N3916

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO 1452 OF 2004

OTTO BENAL MAGITEN
Plaintiff

V

BILDING TABAI
First Defendant

LAWRENCE ACANUFA
TRADING AS ACANUFA & ASSOCIATES LAWYERS
Second Defendant

Madang: Cannings J
2009: 9 July, 29 September,
2010: 19 February

JUDGMENT

DAMAGES – assessment of damages – professional negligence of lawyers – dismissal of earlier proceedings due to lawyer’s negligent failure to be aware of statutory limitation periods

The plaintiff succeeded in establishing a cause of action in negligence against his former lawyers, which had resulted in the plaintiff failing in a breach of contract action against a third party. This was a trial on assessment of damages against the lawyers.

Held:

(1) If a client’s case is dismissed due to the negligence of their lawyer, than in assessing damages against the lawyer it is appropriate to presume, after a cursory inquiry to establish that the plaintiff had a reasonable prospect of success in the earlier case, to assess the damages that would have been awarded in that earlier case (Martha Limitopa and Poti Hiringe v The State [1988-89] PNGLR 364 applied).

(2) The client may also be awarded general damages for distress, inconvenience and frustration caused by a lawyer’s negligence.

(3) The plaintiff was awarded K42,147.00 for business losses (representing the damages that he would have been awarded had he won the earlier proceedings) and general damages of K30,000.00, a total of K72,147.00; plus interest and costs.

Cases cited

The following cases are cited in the judgment:

Albert Areng v Gregory Babia & National Housing Corporation (2008) N3469
Cheong Supermarket Pty Ltd v Pery Muro [1987] PNGLR 24
Joses Taru v New Ireland Shipping Ltd (2008) N3501
Lucas Diritala v Joe Jeffrey WS No 44 of 2004, 01.10.09
Martha Limitopa and Poti Hiringe v The State [1988-89] PNGLR 364
Otto Benal Magiten v Bilding Tabai and Lawrence Acanufa trading as Acanufa & Associates Lawyers (2008) N3470)
Paschal Feria v Ben Lange & The State (2009) N3574
PNGBC v Jeff Tole (2002) SC694
Rodao Holdings Ltd v Sogeram Development Corporation WS 521 of 2001, 23.02.07
Rooney v Forest Industries Council of PNG & Anor [1990] PNGLR 407
Stephen Asivo v Bank of South Pacific Ltd (2009) N3754
Tutunkoff v Thiele (1975) 11 SASR 148

TRIAL

This was a trial on assessment of damages for negligence.

Counsel

B Meten, for the plaintiff
Y Wadau, for the defendants

19 February, 2010 

1. CANNINGS J: The plaintiff, Otto Benal Magiten, succeeded in 2008 in establishing a cause of action in negligence against his former lawyers, Bilding Tabai and Lawrence Acanufa. The lawyers were negligent in that they failed to take account of the six-year limitation period in a breach of contract case that the plaintiff – their client – had in 2001 commenced against Ela Motors, Madang. As a result of their negligence the plaintiff’s case against Ela Motors, Madang was dismissed (Otto Benal Magiten v Bilding Tabai and Lawrence Acanufa trading as Acanufa & Associates Lawyers (2008) N3470).

2. The case against the lawyers is now ready for assessment of damages. The plaintiff is claiming two heads of damages: loss of business and general damages.

LOSS OF BUSINESS

3. By ‘loss of business’ the plaintiff is referring to the damages for loss of business he would have been awarded if his case against Ela Motors, Madang had succeeded. The plaintiffs’ counsel, Mr Meten, submitted that it should be presumed that the case against Ela Motors, Madang would have been successful, so the court’s task is now to consider the evidence in that case and assess the damages that would have been awarded in it. In support of that proposition Mr Meten relied on the judgment of Brunton AJ in Martha Limitopa and Poti Hiringe v The State [1988-89] PNGLR 364, a case in which damages were awarded against the Public Solicitor for his negligence in not filing a client’s negligence action within the six-year limitation period. His Honour cited with approval an Australian case, Tutunkoff v Thiele (1975) 11 SASR 148, which says that once a plaintiff establishes that he would have won a statute-barred action, save for the default of a lawyer, the plaintiff can recover all the damages that could have been recovered in the statute-barred action. The defendant lawyers’ counsel, Mr Wadau, made no effective response to that submission and I am prepared, with one qualification, to uphold it for the purposes of the present case.

