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The Municipal Corporation of the City of Bombay Vs. Anandrao Narayan Surve - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtMumbai
Decided On
Case NumberSmall Cause Court Suit No. 6607 of 1936
Judge
Reported inAIR1940Bom403; (1940)42BOMLR817
AppellantThe Municipal Corporation of the City of Bombay
RespondentAnandrao Narayan Surve
Excerpt:
costs-attorney-attorney salaried servant of party-whether such party entitled to recover costs from opposite party as between party and party or only costs out of pocket-onus on opposing party to show that costs are more than indemnity.; plaintiffs employed a solicitor on a salary for whole time to do their legal work of a certain character. in a chamber summons brought against the plaintiffs by the applicant, the applicant was ordered to pay to the plaintiffs costs which included bath the out of pocket expenses as well as profit costs, and it was taxed accordingly. the applicant took out a chamber summons for a review of taxation on the ground that as the solicitor was in the plaintiffs' service he was entitled to present a bill only for out of pocket expenses and not for profit.....blackwell, j.1. this is a summons asking for a review of taxation. the applicant was sued in the court of small causes as heir and legal representative of his deceased mother in respect of the riot tax applicable to a certain building. his defence was that he was the owner of the building, and being an exempted person was not liable. the court passed a money decree against him ordering him to pay the tax out of the assets left by his mother which might have come to his hands. the plaintiffs, the municipal corporation of bombay, got the decree transferred to the high court for execution by attachment and sale of the immoveable property. the applicant took out a chamber summons for raising the attachment which was dismissed with costs by mr. justice kania by an order dated december 1, 1937......
Judgment:

Blackwell, J.

1. This is a summons asking for a review of taxation. The applicant was sued in the Court of Small Causes as heir and legal representative of his deceased mother in respect of the riot tax applicable to a certain building. His defence was that he was the owner of the building, and being an exempted person was not liable. The Court passed a money decree against him ordering him to pay the tax out of the assets left by his mother which might have come to his hands. The plaintiffs, the Municipal Corporation of Bombay, got the decree transferred to the High Court for execution by attachment and sale of the immoveable property. The applicant took out a chamber summons for raising the attachment which was dismissed with costs by Mr. Justice Kania by an order dated December 1, 1937. Thereafter the execution proceedings were continued and certain further costs were incurred in connection with those proceedings.

2. Mr. P. M. Clubwalla was acting as the plaintiffs' solicitor in connection with the summons taken out by the applicant to raise the attachment. He went on leave preliminary to retirement at the end of December, 1937, and actually retired on April 30, 1938. From the time when he went on leave preliminary to retirement Mr. M. B. Maniar acted in his place, and was continued by the plaintiffs as their solicitor after Mr. P. M. Clubwalla's retirement.

3. Two bills of costs were originally prepared, one relating to the chamber summons before Mr. Justice Kania, and the other relating to the execution proceedings. Subsequently, those bills were consolidated and they were taxed as a consolidated bill notwithstanding the protest of the applicant who contended that a consolidated bill could not properly be presented. Various other objections were taken before the Taxing Master, which I need not refer to having regard to the agreement come to between the parties as to the lines upon which I should deal with this summons. That agreement is as follows:- The matter is to be treated as if the bill lodged for taxation had contained only items relating to the chamber summons which was dismissed by Mr. Justice Kania. All other items in the bill are to be deleted and the matter is to proceed before me as if they never had been included in that bill. Before the Taxing Master certain items in the bill, in the form as now before me pursuant to the agreement between the parties, were objected to upon the assumption made for that purpose that it was a proper bill, and upon that assumption the Taxing Master sustained a number of those objections. The items so objected to, as to which the Taxing Master upheld the objections, are to be treated as having been properly objected to, and the plaintiffs will not seek to recover them. As regards all the items deleted by the agreement from the consolidated bill the plaintiffs further undertake not to seek to recover them by any means hereafter from the applicant. In the event of my detiding that the plaintiffs' solicitor was entitled to present a bill in the form in which by arrangement it now appears before me, the items in the bill as they now finally stand, pursuant to what I have said, are agreed to between the parties. In the event of my holding that the plaintiffs' solicitor was not entitled to present a bill for profit costs as well as out of pocket expenses, but was only entitled to present a bill for out of pocket expenses, the parties have agreed that the out of pocket expenses amount to Rs. 155-9-6. They have also agreed that the profit costs properly incurred amount to Rs. 331-10-0. As regards the costs incurred before the Taxing Master it was agreed that each party should bear their own costs.

