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Pundari v Niolam Security Ltd [2015] PGSC 31; SC1434 (19 June 2015)

SC1434

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA NO 73 OF 2009

BETWEEN

MICHAEL PUNDARI
Appellant

AND

NIOLAM SECURITY LIMITED
Respondent

Waigani: Makail, J
2014: 23rd September
2015: 19th June

SUPREME COURT – PRACTICE & PROCEDURE – Bill of costs – Lawyers costs – Application for review of bill of costs – Limitation of time – 12 months after final order for costs – Bill of costs filed out of time – 8 months after expiration of time limitation – Whether claim for costs time-barred – Discretionary – Inherent power of Court – Constitution – Section 155(4) – Supreme Court Rules – Order 12, rules 17 & 37.

SUPREME COURT – PRACTICE & PROCEDURE – Bill of costs – Review of bill of costs – Reasonableness of costs – Lack of time sheets – No record of type of work and time spent by lawyer – Conservative assessment of costs – Assessment based on nature of work, complexity of case and experience of lawyer – Supreme Court Rules – Order 12, rule 21.

Cases cited:

Tolom Abai & Ors v. State (2000) SC632
Hii Luke v. Richard Maribu (2012) SC1188
Bank of South Pacific Limited v. Thomas Serowa (2014) SC1373
Tolom Abai & Others v. State (1998) N1762

Counsel:

Mr P. Harry, for Appellant
Mr A. Chillion, for Respondent

RULING ON REVIEW OF BILL OF COSTS

19th June, 2015

1. MAKAIL, J: This is the respondent's application to review the Taxing Officer's decision dated 18th March 2014 to certify costs of K216,848.74 for the appellant, leave having been granted by a single Judge of this Court on 22nd August 2014. The application is made pursuant to Order 12, rule 37 of the Supreme Court Rules, 2012 which provides, amongst others, that a Court or a Judge may review the decision of a Taxing Officer. The respondent relies on two grounds:

1. The bill of costs is time-barred under Order 12, rule 17 of the Supreme Court Rules; and
   
2. Excessiveness of the costs.
   

Brief Facts

2. The facts are set out in the affidavit of Tyson Yapao filed on 01st April 2014. The appeal in this case was heard on 27th June 2011 and the decision was handed down on 02nd September 2011. In its decision, the Supreme Court, amongst others, ordered the respondent to pay the appellant's costs on party/party basis, to be taxed, if not agreed.

3. On 17th May 2013 the appellant filed the bill of costs in the total sum of K401,653.20. This was about 18 months after the date of the judgment of 02nd September 2011 and 8 months after the time limit of 12 months expired on 02nd September 2012. The taxation hearing of the bill of costs was adjourned on several occasions. On 18th March 2014, it came for hearing before the Taxing Officer. At the hearing, the respondent through its lawyers Mr Tyson Yapao objected to the bill of costs on the ground that it was filed out of time or was time-barred pursuant to Order 12, rule 17 of the Supreme Court Rules.

4. Order 12, rule 17 of the Supreme Court Rules states:

"A bill shall not be taxed unless the party entitled to costs files a bill within 12 months of the date of the final order for costs."

5. The respondent submitted before the Taxing Officer that the bill of costs was filed out side of 12 months time limitation and it should be dismissed. The appellant asserted that the court file had gone missing and as a result he could not file the bill of costs within time. The respondent submitted that the appellant's assertion was not supported by evidence. The Taxing Officer accepted the appellant's reason, dismissed the objection and taxed the bill of costs. At the hearing, the respondent objected to certain items. They are contained in the affidavit in response by Tyson Yapao filed on 20th May 2014. Out of the total bill of K401,653.20, the Taxing Officer taxed off K184,665.19 and allowed K216,848.74. A certificate of taxation was accordingly, issued for this sum.

Legal Issue

6. The legal issues are whether the bill of costs should be struck out for being time- barred pursuant to Order 12, rule 17 of the Supreme Court Rules and if not, whether costs are reasonable.

Time-Bar

7. Rule 17 of Order 12 was discussed briefly in Royale Thomson v. Canisius Karingu (2011) SC1141. In that case, the Supreme Court in addressing the issue of whether an objection to a bill of costs was properly before the full Court stated, amongst other things, that:

"a party in whose favour an order for costs has been made files a bill of costs under Rule 33 (bill of costs), which must be done within 12 months of the final order for costs (Rule 17, (time limit for taxation))."