4. I do not think Brunton AJ was saying – as Mr Meten is submitting – that it should be presumed without further inquiry that the plaintiff would have won the earlier case. The court should make at least a cursory inquiry into the merits of the earlier case and satisfy itself that the plaintiff had a reasonable prospect of success. I have done that here and I am satisfied that the plaintiff appeared to have a good case with a reasonable prospect of success. He is entitled in the present case to be awarded the damages he would have been awarded in the earlier case on the presumption that he would have succeeded in establishing a breach of contract against Ela Motors, Madang.

5. The case against Ela Motors, Madang was founded on their alleged failure to repair the plaintiff’s PMV bus within the period they agreed to have it back on the road. The plaintiff was in the mid-1990s running a PMV between Madang and Lae. In January 1995 his bus was involved in a collision. He took it to Ela Motors, Madang for repairs. They agreed to have it back on the road within three weeks. In fact, it took more than three months to repair it. This caused the plaintiff cash flow problems. He could not service his bank loan and the bus was repossessed and he went out of business.

6. In January 2001 he commenced proceedings, WS No 74 of 2001, against Ela Motors, claiming damages for breach of contract. In April 2001 that case was dismissed (on the ground that the defendant was incorrectly named) when the plaintiffs’ lawyers negligently consented to it being dismissed, contrary to the plaintiff’s instructions. The plaintiffs’ lawyers compounded their negligence by filing fresh proceedings in May 2001, WS No 636 of 2001 (this time, naming the defendant correctly) by which time the six-year limitation period under Section 16 of the Frauds and Limitations Act had lapsed by more than two months. The plaintiff’s case was dismissed and he was again ordered to pay the defendants’ costs. That was the end of his case against Ela Motors.

7. The plaintiff’s loss of business claim against Ela Motors Madang was in two parts. First he sought damages at a rate of lost profits of K2,230.00 per fortnight for eight fortnights (the period of 16 weeks from when he took his bus to be repaired to the date it was repossessed by the bank), a total of K17,840.00. Secondly, he sought damages to compensate him for the fact that he was put out of business entirely and he claimed K2,230.00 per fortnight for 65 fortnights, a total of K144,950.00.

8. The basis of those claims (that the plaintiff’s PMV business was providing a net income of K2,230.00 per fortnight) was not challenged by the defendants in the present case and there is sufficient evidence to regard it as reasonable. I have no difficulty with the first part of the claim. The bus was off the road for 16 weeks and not earning income for the plaintiff. The second part of the claim is more contentious. The period of 65 fortnights is too long. The proper basis of the calculation should be the period within which it would be reasonable to expect the plaintiff to get a new PMV business up and running. The period I consider in the circumstances of this case to be reasonable is six months (13 fortnights). Those figures should then be discounted by ten per cent as it appears that the plaintiff took no steps to mitigate his losses. It is a fundamental principle of the law of damages that a successful party has a duty to mitigate (lessen the intensity of) his losses. If he fails to do that, the award of damages to which he would otherwise be entitled is reduced (Rooney v Forest Industries Council of PNG & Anor [1990] PNGLR 407, PNGBC v Jeff Tole (2002) SC694, Joses Taru v New Ireland Shipping Ltd (2008) N3501).

9. Damages for loss of business are assessed as follows:

•	Initial period of 16 weeks: K2,230 per fortnight x 8 fortnights = K17,840.00 plus
•	Next period of six months: K2,230 per fortnight x 13 fortnights = K28,990.00
•	Sub-total = K46,830.00
•	Less discount of 10% for failure to mitigate losses: K46,830.00 x 0.10 = K4,683.00; thus
•	Total award for loss of business = K42,147.00.

GENERAL DAMAGES

10. Mr Meten submits that K100,000.00 should be awarded to compensate the plaintiff for the pain, suffering and frustration caused as a result of the negligence of his former lawyers and their refusal to acknowledge that they did anything wrong and their intransigence to his pleas to settle the case out of court. Mr Meten suggested that the frustration endured by the plaintiff was magnified by the acute breach of the duty of care of the lawyers to their client. Mr Wadau for the defendants countered by submitting that it was not proper to put lawyers into a special category and that the claim for K100,000.00 was excessive.

11. I disagree with Mr Wadau that lawyers should not be put into a special category of wrongdoers. Lawyers have a special place in the community. Practising law is an honourable profession, or at least, it should be. When a person goes to a lawyer to seek professional advice and assistance he or she places considerable confidence and trust in the lawyer. The client is entitled to expect a high level of care and attention. When the lawyer is guilty of negligent conduct of a client’s case, which in the present case I described as fundamentally unlawyerly conduct, the client naturally feels aggrieved and stressed. The plaintiff needs to be compensated for this.

