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James Shipping Line Ltd v Commissioner of Inland Revenue [2024] SBHC 136; HCSI-CC 208 of 2020 (8 October 2024)

HIGH COURT OF SOLOMON ISLANDS

IN THE HIGH COURT OF SOLOMON ISLANDS
CIVIL JURISDICTION

Civil Case No. 208 of 2020

BETWEEN

JAMES SHIPPING LINE LIMITED
Appellant

AND:

COMMISSIONER OF INLAND REVENUE
Respondent

Civil Case No. 209 of 2020

BETWEEN

JAMES SHIPPING LINE LIMITED
Appellant

AND:

COMMISSIONER OF INLAND REVENUE
Respondent

Date of Hearing: 11 September 2024
Date of Decision: 8 October 2024

Mr J Sullivan KC and Mr R Kingmele for the Appellant
Ms F Fakarii for the Respondent

RULING ON COST

1. On 24 June 2024 the Court delivered a ruling on the substantive appeals, being appeals filed following the Respondent disallowing the Appellant’s objections to assessments of tax. In allowing the appeals the Court made an order that the costs of the Appellant are to be paid by the Respondent certified for King’s Counsel.
2. The Appellant has applied for costs to be paid at an increased rate. The Appellant submitted that costs should be allowed at four times the rate set out in Schedule 3 of the Solomon Islands Courts (Civil Procedure) Rules 2007 [‘the rules’].
3. Rule 24.1 provides that the Court has a discretion in deciding whether, when and how to award costs. Rule 24.2 provides that subject to the Court’s discretion costs are payable by the party who is not successful in the proceeding or part of the proceeding.
4. Rule 24.4 provides:
   • “24.4.The court may order that:
   • (a) one party pay all the other party’s costs; or
   • (b) one party pay only some of the other party’s costs, either:
   • (c) a specific proportion of the other party’s costs; or
   • (d) the costs of a specific part of the proceeding; or
   • (e) the costs from or up to a specific day; or
   • (f) the parties pay their own costs.”
5. A fall-back position is provided for in rule 24.5 which provides:

“24.5 Unless the court otherwise orders, or the court refers the costs for assessment by a High Court registrar under 24.13, a party entitled to costs in a proceeding is entitled to:

(a) costs in accordance with Schedule 3: and
(b) disbursements properly incurred.”

6. Rule 24.10 provides that costs are normally awarded on a standard basis unless the Court orders the costs are to be on an indemnity basis. What then is the standard basis? The answer lies in rule 24.8 which provides:

“24.8 Costs awarded on a standard basis (formerly known as a party and party basis) are all costs necessary for the proper conduct of the proceeding and proportionate to the matters involved in the proceeding.”

7. While the rules do not provide that costs on the standard basis shall be in accordance with Schedule 3 rule 24.13 provides:
   • “24.13 If the court has not made an order for costs against a party on an indemnity basis, but is satisfied there is a reason why costs should not be in accordance with Schedule 3, the court may:
   • (aa) set the amount of costs, or
   • (bb) set the method by which the costs are to be calculated; or

if the proceedings are in the High Court, refer the costs for assessment by the registrar; and

(a) set a time for the payment of costs,

Otherwise standard costs shall be in accordance with Schedule 3 and the party entitled to such costs may apply for costs to be fixed in accordance with Schedule 3 either orally at the time of the giving of the judgment or by written application at a later time.”