8. Based on this observation, the respondent submits that the bill of costs must be filed within 12 months of the final order. The decision of the Supreme Court of 02nd September 2011 was final as it concluded the appeal and so the bill of costs must be filed by 02nd September 2012. Where it is filed outside of that time, it cannot be taxed. It should have been struck out by the Taxing Officer. The respondent says that the reason for having this time limitation is to ensure that the matter is quickly disposed off and the file closed. It should not be left at the Registry unnecessarily clogging up the filing system at the Registry.

9. It further submits there is no reasonable explanation for the late filing of the bill of costs. If the appellant were to assert that the Court file was missing, hence was unable to have the bill of costs filed, it is unsupported by evidence. If the appellant were to rely on the evidence of Mr Paul Harry in his affidavit filed on 15th April 2014, particularly "annexure D1" to explain efforts made to file the bill of costs, it should be rejected because the evidence clearly shows that the bill of costs was still in draft form. The draft bill of costs enclosed in a letter by Stevens Lawyers to Allens dated 12th September 2012 was not settled and ready for filing when it was discovered that the court file was missing. For these reasons, the respondent submits the bill of costs is time-barred, should be struck out and the certificate of taxation, set aside.

10. The appellant submits the respondent's submission is misconceived. Firstly, relying on Order 12, rule 14 of the Supreme Court Rules, which provides that unless the Court or a Judge otherwise orders, the final order for costs shall include all interlocutory costs orders and submits the Supreme Court order on costs cannot be described as a final order because the Court had remitted the matter to the National Court for assessment of damages and the National Court proceedings are still pending. Until they are completed, costs cannot be finalised and submitted for taxation. Secondly, relying on Order 12, rule 35 of the Supreme Court Rules, which provides that, a party on whom a bill of costs is served, may, by notice, object to any item in the bill and the respondent has failed to file a notice of objection against the bill of costs.

11. I reject the appellant's first point of his submission. The costs incurred by the appellant in prosecuting the appeal are separate and distinct from costs incurred in the National Court. He was awarded costs of the appeal after a final hearing. The Supreme Court has completed its task and the only outstanding matter is the appellant's costs. That is a matter for him to recover from the respondent and must do so within 12 months of the decision. In any case, the filing of the bill of costs itself contradicts the appellant's submission and is a confirmation that the appellant accepts that the Supreme Court order for costs is final.

12. As to the second point, a review of the decision of the Taxing Officer under Order 12, rule 37 is a hearing de novo. That means that it is a fresh hearing and the Court may receive evidence including any objections by the applicant seeking review for the purpose of reviewing the taxed costs: see Tolom Abai & Ors v. State (2000) SC632; Hii Luke v. Richard Maribu (2012) SC1188 and Bank of South Pacific Limited v. Thomas Serowa (2014) SC1373.

13. While the respondent has not filed a notice of objection which would state concisely and specifically the nature and grounds of objection, I consider that Order 12, rule 35 is not in mandatory terms. A party objecting to the bill of costs is at liberty to raise oral objection because of the use of the word "may" used in Rule 35. In any case, since this is a hearing afresh, the respondent has served a copy of the affidavit in response of Mr. Yapao filed on 20th May 2014 on the appellant and the grounds of objection are set out in it. To my mind, this is sufficient notice of the respondent's objection to the bill of costs. Further, the appellant has not shown that he has been prejudiced by the lack of notice.

14. I accept the respondent's submission that the bill of costs is filed out of time or time-barred. But the Court has discretion to review the costs under its inherent powers under section 155(4) of the Constitution. In so doing, the Court must give paramount consideration to the dispensation of justice to the parties: section 158 of the Constitution. It must ask; will justice be served if the bill of costs is struck out because it was filed out of time? Who will suffer most? Is it the appellant or the respondent?

15. Firstly, as the hearing before me is a hearing afresh, the appellant's lawyers have placed before me an affidavit of counsel Mr. Harry sworn on 14th April 2014 and filed on 15th April 2014 explaining the late filing of the bill of costs in response to the respondent's first ground of review. I have considered the affidavit and I am satisfied with the explanation. I accept that the court file was missing between the dates of the decision of the Supreme Court and filing of the bill of costs. A supplementary court file was created and used for the purpose of taxing the bill of costs.

