Abai v Independent State of Papua New Guinea [2000] PGSC 5; SC632 (5 May 2000)

Unreported Supreme Court Decisions

SC632

PAPUA NEW GUINEA

[SUPREME COURT OF JUSTICE]

SCA NO. 95 OF 1998
BETWEEN: TOLOM ABAI & OTHERS
-APPELLANT-
AND: THE INDEPENDENT STATE OF PAPUA NEW GUINEA
-RESPONDENT-

Waigani

Los Jalina Injia JJ
26 October 1999
5 May 2000

COSTS - Taxation - Review - Preparation for trial - Quantum of - Discretionary - Exercise of discretion - Grounds for interference - Principles discussed - National Court Rules, O22 r35, 36, 60, 62.

Cases Cited

WS NO. 31/91 Louise Baduk -v- The State, Unpublished National Court judgment dated 4 November 1988

Slingsby -v- Attorney General (1918) P.236

White -v- Altrindam Ulman District Council (1936) ALL E.R. 927

Ogilvie -v- Massey [1910] P.243

Re Glassford (1910) 27 V.C.R. 357

The Oriental Bank Corporation (1887) 56 L.J. 874

Commissioner of Land Tax -v- Jowett [1930] ArgusLawRp 76; (1931) 45 CLR 115

Counsel

J. Aisa for the Appellant

H. Polume for the Respondent

5 May 2000

LOS JALINA INJIA JJ: This is an appeal against an order of the National Court dismissing the appellant’s application for a review of the Registrar’s decision to tax off K810,800.00 from two bills totaling K1,065348.99 for one particular item, namely for “preparation for trial.” The order was made under Order 22 rule 62 of the National Court Rules.

A chronology of proceedings in the National Court is that on 20 December 1996 in proceedings WS No. 819/94, a total of some 766 former retrenched Defence Force soldiers sued the respondent for their outstanding retrenchment benefits. They were represented first by Howard & Dirua Lawyers and later by Emily Dirua Lawyers which succeeded the former law firm. Following unsuccessful negotiations between the parties to settle the matter out - of - court, the matter came before the National Court on a number of occasions culminating in a trial which resulted in judgment being entered in favour of some of the plaintiffs on 20 December, 1995. Of the 766 plaintiffs, 398 plaintiffs were successful whilst 374 plaintiffs were unsuccessful. On 16 August, 1996, the Court endorsed a consent order on costs which stated that the State would “pay Emily Dirua Lawyers and Howard and Dirua Lawyers legal costs on Solicitor/Client basis to be taxed if not agreed”. As parties were unable to settle on costs, the appellants’ lawyers submitted two bills of costs to the Registrar for taxation. The first one was prepared by Howard and Dirua Lawyers, and the second one was prepared by Emily Dirua Lawyers both of which bills covered the period from 1 February 1994 - 17 February 1996. A major component of the costs was for work done for preparation for trial under item 12 of Schedule 2 of the National Court Rules. The Registrar taxed the two bills in the manner aforesaid and upon review, his decision was upheld by the National Court.

The grounds of appeal are as follows:-

(a) That the trial Judge erred in law and in fact in holding that the level of costs on party basis is the same level as that of client solicitor costs.

(b) That His Honour had erred in law and in fact in holding that while the Respondent had agreed with the Appellants to pay legal costs reasonably incurred by the appellants, that the appellants costs incurred was unreasonable and unnecessary resulting in taxing off in each case above © and(1) and ©(iii) more than to 60% of the costs incurred.

(c) That His Honour had further erred in law and in fact in holding that the bill of costs based on client solicitor costs be substantially the same as that for party costs and therefore the same principle in taxation for party costs applies in client/solicitor costs and further holding that in these cases the client solicitor was in general terms.

(d) His Honour had erred in law and in fact by ruling that because no reasonableness was used by the appellants in compiling taxation of costs because the third party was paying the costs, warranted the taxing officer to tax the costs hereby.

(e) That His Honour relied strongly that because of no records, dates, diaries or work sheets kept by the lawyer doing the work when a reasonable conclusion can be drawn that this particular case had involved of 700 soldiers, whose records had to be searched at different Army Barracks which was time consuming. His Honour had failed to apply reasonableness on a number of hours instead of taxing off more than 60% of the costs.

There is some reference in the submissions by the appellant relating to amounts taxed off for disbursements. Although there is some mention of disbursements in the Notice of Appeal, it is not specifically raised as a ground of appeal in the Notice of Appeal. Therefore we do not think the matter of disbursements is properly before us for consideration.

At the hearing of the appeal, although grounds (a) and (c) were framed on the difference between party - party costs and Solicitor/Client costs, these grounds were not really argued before us in order to demonstrate any error of principle which affected the exercise of discretion. We believe this is because the judge’s reference to party-party costs as compared to solicitor-client costs was obiter only. Therefore we would dismiss those grounds.

