Umba v Koral [2008] PGDC 113; DC798 (30 October 2008)

DC 798

PAPUA NEW GUINEA
[IN THE DISTRICT COURT OF JUSTICE
SITTING IN ITS CIVIL JURISDICTION]

DCCi 198 of 2007

BETWEEN

DENNIS ANTON UMBA TRADING AS UMBA LAWYERS
Complainant

AND

THOMAS KORAL
Defendant

Goroka: M. IPANG

2007: May 24
June 13
July 12
August 03, 14, 17, 31
September 12
2008: January 08
July 03, 23
August 13, 20, 25
September 03
October 03, 14, 22, 30

CIVIL LAW- Lawyer suing for Legal fees – Conduct of parties relevant considerations – Nature of Services rendered and use of law firm letterhead – No specific instruction issued to law firm – No fee agreement – Professional Conduct Rules 1986 r. 18 (5) (c) invoked – s. 66 of the Lawyers Act, 1986 – whether any lawyer – client agreement existed – Lawyer can sue on a fee agreement provided such existed under s. 66 of Lawyers Act, 1986.

CONTRACT LAW: No Lawyers fee agreement with client – No basis of legal cause of action – Test of Equality of bargaining Power – sections 4 and 5 of Fairness of Transaction Act, 1993.

Cases Cited:

Papua New Guinea Cases

1. Jack Livinai Patterson trading as Patterson Lawyers –v- NCDC (05/10/01) N2145.
2. Dr. Florian Gubon trading as Gubon Lawyers –v- Pacific Mobile Communications Ltd
WS No. 20 of 2002 N3104.
3. Negiso Investments –v- PNGBC Ltd (26/06/03) N2439.
Overseas Cases.
1. Lloyds Bank Ltd –v- Bundy [1974] 3All 757.
2. Groom –v- Crocker [1939] 1 KB 104.

Legislation

1. Constitution of Independent State of Papua New Guinea – Schedule 212.
2. Lawyers Act, 1986 (Consolidated to No. 15 of 1997).
3. Professional Conduct Rules, 1986 (LS No. 8 of 1989).
4. Fairness of Transaction Act, 1993.

Counsels

Mr. D. Umba for D. Umba Lawyers as Complainant

Mr. K. Pilisa Lawyers for the Defendant. (Part-time Lawyers) half-way through and then Defendant defended himself.

30th October 2008

JUDGMENT

M IPANG Magistrate: Complainant Dennis Anton Umba trading as Umba Lawyers sued Defendant Thomas Koral for legal services rendered to the defendant from the time complainant was working as a lawyer with Acanufa Lawyers and through to the time complainant was practicing own his own accord under the name of Umba Lawyers. Complainant issued a Cost Memo DAU/05/07 for the sum of K3, 650.00 to the defendant, upon which defendant failed to settle which eventually led to the institution of this court proceeding.

2. Defendant Mr. Thomas Koral from the outset totally denies liability and said he has no claim to settle with Umba Lawyers, the complainant in this matter. He has maintained in his defence throughout this proceeding that he has not given any instructions to Umba Lawyers to deal with his case. He said he has given instructions to Acanufa Lawyers. Therefore, he maintained that his Bill of costs has to come from Acanufa Lawyers. Defendant said he has not engaged the services of Umba Lawyers and therefore owes no bills to settle with Umba Lawyers. In other words, defendant is saying he has no agreement or contract with Umba Lawyers to have the carriage of his matter.

3. Background History of this Case.

There are long train of events which finally leads to the conclusion and decision of this case. In order to appreciate the delay in the decision of this case, I will state in chronological order the events and the nature of proceedings.

1. Complainant filed Default Summons Upon a Complaint for a Civil Debt on the 1st of May 2007 and the case was registered and remembered as DCC No. 125 of 2007 (Refer to the copy of the Court Summons).
   
2. On the 24th of May 2007, at 9:30 am complainant has a matter before the

National Court so this matter was stood-over to 1:30 pm for mention. At 1:30 pm, both parties briefly appear. Defendant T. Koral denied the liabilities and said he has a Defence and Cross-Claim to file and serve on the complainant.

100. Matter was further adjourned to the 13th of June 2007 at 9.00 am. The Court directed defendant to file and serve the complainant with his Defence and Cross-Claim and for the complainant to file a Reply to Defendant’s Defence and Cross-Claim.
     