16. Secondly, while I accept its submission that the time limitation of 12 months is to ensure that the matter is quickly disposed off so that it is not left at the Registry unnecessarily clogging up the filing system at the Registry, the respondent has not shown that it is being prejudiced by the late filing of the bill of costs. On the contrary, I find that it is well aware of the order for costs and has been put on notice of the proposed costs as per the draft bill of costs which was sent to its lawyers in September 2012. For these reasons, I find it is not disadvantaged by the late filing.

17. Thirdly and finally, the Supreme Court as the final Court of the land has awarded costs in favour of the appellant. The appellant is, therefore, entitled to recover his costs for prosecuting the appeal. The mechanics of the costs can be sorted out later but in my view, it would be in the interests of justice that he be given the opportunity to stake a claim to the entitlement.

18. For the forgoing reasons, I dismiss the first ground of review.

Reasonableness of Costs

19. As to the second ground and indeed, alternative to the first, the respondent submits the Court review the Taxing Officer's decision to allow certain items. The annexure "C" to the affidavit of Tyson Yapao filed on 01st April 2014 is the copy of the Bill of Costs with hand written notes of the figures allowed by the Taxing Officer.

20. Time sheets were the major issue and none was provided at the taxation hearing to justify the allowances made. In the case of Tolom Abai & Others v. State (1998) N1762, the National Court in reviewing the Taxing Officer's decision stated:

"The objections to the 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 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 evident would be guilty of negligence and clearly in error."

21. In the appeal Tolom Abai & Ors v. State (supra), the Supreme Court agreed with the National Court that a lawyer is required to keep a record of time spent on a case and details of work done. The Supreme Court said:

"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 4 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 lawyers. The lawyer here admits that she did not keep diary entries to 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 been exact'. A taxing officer who allowed amounts for time claimed when there was no supporting material would be negligent and clearly in error."

22. The respondent submits there is clearly an error by the Taxing Officer in allowing the items objected to without being shown written records of work done by way of time sheets, diary notes etc. In Hii Luke v. Richard Maribu (supra), the Supreme Court stated:

"It is also well established principle that the Taxing Officer has a very wide discretion to assess costs. Usually, the Court will not interfere with the exercise of that discretion except in cases where the Taxing Officer acted on wrong or mistaken principle. The exercise of discretion on quantum of costs power each time of costs or the global amount for all items is almost non-renewable except in very exceptional circumstances, such as where the discretion was exercised in a manner that was manifestly wrong or the amount allowed or disallowed is exorbitant."

23. The respondent submits case authorities establish that the Court can interfere with the exercise of discretion by the Taxing Officer if there is an error or the exercise of discretion was wrong. In this case, the Taxing Officer had made allowances on certain items objected to (shown in the table below) without the appellant's lawyers showing any evidence of timesheets to verify work done. This is clearly wrong as was held by the Supreme Court in Tolom Abai & Ors v. State (supra).

24. The grounds of objection are set out in the table in the affidavit in response of Tyson Yapao filed on 20th May 2014. These were also the grounds of objection before the Taxing Officer and were overruled:

25. Firstly, the appellant submits the respondent does not dispute the sum of K18,048.00 as disbursement in Item 6. It objects on the basis that it has taken his lawyers more time to prepare the appeal book. The appellant submits this submission should be rejected because from 100 hours, the Taxing Officer reduced it to 50 hours. It is unrealistic to further reduce the time spent to 5 hours because if that were to be the case, it would not truly represent the amount of time and work involved in preparing a 750 page appeal book.

26. He submits for Item 15 and Item 16, time was spent by his lawyers to review the transcript of the National Court proceedings to confirm that he prosecuted the claim in person in the National Court. His lawyers also had to read through the documents to understand the nature and basis of the claim to prepare the appeal.

27. For Item 18, time of 200 hours claimed was reduced by the Taxing Officer to 60 hours. This was a significant reduction of time given that this was a wrongful dismissal claim and time had to be spent on researching the law, case authorities and drafting written submission for the appeal. No further reduction should be made. For Item 68, 100 hours was spent on numerous attendances between the lawyers and the appellant to clarify the proceedings and documents filed in the National Court.