We agree with Mr. Aisa for the appellant that the main issue raised by the remaining grounds of appeal is whether the trial Judge erred in upholding the Registrar’s decision to tax off 68.73% of the first bill of costs, and 68.35% of the second bill of costs, for work done in “preparation for trial.”

There is no dispute that the appellants were entitled to have their costs taxed on a Solicitor-Client basis and only reasonable costs for work “necessarily or properly done in preparation for trial” were allowable: see order 22 r35-36. The question before the judge was whether the amount of costs claimed in the bills of cost for preparation for trial were reasonable. The appellants in their two bills of costs set out at great length and in great detail description of the nature of the work undertaken and the volume of man-hours committed in the material period. But the trial Judge agreed with the taxing officer that information lacked sufficient particularity and supporting documents to justify the whole of the amount claimed. In relation to the first bill, the Trial Judge said:

“As is stated on a leading text on costs Saddington & White; Costs, Solicitor and Client. At page 23 on “The most important matter to which attention must be given is the keeping of written or typewritten entries of details of the work done. Solicitors should realise that they must keep such entries for their own protection as well as for convenience and profit. The actual system to be used will probably vary with the nature and extent of the solicitor’s practice. The essential is that whatever the system may be, the result should be a full and complete written record of: (a) the work actually done; (b) the dates upon which it was done; (c) the times occupied thereon. Most important of all, such a record must be entered up substantially at the time of doing the work, otherwise it is of a very little value.

“I must fully endorse the above statement and principles and confirm that a lawyer should have and keep such a record for use for their internal accounting purpose and especially for the preparation of charges and costs statements. And I must find that the failure of a lawyer to keep such records means that there is no evidence to support any later claim for costs for time spent.

All people have access to diary books, and it must be a simple matter to note in a daily diary of what one does and for how many hours and in a case like this that a certain named plaintiff was interviewed for whatever length of time. The diary would also note the venue and the time taken to get to the venue. Such a diary would also be used for forward planning purposes with appropriate entries. It is axiomatic that all lawyers would keep some sort of diary of work done or appointments made.

“In this case the lawyer stated that ‘she could not keep diary sheets because she was at Murray Barracks for 6 months to inspect men’s file...’ But this just does not make sense, it must be very simple to carry a compact diary book with entries for arriving and leaving the venue and who was interviewed for how many hours or whose files were inspected and for how long.

Such a diary book would also note who was to be interviewed in future days by way of forward planning entries.

“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 lawyer. The lawyer here admits that she did not keep diary entries or 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 being exact’. A taxing officer who allowed amounts for time claimed when there was no supporting material would be negligent and clearly in error. The lawyer refers to the discretion to be applied based on the complexity of the matter, see O 22 Rule 36(3). However I cannot anywhere find any analysis of the complexity of this case or how special skill was required. There is an explanation of Difficulty on pages 6, 7, 8, of the Bill of Costs however all that seems to highlight is the volume of the case because of the multiple plaintiffs. Much of the work seems to be mechanical being an analysis of the pay status of each individual plaintiff and the calculations required, looking at the Schedules to the Writ, for items like leave entitlements, furlough leave, repatriation expenses, interpretation of certain NEC decisions, and the relationship with the Defence Force Retirement Fund amounts. So surely once the status of one plaintiff was ascertained and a formulae was worked out then it just becomes a matter of calculation on the same principles for all the other plaintiffs. There was no fresh analysis of legal principles of each plaintiff, merely a fresh outline of the status and then calculations. IN so far as there was a complexity it was purely because of the volume of documentation for so many plaintiffs, volume which was repetitive.

“In the analysis of the Taxing Officer there appears to be a lot of concessions diaries, and I refer here to page 23 of the Judgment of 9 April. So even though there were no supporting material for the work claimed, there was little room for any exercise of a discretion after allowing for concessions made and the lack of real complexity. At page 15 it is noted that the taxing officer was allowing all costs where detailed information was provided and where the work was necessary.”

In relation to the Second bill, the trial judge said:

“The objections to the Bill called the Dirua 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 was 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 time spent on a case and as the authorities say there must be the proper keeping of written or recorded entries or 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 evidence would be guilty of negligence and clearly in error.”

The appellant’s counsel reiterates his submissions before the National Court and submits that a more reasonable disallowance under Schedule 2 Table 1, item 12 of both bills would have been by 50%. Mr. Aisa relies on the decision of the National Court in Melinda Baduk by her next friend Louise Baduk v. The State in WS No. 31/91 dated 4 November, 1988 in which the Chief Justice disallowed 46.61% of a bill of costs.

