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South Pac Builders Supplies Ltd v Naidu [2001] TOLawRp 7; [2001] Tonga LR 33 (26 February 2001)

IN THE SUPREME COURT OF TONGA
Supreme Court, Nuku'alofa

C 394/99

South Pac Builders Supplies Ltd

v

Naidu

Ford J
7 and 21 February 2001; 26 February 2001

Costs – solicitor and client basis claimed – have to be exceptional case to warrant that
Discovery - non-compliance – reflected in costs award

On what was anticipated to be the final afternoon of the hearing, counsel for the plaintiff advised the Court that her client had considered its position over the break and she had been instructed to seek leave to discontinue the action. Leave was granted and counsel for the third defendant, Mr Waalkens, immediately applied for costs to be awarded on a solicitor and client basis describing the case as a "hopeless and worthless action". Counsel then made submissions on the question of costs but because, at that stage, Mr Waalkens did not have any records with him to indicate the likely amounts involved, it was left on the basis that he would provide Miss Tonga with particulars of his claim and counsel would then endeavour to reach agreement in relation to costs. The Court specified that if agreement was not possible then the matter should be referred back to the Court for a ruling. The costs claims by the first and second defendants were settled. Counsel advised that they were unable to reach agreement as to the costs claim by the third defendant. Additional submissions were filed by Mr Waalkens in support of his claim for an award of costs on a solicitor and client basis and counsel for the plaintiff filed submissions in opposition.

Held:

1. The case did not fall within the Fonua type of case where it was held that the claim was "bogus" and that the plaintiff had persisted in a "thoroughly worthless action". The true facts unfolded only gradually as the hearing progressed. The real cracks in the plaintiff's case began to open up under skilful and exacting cross-examination capped off by a favourable impression created by the defendant's witnesses. It was not the sort of exceptional case referred to in the Fonua decision that would warrant an award of costs on a solicitor and client basis.

2. While the rules relating to discovery were primarily directed at the party to the action, there was also a heavy onus on the party's solicitor to ensure compliance. The Court showed its condemnation of the plaintiff's conduct in relation to disclosure and discovery in the strongest possible terms and allowed the defendant costs on a solicitor and client basis in respect of all steps taken by its counsel (including his Tongan agent) in relation to disclosure and discovery subsequent to counsel's initial letter of 12 July 1999. In all other respects, costs were awarded to the defendant on a party/party basis.

3. The defendant then had to file pursuant to O 29 Rule 3 two separate bills of cost for taxation (one in respect of the solicitor and client costs, the other in respect of the party/party costs). The bills were to be filed within 28 days of the date of ruling.

Cases considered:

Compaq Computer Australia Pty Ltd v Merry [1998] FCA 968; (1998) 157 ALR 1

Fonua v MBf Bank [1999] Tonga LR 4

Jones v Petas [1948] VicLawRp 16; [1948] VLR 331

Counsel for plaintiff: Miss Tonga
Counsel for first and second defendants: Mr 'Etika
Counsel for third defendant: Mr Waalkens

Ruling on Costs

On the afternoon of what was anticipated to be the final day of this hearing, counsel for the plaintiff advised the Court that her client had considered its position over the lunch break and she had been instructed to seek leave to discontinue the action. Leave was granted and counsel for the third defendant, Mr Waalkens, immediately applied for costs to be awarded on a solicitor and client basis describing the case as a "hopeless and worthless action".

I then heard some submissions from counsel on the question of costs but because, at that stage, Mr Waalkens did not have any records with him to indicate the likely amounts involved, I left it on the basis that he would provide Miss Tonga with particulars of his claim and counsel would then endeavour to reach agreement in relation to costs. I made it clear, however, that if agreement was not possible then the matter should be referred back to me for a ruling but I indicated that, in that event, the plaintiff could expect to be on the receiving end of some strong criticism from the Court because of the unsatisfactory way in which it had handled issues relating to discovery.

That is the situation we have now reached. Counsel have advised that they have been unable to reach agreement and additional submissions have been filed by Mr Waalkens in support of his claim for an award of costs on a solicitor and client basis and counsel for the plaintiff has filed submissions in opposition. I should record that although the first and second defendants were separately represented, counsel for the third defendant effectively acted as lead counsel for all the defendants and handled most of the cross-examination of the plaintiff's witnesses. The court has been informed that the costs claims by the first and second defendants have been settled but a ruling now needs to be made in relation to the third defendant's (the "defendant") application.