4. I proceed to consider the matter in the light of the agreement come to between the parties. The substantial point for my determination is whether the plaintiffs' solicitor being an employee of the plaintiffs upon a salary is by reason of his being so employed not entitled to present a bill which will include profit costs, but, only to present a bill for out of pocket expenses, or whether notwithstanding that he is employed on a salary basis he is entitled to present a bill which will include profit costs.

5. A number of documents which have a bearing upon the terms upon which the solicitor was employed by the plaintiffs have been put in collectively as exhibit (A). It is not necessary to refer to them all in detail. It will be enough if I give the substance of the material matters emerging therefrom. I may here mention that the actual documents relating to the employment of Mr. Clubwalla as the plaintiffs' solicitor were not available in Court, but a number of documents relating to the employment of his successor, Mr. Maniar, were in Court. The parties agree that, except as to the question of remuneration, the documents relating to Mr. Maniar's appointment and employment were equally applicable to Mr. Clubwalla and that the documents put in, so far as they relate to Mr. Maniar, may be treated, apart from the question of remuneration, as relating to Mr. Clubwalla. Mr. Clubwalla was required to give his whole time to the service of the Municipal Corporation and was not to be allowed to engage in private practice. He was also entitled to the benefit of the municipal leave and provident fund rules. His duties were to look after the less important legal work of the Municipality. It embraced all High Court suits relating to property taxes, ejectment and recovery of rents, suits filed against the Municipal Corporation, all Municipal references and suits filed against the Municipal Corporation in the Small Cause Court, assessment and election appeals, and various non-contentious matters. The salary agreed to be paid to Mr. Clubwalla was Rs. 1,000 a month up to December, 1937, when he went on leave preliminary to retirement. As appears from a statement of Mr. Coltman before the Taxing Master on December 3, 1938, which counsel agreed was accurate, and which was put in as part of exhibit (A) (Coll.), the Municipal Corporation also employed an assistant solicitor on a salary of Rs. 220 a month, a further assistant-a qualified pleader-at Rs. 130 per month, a clerk-a qualified pleader-at Rs. 90 a, month, two typists at Rs. 75 and Rs. 60 a month, a General Court Clerk at Rs. 90 a month, a search clerk at Rs. 65 a month, a despatch and filing clerk at Rs. 40 a month, and three peons at Rs. 25 per month each, and an outside bill clerk. Commission at four per cent, on recoveries on bills made by the outside bill clerk were payable up to March, 1938, after which date the bill clerk was paid two per cent. Further the Municipal Corporation provided office rooms, furniture, stationary, lights and other expenses incidental to a solicitor's office, and also a law library for the use of the solicitor. In addition therefore to paying Mr. Clubwalla Rs. 1,000 per month the Municipal Corporation incurred in connection with their legal assistant's department further monthly expenses which may be taken roughly to come to about another Rs. 1,000 a month, and further they have to keep up the office and maintain the incidental expenses relating thereto.

6. Under the order of Mr. Justice Kania of December 1, 1937, the applicant was ordered to pay to the plaintiffs their costs of and incidental to the chamber summons and of the order made by him when taxed and noted in the margin. The taxation contemplated by that order was of course taxation party and party. It is common ground between the applicant and the plaintiffs in this matter that taxation as between party and party is in the nature of an indemnity. In that connection the observations of Bramwell B. in Harold v. Smith (1860) 5 H. & N. 381 were referred to (p. 385):-

Costs as between party and party ' said Bramwell B. ' are given by the law as an indemnity to the person entitled to them: they are not imposed as a punishment on the party who pays them, nor given as a bonus to the party who receives them. Therefore, if the extent of the damnification can be found out, the extent to which costs ought to be allowed is also ascertained. Of course, I do not say there are not exceptional cases, in which certain arbitrary rules of taxation have been laid down; but, as a general rule, costs are an indemnity, and the principle is this,-find out the damnification, and then you find out the costs which should be allowed.

