N9026

PAPUA NEW GUINEA
[IN THE NATION COURT OF JUSTICE]

MP NO. 4 OF 2020

IN THE MATTER OF AN APPLICATION FOR TAXATION FOR TAXING OF COSTS PURSUANT TO SECTION 63 OF THE LAWYERS ACT 1986

BETWEEN
PARKER MANAGEMENT LTD trading as PARKER LEGAL
Applicant/Respondent

AND
ABEL JOHN
Respondent/Applicant

Waigani:  Thompson J 
2021:  5th, 10th August; 13th August

COSTS – review of costs taxed by Taxing Officer – lawyer’s own bill of costs – bills issued by lawyer to client – no conditions expressed or rights reserved in bills  part payment of bills – lawyer substituted issued bill for bill in taxable form for higher amount – unconditional bills only able to be withdrawn in special circumstances

Counsel:

Mr P. Pato, for the Applicant
Mr J. Talipan, for the Respondent

13th August, 2021

1.	THOMPSON J:	This is an application by the respondent/applicant (“the defendant”) for review of the costs of the applicant/respondent (“the plaintiff”) which were taxed and certified by the Taxing Officer (“TO”) on 26 January 2021 in the sum of K40,394.22.

2.	The documents show that the plaintiff is a firm of lawyers.  I make the observation that the legal status of “Parker Management Ltd” trading as a firm of lawyers, is unclear.  A company is not and cannot be a lawyer, and it is an offence under the Lawyers Act for a non-lawyer to practise as a lawyer or charge legal fees.  However, this was not raised by the parties, and I will not take it any further.

3.	The affidavits show that the defendant and his wife are PNG citizens who married in PNG, but the defendant has been employed and living in Australia since 2011.  Three of the children of the marriage live there with him, while the wife resides in PNG.  In September 2018 the defendant engaged the plaintiff to act on his behalf in issuing proceedings for divorce and custody.  This was done, but the proceedings on MC 24/2018 were discontinued on 25 May 2019.  Fresh proceedings on MC 12/2019 based on a different ground, were issued on 22 May 2019.  A dispute arose over the legal fees charged by the plaintiff, the defendant withdrew his instructions, and the plaintiff ceased to act for the defendant on 4 October 2019.  There was no written fee agreement between the parties.

4.	The plaintiff issued a bill No. 18030-1 in the sum of K9,508.00, of which the defendant paid K7, 650.00 in March 2019.  The plaintiff issued another bill No. 18030-2 in the sum of K12,720.00, which was said to include the outstanding balance of K1,858.00 from the earlier bill, and of which the defendant paid K5,000.00 in June 2019.  The balance then outstanding was K7,720.00.  The defendant queried the amount of the bill, and the plaintiff told him that it was based on a “discounted rate of K600.00 per hour”.   The defendant said that he had not been informed of how many hours had been spent by the plaintiff, he considered the fees excessive, and he queried why the plaintiff had not issued receipts for the cash payments already made.

5.	On 1 October 2019 the plaintiff issued another bill No. 19017 for K7,529.00.  This bill set out the time spent on MC 12/2019.  The covering letter said that the bill was “calculated at the rate of K600.00 per hour”, and that “If you had asked for our rate before engaging us, we would have told you”.  The plaintiff further said that he only issued receipts to clients for payments of “big amount of money, in order to avoid confusion”.

6.	In this letter, the plaintiff requested payment of K7,720.00 still outstanding from the earlier bills and K7,520.00 for the new bill, making a total of K15,249.00.  The plaintiff said in his covering letters that his hourly rate was K800.00, but he had charged a discounted rate of K600.00.  He did not give any explanation for saying this.   

7.	The bill No. 19017 appeared to have been produced by standard legal billing software, setting out in separate columns the date, description of the work, the number of units and the amount for each item in the bill.  At an hourly rate of K600.00, one unit represented 10 minutes of time.  The total time recorded in the bill was 104.5 units, meaning a total of 10.45 hours was spent on MC 12/2019 from 14 May 2019 to 1 October 2019 and the bill included a 10% charge for GST.

8.	The defendant apparently responded by saying that an hourly rate had never been agreed, and that they had a “block allowance arrangement” of K10,000.00 for the first petition, which he said had to be discontinued due to the plaintiff’s negligence.  The defendant apparently requested timesheets and worksheets showing the amount of work done and the amount of time spent.

9.	When the last bill was not paid, the plaintiff filed a bill of costs in taxable form on 29 October 2019 in MC 24/2018, including work on MC 12/2019, in the sum of K81,314.04 prior to deduction of K12,650.00 already paid, leaving a balance of K71,164.04.  He sent this to the defendant with a covering letter saying that he did not need to provide worksheets to the defendant.