28. For Item 69, recovery of costs was sought for expenses incurred to prosecute the claim in the National Court. Costs were for travel and accommodation including a loan to pay for lawyers' legal costs. The amount was readjusted from K76,469.25 to K55,871.22. Further, a total of 20 hours was spent on attendance at the National Court Registry to obtain court documents and transcript of the proceedings caused by delays in the documents being unavailable in time. The Taxing Officer reduced the time to 10 hours. There should not be further reduction. Item 72 is for costs incurred in preparing the bill of costs and attending on taxation. It was agreed between parties to reduce 40 hours of work to 20 hours. The amount of K7,040.00 should be allowed.

Assessment of Costs

29. An important piece of evidence missing in this case is time sheets or record of time spent on work per item in prosecuting the appeal. It is the duty of the appellant's lawyers to keep a proper record of the time spent on work done for the appellant. A time sheet is a record of the type of work done by the lawyer and the time spent on the work by the lawyer. It will verify the lawyers claim for costs. In the absence of time sheets, it is difficult to confirm the costs claimed in each item of the bill of costs. This was the reason the Supreme Court in Tolom Abai & Ors v. State (supra) insisted on time sheets to be produced on taxation. In a case where time sheets are missing, it will be up to the Court to make a conservative assessment of the costs based on, amongst others, the nature of work, complexity of the case and experience of the lawyer: Order 12, rule 21 of the Supreme Court Rules.

30. One other consideration is the costs must be necessarily and reasonably incurred. Any costs incurred outside these criteria should be rejected or disallowed: Order 12, rule 30(1) of the Supreme Court Rules. The overriding consideration is the costs must not be exorbitant. It must be reasonable.

31. Applying these criteria to this case, I address the objection as follows:

• Item 1 – Drafting application for leave to appeal.
  

The Taxing Officer allowed K1,168.00. The costs were incurred improperly by the appellant: Order 12, rule 30(1) of the Supreme Court Rules. The correct form to appeal was a notice of appeal and the lawyers should have properly determined whether leave was required to appeal in the first instance. The objection is upheld. K1,168.00 is disallowed.

• Item 2 – Drafting and engrossing notice of discontinuance of application for leave to appeal.
  

The Taxing Officer allowed K336.00. The costs were incurred improperly by the appellant: Order 12, rule 30(1) of the Supreme Court Rules. The correct form to appeal was a notice of appeal. The filing of the application for leave to appeal was the fault of the appellant's lawyers and the respondent should not bear the costs of its discontinuance. The objection is upheld. K336.00 is disallowed.

• Item 6 – Preparation of the Appeal Book (750 pages).
  

The Taxing Officer allowed K18,048.00 based on 100 hours of work. Given that there are no time sheets to verify the appellant's assertion of 100 hours spent on this activity and that the appellant is unable to point out which documents were not in order to justify the claim of 100 hours, I uphold the objection. The other reason is that the appeal book should contain the base documents such as the writ of summons, decision and order of the National Court, affidavits and transcripts of the proceedings. Locating and putting these documents together for the appeal book should not take many hours of work. The assertion that the documents could not be retrieved quickly because they were at Kokopo National Court Registry must be rejected because the appellant should have copies and should have provided them to the lawyers. Further, the appellant's lawyers have been in practice for a long time now and should have been able to identify these documents without much difficulty. All up, I agree with the respondent that the work should take about 10 hours. I uphold the objection. From K18,048.00, I disallow K8,048.00 and allow K10,000.00.

• Item 15 – Perusal of Transcript of National Court proceedings (414 pages).
  

The Taxing Officer allowed K9,000.00 based on 20 hours of work. Again, there are no time sheets to verify the appellant's assertion of 20 hours spent on this activity. Perusing transcripts should be confined to the trial (evidence of witnesses and final submissions of parties) and the decision. Unless interlocutory rulings are part of the appeal, transcripts of proceedings relating to them are not relevant. There is no suggestion that interlocutory rulings were part of the appeal in this case. Again, the appellant's lawyers are experienced lawyers and should have been able to understand the basis of the claim and the reasons of the Court's decision. The time spent on these activities would not have taken more than 5 hours. For these reasons, I uphold the objection. From K9,000.00, K6,750.00 is disallowed and K2,250.00 is allowed.

• Item 16 – Perusal of Court documents and Transcript of National Court proceedings into Appeal Book.
  

The Taxing Officer allowed K22,500.00 based on 50 hours of work. I agree with the respondent that this Item is a duplication of Item 6 and Item 15 (above). I uphold the objection. K22,500.00 is disallowed.

