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Kingdom of Tonga v Allianz Australia Insurance Ltd [2006] TOLawRp 5; [2006] Tonga LR 69 (17 February 2006)

IN THE SUPREME COURT OF TONGA

Kingdom of Tonga anor

v

Allianz Australia Insurance Ltd

Supreme Court, Nuku'alofa
Ford J
CV 723/2003

25 May, 8 July, 19 July, 27 October, 30 October, 1 November, 23 November, 29 November, 21 December 2005 and 1 February 2006; 17 February 2006

Costs – reasonably necessary for attainment of justice – hourly rate $400 allowed in full

The defendant was successful in a claim under a marine insurance policy where the issue before the court had been whether the plaintiffs' vessel was insured at the time it was damaged in a cyclone. The three-day hearing was confined to the issue of liability only. Issues then arose over the defendant's entitlement to costs and disbursements. The plaintiffs challenged the defendant's New Zealand counsel's charge out rate of TOP400 per hour which was higher than the amount allowed on taxation to Tongan senior counsel and submitted that approval should have been given to that rate prior to the commencement of the trial. There was also a challenge to the amount claimed for witnesses' travel expenses and to a claim for fees incurred by the defendant's Australian solicitors.

Held:

1. The overriding consideration under Order 29 Rule 4 (1)(ii) of the Supreme Court Rules 1991 (O.47 Rule 2(1) of the Supreme Court Rules 2007) was that the costs, charges and expenses to be allowed to a party in civil proceedings were those that were reasonably necessary or proper for the attainment of justice or for defending the rights of the defendant. There was no element of surprise or prejudice associated with the hourly rate claim of TOP400 and it was allowed.

2. The claim for overseas witnesses' travel expenses and other disbursements was allowed in full.

3. Overseas solicitor's costs are recoverable on taxation in Tonga if the solicitors were effectively acting as agents for the lawyer on the record who, in turn, was admitted and certified to practise law in Tonga.

Cases considered:

Gough Finance Ltd v Westpac Bank of Tonga [2005] TOSC 29

Taimi o Tonga Ruling on Costs [2004] TOSC 22

Yanuca Island Ltd v Markham (Court of Appeal, Fiji, Civil Appeal No AB U0092, 11 November 2005)

Statutes considered:

Law Practitioners Act 1989

Legal Practitioners Act 1997 (Fiji)

Rules considered:

Supreme Court Rules 1991

Counsel for plaintiff: Mr Stanton and Mr Afeaki
Counsel for defendant: Dr Harrison QC

Ruling on costs

In a judgment dated 25 February 2005, following a three-day hearing, I held that the plaintiffs had failed in their substantive claim and I awarded costs to the defendant to be agreed or taxed. An appeal was then foreshadowed but that was withdrawn on 6 May 2005. There was no agreement reached as to costs.

The defendant's bill of costs was filed for taxation on 25 May 2005 accompanied by a helpful memorandum from counsel. Leave was sought and granted for the bill of costs to be filed out of time. A number of issues arose in connection with the taxation exercise. I do not intend to refer to them all in this ruling but I acknowledge that the matter has taken longer to dispose of than the court would otherwise have wished. The delay is regretted.

The relevant facts in the substantive action were that the plaintiffs' vessel, the M V "Olovaha", ran aground in Tonga and was seriously damaged during a cyclone on the night of 15 January 2003. The issue before the court was whether, at the time it sustained the damage, the vessel was insured with the Sydney-based defendant underwriters. The plaintiff claimed damages in the sum of T$1,745,327.00 but the hearing was, by agreement, confined to liability issues.

The bill of costs submitted by counsel for the defendant was for a total amount of T$72,922.77 made up as follows:

Counsel's fees -- 113 hours 45 minutes @ T$400 per hour: $45,500.00

Australian solicitor's fees (Withnell Hetherington) -- 39.6 hours @ T$300 per hour: $11,880.00

The fee claimed on taxation by Dr Harrison of T$40,000.00 can be compared to the actual fee he charged out to the defendant which is shown in two invoices before the court as NZ$74,000.00 together with disbursements. The bill of costs submitted for taxation is supported by computer printouts and detailed costs breakdowns all of which, for taxation purposes, I accept.