8. The Respondent submitted that costs should be in accordance with Schedule 3 and referred the Court to the decision of Interreligious and International Federation of World Peace v Hocking Construction and Joinery Ltd [2012] SBHC 16. At paragraph [8] the Court said:
   • “8. The position with regard to costs would therefore seem to be the court can either order a losing party to pay costs assessed on a standard basis or on an indemnity basis. However Rule 24.13 makes it quite clear that they are not the only options available in the High Court. If the High Court does not order assessment on an indemnity basis it can fix an amount of costs which should be paid; or direct how the costs are to be calculated; or refer the assessment of costs to the Registrar and the court can also set the time by which costs are to be paid. The remainder of Rule 24.13 removes any doubt. If costs are not ordered to be assessed on an indemnity basis or on a standard basis, the amount of costs that can be ordered to be paid are not limited to those costs fixed by Schedule 3 to the Rules. Put another way, amounts greater than those set out in Schedule 3 can be ordered to be paid by the party liable to pay costs. What is also apparent from Rule 24.13 is if the court orders assessment of costs by the Registrar then the Registrar has discretion to award costs in excess of those set out in Schedule 3. Both the court and the Registrar must take into account the considerations set out in Rules 24.36, 24.37 and 24.38 but can otherwise they can exercise their discretion.”
9. Finally rule 24.12 makes provision for some or all of a party’s costs to be paid on an increased or indemnity basis. That rule provides:
   • “24.12 The court may also order some or all of a party’s costs be paid on an increased or indemnity basis if:
   • (a) the other party deliberately or without good cause prolonged the proceeding; or
   • (b) the other party brought the proceeding in circumstances or at a time that amounted to a misuse of the litigation process; or
   • (c) the other party otherwise deliberately or without good cause engaged in conduct that resulted in increased costs; or
   • (d) in other circumstances (including an offer to settle made and not accepted) if the court thinks it appropriate.
10. Mr Sullivan KC of counsel for the Appellant has set out in detail why costs should be greater than as set out in Schedule 3. He has sought $25,353.50 for disbursements and costs fixed at four times the amount provided for in Schedule 3, making a total of $452,153.50. He submitted there are a number of relevant circumstances to justify this claim, including the fact that Schedule 3 costs equate to less than 5% of solicitor and client costs.
11. The appeals were from assessments made by the Respondent. Ordinarily an award of costs following a successful appeal would also provide for the costs to include the costs in the Court below. In this case as there was not a Court below as the appeals were from the Respondent’s assessments. The Appellant necessarily incurred costs in objecting to the assessment of the Commissioner. Those costs are not part of this litigation and no claim can be made to recover such costs. The effect of this is that a successful appellant has incurred costs that cannot be recovered as they would be able to if the case had been an appeal from a lower Court.
12. I accept that the costs of preparing the appeal involved reviewing thousands of pages of documents which resulted in samples being put before the Court which were annexed to the sworn statements of two deponents. The sworn statement of Jianni Reyno T Jabajab comprised 245 pages, while the sworn statement of Lee Junsueng comprised 316 pages.
13. While the costs of having a certified interpreter translate those documents can be recovered as disbursements, the time commitment of counsel was necessarily greatly increased because of the need to engage an interpreter to assist counsel.
14. Mr Sullivan KC submitted that much of this expense could have been avoided had the Respondent agreed to facts that were proposed as ‘agreed facts’ rather than putting the Appellant to proof and not challenging such evidence, once it was put before the Court. At the appeal then the facts set out were not challenged. Similarly the Respondent did not place evidence before the Court but argued the matter on points of law only.
15. The Appellant was required to prepare the Appeal Book which comprised two volumes of nearly 700 pages. Schedule 3 makes no allowance for the time engaged in this process.
16. The Appellant also relied on the delays in having the appeals dealt with. The assessments were served on 14 March 2019. Objections were lodged by 2 May 2019. It has not been explained why the objections were not determined until 19 March 2020 (more than 10 months after the objections were lodged). I take judicial notice that in March 2020 there were concerns about the effects of COVID-19 and that from the start of April 2020 until May 2020 the Courts were shut down. However the appeals were filed on 12 May 2020.
17. On 19 March 2021 the Court had ordered discovery to be completed by 30 April 2021 but the Respondent did not comply with that order. By the time of a direction hearing on 2 September 2021 the Respondent has still not complied even though he had received the Appellant’s sworn disclosure statement almost five months earlier. On 2 September 2021 counsel for the Respondent agreed to file the disclosure statement by 22 September 2021 and was ordered to do so. The Court further ordered that if the Respondent was in default of filing and serving the disclosure statement by 22 September 2021 judgment would be entered for the Appellant and the objections to the assessments would be allowed and the assessments for each of the periods October to December 2017 and January to December 2018 would be set aside and the Respondent would pay the Appellant’s costs of and incidental to the appeal.
18. The Respondent filed a statement of disclosure listing only 20 documents in Part One of the First Schedule. As the statement of disclosure for the Appellant had identified 1170 documents in Part One of the First Schedule, the Respondent’s list was clearly incomplete making the sworn statement misleading. On 7 October 2021 the Court ordered the Respondent to file and serve a final list of disclosure under oath by 21 October 2021.
