Costs in Papua New Guinea are normally awarded on a party and party basis, which leaves the winner out of pocket. This case is the authority for when the loser must pay the winner's costs in full.
Rex Paki v Motor Vehicle Insurance Ltd [2010] PGSC 2; SC1015
Supreme Court, Waigani — Salika DCJ, Gabi and Hartshorn JJ, 9 February 2010. SCA 68 of 2006.
What happened
Motor Vehicle Insurance Ltd sued Mr Paki, who had acted as a liquidator, and sought discovery of certain invoices. He did not produce them. Davani J in the National Court struck out his defence under Order 9 rule 15 for failure to give discovery and ordered that damages be assessed. Mr Paki appealed, arguing that once the judge had found the invoices did not exist she could not logically strike out a defence for failing to discover them. He also relied on a deed of release.
What was argued
Mr Paki said the sanction was illogical and disproportionate. The insurer said he had been required by law to keep the invoices as records of the liquidation for seven years, that his conduct over discovery had been obstructive throughout, and that the appeal was itself a further waste of its resources.
What the Court decided
1. Davani J’s finding about Mr Paki’s conduct on discovery, and her ruling striking out the defence, were proper and appropriate in the exercise of the discretion under Order 9 rule 15.
2. The deed of release had no relevance to discovery. Mr Paki was required by law to maintain the invoices as records of the liquidation for seven years.
3. His actions had caused the insurer “an enormous amount of wasted time, effort and money”. His conduct was improper, unreasonable and blameworthy.
4 to 8. The appeal was dismissed, the strike-out upheld, judgment entered for the insurer for damages to be assessed, and Mr Paki ordered to pay the costs of the National Court proceedings and the costs of the appeal on an indemnity basis, including any hearing on quantum.
The award of costs on an indemnity basis is discretionary. It may be made where a party’s conduct in the proceedings has been improper, unreasonable or blameworthy, so that it is unjust to leave the other party bearing part of its own costs. Later courts quote this passage as the governing statement.
Did it make new law?
The Court affirmed Davani J’s decision and drew on earlier costs authority including Bean v Bean [1980] PNGLR 307 and Gulf Provincial Government v Baimuru Trading [1998] PNGLR 311. Its contribution was a compact statement of when indemnity costs are justified, in terms that have since been extended to solicitor and client costs against lawyers personally where they, rather than their clients, are responsible for the wasted costs.
Why it matters
Discovery obligations are enforced. A party who fails to give discovery risks having its pleading struck out, and cannot escape by asserting the documents are gone if it was under a duty to keep them.
Conduct drives costs. Pursuing hopeless applications, ignoring warnings, and forcing the other side to incur expense may convert an ordinary costs order into an indemnity order. A prior warning letter putting the other side on notice strengthens the later application.
Lawyers are exposed. Where the fault lies with the lawyer, the Court may order the lawyer to pay on a solicitor and client basis.
What it does not decide
Paki does not make indemnity costs the norm for every unsuccessful party, and losing an arguable case is not blameworthy conduct. It also predates the current Supreme Court Rules, though the costs discretion in Order 12 of those Rules is applied in the same way. The source of the costs power itself is addressed in Thiess Bros v Chief Collector of Taxes [1982] PNGLR 385.
Recent cases applying it
- Layo v Ondalane [2025] PGSC 135; SC2850 — paragraph 28 of Paki quoted on whether costs should be awarded on an indemnity basis for conduct contravening the professional conduct rules.
- Pacific Trade International Ltd v Waisime [2020] PGSC 137; SC2053 — Hartshorn J found the requirements for solicitor and client costs against a lawyer made out, referring to Paki, where the lawyers had been put on notice by letter.
- Angoman v Angoman [2019] PGSC 129; SC2074 — the appellant’s lawyers ordered to pay the costs of a withdrawn application on a solicitor and client basis, applying Paki.
Sources
- Paki v Motor Vehicle Insurance Ltd [2010] PGSC 2; SC1015 (Salika DCJ, Gabi and Hartshorn JJ, 9 February 2010)
- National Court Rules 1983 — Order 9 rule 15; Order 22; Supreme Court Rules 2012 — Order 12
- Bean v Bean [1980] PGSC 8; [1980] PNGLR 307; Thiess Bros (Pacific) Pty Ltd v Chief Collector of Taxes [1982] PGSC 23; [1982] PNGLR 385
- Layo v Ondalane [2025] PGSC 135; SC2850; Pacific Trade International Ltd v Waisime [2020] PGSC 137; SC2053; Angoman v Angoman [2019] PGSC 129; SC2074
Gulf Provincial Government v Baimuru Trading Ltd [1998] PNGLR 311 is cited as it appears in the judgment and was not separately opened for this brief.
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