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National Court of Papua New Guinea |
Unreported National Court Decisions
PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]
W.S. NO. 138 OF 1996
BETWEEN
SIMON NORUM Trading as SIMON NORUM & CO LAWYERS - Plaintiff
And
DANIEL IKIO - First Defendant
And
KOMAIP TRADING PTY LTD - Second Defendant
Mount Hagen
Lenalia AJ
1 July 1997
11 July 1997
CIVIL LAW - Contract - Champerty - Agreement between client and lawyer that lawyer should receive a specific portion of money recovered is champerty at common law.
CIVIL LAW - Contract - Remuneration by agreement - Contingency fees or conditional fee agreements - Whether contingency fees allowable by the Lawyers Act - Contingency fees provided for under S. 66 (1) (2) of the Lawyers Act - Contingency fees ought to be reasonable - Must not be unfair or unreasonable S. 66 (3).
CIVIL LAW - Contract - Contingency fees calculated at twenty-five percent (25%) plus interest to be for the lawyer - Unfair and unreasonable in all the circumstances of the case as regards complexity, time and skill involved.
The Plaintiff being a lawyer received instructions in early 1994 from the two defendants to act for the Second defendant claiming damages against the State for destruction of a substantial retail and wholesale shopping centre, a kai bar, fuel and tyre service. A purportedract was enterentered into between the plaintiff and the defendants for the plaintiff to “retain 25%” of whatever the award would be. He was to alsain the interinterest and c
Cases Cited::
Trans Trust SPRL v Danubian Trading Co [1952] 2 QB 297
Haseldine v Hosken [1933] 1 KB p>
Ex Parte Cathcart [1893] UKLawRpKQB 119; [1893] 2 QB 201
11 July 1997
LENALIA AJ: The plaintiff a lawyer by profession commenced proceedings by a Writ of Summons against the two defendants for failure to comply with the terms of an agreement in contract entered into between the plaintiff and the 1st defendant. The contract was if the plhe plaintiff won the case, he would retain 25 percent of the award plus the interest and costs. The agreement was mad27th 27th August 1994 (see “A”) and was reduced into writing and signed beed between the parties on 18th August 1995 almost a year later. The& matts listed for hear hearing on 1st of July 1997. M60; Mr Peraki aed for ther the plaintiff. Ther no lawyer for thendanendants and since the Notice of Trial had served the mattematter was proceeded with eith ex-parte pursuant to O. 10 r. 12 of thionalt Rules. I 0; I noted from the file that there had bead been about three notices of trial. Onseconice, it , it was seas set down for 8th of September 1997. The l notice of trial file filed on 13th June 1997, sets the hearing date on 1st of July.&#This t notice would seem to supersede the one filed oned on 30th 30th May, 1997.
The evidence of this matter is fully stated in the only affidavit of the plaintiff. In early 1994, the plaintiff received instructions from a Senior Police Constable Jacob Kamiak of C.I.D. office in Mount Hagquesting the plai plaintiff to take over the defendant’s case file from Joseph Mek Teawyers because the former smer solicitor had not done any constructive work on their claim. That cas No. 641 OF 1994) 994) involved a police raid conducted by police on the defendant’s premises on 20th of October, 1991 at Laiagam District in Enga Provincing which policemen being agents of the State looted and dend destroyed the premises of a trading company known as Kamiak Trading which dealt in substantial retail and wholesale shopping business in Laiagam. Destruction inc a Kai bar, bar, a fuel and tyre service.
Upon instructions, the plaintiff noticed that all documents constituting instructions were quite bulky and the tiff estimated that it would require considerable work load load including engagement of an independent valuation report and a private accountant was to be engaged to do a cash flow data information, drafting of affidavit evidences and so on. These reporte to be obtainbtained within some six months. On the basis of saluation tion the plaintiff requested the defendants to makeposit of an amount of between K25,000 to K35,000 before he could proceed to do any actual tual work.