It has been argued by Mr. Joshi for the applicant that in the present matter the damnification in this case has not been found out, and that there is no evidence what the damnification in fact has been. Consequently his argument is that the Court is not in a position to find out the costs which should be allowed, and therefore that no costs should be allowed except the out of pockets which he concedes are properly recoverable from the applicant. I shall return to this argument later.

7. Gundry v. Samsbury 1910]1 K. B. 645 was referred to. There it was proved that the plaintiff had agreed with the solicitor that he should not pay him any costs. The Court held that at common law as well as under the Attorneys and Solicitors Act of 1870, the plaintiff could not recover from the defendant more costs than he was liable to pay his solicitor inasA. I. R.much as party and party costs were awarded as an indemnity only. The plaintiffs do not dispute the principle laid down in that case which is applicable where an agreement has been proved to have been entered into between the solicitor and the client that the client should not be liable to pay any costs. That case has no direct bearing upon the matter before me.

8. Three English cases were cited which have a definite bearing upon the point which I have to determine, and I will briefly consider them in order of date. In 1849 the case of The Attorney General v. Shillibeer (1849) 19 L.J. Exch. 115 came before the Court of Exchequer of Pleas. It arose out of an excise information, and the question was whether the Crown, which by 2 & 3 Will. IV, c. 120, Section 101, was entitled to ' full costs of suit and all other reasonable charges and expenses', was entitled to recover costs because the Crown employed the solicitor of Excise at an annual salary, and had not incurred any expenditure in matters depending in the particular suit. Mr. Joshi argued that that case had no bearing upon the point before me inasmuch as, in his submission, the decision was given only in reference to a statutory right conferring upon the Crown, which usually neither pays nor receives costs, the right to receive the full costs of the suit. I do not agree with Mr. Joshi's submission. It is, in my opinion, quite contrary to the view expressed by Parke B., who delivered the judgment of the Court. An extract from his judgment will make this plain and will also show the opinion which the Court arrived at upon the question of the solicitor being employed on an annual salary. Parke B. said (p. 117):-

The statute gives full costs, and that means full costs just in the same way as in an ordinary suit between subject and subject: those are taxed according to the well known scale, and the attorney is allowed so much for his fees. We think that the meaning of the statute was to give the Crown solicitor the same fees. Then, it was argued on the other side that this was not to be for the benefit of the defendant, and that any agreement the Crown chooses to make for the benefit of the public, as this agreement obviously is, that the solicitor should only receive a certain annual stipend, cannot affect the defendant, who must pay the ordinary fees. It is perfectly clear that the Crown incurred expenses about this suit; and unless the Crown is to be compensated by the payment of the ordinary fees, there would be no mode of compensating it at all, because it is impossible for the Crown to say what proportion the expense of conducting this particular suit must bear to the entire salary for the year until the end of the year, when all the suits are known, and when the expense of each would be calculated, which at the time the costs are taxed it is impossible to know; and therefore it is impossible, if the Crown is to be compensated at all, that it should be compensated except in the way of payment of the ordinary fees. Then it was said that It is the fault of the Crown, because they have made such a bargain with the solicitor that they cannot tell how much salary is paid for the costs of a particular suit since they made such a bargain with the solicitor. We think that objection really has no weight. The Crown has a solicitor, and makes a perfectly fair bargain with him, very much to the benefit of the public, and we think that ought to make no difference in the case. The costs of this suit are to be taxed on the same principle as if the Crown solicitor were himself conducting each suit at the expense of the Crown in the ordinary way.

In my opinion it is plain from this judgment that the Court treated the statutory right as conferring upon the solicitor not the right to receive such full costs as the solicitor might allege that he had incurred in the conduct of the litigation, but only such full costs as were properly recoverable on taxation treating the matter as if it were a matter between subject and subject in an ordinary suit or litigation. Mr. Joshi argued that the question of idemnity was not referred to in terms in the judgment. That is true. But it seems to me plain from the words used by Parke B. that he had the principle of indemnity in mind when he referred to the fact that the Crown had incurred expenses in connection with the suit, and that it would be impossible for the Crown to say what proportion the expenses of conducting the particular suit must bear to the entire salary for the year. The judgment certainly proceeded upon the basis that the Crown was entitled to devote the costs recoverable on taxation in reduction of the salary payable by the Crown to the attorney. That is the principle which underlies the later cases to which I shall proceed to refer.

