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'Ameleki v Nai (No 2) [2000] TOLawRp 61; [2000] Tonga LR 258 (28 June 2000)

IN THE LAND COURT OF TONGA

'Ameleki

v

Nai (No 2)

Land Court, Nuku'alofa
Finnigan J
L 228/99

26 June 2000; 28 June 2000

Costs — factors in assessment of quantum

Costs — determination of proportionate liabilities

On 29 May 2000 costs were awarded to the plaintiff against each of the defendants. Written submissions were received by the Court and there were substantive arguments about the proportionate liabilities of each of the defendants, and about whether the plaintiff was fully or only partially entitled to costs, whatever they may be. The Court determined that the costs issue should proceed under the Supreme Court Rules Order 29, Rule 2: that the Court should proceed "at the conclusion of [the] trial and forthwith assess the amount of costs payable under [the costs] order".

Held:

1. What was awarded was ultimately the Judge's assessment of what a fair amount to allow as "reasonably necessary or proper for the attainment of justice".

2. The rate allowed to counsel was intended to provide a fair return for counsel's expertise and counsel cannot be allowed fees for time spent learning the law.

3. In assessing the quantum, the Court took into account the nature of the claim, the novelty of the legal issues that were raised, the facts that were adduced in evidence and the examination and cross-examination of witnesses that was required. The Court awarded 65% of the allowable costs of $6487.50. Therefore quantum for party-party purposes was $4217, plus all disbursements that were proved by proper receipts.

4. The costs order against the second defendant, the Minister, was an error. Only administrative action was sought against him and counsel for the plaintiff could not find any evidence on which she could seek costs against him.

5. The Court set aside the determination against all three defendants and declared that costs were awarded to the plaintiff against the first and third defendants. The first and third defendants were directed to each pay one third of the party-party amount ($1,405.66 each) and half of all disbursements.

Cases considered:

OG Sanft & Sons v Johnson [1991] Tonga LR 1

Polynesian Airlines v Kingdom of Tonga [2000] Tonga LR 145

Practice Direction 02/92 [1992] Tonga LR 2

Statute considered:

Court of Appeal Act (Cap 9)

Rules considered:

Land Court Rules 1991

Supreme Court Rules 1991

Counsel for plaintiff: Mrs Vaihu
Counsel for first and third defendants: Ms Tonga
Counsel for second defendant: Mr Kefu

Judgment

In my judgment issued on 29 May 2000 I awarded costs to the plaintiff against each of the defendants, to be agreed or taxed. Counsel for all three parties have filed written submissions about the costs, and there was a chambers hearing on 26 June 2000. In the submissions there were substantive arguments about the proportionate liabilities of each of the defendants, and about whether the plaintiff is fully or only partially entitled to costs, whatever they may be. I heard counsel and determined that the costs issue should proceed under SCR Order 29 Rule 2. That is that I should proceed "at the conclusion of [the] trial and forthwith assess the amount of costs payable under [the costs] order". For this purpose, counsel would normally file submissions and the submissions filed by counsel in the present case are an ideal basis of the assessment.

This procedure is one that has been provided for the convenience of counsel and the parties, both in the 1991 Supreme Court Rules and in the 1990 amendment to s 10 of the Court of Appeal Act (Cap 9), (s 5 of Act No 11/1990). It is one that counsel may wish to use more frequently. As the Court noted in Polynesian Airlines v Kingdom of Tonga [2000] Tonga LR 145, the fixing of the quantum of costs by the Court without resort to taxation is a course open to litigants in Tonga. Pursuant to O29 R 2 it is the responsibility of the Court to finalise the costs issue as soon as possible after a trial or chambers hearing. The next step available is appeal to the Court of Appeal by leave, (pursuant to s 10, as amended in 1990). If followed, this path excludes taxation of party-party costs which, according O29 R 3, should occur only "where the Court is unable to assess costs under rule 2". The same procedure is available in cases before the Land Court, pursuant to the Land Court Rules 1991, O2 R 2 (applying the Supreme Court Rules) and O6 R 2 (providing for chambers determinations by a Judge sitting alone).