Apparently, the fiefend8217;s reply to t to t to the plaintiff was that the only source of income for the defendant company had gone up in flames and trst defendant made an undertaking on behalf of the second defendant that if the plaintiff tiff took up their case, the two defendants were to pay him some money. Having learnt of non availability of funds, the plaintiff informed the first defendant in presence of Senior Constable Jacob Kamiak that he (plaintiff) agreed to be charged with carriage of the defendant’s claim andhe event that the plaintiffntiff won the case, the plaintiff would retain twenty-five percent (25%) of the total award. The plaf also included in d in the contract a proviso specifying that any interest would also be retained by the plaintiff himself as ws costs.
The plaintiff explains at paragraph (10) of hisdavit how he expl explaexplained the terms of the contingency fee agreement to the first defendant in the following terms:
“The term 25% was then explained to the First Defendant s nephew, Jacob Kamiak in E in Enga Language (although he knew what we were talking about) i.e. if the court awarded K10,000.00 then, I will retain K2,500.00 plus interest and costs or if the amount was K500,000.00 I will retain K175,000.00 plus interest and costs. That was on the 27th gust gust 1994 and I made a note of same at the back of the file I was working on. Annexed hered marked with with the letter ‘A’ is a copy of the same.”
The following notations appear on annexure &#A’ as referred to in paragraph (10) of the plaintiff’s affidavit:
“#8220;On the 27/6/94 we agreed that I will retain 25% of the proceeds of the case since there won’t be any deposits made on the matter. Same to be reduced to ng ling later on and to be signed by the parties.
Signed (by plaintiff).”
The short notation above was reducto writing and signed by the plaintiff and the first defendant. I assume that the aute authority and direction to commence working on the defendant’s claim was drafted by the plaintiff himself. It is on the terms of uthoauthority and the purpoagreement contained therein that the plaintiff had sued thed the two defendants for non compliance with the terms of the agreement.&#The contract is in the following terms:
“AUTHOAUTHORITY AND DIRECTION TO WORK ON FILE
To: Simon Norum & Co. Lawyers
PO Box 1421
MOUNT HAGEN
Western Highlands Province
From: Daniel Ikio of Komaip Trading P/L, Laiagam, Enga Province
Re: POLICE RAID - KOMAIP TRADING - 20TH OCTOBER, 1991
I, DANIEL IKO of Komaip Trading Pty Limited, Managing Director of Laiagam, Enga Province hereby authorise and direct Simon Norum & Co., Lawyers to work on the company’s file against the State and I do acknowledge on behalf of the company the fact that I have made no deposit to cover the costs involved and in the event that the case is won the lawyer Simon Norum will retain 25% (percentage) of our claim plus interest as costs and pay us the other 75% (percentage). Ifoose the case, then Simo Simon Norum & Co., Lawyers will not bill me for the work in progress done to date ie write off the bill in the sum of K35,000.00.
This AUTHORITY and DIRECTI given for VALUABLE CONSIDENSIDERATION and is irrevocable without the written consent of Simon Norum & Co. Lawyers.
Dated: the 18th day of August, 1995.
SIMON NORUM for CLAIMANT (Signed)
SIMON NORUM & CO.
LAWYERS. (Sign8221;
The plai plaintiff pursued the claim WS No. 641/94 by trial and the Court found in favour of the second defendant ade an award of K398,000.00 and an interest from the date of the issue of the writ amountingnting to K35,940.00. The total award to the twoe two defendants was an amount of K433,940.00. The piff after the award ward was made, gave notice by a coverinter and a copy of the order to the Solicitor General’s Office in December, 1995.  A chequedrawn by the DeparDepartmenFinance (No. 491912) and mand made payable to the second defendant. The first defendant picked the cheque up from Finance withotifying the Solicitor General’s Office and paid it init into his account on 12th of January, 1996.
From the agreement ancalculation, of 25% the total due to the plaintiff would hald have been K99,500. On top that theement also also provided that the interest plus costs also to be retained by the plaintiff. Therest ordered in that caat case was K35,940.00. What ue to the tiff was a as a sum total of K139,440.00 plus coss costs.