9. In Galloway v. Corporation of London 1867 L.R. 4 Eq. 90 an agreement had been entered into between a client and a solicitor, that the solicitor should be paid a fixed yearly salary, to be clear of all expenses of his office, and to include all emoluments, he paying to the client any surplus which might arise of receipts over payments. It was objected on the taxation of a bill lodged on behalf of the Corporation of London by the solicitor at the end of the litigation, which went to the House of Lords, that by reason of the agreement entered into only costs out of pocket should be allowed. In the course of his judgment Sir W. Page Wood v. C. said (p. 96):-

The agreement is simply this: that the solicitor, instcad of charging his client with all those sums which he would be entitled to put down to his debit, charges the client with a fixed sum per annum, and agrees that he shall be remunerated in that way. When the client is ordered' to be paid costs, the bill is to be taxed in the ordinary way, and the certified amount is to go in relief of the salary engaged to be paid, and the surplus, if any, is to be carried over.

The Vice Chancellor then referred to the argument that such an arrangement would really amount to an engagement by the solicitor for the profit of the client, and that such an arrangement might result in, the client making a profit out of litigation. The Vice Chancellor, however, pointed out that some suits might be won, and some suits might be lost, and that the inference that such an agreement was made with a view to make profits could not fairly be drawn from the nature of the agreement. Towards the end of his judgment the learned Vice Chancellor said (p. 97):-

The argument which struck me most was that with regard to the indemnity; but I cannot apprehend that the Court can investigate agreements of this nature with respect to such a question. Mr. Bagshawe cited a case which tended to support his view, with reference to the principle of indemnity, where a person is ordered to pay costs; and, for aught I know, if an agreement has been entered into by a client with a solicitor that he shall pay no costs, it may be a question whether or not the opposite party can avail himself of that agreement, and say to the client, you do not require indemnity. But it cannot be so in a case of this kind, where it is impossible for the Court, without directing an account between the Corporation and the solicitor, to know whether these costs will or not exceed the salary they pay. There are no means of investigating whether the corporation will or will not be indemnified without such an account being directed, and an application to the Court to direct such an account, would be wholly groundless.

In that case therefore the learned Vice Chancellor took the view that when a solicitor was employed on a salary basis nevertheless bills could be presented and taxed in connection with the litigation in the ordinary way and the amount, certified would go in relief of the salary engaged to be paid, and he further took the view that as in such cases there are no means of investigating the question of damnification the Court ought not to go into such a question. Mr. Joshi for the applicant strongly contended against this view of the matter, and urged that a party who seeks to recover costs from the opposite party must show in every case which arises that he has in fact been damnified, and that if he cannot do so he cannot recover costs from the opposite party.

10. A case very similar to the present came before the Divisional Court in Henderson v. Merthyr Tyidfil Urban Council. 1900 1 Q.B. 434 There the District Council employed a solicitor as their clerk at a fixed annual salary of 400, for which among other things he was to prosecute and defend all legal proceedings taken by or against them. Out of pocket expenses were to be paid for by them In an action brought against them, judgment was entered for them with costs, to be taxed as between solicitor and client, they being entitled to taxation upon that footing by virtue of a provision in the Public Authorities Protection Act, 1893. On taxation the Registrar struck out all items except out of pocket expenses paid by the solicitor, on the ground that all work done by him in the conduct of the action was covered by his salary. The Divisional Court held that this taxation was wrong, and that it ought to be reviewed. The argument adduced by Mr. Sankey for the respondent in that case was very similar to the argument submitted to me by Mr. Joshi. It was urged that, costs are only an indemnity, and that the public body in that case had to pay a salary of 400 a year quite apart from that particular action and from any work done by the solicitor in it, that the profit costs of the solicitor were all included in the terms of his appointment in his salary, and that, therefore, by reason of Section 5 of the Solicitors Act, 1870, which is only declaratory of the common law, the Council could not recover from the person ordered to pay costs more than the amount which they would have to pay to their solicitor-that is to say, the out of pocket expenses. The registrar had found on taxing the bill that the sum of ll-12s.-7d. had been charged by the solicitor for the work done, and he struck that off on the ground that that work was paid for by the client by the annual salary of 400. Channell J. in, his judgment said (p. 437):-

Now, the question for us is whether the registrar was right. No doubt the sum of 400/. per annum was paid to the solicitor in respect both of the litigious and the non-litigious work done by the solicitor for the district council. A certain proportion of the 400/.-it is quite impossible to say how much- was, therefore, paid in respect of this particular work which was done by the solicitor in this action. It is for the party objecting to the allowance of the usual costs under such circumstances to shew that the allowance will give more than an indemnity, and in all ordinary cases, such as the present, it is impossible for him to shew it. In some cases, however, he might be able to do so.