Quantum

Plaintiff's counsel filed a bill of costs in taxable form, itemising the amount of each charge by time and rate. The amount claimed is $7071. Excluding the first two items, which are prior to commencement of the present action, and the claimed disbursements of $133.50, for which no receipts or vouchers have been supplied, the total is $6487.50. I think the fundamental principle to apply is the principle provided in O29 R 4(ii) for taxation, i.e. to allow "all such costs, charges and expenses as are reasonably necessary or proper for the attainment of justice or for maintaining or defending the rights of [the] party". It is not necessary to examine each charge made to see if it individually is reasonably necessary or proper. Rather in this exercise what is required is an overall assessment of the bill of costs, against the background of the actual issue litigated and the amount of work that was reasonably necessary or proper to achieve the result.

Counsel claims $2,250 for 5 days' trial at $450 per day. The rate is the rate allowed to plaintiff's counsel by the governing practice direction, Practice Direction 02/92 [1992] Tonga LR 2. The hearing occupied morning and afternoon sessions on each of the five days and that claim is itself reasonable. Counsel in her submissions suggested that on the party-party basis, if other counsel agreed and thus avoided taxation, $5,000 would be an award acceptable to the plaintiff. This is about 77% of the allowable solicitor and client costs (above) and that is too high for a party-party award in practically any normal case. It is certainly too high for the issues and litigation of the present case.

In this assessment under O29 R 2, what is awarded is ultimately the Judge's assessment of what a fair amount to allow as "reasonably necessary or proper for the attainment of justice (etc.)". It is not a matter for fine assessment of hours spent or for argument about minor details. There are various rules of thumb and guiding principles available to the Court. Sometimes it is satisfactory to make a simple assessment of what percentage of the successful party's solicitor and client costs should be paid by the other party or parties as being reasonably necessary or proper for the attainment of the judgment achieved. Sometimes the Court will assess a period of time for trial plus preparation for trial. This will depend on the issues involved and the economy of court time that may have been achieved or unnecessary expenditure of court time. Hence the 1-day-plus-3-days, or even 1-day-plus-15-days assessment that can be found in Polynesian Airlines (above).

It is important to have in mind the principle stated by Martin CJ in OG Sanft & Sons v Johnson [1991] Tonga LR 1 at 2. The rate allowed to counsel (now in Practice Direction 02/92) is intended to provide a fair return for counsel's expertise, and counsel cannot be allowed fees for time spent learning the law. This means that there is a fairly easily assessed average for time spent in preparing a run-of-the-mill case. The issue litigated in the present case was of considerable importance to the plaintiff and the first defendant, and the legal issues needed careful argument and decision. On the other hand, in its pleadings and its facts it was straight-forward. The claim in the bill of costs for 10 hours drafting filing and serving the statement of claim is well beyond what an unsuccessful defendant should pay for. So is a half-hour charge for receiving a notice of a directions hearing and advising the client. Likewise three hours perusing a statement of defence and advising the plaintiff, and 10 hours for "preparation for trial research in law and authorities" with a further 6 hours considering and working on the written submissions, are times outside the average of what would be reasonably necessary or proper.

It would definitely be excessive to allow the days of trial plus 3 days preparation for each of those. For this case a percentage calculation is more appropriate. It seems to me that of the allowable solicitor-client charges made in the bill of costs, the amount that is reasonable and proper expenditure for the purposes of a party-party award is about 65%. In that assessment I take into account the nature of the claim, the novelty of the legal issues that were raised, the facts that were adduced in evidence and the examination and cross-examination of witnesses that was required. By this assessment, I would award 65% of $6487.50, which by my calculation is $4,217. I fix quantum for party-party purposes at $4217, plus all disbursements that are proved by proper receipts.

However, I must say I am concerned at the amount of the solicitor-client charges in this case, and wonder who it may be that advises the public that on the client's application their lawyers' fees are liable in every case to taxation.