This claim would have been a hard fought case however unfote asas, Ray Vaea Lawy Lawyers did not appear and the case was heard ex parte in absence of the the defendants despite a defence being filed. Although the defendan217; 217; defence was not argued, I think there is no rule of law saying that I should not mention in passing what the defence say generally. In any event this court ofrt of law and I am required by law to consider the evidence as presented to me. The de in general as contacontained in the defence filed on 29th March 1996 is that the first deft was illiterate and he dide did not fully understand the terms of the contract in particular the terms about 25%. What the first Dent undersnderstood was a sum of K25,000 orally agreed to in 1994.
The issue really is whether or not the agreement was fad reasonable having regard to the complexity of the matter, the time and skill involved andd and the scale of costs that might be applicable. What is obvious it the plae plaintiff is a lawyer claiming for a contingency fee agreement purportedly entered into between him and the first defendant. The lawyer claims damagr pfor professional services rendered to his client way back in 1995. The first requisite of a aontract is that the parties should have reached an agreement. often said that reement ient is made when one pane party accepts an offer made by the other. Whe terms of a contract arct are agreed upon, a contract is ed.
The plaintiff in the current case claims that that the contract he entered into between the two defendants had been breach160; A breach of a contracttract is committed when a party without lawful excuse fails or refuses to perform, or performs defectively or incapacitates himself from performing the contract. Thilure or refusal to perf perform a contractual promise when performance has become due is prima facie a breach. Two points worttioning, fig, first, is whether the party alleged to be in h has indeed made any promipromise to perform. In a case of a unilatcontrcontract where a party promises to perform but has not his promise. The sece second point at ihat in a unilateral contract failure to perform is not a breach if that condition agreen has not occurred: T60; Trans Trust v Danubianubian Trading Co. [1952] 2 QB 297: see also “The Law of Contract” 5th Ed. by GH Treitel 628.
The plaintiff is a lawyer and conduct of his services are governed by the Lawyers Act of 1986 as amended to date. His conduct is alserned aned and regulated by the Professional Conduct Rules of 1989. A lawyer is allowed to recover costs in an action where a client has not paid the lawyer’s remunerations. The practi taking a percenercentage oum recovered, or to be recovered from contentious or non-contentious business if successfulssful is usually known as “champerty1; in common law. In UK the oldes and torts orts of m of maintenance and champerty were abolished by statute in 1967 but a champertous agreement may still be treated as contrary to public policy and so unlawful: Oxford Refe “A DictiDictionary of Law” 240. In terms of an agnt by a sy a solicitor with a client that the lawyer should receive a specified portion of oney recovered is defined as an agreement by a lawyer to reto receive payment in the form of a share in the event that the contentious business is successful is regarded as Champertous: Haseldine v Hosken [1833] 1 KB 822.
The Constitution makes the operation of common law subject to, or subordinate to an Act of Parliament (see Schedule 2.2 of the Constitution). In other words whommon lawn law is inconsistent with an Act of Parliament, the Act of the Parliament prevails. Sn 62 of the Lawyers AcvidAcvides that a lawyer may recover in action costs due to him if a client has defaulted in payn payment. The above section is in tllowing terms:
“62. ټ ACTION TION TO RECO RECOVER COSTS
(1) ҈ yelawhat shat bringbring proceedings to recover costs due to him until the end of a period of one month afte after a bill of costs has been delivered in acnce whis Ap>
(2) A bi A bill shll shall conl contain the particulars required by the Rules of Court.
(3) ; ...
(40   The bf c ots ssall:
(a) ټ bn sigp>d:
(i60;&i60;&##160;; by thyer, or, if the cots cots are due to a firm, by , by one oone of thef the memb members of the firm, in his own name or in the name of the firm; o
(160;& f onor on behalbehalf of t of the lawyer, of , of if the costs are due to a firm for or on behalf of the firm, by a lawmploy the r or by the firm, as the case may be, or be enclosed in, or accompaniedanied by, by, a leta letter that is so signed and refers to the bill; and
(b) ҈ be deli delivered to the arty charged personally, by sending it to him by registered post to, or by leaving it for him at, his place of business, dwelling house or last known place of abode.”