The learned Judge instanced a case in which the costs of the litigation exceeded the amount of the salary payable to the solicitor. The learned Judge continued (p. 437):-

Here, however, the registrar was wrong in disallowing the whole of the solicitor's profit costs. A certain part of the salary of 400/. was paid by the district council in respect of them, and that portion ought to have been allowed and paid by the opposite party. It must be assumed until the contrary is shewn that 400/. is a proper sum to be paid to the solicitor for his whole year's work, and also that 11/. 12s. 7d. was a proper sum to be paid to him for this part of his work. The district council must, therefore, be presumed to be paying their solicitor 11/. 12s. 7d. out of the 400/. for this very work. It seems to me that the registrar was clearly wrong in disallowing the whole of the amount charged by the solicitor in respect of work done by him, and, further, that unless something could be shewn which it is most improbable in this case can be shewn; the whole ought to have been allowed, and, therefore, I think that there must be a review of the taxation. Cases such as this arise frequently, and I believe that they are always dealt with in the High Court in the way I have mentioned.

Mr. Joshi submitted that this decision was wrong, and that I ought not to be guided by it. He argued that the learned Judge had wrongly placed the onus on the party against whom costs were to be recovered to show that the costs as taxed would give more than an indemnity. Mr. Joshi argued that it was for the party seeking to recover the costs to prove that he was entitled to the indemnity and to adduce evidence to show that he had actually incurred a liability for the costs which he sought to recover by way of indemnity. I do not agree with Mr. Joshi's argument, and in my opinion he has not appreciated what underlies the judgment of the Divisional Court in this case. In my opinion that judgment proceeded upon the footing that the council were entitled to receive costs and to appropriate them in reduction of the salary payable by them to the solicitor. As was pointed out by Channell J., the district council had a quantity of work which must be done by a solicitor, some of it being litigious and some non-litigious, and that they paid the solicitor 400 a year for his services both in respect of litigious and of other matters. Channell J. agreed that the matter must be approached upon the footing that when the council were successful in an action and costs were awarded they were only entitled to an indemnity, and he dealt with the case in his judgment upon the basis that the council were entitled to receive costs in reduction of the salary agreed to be paid by them to the solicitor partly in respect of litigation to be conducted by him; in other words, the matter had to be looked at as if the council had paid to the solicitor costs in advance of litigation in which they might be engaged out of which litigation they might, recover costs and set them off against the salary so paid in advance. If this is, as I 'think it is, the principle underlying the judgment, Channell J. took the view that inasmuch as the costs of litigation as between party and party are fixed by a scale, that scale must be treated as a fair remuneration for the work done and services rendered in respect of that litigation, notwithstanding that the solicitor was paid a salary, and that therefore in the absence of any evidence to the contrary it would be proper to treat such costs awarded according to the scale as the expenses actually incurred by the client for which he was entitled to be indemnified by the opposite party. I do not agree with Mr. Joshi's contention that the learned Judge put the onus, upon the wrong party reading his judgment as a whole. I agree with that judgment, and I think that I ought to apply the principle underlying it to the matter before me.

11. Two Indian cases were referred to, viz. Azimulla Saheb v. Secretary of State for India 1892 I.L.R. 15 Mad. 405 and on appeal in Muhammad Alim Obllah Sahib v. The Secretary of State for India 1893 I.L.R. 17 Mad. 162 and Nusserwanji & Co. v. S. S. Wartmfels. 1916 I.L.R. 40 Bom. 588: s.c. 18 Bom. L.R. 118 I do not think it necessary to discuss the Madras case. In that case, as well as in the Bombay case, the solicitor, according to the terms of his employment, was entitled in addition to the salary payable to him to retain any costs awarded to the Secretary of State in litigation. Mr. Justice Macleod held that even though the solicitor was entitled to retain for himself the costs of the litigation, and that therefore the Secretary of State could not set off those costs against the salary payable to the solicitor, nevertheless the Secretary of State was entitled to be compensated by receiving costs from the losing party. He said (p. 597):-

If they choose, instead of setting off their costs against the salary they have to pay, to hand them over to their solicitor as a bonus, can the plaintiffs object I think they could only object if the solicitor depended entirely on his remuneration for costs recovered from opposite parties.