Liability

When I made the order for liability for costs, I expected the three defendants to agree to divide their joint and several liability into equal thirds. Costs are not punitive. They compensate for expense in establishing a right by litigation. Even though there was no finding explicitly against the first defendant, he clearly was making the same claim as the plaintiff, and it was he who was unsuccessful. Counsel for the first and third defendants is correct in her submission that full costs should not be awarded, but they rarely are in a party-party award. Her submission that half the solicitor-client costs should be awarded I have largely upheld. Counsel's further submission, that the first and third defendants were not liable to pay any costs because the judgment found that the fault was that of the second defendant I cannot accept. The first of three reasons for the judgment was that the third defendant had inequitably broken his assurance to the plaintiff. Clearly on that finding the third defendant is liable to pay costs. Counsel made no submission about the proportions to be paid by each of her clients, and I expect she accepts that her clients are liable jointly and severally, with each contributing equally. That is my own view, and I shall direct accordingly.

Counsel for the second defendant has submitted that his client was a wholly successful party in the litigation and, despite my ruling that he was to pay costs, is not liable. He seeks variation of the costs order and relief from the costs liability. The argument is fully set out in the submission, including the citations relied on and this courtesy is appreciated.

A little detail is needed here. At the close of the plaintiff's case, counsel for the second defendant, the Minister, moved for dismissal of the claim against the Minister. He submitted then that although there had been evidence about other actions by the Minister, the claim against the Minister in paragraph 11 of the statement of claim about the present issue had not been proved by any evidence. After agreeing with the Court that the Minister is a necessary party, even if only for the sake of the registration order sought by the plaintiff, he amended his application to a motion for leave to take no further active part in the proceedings and to abide the outcome. Counsel for the plaintiff replied that although there was an allegation pleaded against the Minister, she accepted he should now be granted leave to abide the outcome. She agreed with the Court that the statement of claim sought no remedy against him. She went on to state that she accepted there was no evidence on which she could seek an order for costs against the Minister. I thereupon held that there was not sufficient evidence for the award of any punitive remedy against the Minister, and gave leave to counsel to remain silent thereafter and abide the outcome. Counsel for the Minister then sought costs to that point for the Minister, and I reserved the issue of costs of the Minister for submissions at the costs stage.

In the event, after the evidence of the other defendants was heard, I held there had been a failure by the Minister, which was an error of law. I stated that I made that finding without hearing further from counsel because first, it was by his own motion that he had withdrawn and second, because there was no detriment to the Minister from my findings about his failures. He was merely directed to take administrative action, and that direction would have been made in any event from my finding against the third defendant alone. Thereafter, without hearing further from counsel I directed that the Minister was liable in costs along with the other two defendants on the principle of liability following the event.

As counsel saw it, and as he expounds in his submissions, the granting of the leave that he sought made his client a successful party. As a successful party the Minister is prima facie entitled to costs, liability following the event. Thereafter, since the Court held that the Minister had made an error of law, he accepts that the Minister is disentitled. Thus, his position is that the Minister's position in costs is neutral, and he submits that the proper position is that the Minister should be excluded from the order.

I have considered these submissions very critically. The order against the Minister is not a punitive order. At first glance, it seems inequitable to place the costs burden wholly on the other two defendants and relieve the Minister of liability when he has been at fault. Quantum to be paid by each was left for agreement or taxation and is now to be fixed by this judgment. Finally however, I have concluded that the order against the Minister was an error. This is partly for the reasons advanced in submissions by counsel on his behalf, and I now think I should have heard those submissions before deciding liability. There is also the reason that the Minister was never in jeopardy in the proceedings, because no remedy was sought against him, only administrative action. The third reason is that I had overlooked the concession of counsel for the plaintiff at the time that she consented to the Minister's motion, that she had adduced no evidence on which she could seek costs against him. In advance, counsel for the plaintiff had accepted the points now made by counsel for the Minister. Now that the costs issue has been argued this concession has ruled out any award of costs against the Minister.

The Order in Costs

The issue of liability is reopened on the application of counsel for the second defendant. I set aside my earlier determination against all three defendants, and declare that costs are awarded to the plaintiff against the first and third defendants.

The issue of costs is primarily equitable. I give effect to the equities as I see them and direct that the first and third defendants shall each pay one third of the party-party amount above i.e. $1,405.66 each, and each shall pay half of all disbursements that are proved by proper receipts.