The first challenge made by the plaintiffs is to Dr Harrison's charge out rate of T$400 per hour which, they note, is higher than the usual scale for senior counsel in Tonga. Plaintiffs' counsel acknowledges that Practice Direction No. 2 of 1992 specifically allows a Judge "on special cause shown" to increase the scale rates to such amount as he sees fit but it was submitted that application for such increase should have been made prior to the commencement of the trial. Reliance in this regard was made on the following statement from the judgment of Ward CJ in the Lali Media case - Taimi o Tonga Ruling on Costs [2004] TOSC 22, 24:

"Counsel are reminded that, if they wish to claim their costs following a successful outcome at other than the usual rates in Tonga, application should be made to the court to certify it is an appropriate case. Such application should normally be made before the case is heard and failure to do so may result in the costs being awarded on the normal scale for Tonga."

In response, counsel for the defendant stressed that the Chief Justice had used the word "normally" and he submitted that there was no rule of law covering the timing of an application to certify and that, in any event, the overall consideration must be the justice of the particular case.

I accept the submissions advanced on this issue by counsel for the defendant subject, of course, to the overriding consideration spelt out in Order 29 rule 4(1)(ii) of the Supreme Court Rules 1991 that the costs, charges and expenses to be allowed to a party in civil proceedings are those that are reasonably necessary or proper for the attainment of justice or for defending the rights of the defendant. There was no element of surprise or prejudice associated with the submission of Dr Harrison's bill of costs. The plaintiffs were keenly aware from the very outset of the proceedings that Dr Harrison was acting and that he would be appearing at the trial on behalf of the defendant.

At the time of the Lali Media hearing in March 2003, Dr Harrison, who appeared for the plaintiff in that litigation, had a charge out rate in New Zealand of NZ$450 per hour. Upon taxation, the then Chief Justice held that it was reasonable to allow Dr Harrison's counsel fee for the hearing in Tonga in the amount of T$350 per hour.

In the present case, Dr Harrison advised the court that his current charge out rate in New Zealand varies, according to the circumstances, between NZ$450 and NZ$550 per hour. His claim for taxation purposes is based on an hourly rate of T$400 which, at the exchange rate operating at the date of his submissions, equated to NZ$283 per hour. It is not altogether clear, but if the NZ$74,000.00 figure which Dr Harrison actually charged out to the defendants is in respect of the same 113.75 hours claimed in the bill for taxation, then counsel's actual charge out rate in the instant case would have been NZ$650 per hour. The discount counsel has made in the bill tended for taxation, therefore, is considerable.

In the particular circumstances of this case, I accept the reasonableness of the T$400 per hour figure in relation to Dr Harrison's fees. Although my determination of the substantive action, in the end, involved relatively straightforward issues that outcome was by no means always obvious. Defence counsel in his submissions on costs, referred to the plaintiffs' "confusing and discursive approach to pleading in a number of different documents" and to the "unnecessarily complicated scope of the plaintiffs' oral and documentary evidence which lengthened the trial and added substantially to the defendant's preparation time." Those observations do not overstate the position. As defence counsel summed it up:

"The defendant was put to wholly unnecessary expense because the plaintiffs' chose to make a simple case immensely complicated and prolonged."

I accept that in all the circumstances the defendant acted reasonably and properly in instructing senior counsel from overseas to act on its behalf. For his part, Dr Harrison has made an appropriate and significant reduction for taxation purposes not only in his charge out rate but also in relation to the actual bill of costs he submitted to the defendant. I consider those concessions to be fair and appropriate and I have no difficulty in concluding that the claim in respect of Dr Harrison's fee should be allowed in full.

I turn now to disbursements. The plaintiffs' opposition to the defendant's claim to disbursements is expressed in tentative terms. Counsel's opposition appears to be confined to witnesses' travel expenses. In response, Dr Harrison submitted:

"If a Tongan plaintiff chooses to sue an overseas entity in the courts of Tonga, about matters largely transacted overseas, it is inevitable that witnesses will have to travel Tonga to give evidence in order that the defendant can adequately prosecute its defence. If anything, payment by the unsuccessful party of the travelling expenses of witnesses, as a disbursement legitimately incurred by the successful party, is an a fortiore case."