4. On the 14th of May 2000, Defendant filed his Defence and Cross-Claim. I have also noted that this was the same date in which defendant has filed his Notice of Intention to Defend. Then on the 29th of May 2007, complainant filed his Reply to Defence and Defence to Cross-Claim respectively.
   
5. Both parties have yet to file their respective affidavits so on the 13th June 2007 the Court further adjourned this matter to 12th of July 2007 at 9.00 am. On the 27th of June 2007, complainant filed his affidavit sworn on the 25th of June 2007 with annexures ‘A’, ‘B’, ‘B2’ and ‘C’. Annexure ‘A’ was a letter written by complainant dated 22nd of February 2007 addressed to the defendant with the subject matter. “Outstanding Cost of K1, 500.00 in cash with Petrus Alex and Alex Kavie, Annexure B1 letter addressed to defendant dated 14th of March 2007 W.S. No. 1156 of 2000 T. Koral –v- F. Puringi and P. Koke, Annexure B2 letter addressed to the defendant dated 14th of March 2007 regarding Cost Memorandum in the sum of K3, 650.00 and Annexure C was the remainder of outstanding K3, 650.00 dated 13th of April 2007.
   
6. On the 12th of July 2007, court noted that complainant has complied with the direction issued on the 13th of June 2007 that was for the both parties to file their respective affidavits by 12th of July. Defendant has not complied with this direction sighting his reason that he issued instruction to his lawyer to draw up his affidavit but his lawyer has yet to complete the task. Complainant submitted that since defendant has not complied with court’s direction and now that he seeks further adjournment, he should meet the cost of this adjournment. Court ordered defendant to meet the cost of the adjournment and further adjourned the matter to the 03rd of August 2007 at 9:00 am for further mention.
   
7. On the 3rd of August Mr. K. Pilisa from Pilisa Lawyers seek leave to represent the defendant. Complainant seeks further adjournment. Matter was then further adjourned to the 14th of August 2007 for mention at 9.00 am. On the 9th of August 2007, complainant filed an Affidavit opposing application to dismiss proceeding sworn by the Deponent Mr. D. Umba on the 8th of August 2007.
   
8. On the 14th August 2007 the Defendant’s counsel Mr. K. Pilisa from Pilisa Lawyers filed a Notice of Motion to have the substantive complaint by the complainant dismiss. This matter came before SPM Mr. M. Gauli, who heard the motion and adjourned the matter to the 17th of August 2007 at 9:30 am for his ruling. On the 17th of August 2007 His Worship Mr. M. Gauli over-ruled defendant’s application and ordered that the matter proceed to substantive trial on the 31st of August 2007 at 9:30 am.
   
9. On the 31st of August 2007 at 9:30 am, Complainant Mr. D. Umba appears. Defendant and his Lawyer Mr. K. Pilisa showed nil appearances. Complainant applies for a new trial date to be allocated. Court allocated 12th September 2007 at 9.00 am as the new trial date. Complainant under took to inform the Defence Counsel of the new trial date.
   
10. At 9:00 am on the 12th of September 2007, complainant appears and both the defendant and his lawyer showed no appearances. Matter was stood-over to 1.30 pm. At 1.30 pm, defendant and his lawyer still did not appear and no reason for non-appearances was given. The complainant applied to have the matter proceed to ex-parte determination on the basis that both the defendant and his lawyer were well aware that this matter has been set down for trial today. Court granted complainant’s application and matter proceeded ex-parte. Complainant D. Umba gave a sworn evidence and tendered his sworn affidavit and annexures. Court granted the Ex-parte Order dated 12th of September 2007 in favor of the complainant.
    
11. After the formal Ex-parte order was filed, Warrant for Execution dated 22nd October 2007 was filed. Defendant then filed an application to set-aside ex-parte order dated 12th September 2007. After hearing submissions from Mr. Bino from Pilisa Lawyers and the complainant, the matter was adjourned to the 08th of January 2008 for ruling. On the 8th of January 2008, I upheld Defendant’s application and set aside Ex-parte Order dated 12th of September 2007 and set the matter for fresh hearing on the 5th of February 2008 before Magistrate Frank Manue.
    