The la Act ivocally also proo providesvides for a lawyer to enter into a written agreement with his client for contentious or non-contentious business done or to be done by a lawyer.
This is clear from the terms of S. 66 of the Act. It says:
“66. REMUNERATION BY AGREEMENT.
(1) lawyer may make a writtwritten agreement wit client as to his remuneration in respect of contentious or non-contentious business done oone or to be done by him.
(2) ҈҈ reemeferred rred to into in Subs Subsectioection (1):
(a) & may provide for the remunremuneration of the lawyer by a gsum, or by commission or percentage, or otherwise, and at a at
a greater or a lesser rate than that at which he would otherwise have entito be erated; and
(b)p>(b) may be made on the terms that the amount of the agreed remuneration either shall or shall not include all or any disbursements made by the lawyer.
(3) If on moti tht t itors Juda Judge thae that thet the agre agreement is unfair or unreasonable, he may:
(a) ـ reduce duce the amount a to bable the ment;p>
(b) d< &160;  #160; direcdithat the costscosts of the business done by the lawyer be ascertained bation
(60; ـ Anement:ment:
>
(a) sub; st jecSubo ctioe (5), (5), does not affect the amof, orrights or remedies for the recovery of, costs payable by the client to, or to theo the clie client by, a person other than the lawyer
)ټ excluexcludes ades any clay claim by the lawyer in respect of the business to which it relates, other than:(ii)&##160;;ټ a claim for the agreed costs; or
(ii) &#a 0; a cl a claim foim for such costs as are expressly excepted from the agreement.”
Apparently by the terms of S. 66 of the Act the plaintiff was entitled to enter intontraca grom, or by comy commissimission oron or percentage or otherwise. What t clear is that therethere is no specific percentage set by the Act. I think it would be unjust for the Act to set a specific percentage because no difference would be placed between a ctious or non-centious businbusiness and obviously no consideration would be had to factors such as the complexity of the matter, the time taken to complete it, and skilled involved in carriage of a matter. I conclude that the plff hiff had the right as he did to enter into a fee agreement contingent on the outcome of the case but only after a bill of costs has been given to a client anre he refuses to pay.
The next issue I must address ress and look at is the terms of the contract and ask myself if the terms agreed upon were reasonable and fair in the circumstances of the case conducted by the plaintiff. The parties in this case eave expressed their intentions in a purported agreement and which the defendants have denied by their defence filed. The no we Court can look iook into the minds of contracting parties but to look at their intenintentions by looking at their evidence anir course of dealings and circumstances surrounding an alleged breach. Generally spea speaking are parties are bound by whatever representation they make and which they intend to bind them: The Law of Contract by WT Major 45-46. Where there is no inons tl be legally bound, the parties are not bound. I60; In this conon, there here is no motion before me pursuant to S. 66 (3)he Lawyers Act which requires that on a motion by a client it appears to a Judge that the athe agreement entered into was “unfa unreasonable”, I couI could reduce the amount agreed to be payable under the agreement.
I inspected file WS No. 641 of 1994 to give me an idea of how much work was done by the plaintiff to justify the amount he claims. I must say with respect that the amount claimed is unfair and unreasonable having regard to the nature and complexity of that case. There was no of cpresentedented to this Court as required by S. 62 (2) of the Lawyers Act which bill shll should contain particulars as required e Rules of Court. The “Ruf Court”#8221; is interpreted in the Lawyers Act Act to mean the National Court Rules.
Order 22 r. 49 of the National Court Rules provide as follows:
“(1)  ill scontaiontain part particulars of:
(a) & the work done by the lawy lawyer his servants and agents; and
(b) 𧍘 the disbursement ment made; and
(c) <;¦ the cost cost claim for the work done.
