N511

PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]

KRAMER CONSULTANTS PTY LTD AND CAMERON MCNAMARA PTY LTD 
— TRADING AS CAMERON MCNAMARA KRAMER AND ASSOCIATES

V

THE INDEPENDENT STATE OF PAPUA NEW GUINEA

Waigani
Cory J

11 July 1985
29 July 1985

COSTS - Order for "costs" - What included - Arbitration - "Costs of reference" - To be taxed in National Court - Plaintiff not legally represented - Order in favour of plaintiff - Recovery limited to legal professional costs - National Court Rules, O 22, r 36 - Arbitration Act (Ch No 46), s 3, Sch 1.9 - Lawyers Act (Ch No 91), s 36.

On the determination of an arbitration suit on which the plaintiff was not legally represented the arbitrators made an award upholding the claim of the plaintiff in part and dismissed the counterclaim of the defendant and ordered that the defendant pay the plaintiffs "costs of the (arbitration) reference — such costs to be taxed in the National Court". On the reference of a question arising on taxation by the Registrar:

Held

The words "costs of the (arbitration) reference" in the arbitrator’s award were restricted to professional legal costs incurred by the plaintiff; and that because, for the purpose of costs, the plaintiffs were conducting a litigation without legal representation, they were not entitled to costs incurred in preparation of the arbitration other than out-of-pocket disbursements and costs for attending on the hearing of the arbitration as a witness.
London Scottish Benefit Society v Chorley (1884) 13 QBD 872; Buckland v Watts [1970] 1 QB 27, followed.

Cases Cited

Buckland v Watts [1970] 1 QB 27.
Hart v Aga Khan Foundation (UK) [1984] 1 All ER 239.
Hart v Aga Khan Foundation (UK) [1984] 1 WLR 994; 2 All ER 439.
London Scottish Benefit Society v Chorley (1884) 13 QBD 872.
Ogier v Norton (1904) 29 VLR 536.

Reference

This was a reference pursuant to the National Court Rules, O 22, r 54, by the Registrar of the Court, on a question arising out of a taxation of costs. The question referred is set out at the beginning of the reasons for judgment hereunder.

Counsel

M Hirst, for the plaintiff.
A Mullumby, for the defendant.
Cur adv vult

29 July 1985

CORY J: This is a reference by the Registrar under the National Court Rules, O 22, r 54, which empowers the Registrar to refer to the court for direction any question arising out of taxation.

The question referred is:

"Are those items in the applicant’s bill of costs herein, other than those items relating to disbursements, allowable costs items under the Rules of this Court or at law for the purpose of taxation of costs?"

The reference arises from an arbitration dispute between the parties relating to work carried out by the plaintiff for the defendant. I am instructed by the parties that at the beginning of the arbitration neither side sought to be legally represented at the arbitration; the plaintiff stating that it did not want to be legally represented so that "the arbitration could be determined as quickly and as cheaply as possible". A great deal of time and resources were spent in preparing for and in the hearing of the arbitration.

The arbitrators made an award upholding the claim of the plaintiff in part, and ordering the defendant to pay a total of K255,481. The counter-claim of the defendant was dismissed. The defendant was ordered to pay the arbitrator’s costs in the sum of K52,820, and in addition, the defendant was ordered to pay the plaintiffs costs of the arbitration reference — such costs to be taxed in the National Court of Papua New Guinea. The plaintiff prepared a bill of costs, a substantial part of which included time spent by the principal members of the plaintiffs firm in preparing for and attending on the arbitration. On the taxation before the taxing officer, the Registrar, the plaintiff claimed it was entitled to these costs and on objection by the defendant, the question was referred by the Registrar to the National Court.

The Arbitration Act, (Ch No 46), s 3, provides that:

"Unless a contrary intention is expressed in the submission (that is, a written agreement to submit differences to arbitration), a submission shall be deemed to include the provisions in the schedule so far as they are applicable to the references under the submission."

Schedule 1.9 provides:

"The costs of the reference and award are in the discretion of the arbitrators or umpire, who may direct to and by whom and in what manner, the costs or any part of the costs are to be paid and may tax or settle the amount of costs to be paid or any part of the costs, and may award costs to be paid as between solicitor and client."

The plaintiff submits that on a taxation of costs under an arbitrator’s award the taxing officer must tax the costs according to the language of the award (F Russell, Law of Arbitration (20th ed, 1982), at 345) and that the words "costs of the reference" in the arbitrator’s award in this case include all the expenses properly incurred by the parties in the course of the whole inquiry before the arbitrators. The plaintiff further submitted that the time involved by the plaintiff in preparing for the arbitration was covered by the costs rules of the National Court Rules, O 22, r 36, which provides that on a taxation in a "special case" costs may, at the discretion of the taxing officer, be allowed in relation to items not mentioned in Table 1 of the second schedule and that O 22, r 36(3), sets out the matters to which the taxing officer is to have regard in exercising his discretion. These matters include:

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

(b) The skill, specialised knowledge and responsibilities required of and the time spent and work done by the solicitor or counsel; [My emphasis.]

It follows then as part of the plaintiffs’ submission that the question whether any item should or should not be allowed is for the taxing officer’s exercise of discretion and not one on which the court should give a ruling.