• Item 18 – Researching case authorities for use in extract of submission in support of case including write up.
  

The Taxing Officer allowed K27,000.00 based on 60 hours of work. Again, there are no time sheets to verify the appellant's assertion of 60 hours spent on this activity. A perusal of the written decision of the Supreme Court shows that the appellant's claim in the National Court was for breach of contract of employment and damages. He alleged he was not accorded a right to be heard prior to his dismissal by the respondent. The claim was dismissed. On appeal, the Supreme Court in a majority decision upheld the appeal, entered judgment on liability and remitted it for trial on assessment of damages. The claim is common in employment setting cases. The numerous decided cases identified by the lawyers in their research is a confirmation of the increasing number of reported cases coming before the Court. The lawyers should have used them as point of reference to prepare the appeal. It boils down to whether the employee is entitled to notice and damages that follow from the breach. Again, the appellant's lawyers are experienced lawyers and should have been able to determine the nature and basis of the case including the reasons of the Court's decision. I agree with the respondent that the work should not take more than 5 hours. For these reasons, I uphold the objection and from K27,000.00, I disallow K18,000.00 and allow K9,000.00.

• Item 68 – Telephone conference and attendances by lawyer.
  

The Taxing Officer allowed K13,500.00 based on 100 hours of work. For the same reason given above, there are no time sheets to substantiate the sum allowed. The type of attendances described by the appellant seems like a duplication of activities in Items 15, Item 16 and Item 18. In any case, if the attendances were for receiving initial instructions, if the perusal of the documents including the reasons of the Court's decision and researching the relevant law and case authorities were in preparation of instituting an appeal against the decision of the National Court, these activities should not take more than 20 hours. As noted above, the claim is common in employment setting cases and having received the initial instructions (information about the background of the claim) the lawyers should have been able to assess the chances of success in the Supreme Court without much difficulty. Furthermore, they should have been able to determine which documents were relevant for the purpose of the appeal. For these reasons, I uphold the objection. From K13,500.00, I disallow K3,500.00 and allow K10,000.00.

• Item 69 – Client expenses.
  

The Taxing Officer allowed K55,871.22 (not K60,371.22) as per adjustment by appellant's consent as client expenses. I agree with the respondent that the costs for this Item are not recoverable because they are not directly related to the appeal. In any case, Order 12 on costs and particularly, the Fourth Schedule make no provision for recovery of what the appellant describes as "client expenses". It is not stated that these expenses are disbursements and claimed under Order 12, rule 20 of the Supreme Court Rules. The appellant says these were costs necessarily and reasonably incurred to prosecute the appeal and should be paid by the respondent. In my view, costs other than disbursement such as client expenses are not covered in the Fourth Schedule of the Rules so there was no basis for the Taxing Officer to allow these costs. For these reasons, I uphold the objection. K55,871.22 is disallowed.

• Item 72 – Preparation of bill of costs and attendance at taxation hearing.
  

The Taxing Officer allowed K7,040.00. Order 12, rule 35(9) of the Supreme Court Rules provides if, on taxation of any costs, one-sixth or more of the amount is taxed off, the lawyer whose bill it is, shall not be allowed fees for preparing and attending on taxation. This rule is commonly referred to as the "one-sixth rule". In this case, one-sixth of the total bill of K401,653.20 is K66,942.20. The sum of K184,665.19 was taxed off by the Taxing Officer. Even though parties may have agreed to allow the costs, the sum taxed off is more than one-sixth of the total bill and the costs of taxation should have been disallowed. The Taxing Officer erred. The sum of K7,040.00 is, therefore, disallowed.

Conclusion

32. The total sum disallowed is K123,213.22. Deduct this sum from the total sum of K216,848.74 allowed by the Taxing Officer, the balance is K93,635.52. I allow this sum.

Order

33. The orders are:

1. The application for review is upheld.

2. The decision of the Taxing Officer to allow costs of K216,848.74 dated 18th March 2014 is quashed.

3. The total costs allowed is the sum of K93,635.52, to be paid by the respondent.

4. Each party shall pay their own costs of the review.

5. Time shall be abridged.

_______________________________________________________________

Stevens Lawyers: Lawyers for the Appellant
Allens Lawyers: Lawyers for the Respondent