In support of his application for an order seeking an award of costs on a solicitor and client basis, Mr Waalkens submits that the "hopelessness" of the plaintiff's case was apparent from an early stage of the trial and he produced a handwritten letter which he had handed to the plaintiff's counsel during the second morning of the hearing putting on record his assessment that the plaintiff's claim lacked any credibility and giving notice that if the plaintiff continued then he would be seeking solicitor and client costs. In his letter Mr Waalkens referred to the decision of Ward CJ in Fonua v MBf Bank [1999] Tonga LR 4 which was approved by the Court of Appeal ([2000] Tonga LR 319 (CA)), where the Chief Justice had awarded costs on a solicitor and client basis and Mr Waalkens drew attention to the strong message the Court had given in that case to plaintiffs pursuing what the learned Chief Justice had referred to as "thoroughly worthless actions". Mr Waalkens also apparently repeated his advice to plaintiff's counsel on the second last day of the hearing.

Counsel for the plaintiff submitted that the nature of the case was not the same as the Fonua case. She said that in the present case the Court did not allow the third defendant's "no case" application at the end of the plaintiff's case and she submits that it was not up until the lunch break on the final day that it became clear that "the plaintiff's evidence was not strong enough against that of the defendants".

There is a rather complicated background to the case which I need not go into except to say that as a result of other proceedings which had come before me last year, I was aware that there had been a falling out between the chairman and the managing director of the plaintiff company. The managing director was the first defendant, Mr Naidu. The second defendant was the company secretary and financial manager.

Events had developed to the point where the chairman considered that the first and second defendants were no longer working in the best interests of the company and so he said that on 27 February 1998 he personally delivered a letter to a Mr Choo, manager of the defendant bank, withdrawing the second defendant's cheque signing authority. The company's case was that Mr Choo had failed to act on this instruction and over the course of the following five or six weeks, the Bank continued to honour cheques signed by the second defendant. The company claimed that three of those cheques were not for legitimate company debts but for the personal benefit of the first defendant.

The defendant's primary defence was that no such instruction had ever been given to Mr Choo. Given the fact that Mr Choo was no longer in the Kingdom and, therefore, not available as a witness, that particular defence could well have been a difficult proposition for the Bank to establish had it not been represented by particularly able counsel.

At the end of the plaintiff's case, Mr Waalkens made a submission on behalf of all the defendants that there was no case to answer. It is not correct to say, as counsel for the plaintiff has put it in her submissions, that the Court did not allow that motion. What the Court did, in fact, was to require the defendants to make an election as to whether or not they were going to give evidence and having received confirmation from Mr Waalkens that evidence would be called, I then declined, in the exercise of my discretion, to rule on the application but said that I would do so at the conclusion of all the evidence.

Counsel for the defendant pressed strongly for a ruling on his application and he referred to a recent decision of this Court in which Ward CJ had given judgment immediately in response to a "no case" submission without putting the defendant to an election. From counsel's description of that particular decision, however, it appeared that the situation was one in which His Honour was able to determine the submission on a question of law without the need to examine the evidence.

In the present case, as I indicated to counsel at the time, I considered that it would not be possible for me to make a determination on the "no case" submission without reviewing much of the evidence which at that point in time was very much in contention. The approach I followed in this regard has been the practice in other jurisdictions for many years. The relevant authorities were reviewed relatively recently in Compaq Computer Australia Pty Ltd v Merry [1998] FCA 968; (1998) 157 ALR 1, where Finkelstein J said:

"There is a settled rule of practice that when counsel for the plaintiff closes his case and counsel for the defendant wishes to submit that there should then and there be judgment for the defendant, counsel for the defendant must elect to call no evidence. This is the practice laid down for judges in the United Kingdom by the authorities ... Further, as Herring CJ observed in Jones v Petas [1948] VicLawRp 16; [1948] VLR 331 at 333:

"In the ordinary case it is most undesirable that the plaintiff's evidence should have to be reviewed twice during the course of the trial, first by itself at the close of the plaintiff's case, and then later along with any evidence called for the defendant."

But like most rules, the practice is not inflexible. The judge always retains a discretion whether there should be adherence to it. For example, if the case can be decided on a question of law without the need to examine the evidence, departure from the rule will usually best serve the interests of justice."

Because of the way the present case developed, it was simply not necessary for me to rule on the "no case" submission and I say no more about it.

Returning to the defendant's costs claim, I do not accept that the present proceeding falls within the Fonua type of case where His Honour held that the claim was "bogus" and that the plaintiff had persisted in a "thoroughly worthless action". I am inclined to agree with the brief analysis of the case outlined in the plaintiff's submissions in response to the defendant's application. The true facts, as it were, unfolded only gradually as the hearing progressed. The real cracks in the plaintiff's case began to open up under skilful and exacting cross-examination capped off by a favourable impression created by the defendant's witnesses. It is not the sort of exceptional case referred to in the Fonua decision that would warrant an award of costs on a solicitor and client basis.