50. On the 05th of February 2008 the matter was not mentioned before Magistrate F. Manue. On the 13th of February 2008 at 9.00 am came before Magistrate F. Manue. Both parties were present. This time, Pilisa Lawyers did not make appearance for the defendant. Magistrate Manue adjourned the matter to the 29th of May 2008 at 1.30 pm for trial. On this date the complainant by his letter of 25th May 2008 seek further adjournment. Defendant has no objections. Matter was further adjourned for trial on the 25th of June 2008 at 1.30 pm.
    

13. When the complaint was put to the defendant on the 25th of June 2008, he denied liabilities. The complainant then sought directions from the court as to whether he will have to repeat the same evidence he gave during the ex-parte proceeding on the 12th of September 2007. Magistrate F. Manue consulted me and both of us agreed that I will take carriage of this matter. Matter was then adjourned to the 3rd of July 2008, at 9:00 am for mention. On the 03rd of July 2008 at 9.00 am, both parties appeared and 23rd July 2008at 9.00 am was the trial date allocated. On this date the trial date was further adjourned to the 13th of August 2008 at 9:00 am because while the complainant appeared, defendant did not appear. On this date I was on the duty-travel to Port Moresby so the trial could not proceed. The trial was re-scheduled on the 20th of August 2008 at 1:30 pm.
    
14. When the matter was heard on the 20th of August 2008, complainant submitted that he has given his evidence on the 12th of September 2007 (Ex-parte trial) and do not wish to repeat the same evidence. I, then made it clear to the complainant that when the Ex-parte Order dated 12th of September 2007 was set-aside on the 8th of January 2008 all the evidence obtained ex-parte followed suit (are in fact set-aside). This is how a fresh or a new trial and he must cal new evidence. Matter was further adjourned to the 25th of August 2008 at 9:00 am. Thereafter the matter was re-set for trial on the 03rd of September 2008 at 9:00 am. On this date both parties presented their evidences and close their cases respectively. Both parties directed to file in their written submissions by 19th of September 2008. Initially I was supposed to deliver the decision on the 3rd of October 2008, however since the decision was not ready, the matter was adjourned indefinitely.
    
15. Both parties were directed to file their written submission by 19th of September 2008. Complainant filed his submission on the 24th of September 2008, which is almost five (5) days over the deadline. Defendant filed his submission on time, which is on the 19th of September 2008.
    

4. Legal Issues:

1. Whether defendant has agreement with Acanufa Lawyers to have carriage of his matter.

2. Whether defendant has instructed Umba Lawyers to have carriage of his matter.

5. The complainant Mr. D. Umba was a Lawyer in the employ of Acanufa & Associates Lawyers in 2000 when defendant gave instructions to Acanufa & Associates Lawyers to take carriage of his case. Complainant who was then In-charge of Litigation matters took charge of defendant’s matter. There is no doubt and I am satisfied there was a lawyer-client relationship or contract established between Acanufa & Associates Lawyers and the defendant Thomas Koral. This has been a fact which has not been disputed. So the first issue is, yes, there was an agreement between the defendant and Acanufa Lawyers.

6. The second issue: Whether defendant has in place a retainer agreement with Umba Lawyers.

7. Brief Facts.

It was not disputed that complainant D. Umba is a Lawyer by profession and holds an Unrestricted Practicing Certificate (UPC). He gave evidence that prior to setting up his own private practice he was employed by Acanufa & Associates Lawyers from April 1996 up to the end of December 2006 (10 years). He said he was in-charge of litigation matters.

8. Complainant said defendant Koral is employed with Air Niugini and operates a PMV Business. His vehicle was involved in an accident at Chimbu Province on the 03rd of February 1999 with a vehicle owned by Francis Puringi driven by Paul Kowa Pokea. Complainant said defendant’s vehicle sustained damages and he approached Acanufa Lawyers and gave me instructions to work on his case.

9. Complainant then filed proceeding in the National Court as was registered as WS. No. 1156 of 2000. He said he worked on defendant’s case from 2000 up to end of 2006 when Acanufa Lawyers, the legal Firm was dissolved as the Principal L. Acanufa left for Port Moresby.

10. Complainant said as part of his “pay-off” (final entitlements) it was agreed between him and Lawrence Acanufa that any outstanding cases will be transferred to him as Umba Lawyers and he will be their Lawyers. He said that upon that arrangement, he sent out letters to various clients who have outstanding matters with Acanufa lawyers, rendering them Bill of Costs for work done so that when Bills were paid, the payments will cover his final entitlements. He said Defendant Koral’s case is just one of the others.

