasing the defendant of all liabilities in consideration of a payment of K600 for solatium. The defendant sought to enforce the deed of release, which the plaintiff challenged. The Court held that the deed of release was unenforceable and refused to enforce it. The Court reasoned that:

"Whilst parties can always talk between themselves without lawyers, in the circumstances of PNG and by virtue of the disparity of education and understanding between the plaintiff and the defendant, I must find that the parties here are not on an equal footing. The plaintiff here is at a great disadvantage. I must find it is unconscionable for a plaintiff of the nature and the sophistication of the Motor Vehicle Insurance Trust to negotiate directly with an illiterate villager without taking appropriate precautions to ensure that the villager understands his legal rights."

29. Quite recently, in The Papua Club Inc v. Nusaum Holdings Ltd & Ors (No 2),[22] referred to the decision in Kora Gene and English cases as well as the Australian case of Commonwealth Bank of Australia v. Amadio[23] and decline to declare a contract of sale of a property. His Honour reasoned that:

"Applying these principles to the present case, I cannot see how the plaintiff was at a disadvantage, let alone at a special disadvantage. The reason being, it had received independent legal advice that its interests in the property were not protected either by the Deed or the Sub-lease after 20th December, 2005. Yet, it took no remedial actions. For instance, it knew full well that it needed to obtain restraining orders before settlement to restrain the sale of the property or to negotiate an agreement with the second defendant for its interests to be protected in the event of the property changing ownership, but it did not. The plaintiff was advised of these options but it ignored them.

The defendants were in no better or stronger position than the plaintiff in the whole transaction because they were all represented by lawyers and were given appropriate legal advice on their respective rights in the property. This was not the case of the defendants having an unfair advantage over the plaintiff. For instance, there were no undue influences or pressures which were brought to bear on the plaintiff by the defendants. The parties dealt with each other through their lawyers on an equal footing throughout the whole transaction. There is nothing which can suggest otherwise."

30. Apart from one or two cases[24] making reference to the Fairness of Transactions Act, the decision in Negiso Investments Limited v. PNGBC Limited[25] actually considered and applied the provisions of s. 4 and s. 5 of the Act. There the Court found the actions of the defendant unfair and directed the parties undertake mediation under s. 7 of the Act and failing that return to the Court for appropriate remedial orders. That was in a case of the defendant exercise its rights as a mortgagee but rather in a much delayed manner causing the plaintiff to suffer more interest charges on the principle amounts owed.

31. What is the effect of all of the foregoing considerations in the case before me? I am of the opinion that, even though there is no specific requirement under s. 66 (3) of the Lawyers Act for a lawyer to ensure that there is no unfair advantage gained through any inequality in the bargaining power between a lawyer and his client, lawyers have such an obligation. Usually, the client will not be a lawyer and would have little or no knowledge and understanding of the relevant provisions of the Lawyers Act. That is why I said in the Patterson Lawyers v. NDCD[26] case that a lawyer is under an obligation to inform the client of his right to have his lawyer’s costs in taxable form and taxation if there is no agreement.

32. Just informing a client of his right to costs in taxable form and taxation in the event of no agreement is not enough. The lawyer is under an obligation to assure the client that he will in fact put his costs in taxable form and that he will allow for a taxation of his costs if need be. The lawyer is also duty bound to fully disclose his hourly charge out rate, an estimate of how long it will take the lawyer to have the matter or the business for which the lawyer is instructed resolved, an estimate of the costs from start to finish having regard to the nature and complexity of the business or matter. Further, the lawyer is duty bound to inform the client of the advantages or the benefits of the client agreeing to fee agreement as opposed to the client going by the provisions of s. 62 and s. 63 of the Act. Furthermore, the lawyer is duty bound to ensure that the terms of the fee agreement are in fact fair and reasonable in all of the circumstances. This leads me to consider the second main issue.

Third Issue – Cause of Action

33. Whether or not, a fee agreement is fair and reasonable is in my view both a question of fact and law. The factual part concerns the need to establish by evidence the nature of the matter or business in relation to which the client had gone to a lawyer at the first place and a fee agreement had been entered into. Evidence would also be require to establish whether or not the lawyer had in fact informed his client of the client’s right to receive a bill of cost to him in taxable form and taxation in the event of a dispute on the bill of costs, the steps the lawyer had taken to inform the client, the client fully understanding, appreciating and freely entering into the fee agreement and the kind of services the lawyer had in fact rendered the client to warrant the kind of costs the lawyer might be claiming. These are matters that can only be established one way or the other through a calling of relevant and appropriate witnesses. Unless there is no dispute in the facts, the question of whether or not a fee agreement is fair and reasonable can thus be determined through a trial in the normal way with cross-examination of witnesses and findings of relevant facts.

34. The legal part of the question raised above, involves a consideration of the relevant legal principles on the issues of equality of bargaining powers and fairness of the terms agreed in the light of the nature of the business or matter the lawyer was contracted to attend to and what the lawyer had in fact done. In my view this aspect and the factual questions can not be resolved summarily in the way argued for by the defendants.