There is one exception to the point I have just made. It relates to the question of discovery. Mr Waalkens referred to the plaintiff's appalling performance regarding disclosure and discovery despite warnings. In his submissions he said:

"Considering the poor performance by the plaintiff with respect to discovery of documents given the number of applications and requests made for proper discovery, the present case is a compelling one to emphasise the point that litigants in Tonga must give proper discovery in cases which go to trial and that in default, an approved cost order will result."

In earlier submissions, Mr Waalkens enumerated the following chronology of steps he had taken to obtain discovery:

"(a) 12/7/99 Letter to Mr Tonga seeking discovery - detail and categories of documents

(b) 24/8/99 Further letter of reminder

(c) 20/10/99 Further reminder letter

(d) 25/11/99 Mr Tonga replies

(e) 7/4/00 Finnigan J. orders disclosure/discovery

(f) 18/4/00 Letter to Mr Tonga advising of categories of documents

(g) 3/5/00 Plaintiff's first "list" of documents

(h) 24/5/00 Letter to Mr Tonga as to lists inadequacies

(i) 26/5/00 Mr Tonga replies -- rejects

(j) Aug 00 Bank seeks order from the court as to discovery. See Yeoh affidavit

(k) 25/10/00 List and affidavit as to documents by plaintiff

(l) 30/10/00 Local agents letter to court (Mr Niu) as to Bank alarm at lack of discovery

(m) 6/11/00 Supplementary list of documents -- and copies of all documents provided for first-time

(n) 9/11/00 Hearing."

Inexplicably, despite these efforts, some 5 documents which Mr Waalkens fairly described as "critical documents" were still not disclosed by the defendant. Counsel submitted:

"In its most neutral gloss the plaintiff has provided an incomplete picture. The third defendant contends the plaintiff has conducted a deliberately misleading case, with selective evidence, by omission of proper discovery and reference to the full evidential picture."

Mr Waalkens endeavoured through cross-examination to elicit an explanation from the plaintiff's witnesses for the company's inadequate discovery but the answers given were vague and totally uninformative.

While the rules relating to discovery are primarily directed at the party to the action, there is also a heavy onus on the party's solicitor to ensure compliance. Thus Halsbury, 4th edition, vol 13 para 45, states:

"The client cannot be expected to realise the whole scope of his obligation regarding discovery without the aid and advice of his solicitor and the latter has a peculiar duty, as an officer of the court, carefully to investigate the position and, as far as possible, to see that full and proper disclosure of all relevant documents is made. The solicitor cannot simply allow the client to make whatever list of documents the client thinks fit, nor can the solicitor escape the responsibility of careful investigation or supervision ... indeed, the solicitor owes a duty to the court carefully to go through the documents disclosed by his client to make sure, as far as possible, that no relevant document has been withheld from disclosure. If the client will not give him the information he is entitled to require, or if the client insists on making a list of documents or swearing an affidavit verifying the list which the solicitor knows to be imperfect, it is the solicitor's duty to withdraw from the case. If the solicitor is guilty of misconduct in this respect, he may be ordered personally to pay or to contribute to the costs of the action. In this matter a solicitor must search his own conscience."

The criticism Mr Waalkens makes of the plaintiff's totally inadequate disclosure and discovery in this case is, in my view, justified. Whether it is proper to attribute all the blame to the plaintiff as distinct from it's solicitor is something that has not been explored before me but, in fairness, I acknowledge that counsel for the plaintiff was not the solicitor on the record. Indeed, as I understand it, she was not instructed in the matter until the eve of the trial.

In all events, I consider that it is entirely appropriate for the Court in the present case to show its condemnation of the plaintiff's conduct in relation to disclosure and discovery in the strongest possible terms and, in the context of the application before me, I propose, in the exercise of my discretion, to allow the defendant costs on a solicitor and client basis in respect of all steps taken by its counsel (including his Tongan agent) in relation to disclosure and discovery subsequent to counsel's initial letter of 12 July 1999.

I appreciate that this exercise may create some difficulties for counsel particularly when the attendances in relation to discovery overlap with other matters. If there is a grey area, however, my instruction to the Registrar upon taxation is to err in favour of the attendance being a discovery matter. In all other respects, costs are awarded to the defendant on a party/party basis.

The defendant is now to file pursuant to O 29 Rule 3 two separate bills of cost for taxation (one in respect of the solicitor and client costs, the other in respect of the party/party costs). The bills are to be filed within 28 days of today's date.