A case of that character is not before me. If it were, I should, of course, be bound by that decision, though I may be allowed to say with great respect that I very much doubt whether the decision there actually come to was correct inasmuch as the costs recovered were to go, not in reduction of the salary, but into the pocket of the solicitor in addition to the salary. I am concerned with a case where, if costs as between party and party are allowed to be recovered, the Municipal Corporation will be at liberty to set them off against the salary payable by them to Mr. Clubwalla. In the course of his judgment Mr. Justice Macleod referred to the English cases to which I have drawn attention, and he appeared to assent to the principles laid down in them. I also assent to them.

12. I have come to the conclusion that the plaintiffs' contention is right, and that of the applicant wrong. In my opinion the agreement made between the Municipal Corporation and Mr. Clubwalla was of a character which permits the Municipal Corporation to recover the costs of litigation in which they are successful and to set off those costs against the salaries and various expenses incurred by them in their legal assistant's department. Part of the work to be done by their legal assistants is litigious work and in fixing the salaries payable to their employees, in their legal department, some of whom are qualified professional men, the Municipal Corporation must, I think, be taken to have had in view the amount of litigation in which they were likely to be involved spread over a period of years, and to have fixed the salaries payable by them to their various legal assistants in the light of the possibility of recovering costs out of some of the litigation in which they might be involved. If this be the right view to take of the agreement which they made, then it seems to me that the principle laid down in the English cases is clearly applicable. It would I think be impossible for the Municipal Corporation in the case of any bill sought to be taxed in connection with a particular litigation to say exactly what proportion of the salary payable to their solicitor, or of the general expenses incurred by them in connection with maintaining their legal establishment, must bear to the entire salary for the year or the expenses for the year until the end of the year. But it is obvious that some part of the salary, and some part of the expenses of the legal establishment, were incurred in the light of such possible litigation. Consequently, it seems to me that the Court in the absence of evidence to the contrary ought to assume in favour of the Municipal Corporation that the party and party costs applicable according to the scale should be treated as expenditure reasonably incurred in the conduct of the particular litigation, that the Municipal Corporation are entitled to set off those costs against the salary paid to the solicitor, and that they are entitled to recover them by way of indemnity from the opposite party. In my view Mr. Justice Channell rightly put the onus upon the opposite party of showing that in the particular circumstances of any case the allowance provided for by the scale would give more than an indemnity. In my opinion he was also right in saying that in all ordinary cases it would be impossible for the opposite party to show that, though in some cases he might be able to do so.

13. Counsel are agreed that the profit costs in this matter are Rs. 331-10-0, the out of pockets being Rs. 155-9-6. I have come to the conclusion that that sum of Rs. 331-10-0 is not in the circumstances more than an indemnity, having regard to the fact that the plaintiffs were incurring an expenditure of Rs. 1,000 per month in salary for Mr. Clubwalla, and a further expenditure of roughly Rs. 1,000 per month in connection with their legal establishment, and that some portion of that expenditure must be attributed to the work involved in connection with this chamber summons. In the absence of evidence to the contrary, I think that I ought to assume that out of the total amount of such expenditure incurred by the plaintiffs in connection with their legal establishment Rs. 331-10-0 is the proper amount referable to the work in question. In my opinion therefore the applicant fails on this chamber summons in the form in which it has been ultimately agreed that it should be argued before me, and I dismiss it.

14. As regards costs Mr. Joshi submits that as this is in India a novel point of principle, and as he had agreed to the chamber summons proceeding upon a restricted basis for the purpose of getting this point of principle determined the proper order would be that each party should bear their own costs. Mr. B. J. Desai informs me that the Municipal Corporation are prepared to leave the matter to the Court. In the circumstances I think that the proper order will be that each party should bear their own costs, and that is the order which I make.


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