Costs for “preparation for trial”, that is, for “work necessarily or properly done in preparing for trial” is provided for in Schedule 2, Table 1, Part 7, Item No. 12. The types of work falling under “preparation for trial” are expressly stipulated in Item No. 12 and these include taking instructions from clients, interviewing witnesses and checking documents. The amount of costs for “preparation for trial” is stipulated as “discretionary.” The Taxing Officer, that is, the Registrar, has a wide discretion to determine a reasonable amount of costs for an item of costs stipulated “discretionary”. The criteria for determining a reasonable amount of costs for preparation for trial are expressly stipulated under O36 r3(a)-(g) and these are:

“(3) A taxing officer, when exercising his discretion under .... in respect of any item marked ‘discretionary’ in Table 1 of Schedule 2 shall have regard to-

(a) the complexity of the item or of the proceedings in which it arose and the difficulty or novelty of the question; and

(b) the skill, specialized knowledge and responsibility required of and the time spent and work done by the solicitor or counsel; and

(c) the number and importance of the documents (however brief) prepared or perused; and

(d) the place and circumstances in which the business involved was transacted; and

(e) The importance of the proceedings to the client; and

(f) Where money or property was involved, its amount or value; and

(g) Any other fees and allowances payable to the solicitor or counsel in respect of other times in the same proceedings, but only where work done in relation to those items has reduced the work which would otherwise have been necessary in relation to the item in question.”

The principles governing review by the National Court of the Taxing Officer’s exercise of discretion in relation to an item of costs marked “discretionary” under the rules are settled in other common law jurisdictions and we see no reason why we should not adopt those principles here. The Taxing Officer has a very wide discretion. The exercise of his discretion must be in accordance with correct principles and the amount allowed must be reasonable. In respect to matters of principle, the Court will not interfere with the exercise of that discretion except in cases where the Taxing Officer acted on wrong or mistaken principle. In respect to questions on quantum, the exercise of discretion is almost non-reviewable. The appellant Court will only interfere with the Taxing Officer’s taxation on quantum in very exceptional cases: Slingsby v. Attorney General [1918] P.236 at 239 White v. Altrindam Ulman District Council [1936] 1 All E.R. 927 at 926 - 927; or where the Taxing Officer is shown to have “gone virtually wrong”: Ogilvie v. Massey [1910] P243 or where the discretion was exercised in a way “manifestly wrong or that the amount allowed (or disallowed) is exorbitant”: Re Glassfurd, (1910) 27 V.C.R. 357 at p.263; [1901] ArgusLawRp 112; 7 A.L.R. 276.

The National Court’s review of taxation by the Registrar under O22 r62 is discretionary. Order 22 r62 gives the judge wide discretion to “enter such judgment for the costs as the nature of the case requires”. A similar discretion is vested in a judge under Order LIV r55 of the Australian High Court Rules 1928 which gives a judge a general discretion to “make such orders as he may think just.” The extent of an appellate Court’s intervention of the judge’s exercise of discretion under OLIV r55 was considered by the High Court of Australia in Commissioner of Land Tax v. Jowett, [1930] ArgusLawRp 76; (1931) 45 C.L.R. 115. In that case, the High Court adopted a statement of Cotton L.J. in The Oriental Bank Corporation (1887) 56 L.J. 874 - 875 where His Lordship said:

“In order to justify a Court of Appeal in interfering with the discretion of a Judge it must be shown (1) that he has exercised it in a manner not within his discretion, or (2) that there has been an exercise of his assumed discretion on wrong principles, or (3) that there has been some great loss occasioned by someone by a clearly erroneous exercise of his discretion”.

We adopt these principles as being relevant and appropriate to this Court’s review of a judge’s exercise of discretion under our Order 22 rule 62. It follows that in respect to the question of quantum, this Court will not interfere with the trial judge’s review on taxation of costs on question of quantum only except in very exceptional cases.

We consider the present appeal to be on the question of quantum only. The strength of the appellant’s arguments rests on the disproportionate percentage difference between the amount allowed and disallowed. His submissions is that about 70% of the bill was disallowed resulting in a total of K810,800.00 being taxed off from a total bill of K1,065,348.99 under this particular item, leaving the total sum allowed at only K276,148.99. A reasonable disallowance, he submits, would have been by 50%. Whilst we agree with the trial judge that amounts of the size shown in these two bills should be supported by some written records of attendance, receipts, and so on, we consider that there was ample information contained in the two bills under this item to support the conclusion that great amount of work was done by the Appellant’s lawyers in the given period to support a good portion of the total amount claimed under this item. It would also seem the trial judge had put emphasis only in relation to the 398 successful plaintiffs and not for the entire 766 plaintiffs for which the Respondent agreed to meet their costs on a solicitor client basis. The two bills appear to cover costs incurred in prosecuting the entire 766 plaintiffs. Quite rightly so in our opinion first, it is the State’s slowness or uncaring attitude towards the claims by the Plaintiffs many of which were not under any dispute that had forced the Plaintiffs to engage lawyers. Secondly once the lawyers had been engaged the delay continued and hence necessitated the court proceedings. Against this background we consider the reduction of the claim by 70% was manifestly wrong or exorbitantly high. We hold therefore that the National Court did not exercise the discretion fairly. We would therefore uphold the appeal, quash the decision of the National Court and order that the total costs be reduced by 50%. Costs follow the event.

Lawyer for the Appellants: J.F. Aisa & Associates

Lawyer for the Respondent: Solicitor General