35. I am of the view that, in the light of the matters covered in the immediately preceding paragraphs, s. 66 or any other provision in the Lawyers Act, do not in much the same way as is done in subsection (1) of section 62 of the Act to preclude a lawyer taking out court proceedings to enforce a fee agreement he might have in place between his former client and himself. All there is, is subsection (3) of the s. 66 which only empowers a Court to review the fairness and or reasonableness of a fee agreement. Clearly therefore, in my view, for the reasons earlier given, a lawyer would be at liberty to take out legal proceedings to enforce his agreement. This view is fortified by the provisions of s.69 which specifically provides that the requirements for taxation and the application of the earlier provisions of s. 62 to 65 of the Act do not apply when there is a fee agreement under s. 66 of the Act. However, where a review under s. 66 (3) results in a direction or order for a lawyers costs to be ascertained by taxation, the need to put the lawyer’s costs in taxable form and taxation of the same would become necessary. Accordingly, this distinguishes the basis for the decision in Patterson Lawyers v. NCDC[27] and the Philip Mamando[28] cases from the present case. In these circumstances, I am not persuaded to follow the reasoning and decisions of Davani J., in the cases of Soi & Associates Lawyers[29] and Manu & Associates Lawyers.[30]

36. Considering all of the foregoing, I am not persuaded that this is an appropriate case to be resolved by summary determination as argued for by the defendants. Instead, I am satisfied that the plaintiff’s statement of claim does disclose a cause of action based on the law of contract. However, before the matter progresses any further, it would be incumbent on the part of the plaintiff to reconsider his position with a view to withdrawing his proceedings unless he is able to demonstrate to the satisfaction of the Court that his fee agreement with the defendant is fair and reasonable. This would be necessary in the light of the discussion on the relevant legal principles in the foregoing. If after a reconsideration of his case the plaintiff decides to pursue the action, it would be incumbent on him to review his pleadings and ensure that the relevant factors that render the agreement as a fair and reasonable one are clearly pleaded before any further steps and therefore costs are incurred. A failure to do that may give cause to the defendants to apply for appropriate orders, including a dismissal of the plaintiff’s claim for failure to plead a cause of action that is sustainable.

37. Based on the above reasons and for clarity I make the following orders:

1. The defendant’s application seeking a dismissal of the proceedings for failure to disclose a reasonable cause of action is dismissed.

2. An order in the form of a declaration that, the plaintiff’s claim is for legal costs and as such the relevant provisions of the Lawyers Act apply.

3. The plaintiff shall within 14 days from today seriously reconsider pursuing these proceedings in the light of the foregoing discussion on the principles governing the fairness or otherwise a fee agreement.

4. If the plaintiff decides to pursue the claim, he must revisit his pleadings within 14 days from today and take all steps necessary to ensure that the pleadings clearly demonstrate that the fee agreement between the plaintiff and the defendant is fair and reasonable.

5. A failure to comply with terms 3 and 4 of these orders may give cause to the defendants to apply for appropriate orders, including a dismissal of the plaintiff’s claim for failure to plead a cause of action that is sustainable.

6. The defendant shall pay the plaintiffs cost of the application, which shall be agreed, if not taxed.

7. The time for entry of these orders is abridged to the time of settlement by the Registrar, which shall take place forthwith.

_________________________________

Gadens Lawyers: Lawyers for the Defendant/Applicant.
Gubon Lawyers: Lawyers for the Plaintiff/Respondent.

^[1] (05/10/01) N2145.
^[2] (10/06/04) N2560.
^[3] (23/08/04) N2597.
^[4] (19/02/04) N2516.
^[5] [1981] PNGLR 392.
^[6] The others are: Simon Norum Trading as Simon Norum Lawyers v. Daniel Ikio and Komap Trading Pty Ltd (11/07/97) N1593; Philip Mamando v. Lumusa Local Level Government Council (13/9/98) N1752; Yapao Lawyers v. Yaliman Pawe and Others and Pogera River Alluvial Miners Assocation (18/09/98) N1759; Tolom Abai and Others v. The State (24/09/98) N1762, and Jack Livinai Patterson trading as Patterson Lawyers v. Teachers Savings and Loans Ltd (19/02/04) N2516.
^[7] Opt cit n 3.
^[8] Opt cit n 6.
^[9] Opt cit n 6.
^[10] Ibid.
^[11] Opt cit n 3.
^[12] Opt cit n 6.
^[13] Ibid.
^[14] Ibid.
^[15] Opt cit n 6.
^[16] Opt cit n 6.
^[17] Ibid.
^[18] See, Blomley v. Ryan [1956] HCA 81; (1956) 99 CLR 362 and Hart v. O’Conner [1985] UKPC 1; [1985] All ER 880; (1985) AC 1000 for examples of authorities on point.
^[19] [1974] 3 All ER 757.
^[20] Per Lord Denning at p.765.
^[21] [1995] PNGLR 344.
^[22] (03/09/04) N2603, Gavara-Nanu J.
^[23] (1983) 151 CLR 447.
^[24] For example Bank of Papua New Guinea v. Derick Sakatea Niso (18/10/04) N2664 and Smugglers Inn Resort Hotel Limited & Ors v. Papua New Guinea Banking Corporation and Christopher Burt (24/05/06) N3062.
^[25] (26/06/03) N2439.
^[26] Opt cit n 1.
^[27] Opt cit n 1.
^[28] Opt cit n 6.
^[29] Ibid.
^[30] Opt cit not 3.