11. Mr. D. Umba further stated that on the 22nd of February 2007 he forwarded a letter to Mr. Koral and he only received K300.00 from Mr. Koral for the work done. Complainant said he wrote back to the defendant advising him that the amount of K300.00 is insufficient and requested defendant to pay a deposit of K1000.00 within 14 days. He tendered copy of letter, annexed as ‘C4’ that he wrote to the defendant. Complainant said he did not receive any response so he wrote another letter on the 14th of March 2007 and enclosed a ‘Bill of Costs’ for 2000 up to date. He tendered a copy of the letter and the said ‘Bill of Costs’ and was marked as exhibits ‘C5’ and ‘C6’ respectively. He said he sent another letter to the defendant when he did not receive any response. He tendered a copy of this letter and was marked as exhibit ‘C7’.

12. Complainant Mr. Umba said defendant Koral never responded to any of his letters. He never made enquiries to raise the issue that he engaged Acanufa Lawyers and not Umba Lawyers. He kept the issue till he was issued with summons. Complainant said he was the Lawyer who had carriage of the matter from day one when he was with Acanufa lawyers so he had to render him his Bill of Costs. He also said this is a clear case of debt owing to a lawyer from a client and defendant Koral should settle this debt.

13. During the Cross-Examination, the following questions were put by the Defendant to the complainant and these responses were given:

1. Q. Umba Lawyers practiced as of February 2007. The work was done by Acanufa Lawyers between December 2000 and March 2002?

A. Umba Lawyers practiced as of 1st January 2007. Work was done under the Firm of Acanufa Lawyers however pursuant to an arrangement all incompleted files were transferred to me (Umba Lawyers). Your file was one of them.

2. Q. Acanufa Lawyers is a separate entity from Umba Lawyers?

A. Yes, Acanufa Lawyers is now dissolved.

3. Q. I have a contract with Acanufa Lawyers. I don’t have any contract with Umba Lawyers?

A. Acanufa Lawyers contract ended as 31st December 2006. All

litigation matters were then transferred to Umba Lawyers.

4. Q. Don’t you have right to inform your clients?

A. Through letters

5. Q. In your affidavit especially paragraph 7, you stated that you had agreement to carry my file. Do you have that agreement?

A. I can’t answer. I gave oral evidence.

6. Q. Don’t you think , your clients have courtesy to know of this agreement?

A. We sent letters.

7. Q. I don’t know Umba Lawyers, why will I see you?

A. I have carriage of your matter.

8. Q. Why was I not being informed of changed of my lawyers?

A. You had my letter.

14. Based on his line of questions put to the complainant during Cross-Examination, he gave evidence that he had an accident and has engaged the services of Acanufa lawyers to seek damages. He said he has never engaged the services of Umba Lawyers. He said complainant was an employee of Acanufa Lawyers and his file was with Acanufa Lawyers. When Acanufa Lawyers was dissolved he has not idea, complainant carried his file with him to his law Firm. Defendant admitted complainant wrote letters 3-4 times but he said he never replied because he has no business deals with Umba Lawyers. Defendant said he was unnecessarily brought before the court by the complainant. He maintained that he was supposed to be informed and consent to the charges or arrangement between Acanufa and Umba. He said his file should have given back to him.

15. Defendant said Acanufa lawyers and also Umba Lawyers had not written to him indicating that Umba Lawyers will carry on with his case. He said he has no knowledge of what transpired between Acanufa and Umba Lawyers and he has nothing to do with this arrangement as a client.

16. During Cross-Examination, complainant put these questions to the defendant.

1. Q. You have a matter before the National Court?

A. Yes, with Acanufa Lawyers.

2. Q. Its in your interest this matter should be finalized?

A. Yes, with Acanufa Lawyers.

3. Q. On the 22nd of February 2007, I sent a letter to you that you still have

A Matter before the National Court but you still did not bother to come and see me and enquire?

A. I engaged Acanufa Lawyers. I have nothing to do with Umba Lawyers.

Q. Wouldn’t it be in your interest to come and see me?

A. I am not that stupid to come and see you.

17. The next issue is which is relevant to resolve is: whether defendant has an agreement (retainer agreement) with the Umba Lawyers to have the carriage of his case.