I do not see any substance in the plaintiffs' objection to the claim for witnesses' travel expenses. They, and the claim for other disbursements, are allowed in full.

Finally, there are the fees incurred by the defendant's Australian solicitors, Withnell Hetherington. This item has proved to be the most contentious claim. Plaintiffs' counsel told the Court that he had been instructed to oppose the claim in its entirety.

The plaintiffs' initial objection was twofold. First, they submitted that many of the Withnell Hetherington attendances appear to be "client/counsel costs as opposed to party/party attendances." Secondly, they submitted, without adducing any evidence on the subject, that "as large International underwriters" the defendant would "have in-house legal experts" and therefore "only backup advice from outsourced legal counsel" would be required.

In response, the defendant denied that "client/counsel costs" were being claimed. Dr Harrison highlighted the fact that the actual costs charged out to the defendant by Withnell Hetherington were substantially higher than those claimed upon taxation. In relation to the plaintiffs' second objection, Dr Harrison told the court that so far as he was aware, the defendant did not have any in-house legal experts. He went on to say that even if it did, it would still have been entitled to consult an Australian firm of solicitors after being served with the writ.

Withnell Hetherington's invoices to the defendant are before the court. They detail with precision all the attendances and time units involved and include particulars of hourly rates and the respective authors. Excluding disbursements, the invoices total A$13,860.00 which, using the conversion rate applicable at the date of counsel's submissions, equated to T$20,097.00. The amount claimed for the Australian solicitors fees upon taxation is T$11,880.00 which is a considerable discount.

I accept that it was appropriate for the Australian solicitors to be instructed and, in the absence of any challenge to the specific attendances detailed in the various invoices, I accept that the amount claimed is reasonable.

That is not the end of the matter, however. Whilst Dr Harrison holds a current practising certificate under the Law Practitioners Act 1989, the Australian solicitors are not licensed to practise law in the Kingdom. Section 12 of the Law Practitioners Act 1989 provides that only a "law practitioner" is entitled to sue for or recover costs and the term "law practitioner" is defined in sections 2 and 3 of the Act as a person who is registered on the Role of Law Practitioners in the Kingdom of Tonga and holds a valid practising certificate. Section 10 of the Act makes it an offence to practise as a law practitioner without holding a valid practising certificate.

Counsel's attention was drawn to the recent decision of this court in Gough Finance Ltd v Westpac Bank of Tonga [2005] TOSC 29, where it was held that overseas based solicitors who were not licensed to practise law in Tonga could not recover costs upon taxation in this country. A similar conclusion was reached more recently by the Fiji Court of Appeal in Yanuca Island Ltd v Markham (unreported) Civil Appeal No. AB U0092 (judgment dated 11 November 2005).

In Yanuca the relevant legislation -- section 52 of the (Fiji) Legal Practitioners Act No.19 of 1997, stated that "a person shall not, unless that person is the holder of a current practising certificate, practice or act as a legal practitioner of Fiji." The trial Judge had upheld a claim for costs by the plaintiff's Sydney-based solicitors upon the grounds that, although they had not held current Fiji practising certificates, they had, at the material time, been acting as agents for the Fiji lawyers on the record. The Court of Appeal upheld that approach.

Dr Harrison sought to place a different interpretation on section 12 of the Law Practitioners Act than the literal meaning applied in Gough but I have not been persuaded that the approach adopted by the court in that case was wrong. However, the court in Gough did go on to say:

"The relevant question to be considered at any taxation hearing, therefore, is whether the law practitioner whose name is on the bill of costs i.e. the person who will receive the payment, is admitted and certified to practise in Tonga."

In the present case, I am prepared to accept that in relation to the proportion of the Sydney solicitor's costs claimed on taxation, the firm was effectively acting as agents for the lawyer on the record who, in turn, was admitted and certified to practise law in Tonga. In terms of the above quotation from Gough, the law practitioner whose name appears on the bill of costs submitted for taxation is Dr Harrison. In these circumstances, I am satisfied that the case can be distinguished on the facts from Gough. I, therefore, uphold the claim in respect of the Australian solicitor's fees.

In summary, the defendant has succeeded and is awarded costs and disbursements in terms of the amounts claimed upon taxation. The total of the award is certified in the sum of T$72,922.67.