Development Bank of Kiribati v Maitinnara [2015] KICA 2; Civil Appeal 02 of 2015 (19 August 2015)

IN THE KIRIBATI COURT OF APPEAL
CIVIL JURISDICTION
HELD AT BETIO
REPUBLIC OF KIRIBATI

Civil Appeal No. 2 of 2015

BETWEEN

DEVELOPMENT BANK OF KIRIBATI
APPELLANT
AND

BOTIKA MAITINNARA
RESPONDENT

Before: Paterson JA
Blanchard JA
Handley JA

Counsel: Batiwate Itibita for appellant
Banuera Berina for respondent

Date of Hearing: 15 August 2015
Date of Judgment: 19 August 2015

JUDGMENT OF THE COURT

1. This appeal from a judgment of the Chief Justice arises from a claim by the respondent, a lawyer practising in Betio, under a costs agreement dated 7 January 2011, to recover her agreed commission of 5% of "the amount recovered" in three cases in which she acted for the Bank pursuant to the costs agreement. The respondent succeeded at the trial and judgment was entered in her favour for $25,178.50 being 5% of the relevant recoveries.
   
2. The Bank defended the claim relying on a breach of Rule 41(1) of the Professional Conduct and Practice (Kiribati Lawyers) Rules 2011 which provides:
   

"A lawyer ..... must not enter into a costs agreement under which the amount payable, or any part of the amount payable, to the lawyer ..... is calculated by reference to a percentage of any judgment, settlement or monetary sum to be recovered by the client".

3. The Bank also alleged that the agreed commission was unreasonable, and that she had not done enough to earn the fee in the Onotoa case. The Bank itself had been directly involved in the negotiations which led to the settlement of that claim and the recovery of $500,000.
   
4. The claim against the Onotoa Shipping and General Services Cooperative Society Ltd (Onotoa) was for a principal debt of $505,872 together with a substantial amount for unpaid interest. At some stage during 2011, which is not revealed by the evidence, the Bank instructed the lawyer to attempt to recover the Onotoa debt. She commenced proceedings in the High Court, obtained default judgment, and was threatening to examine one of the Society's directors who was resident on Tarawa when Onotoa approached the Bank for a settlement. The lawyer was then asked to take no further action for the time being. The negotiations were successful, the Bank agreed to accept $500,000 in full satisfaction, and the Government advanced the money to enable Onotoa to pay the $500,000.
   
5. The Chief Justice had no difficulty in rejecting the Bank's claim that the agreed 5% commission was unreasonable. He also found, based on the lawyer's unchallenged evidence, that she had done enough to earn the agreed commission on this recovery. These findings were well supported by the evidence, and were clearly correct. The fact that the Bank itself had been involved in the direct negotiations which led to the settlement was no answer to the claim.
   
6. The principal argument for the Bank before the Chief Justice, and again in this Court, was that when Rule 41(1) came into force a lawyer was prohibited from charging commission on amounts recovered. The Chief Justice noted that the Rule "does not prohibit a lawyer in Kiribati from charging the client commission". This is correct because the Rule only prohibits entry into a costs agreement which provides for the payment of commission on amounts recovered. In other words, the Rule does not apply to costs agreements of this kind entered into before the Rule came into force or prohibit charging clients commission under such agreements.
   
7. The Chief Justice distinguished between a "costs" agreement and a "fees" agreement under which a lawyer was entitled to a contingency fee. We are unable to accept that there is a relevant distinction for the purposes of Rule 41(1) between a costs agreement and a fees agreement if both provide for the lawyer to be remunerated, in whole or in part, by a commission or percentage of any recovery. However this point does not assist the Bank in its appeal.
   
8. The Rules were signed by the President of the Law Society on 21 January 2011. We were provided with a copy of the Rules but neither Counsel nor the Court could identify any provision which fixed the date they came into force which was probably some time after 21 January. They were made by the Law Society under s.8 of the Kiribati Law Society Act 2006 without any requirement for the approval of the Beretitenti of the Republic or the Attorney General. They do not have the legal status of Regulations as delegated legislation made pursuant to s.25 of the Act.
   
9. The Rules appear to form part of the consensual compact between the Society and its members, and between the members inter se. If so, a breach of the Rules may not make the contract unlawful. The only consequence could be to expose the offender to disciplinary action by the Society or the Court. It would follow that a breach of Rule 41(1) would not make the relevant "costs agreement" illegal and void. The point was not argued, and the appeal can be disposed of without the need to deal with it or express any view about it.
   
10. The costs agreement of 7 January 2011 was entered into before the Rules were signed and could take effect. Accordingly it was not affected by the Rules. Rule 41(1) prohibits entry into a costs agreement of the relevant kind and, as we have already held, it does not prohibit the performance of a costs agreement entered into before the Rules came into force.
    
11. The agreement of 7 January 2011 did not bind the Bank to instruct the lawyer in any particular case or indeed in any case at all. However, if and when the Bank instructed the lawyer in a particular case the retainer would be governed by that agreement. In other words there would be two contracts, the general retainer of 7 January, and a particular retainer when the Bank instructed the lawyer in the particular case. A particular retainer governed by the general retainer would be prohibited by Rule 41(1) if entered into after the Rules came into force.
    
12. The High Court Record does not disclose when the lawyer was retained to recover the Onotoa debt. In view of the amount and its delinquent status it is likely to have been before 21 January but this is speculation. The Bank's defence based on breach of Rule 41(1) required it to prove, the onus being on it, that the Onotoa retainer was entered into after the Rules came into force.
    
13. The master agreement of 7 January 2011 was a unilateral requirements contract comprising a standing and irrevocable offer by the lawyer to accept retainers from the Bank in particular cases on the terms of the master agreement: Halsbury's Laws of England 3rd ed Contract Vol 8 para 121; Great Northern Railway Co. v Witham [1873] UKLawRpCP 60; (1873) LR 9 CP 16.
    
14. Since the master agreement was entered into before the Rules came into force, and there is no evidence that the retainer in the Onotoa case was entered into after they came into force, the Bank's appeal fails and must be dismissed with costs assessed at $500 plus disbursements (if any) to be settled by the Registrar if not agreed.
    
15. As previously indicated, it is not necessary for us to express any view on the position that would have applied if the Onotoa retainer had been entered into after the Rules came into force.
    

____________________________
Paterson JA

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Blanchard JA

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Handley JA