18. As I have alluded a little earlier that it is not disputed there was an agreement (lawyer-client agreement) for the Acanufa Lawyers to deal with the defendant’s case. However, when the Acanufa Lawyers, the legal Firm was dissolved towards end of December 2006, and due to the arrangement between Acanufa Lawyers transfer of defendant’s file to Umba Lawyers has been a caused of concern for the defendant. Umba Lawyers no doubt took carriage of defendant’s case after the law firm Acanufa Lawyers was dissolved. What then is the legal basis which solidified Umba Lawyers to have carriage of defendant’s case? It is obvious from the evidence adduced during the trial and from the final submission received from both parties that there was no specific instructions issued by defendant Thomas Koral to Umba Lawyers to have the carriage of his case by way of lawyer-client relationship or say retainer agreement.

19. Application of Law to the Facts Surrounding Second Issue.

Retainer is the foundation upon which the relationship of lawyer and client rests... A retainer is a contract whereby in return for the client’s offer to employ the lawyer, the lawyer expressly or by implication undertakes to fulfill certain obligations. Therefore, a lawyers authority to act for a client arises from the retainer. In order to avoid disputes with the client as to whether the lawyer had authority to carry out such dealings, it is important that the retainer sets out in some details the type and the extent of the legal work to be covered. I do not find such an arrangement by way of retainer agreement existed between defendant Thomas Koral and the complainant.

20. The Lawyers Act, 1986 and s. 66 Remuneration by Agreement specifically deals agreement between the lawyer and his client over costs or fees payment. The Professional Conduct Rules 1986, Rule 18 (5) (c) states “A lawyer shall charge no more than is reasonable by way of costs for his services having regard to-

(c) any agreement as to costs between the lawyer and his client”

21. It is emphatically clear complainant has not complied with the Lawyers Act, 1986 especially with s. 66 Remuneration by Agreement, the Rule 18 (5) (c) of the Professional Conduct Rules, 1986 and the sections 4 & 5 of the Fairness of Transaction Act 1993. His Honour Kandakasi, J in WS. No. 20 of 2002 N3104 Dr. Florian Gubon Trading as GUBON LAWYERS –V- Pacific Mobile communications ltd, a Unreported judgment which His Honour delivered on the 6th of December 2006 which he made the following statements which I feel I should quote;

“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 term of an agreement. Other legislation such as Fairness of Transaction 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 in to 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, advantage, 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...”

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 in to of the transaction shall be taken in to account.”

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 not 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 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 on extent adverse to his interests that he could not reasonably be held responsible for such consequences”.

22. The common law principles of inequality of bargaining powers and unconscionable conduct which could indo a contract or a transaction (see case of Lloyds Bank Ltd –v- Biendy [1974] 3 All ER 757) were effectively adopted and applied in Papua New Guinea Pursuant to Schedule 2.2 of the constitution. See also Negiso Investments –v- PNG BC Ltd (26/06/03) N2439. What is the effect of having considered all these considerations in the present case before me? What’s the relevance of these considerations? I am of the view 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 irequality in the bargaining power between a lawyer and his client, lawyers have such an obligation. In this present case before me, defendant Thomas Koral is not a lawyer and has no knowledge and understanding of the relevant provisions of the Lawyers Act, 986. In Paterson Lawyers –v- NCDC (05/10/01) N 2145, Kandakasi, J held 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. In this present case the Acanufa Lawyers who had the carriage of defendant’s case ceased to practice. Mr. D. Umba who was previously employed with Acanufa Lawyers and who has since set up his private practice took with him, defendant’s file has greater obligation to inform and obtain defendant’s consent.

23. The acclaimed arrangement made between Lawrence Acanufa and the complainant that complainant will take carriage of all incomplete litigation files is an arrangement made without the consent of the defendant and is totally unfair to the defendant. There is no legal basis upon which complainant can rely on to sue for the recovery of debts he claimed defendant owes him and his law Firm D. Umba Lawyers. In Groom –v- Crocker [1939] 1 KB 104 at p. 108 the court held that the “Solicitors are entitled to act on instructions” and I do not find any instructions issued by the defendant to work on his case as Umba Lawyers. Because of the foregoing reasons I have stated, I dismiss this case and order that complainant meet defendant’s costs of this proceeding to be agreed if not to be taxed by the taxing authority.

Counsel:
Complainant: In Person
Defendant: In Person