(2) ټ&#ery bily bill the the professional charges shall be entered in a in a separate column from the disbursements and every column shall be cost before thl is for ton.R.”
I am of the view that notw notwithstithstanding the provisions of S. 66 (1) (2) of the Lawyers Act which seem to me to allow for contingency fee agreements payable to a lawyer as remuneration for either contentious or non-contentious business my reading of the Lawyers Act, the Professional Conduct Rules and the National Court Rules, the Lawyers Statutory Committee provided for under S. 48 of the Lawyers Act and the Courts are given overriding or supervisory rolls to ensure that agreements entered into between lawyers and their clients are “fair and reasonable”. Thato say the agreement munt must be fair in the manner under which such agreement was made and reasonable in respect of the amount charged having regard to the usuiteriors such as the complexity of the matter, the amount ount of work involved, the time, the importance of the issues to the client and the normal scale of charges: Ex parte Cathcart [1893] UKLawRpKQB 119; [1893] 2 QB 201 per Lord Esher. The co of charging “8220;fair and reasonable” fees is also emboarded in the Professional Conduct Rules of 1986. Clause 18clause (1) (2) (42) (4) andsay:
“(1) Aer shoml complcomply with with the provisions of the Act with respect to costs and to the oion and maintenance of trust accounts.
(2) A lashal not claim his cois costs in a letter of demand for debt or damages or other relief written on behalf of a client unless his client has a right to recover such costs.
(3)ـ҈& ...
(4)&#(4) &160; #160;ـ Aerawyer shall, within a rn a reasonable time after being requested by his client, render a bill of costs covering all work performed for that client to which the request relates.
(5) &##160; A lawyelawyer shallgchar m no more than is reasonable by way of costs for his services having regard to:
(a) ټ he coity o ty o matter, the time and skill involved; aed; and
(b) ny; aalescale of coof costs that might be apble; p>
(c) ټ&#any agry agreeagreeagreement as to costs between the lawyer ayer and his client.” (emphasTherI think an u an unjustifiedified assumption by some lawyers that S. 66 (1) (2) of the Lawyers Act wout would gild give them the right to enter into contiy agreements and they are allowed to engage and enter into into contracts involving percentages that are more than what is reasonable. I do not think the Parli ient intended S. 66 of the Act to be interpreted that way. I a that when the 25% was was agreed on by the plaintiff and the first defendant, the estimated value of the property and cash damaged were already indicated to taintiff. The explanation given e plhe plaintiff at paat paragraph (10) of his affidavit is unexplainable and contradicted by paragraph 9. How could the plaintoing ting to write off a bill for K25,000.00 or K35,000.00 if the award expected was only in the vicinity of K10,000.00 or K20,000.00. This to this Court that buld be nothing less than unjust enrichment. The contract entento betwebetween the plaintiff and the defendants required that the plaintiff was to retain 25% of the amount to be awarded0; Byulation of the awhe award the total due to the plaintiff was some K99,500.00. The awae award itwithout iout interest was K398,000.00. To have subtracted K99,5 f.00 from the award would have left the defendants an amount of K298,500.00. It is nly this, trms of thof the contract also provided that the pthe plaintiff was to retain the “interest plus costs”. The int caled on the awardaward as shown on page 4 of the judgement was K35,940. By construnstruction of tre terms of the purported cct, the plaintiff is claiming a total sum of K125,440.00 plus costs. In my view this this amount is unfair and unreasonable in he circumstances of this case. Or toit another wher way, way, was the contract entered into by the plaintiff and his clieir and reale.  The terms of 25%, the est rest plut plus the costs are quite unfair and unreasonable. Had the first defendaen fully alert and picked up the trick about the three components, he would certainly have have refused representation by the plaintiff.&#The dealings of the plaintiff being a lawyer also borders on a possible referral to the Lawe Law Society. I must thereforuse this clis claim and direct that the costs of the business done by the plaintiff be ascertained by taxation. Cost shall follow thnt.
Lawyer for Plaintiff: Messrs Peraki Lawyers
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