12. As to the appropriate amount I agree with Mr Wadau that K100,000.00 is excessive, as that figure would be considerably more than what the courts have been awarding in equivalent cases in recent times. I refer in the table below to five recent cases (all coincidentally decided in Madang) in which I have included in an assessment of damages an award for distress and frustration.

TABLE 1: AWARDS FOR DISTRESS AND FRUSTRATION

No	Case	Details	Award	
1	Rodao Holdings Ltd v Sogeram Development Corporation WS 521 of 2001, 23.02.07	Defendant breached a management contract with the plaintiff – damages awarded to compensate the plaintiff for the distress, inconvenience and frustration caused to it by the defendant’s breach of contract.	K50,000.00	
2	Albert Areng v Gregory Babia & National Housing Corporation (2008) N3469	Defendants’ breach of contact was result of inefficiency and administrative incompetence over a period of 16 years – bureaucratic bungling over such a long period led to distress and frustration for the plaintiff and his father.	K30,000.00
	
3	Lucas Diritala v Joe Jeffrey WS No 44 of 2004, 01.10.09	Breach of contract re sale of motor vehicle – unpaid balance of purchase price of K5,600.00 – plaintiff tried to get the matter settled out of court but defendant uncooperative.	K2,800.00
	
4	Paschal Feria v Ben Lange & The State (2009) N3574	The 65-year-old plaintiff suffered hardship and suffering – denied the recognition and appreciation that should have been afforded to someone who served the Government for almost 40 years – given shabby treatment.	K30,000.00
	
5	Stephen Asivo v Bank of South Pacific Ltd (2009) N3754	Bank breached mortgage agreement – plaintiff compensated for the inconvenience, hardship, distress and anxiety wrought upon him and his wife by the insensitive treatment meted out by the bank.	K10,000.00

13. After comparing the facts of the present case with those in the above cases I conclude that an appropriate award is K30,000.00.

SUMMARY OF DAMAGES AWARDED

14. The amounts awarded are:

•	Loss of business = K42,147.00
•	General damages = K30,000.00

•	Total damages = K72,147.00

INTEREST

15. In the statement of claim the plaintiff seeks interest under the Judicial Proceedings (Interest on Debts and Damages) Act Chapter No 52. The relevant provision is Section 1, which states:

Subject to Section 2, in proceedings in a court for the recovery of a debt or damages the court may order that there be included in the sum for which judgment is given interest, at such rate as it thinks proper, on the whole or part of the debt or damages for the whole or part of the period between the date on which the cause of action arose and the date of the judgment.

16. As Bredmeyer J pointed out in Cheong Supermarket Pty Ltd v Pery Muro [1987] PNGLR 24, this section confers a four-fold discretion on the Judge: (1) whether to grant interest at all; (2) to fix the rate; (3) to grant interest on the whole or part of the debt or damages for which judgment has been given; and (4) to fix the period for which interest will run.

17. I exercise that discretion in the following way:

1 A plaintiff should in the normal course of events receive interest. There is nothing that takes this case out of the ordinary in that regard. The Court will order that interest be included in the sum for which judgment is given.

2 The rate of interest commonly used is 8%. In view of current economic conditions in the country I think 8% is the proper rate of interest.

3 Interest should be payable on the whole of the sum of damages for which judgment is given.

4 I will fix the commencement date for the appropriate period as the date on which the cause of action in negligence accrued, 18 April 2001 (that was day of the defendants’ first act of negligence). The end of the period is in this case the date of filing of the writ, 1 November 2004 (the date of judgment is not an appropriate date as there was some delay on the part of the plaintiff in prosecuting the case). The appropriate period is 3.5 years.

18. I calculate the amount of interest by applying the following formula:

•	D x I x N = A

Where:

•	D is the amount of damages assessed;

•	I is the rate of interest per annum;

•	N is the appropriate period in numbers of years;

•	A is the amount of interest.

Thus:

•	K72,147.00 x 0.08 x 3.5 = K20,201.16.

COSTS

19. The general rule is that costs follow the event, ie the successful party has its costs paid for by the losing party on a party-to-party basis. The question of costs is a discretionary matter. There are no special circumstances in this case that warrant departure from the general rule.

JUDGMENT

20. I direct entry of judgment in the following terms:

(1)	damages, payable by the defendants to the plaintiff, of K72,147.00;

(2)	interest payable by the defendants to the plaintiff, of K20,201.16;

(3)	being a total judgment lump sum of K92,348.16;

(4)	costs of the proceedings shall be paid by the defendants to the plaintiff on a party-party basis, to be taxed if not agreed.

Judgment accordingly.

_____________________________
Narokobi Lawyers: Lawyers for the plaintiff	
Young Wadau Lawyers: Lawyers for the defendants