The defendant on the other hand, submits that the words "costs of the reference" to arbitration referred to in the arbitrator’s award is restricted to professional legal costs incurred by the plaintiffs and that as for the purpose of costs, the plaintiffs were conducting a litigation in person, without legal representation, they are not entitled to the costs incurred and claimed by them in preparing the arbitration, other than out-of-pocket disbursements and attending on the hearing of the arbitration as a witness.

In my opinion a review of the English authorities, the Arbitration Act and the National Court Rules on costs overwhelmingly support the defendant’s submission that "costs" are restricted to professional legal costs.

There is nothing in either the Arbitration Act or our National Court Rules defining the word "costs". By Sch 2.2 of the Constitution, the principles and rules of common law and equity in England immediately before Independence are adopted as part of the underlying law of Papua New Guinea subject to the qualifications therein set out. In Buckland v Watts [1970] 1 QB 27, a successful appellant was awarded his costs of an action bought by him. He had conducted his litigation in person. On appeal it was held that a litigant in person other than a solicitor was not entitled to claim costs in respect of the time which he had expended in preparing his case but only his out-of-pocket expenses. That case considered and applied the law as laid down by Bowen LJ in the case of London Scottish Benefit Society v Chorley (1884) 13 QBD 872, a decision of the Court of Appeal. In considering the law of costs Bowen LJ said at 876:

"His meaning seems to be that only legal costs which the court can measure are to be allowed, and that such legal costs are to be treated as expenses necessarily arising from the litigation and necessarily caused by the course which it takes. Professional skill and labour are recognised and can be measured by the law: private expenditure of labour and trouble by a layman cannot be measured."

Again at 37 of the judgment of Sir Gordon Willmer in Buckland v Watts:

"What a successful party who has got an order for ‘costs’ is entitled to recover falls, as is well known, under two headings. One heading covers his disbursements; that is to say, money which he has actually had to pay out to other people such as witnesses, counsel, professional advisers and so forth. The other heading is described as ‘costs’. This is intended to cover remuneration for the exercise of professional legal skill. This, I think, is in accordance with the views expressed by Bowen LJ in the judgement which my Lord has already read. It is because there has been an exercise of professional legal skills that a solicitor conducting his own case successfully is treated differently from any other successful litigant in person conducting his own case. We are not concerned with the exercise of other professional skills. Other professional people, who become involved in litigation and conduct their own cases, may recover something in respect of their own professional skill in so far as they qualify as witnesses and are called as such ... but I can find no ground either in principle or on authority for allowing him (the appellant) anything by way of remuneration for the exercise of a professional skill which he has not got."

That the principle laid down in London Scottish Benefit Society v Chorley was a correct statement of the law in England before the passing of the Litigants and Persons (Costs and Expenses) Act 1975 (Imp) was affirmed in the case of Hart v Aga Khan Foundation (UK) [1984] 1 All ER 239 in the judgment of Lloyd J at 242:

"As I have already mentioned, litigants in person were not, before the 1975 Act came into force, allowed anything for their time and trouble: only for their out of pocket expenses. The reason was stated by Bowen LJ in London Scottish Benefit Society v Chorley (1884) 13 QBD 872 at 877."

The decision of Lloyd J was affirmed on appeal to the Court of Appeal in Hart v Aga Khan Foundation (UK) [1984] 2 All ER 439.

In Ogier v Norton (1904) 29 VLR 536, a decision of the Full Court, it was held that a solicitor who conducts his own litigation was entitled to claim his profit costs as solicitor and in doing so adopted the law as laid down in the English authorities (supra) because in conducting his own litigation he was exercising professional legal skill.

In addition an examination of the Arbitration Act (Ch No 46) supports the defendant’s contention that "costs" is to be interpreted as professional legal costs. Schedule 1.9 of the Act provides as follows:

"The costs of the reference and award are in the discretion of the arbitrators or umpire who may direct to and by whom, and in what manner, the costs or any part of the costs are to be paid, and may tax or settle the amount of costs to be paid or any part of the costs and may award costs to be paid as between solicitor and client." [My emphasis.]

The implication here is that the schedule is dealing with professional legal costs and that the arbitrator can order that either those costs be taxed or paid on a party to party basis or as between solicitor and client.

In the National Court Rules on costs — O 22, r 36(3), the costs which the taxing officer has a discretion to allow are professional legal costs incurred by a solicitor or counsel.

The principle that costs are to be confined to professional legal costs is also enshrined in the Lawyers Act (Ch No 91) s 36, under the subheading "Recovery of Costs by Unqualified Persons":

"No costs, fee, reward or disbursement on account of, or in relation to, an act or proceeding done or taken by a person who acts as a lawyer without being duly qualified so to act, or in contravention of s 10(2) are recoverable in an action, suit or manner by any person."

The answer to the question raised by the reference therefore is — those items in the applicant plaintiffs bill of costs herein, other than those items relating to disbursements, are not allowable cost items under the rules of this Court or at law, for the purpose of taxation of costs other than the time spent by the principal members of the plaintiffs firm in appearing on the hearing of the arbitration as witnesses. The matter is therefore referred back to the taxing officer with this direction.

Question answered accordingly

__________________________

Lawyer for the plaintiff applicant: Gadens.
Lawyer for the defendant respondent: B O Emos, State Solicitor.

[1985] PNGLR 205 - Veronica Wangiwa and Dorothy Tomarit v Agatha Harangu