10.	On 5 March 2020 the plaintiff filed an Application for Taxation and bill of costs in taxable form (“the filed Bill”) on MP 4 of 2020, covering all work on MC 24/2018 and MC 12/2019.  The filed Bill was for K81,314.00 prior to a reduction of K12,650.00 for payment, leaving a balance of K71,164.00.  This was approximately three times the amount of the original bills.   The filed Bill omitted four charges totaling over K30,000 which were shown in the Bill filed on MC 24/2018, but the filed Bill still showed the same total at the end of the bill.  It appears that the TO may therefore have taxed the bill which had been filed on MC 24/2018, at the Taxation.   

11.	The Application was set for hearing on 19 March 2020, but due to Covid restrictions, did not proceed.  On 20 May 2020, the plaintiff wrote to the defendant and offered to accept 50% of the filed Bill, ie. K35,582.02, and wrote that if the defendant did not pay, the plaintiff would “make you pay dearly”, said that the defendant would “end up paying more than K200,000.00 plus …”, and “Do not think for a second Parker Legal will not reach you in Perth”.

12.	It appears from this correspondence that the plaintiff had taken personal offence to the defendant’s refusal to pay the outstanding balance of his bills.  A Court may have considerable sympathy for a lawyer, particularly a sole practitioner, who has difficulty in having his bills paid.  However, the statements made by the plaintiff to the defendant were not in accordance with the accepted etiquette of the profession.  

13.	The plaintiff had rendered bills in 2019 totaling K27,899.00, of which the defendant had paid K12,650.00 in 2019, leaving a balance of K15,249.00 outstanding.  When this was not paid the plaintiff has issued another bill for K81,314.04, which after deduction of K12,650.00 already paid, claimed a balance of K71,164.00.  On taxation, this was taxed down to K40,394.22, including GST, although there is no record of the amounts taxed off, or the reasons given.

14.	The filed Bill which was taxed, was a lawyer’s bill to his client.  Under s 64 of the Lawyers Act, the TO shall tax such a bill in accordance with the Rules of Court.  The relevant Rules are contained in Order 22 and the Scale of Costs set out in Schedule 2 Table 1 National Court Rules.

15.	As the Bill is not for work performed pursuant to a written remuneration Agreement, then under O 22 r 35 NCR, all costs shall be allowed which are for a reasonable amount and which were reasonably incurred with the client’s approval.  In the absence of a fee agreement, in order to determine the reasonableness of the costs and the client’s approval, it is necessary to consider the circumstances in which the work was performed and the bill was issued.

16.	The filed Bill of 5 March 2020 was served on the defendant in November 2020.  The defendant filed his Objections Response on 26 November 2020.  The filed Bill covered work on both MC 24/2018, and MC 12/2019 in the period from 27 September 2018 to 24 October 2019.  The Bill did not state the hourly rate, but it could be seen from the charges that it was K800.00.  The Objections included that the plaintiff’s costs should only be allowed at K21,626.47 less payment of K12,650.00, leaving a balance of K8,796.47.

17.	As the Bill is not being taxed on a party/party basis, it is not necessary to consider whether each item is in accordance with the figures in the Scale of Costs.  It is only necessary to determine whether each item was reasonably incurred with the client’s approval.  In order to do that, it is necessary to determine the amount of time which was spent, and if that time was reasonable.

18.	I refer first to the hourly rate.  The bills which were issued to the defendant in 2019, were based on an hourly rate of K600.00.  In his covering letter, the plaintiff said that his hourly rate was K800.00, but he had applied a discounted rate of K600.00.  The plaintiff had not informed the defendant of his hourly rate before work commenced in 2018, so that there was no mention that a discounted rate might be used.  The plaintiff did not say on what basis he had applied a discount.  The plaintiff imposed no conditions for payment, and did not reserve a right to withdraw the bills and charge more, if payment was not received. The final bill of 1 October 2019 did not contain a statement that it was based on a discounted rate, and did not reserve the right to claim a higher rate if payment was not received.

19.	These facts raise the issue of whether or not a lawyer may withdraw a bill already issued and partly paid, and substitute it with a bill for a higher amount.  Pursuant to O 22 r 61, I therefore directed the parties to make further submissions on the issue.