19. By 17 March 2022 the Court made a further order requiring disclosure of identified documents including all internal working papers, emails and diary notes relating to the matter and a further ‘unless’ order was made. Disclosure was eventually provided by the Respondent on 6 April 2022. These delays have been set out to illustrate the attitude of the Respondent to his obligations to the Court and to the Appellant.
20. I have noted that had the Commissioner agreed to facts that at the appeal were not challenged the appeal could have been heard much earlier at a much reduced cost for all involved. He did not do so.
22. I am advised that solicitor/client costs for the Appellant exceeded SBD 2 million which is understandable given the amount of material involved. Counsel for the Appellant, as an aside, pointed out that the sales tax paid to the Respondent being tax on the Appellant’s legal bill to bring the appeal was $200,000.00.
23. The Respondent accepts that the Court has a discretion in determining costs for the appeals. However Ms Fakarii for the Respondent argued that the effort put in by the Appellant to argue the appeals should not be a ground for an increase in costs. The basis for this submission was that in order to arrive at an agreed issue of law counsel would need to have agreed on facts to their satisfaction. Counsel submitted that the evidence adduced by the Appellant allowed the parties to reach a concession to argue on a point of law. In order to do so, much consideration had to be given to the material set out in the sworn statements provided by the Appellant. It was submitted much of the material was referred to during the hearing. The flaw to this argument was that the information was already before the Commissioner in the detailed submissions the Respondent had received in objecting to the assessments. Any further material that could assist in arriving at agreed facts could have been sought. The submission is also odd in light on rule 24.8 that standard costs are all costs necessary for the proper conduct of the proceeding proportionate to the matters involved in the proceeding.
24. Counsel for the Respondent further pointed out that the issue of law was novel and important for the tax laws of Solomon Islands and was of public interest. Ms Fakarii submitted that the issue required the Court’s interpretation of the legislation which will influence reforms and guide future taxation transactions, and important revenue mechanism for the State. These are really arguments that would justify an increase in costs in terms of rule 24.8. Why the Appellant should bear the expense has not been explained.
25. So far as delay in the Court proceedings is concerned Ms Fakarii submitted that the delay was not entirely the fault of the Respondent, as it depended on Court schedules and changes of counsel in the Attorney General’s Chambers and time for the Appellant to prepare documentation.
26. Having considered the submissions of counsel I consider that preparation for these appeals required an unusually large amount of time. Careful consideration of statutory interpretation was required. A very high level of skill labour and responsibility was shown by the Appellant’s legal representatives in a complex and what is acknowledged was on a novel question of law. SBD11million was involved in the two appeals and I accept that the level of expertise and the quality of work was appropriate to the nature of the proceedings. Given the way the appeal was argued I am surprised that the parties could not have agreed on the points of law to be argued. This is especially so when on the material before me the Appellant had sought to deal with the matter on this basis seeking an agreement on facts and issues yet no such agreement was initially forthcoming.
27. I find as a fact that the Respondent in repeatedly failing to comply with orders for disclosure without good cause did prolong the proceedings. Had the Respondent given proper consideration of the facts the appeals could have been determined on the points of law at a much earlier date. Counsel may have been hampered by the lack of material provided by the Respondent as is apparent from the delay in providing adequate discovery. That is the fault of the Respondent not the Appellant. Be that as it may, I find that in the circumstances outlined the costs necessary for the proper conduct of the proceedings were much greater that is provided in Schedule 3. The Appellant has sought a figure four times that provided in Schedule 3. I find that the costs sought are no more than were necessary for the proper conduct of the proceedings.
28. I regard the present case as an exceptional case peculiar to its circumstances and not one that should be used to justify an increase in other cases. It is not for this Court to comment on the present level of costs set out in Schedule 3 and I specifically do not do so. Having considered the comments of the Court of Appeal in the various decisions of Yam v Wong reported at [2002] SBCA 9 and [2003] SBCA 11, I have reached the conclusion that the costs sought by the Appellant being less than 20% of actual costs was necessary for the proper conduct of the appeal being in mind all the matters raised by both counsel. It is not necessary to then consider a further increase in those costs in accordance with rule 24.12(d).

Orders

1. Each appeal be allowed.
2. The Determination dated 19 March 2020 and served 20 March 2020 be set aside.
3. Both Objections lodged 2 May 2019 be allowed.
4. The Amended Assessment served 20 March 2020 be set aside.
5. The Respondent shall pay the Appellant’s costs of and incidental to both appeals with certification for King’s Counsel, fixed at a multiple of four times Schedule 3 in the sum of $426,800.00 plus outlays and disbursements in the sum of $25,353.50, the total award being $452,153.50.
6. Pursuant to rule 17.75, the Respondent shall pay interest on the said sum of $452,153.50 at the rate of 5% per annum from 26 June 2024 until payment.

By the Court
Hon. Justice Howard Lawry
Puisne Judge