20.	There do not appear to be any reported cases in PNG on this point.  In the Australian case of Edwin Sutherland & Co’s Bill of Cost (1970) QD.R. 330, the lawyer had issued a Bill to his client, who requested that it be taxed.  The lawyer then withdrew that Bill, and substituted another Bill in taxable form, which was 50% higher.  The Full Federal Court, in affirming the Supreme Court decision, said:

… a solicitor may deliver a conditional bill, and provided that the conditions are valid, if they are not fulfilled, the solicitor may then withdraw the Bill.  If a solicitor wishes to preserve his rights in this respect, he may do so when delivering his first …. Bill.
  
21.	The court determined that, in the absence of a valid conditional bill with an express reservation of rights if the conditions are not fulfilled, a solicitor could not ordinarily withdraw that bill.  The court held:

In order to entitle a solicitor to withdraw a bill and to substitute another, there must be special circumstances, and accordingly (the solicitor) must on taxation of the second bill, be limited to the amount of the first bill.

22.	Following a long line of authorities including Polak v Winchester (Marchioness) (1956) 2 All ER 660, the court said that such special circumstances would be on the grounds of fraud by the client, or accident or mistake by the solicitor.

23.	These principles are in accordance with the ordinary common law principles applicable in PNG to the interpretation of contracts and documents.  Applying them in the present case, I find that, in order for a lawyer to be entitled to withdraw one bill and substitute it by another, the first bill issued by the lawyer must have been a conditional bill, with valid conditions which have not been fulfilled, or there must be special circumstances such as fraud by the client, or accident or mistake by the lawyer.

24.	Here, the bills issued by the plaintiff to the defendant were not conditional bills, and did not reserve a right to the plaintiff to withdraw them upon non-fulfillment of valid conditions.  There was no evidence of any fraud by the defendant, or of any accident or mistake by the plaintiff in the bills, so that there were no special circumstances.  Further, the earlier bills had already been validly issued in 2019 and the defendant had already paid nearly all of the first bill and about 40% of the second bill, including the GST component.  There was no basis on which the plaintiff could withdraw those 2019 records of work performed, time spent and fees charged, and in effect say in 2020 that those records were not true records, and that in fact the work performed, time spent and hourly rate were all nearly three times higher.  

25.	The plaintiff submitted that the first bills were not bills in taxable form, so were not enforceable, and that he had to replace them with a bill in taxable form in order to enforce them.  That submission is rejected.

26.	First, the original bills were enforceable.  Section 62 of the Lawyers Act says that a lawyer shall not enforce his costs until a month after a bill of costs has been delivered in accordance with the Act.  The bill must contain the particulars required by the Rules of the National Court, and under s 62 (4) (a) (b), shall be signed by the lawyer and delivered to the client.  Where this is proven, the bill “shall be assumed, until the contrary is shown, to be a bona fide bill complying with this Act”.  The particulars required by the Rules of Court are set out in O 22 r 49.  They are simply that the bill shall contain separate particulars of the work done, the disbursements made and the costs claimed for the work done, with the fees in a separate column from the disbursements, and must be endorsed with the name and the address of the lawyer. The original bills issued by the plaintiff complied with all these requirements.  Those bills were enforceable.

27.	Secondly, and in any event, even if the plaintiff wished to present the original bills in a different format, namely, in the standard format of a bill of costs generally adopted on taxation, he only had to change the format of the bills.  He did not have to increase the charges.  The mere substitution of one bill by another, did not give a right to increase the charges in the bill by nearly 300%.

28.	I find that the plaintiff was not entitled to withdraw the unconditional bills issued in 2019 and substitute them by the bill filed on 5 March 2020.  On taxation, the plaintiff should therefore have been limited to the amount of the original bills.

29.	The bills issued by the plaintiff in 2019 were based on an hourly rate of K600.00, and the plaintiff was not entitled to substitute this by an hourly rate of K800.00 in the substituted bill.  The filed Bill should therefore have been taxed at an hourly rate of K600.00. 

30.	The defendant’s Objections to the taxation did not specify what hourly rate he considered appropriate, possibly between K147-K300.00 based on some calculations, but there was no evidence that K600.00 was an unreasonable rate, and this rate should have been applied.

31.	I refer next to the reasonableness of the amount of time that was spent. 

32.	The defendant did not specifically identify any particular item for which he considered the time spent to be excessive.  His Objections stated that he was unable to do this because the specific time spent on each item of work was not identified, and there was no evidence such as time sheets to show the time spent.

33.	The original bill for MC 12/2019 identified each item of work done, and a charge for the time spent.  For instance, on 19 September 2019, the bill says that the plaintiff attended court and adjourned the matter to the Registry, which took 1.5 hours and cost K900.00.  However, this work is not specified in the filed Bill, which simply says in Part Five Attendances: “General attendance including filing and serving documents, perusal of and review of files and documents before court attendances and making notes, engrossing and general preparation for each court attendances and drafting, say ten hours, K7,998.00”.  This description was for three different types of work, and did not identify court appearances for which the preparation was said to be required.   Neither the defendant nor the TO had any way of identifying the separate time spent on each type of work, or on any court appearances.

34.	 The 2019 bill for MC 12/2019 showed a total of 10.45 hours spent from 14 May 2019 to 1 October 2019.  The filed Bill for the same period shows 22 hours totaling K17,600.00 for non-identified time spent, in addition to about K6,000.00 for time spent in  preparation of documents, making a total of K23,600.00.  In relation to disbursements, the 2019 bill showed K830.00 for specific items, while the filed Bill showed a non-itemized figure of K3,500.00 for MC 24/2018 and MC 12/2019.

35.	It can be seen that, in addition to increasing the hourly rate, the filed Bill failed to identify each item of work done and the time spent on doing that work.  It therefore did not actually comply with the requirements of O 22 r 49 (1) to show particulars of the work done and the costs claimed for that work.  

36.	The charges included about K20,000.00 for 25 hours of researching the principles of the law on divorce including case precedents.  As the proceedings were uncontested, the need for such research was unclear, and in any event, the time spent was excessive for such a long-established area of law.  There was no written decision from the TO, so it is not known which items were taxed off or allowed, but some hand-written notations indicate that he may have taxed off K10,995.00 for this particular item, and allowed K9,000.00, which would be 11.25 hours at K800.00 per hour.  A lawyer is expected to have a reasonable knowledge of his work, and cannot charge a client for work performed in learning his own business (Tolom Abai & anor v The State (1998) N1762).   Even 11.25 hours for research is excessive, and should not have been allowed.  

37.	There are also other errors, such as allowing a figure for the cost of the taxation, when more than 1/6th of the bill had been taxed off (see O 22 r 56 (2)), and allowing 10% GST on the whole total, including disbursements, when GST was not payable on most disbursements and had not been charged on all disbursements in the original bills.

38.	It is open to infer that the filed Bill did not represent a genuine assessment of the time spent by the plaintiff in carrying out the work.  It was more in the nature of a penalty sought to be imposed on the defendant for querying the 2019 bills.  As the court said in Edwin Sutherland’s case, if a solicitor is not as a general rule prevented from withdrawing a bill and substituting another, “it might well be open to solicitors to act oppressively…”. When the only amount remaining unpaid for the 2019 bills was K15,249.00, the filing of a substituted bill for a further K71,164.04 was punitive.  

39.	I have already found that the plaintiff was not entitled to substitute the 2019 bill with the filed Bill.  On taxation, the plaintiff was therefore limited to the amount of the 2019 bills.  The filed Bill was taxed down to K40,394.22 inclusive of GST, so that the costs and disbursements must have been allowed at K36,354.80 before GST.  If the filed Bill (excluding disbursements, costs and GST) is now taxed at the hourly rate applied in 2019, and by an assessment of a reasonable amount of time which was spent, the original figure of K69,750.02 would be reduced by 25% for the hourly rate and then by at least 50% for the time spent, to arrive at K26,156.25.  This is not substantially different from the 2019 bills for the same work, which totaled K27,899.00.  

40.	The defendant did not establish that the 2019 proceedings were only necessitated by the alleged negligence of the plaintiff in the 2018 proceedings, or that the hourly rate or the time spent as shown in the 2019 bills, was excessive. 

41.	As the plaintiff should have been limited on taxation to the amount of the 2019 bills, and as there was no evidence that those bills were unreasonable, I find that the amount of costs payable is K27,899.00, prior to deduction of K12,650.00 already paid, so that the total of the costs now payable to the plaintiff, is K15,249.00.

42.	As the defendant has been successful in his review of the taxed costs, costs will follow the event. 

43.	I therefore make the following orders:
	(1)	The Certificate of Taxation filed 26 January 2021, is set aside.
(2)	The amount of costs payable by the respondent/applicant Abel John to the applicant/respondent Parker Management Ltd trading as Parker Legal 
pursuant to a taxation under s 63 of the Lawyers Act, is reviewed and assessed in the sum of K27,899.00, less K12,650.00 already paid, leaving a balance payable of K15,249.00.

(3)	The applicant/respondent, Parker Management Ltd trading as Parker Legal 	is to pay the respondent/applicant Abel John’s costs on a party/party basis, to be agreed or taxed.
__________________________________________________________________
Lawyers for the applicant/respondent:  Lawyer in person
Kortal Lawyers & Associates: Lawyers for the Respondent/Applicant