Home | Databases | WorldLII | Search | Feedback National Court of Papua New Guinea

Schultz v Michael Wilson (trading as Warner Shand Lawyers) [2023] PGNC 2; N10095 (4 January 2023)

N10095

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS NO 1132 OF 2017

HAZEL LARIAU SCHULTZ FOR HERSELF & ON BEHALF OF ELKEVAR EREMAS, MALKAVAR EREMAS, MISIEL EREMAS, LYDIA EREMAS & TANISHA EREMAS
Plaintiffs

V

MICHAEL WILSON TRADING AS WARNER SHAND LAWYERS
First Defendant

MICHAEL WILSON & ROBERT ASA TRADING AS
WARNER SHAND LAWYERS RABAUL
Second Defendants

Cannings J

Kokopo: 3 November 2022
Waigani: 19^th December 2022, 4^th January 2023

LAWYERS – commencement of proceedings by clients against their lawyers – complaint of unreasonable delay by lawyers in settlement of conveyancing transaction.

PRACTICE AND PROCEDURE – requirement for civil proceedings to disclose a reasonable cause of action – difficulty in identifying cause of action pleaded in statement of claim – whether proceedings should be dismissed because of defective pleading – National Court Rules, Order 12 rule 40.

NEGLIGENCE – lawyer/client relationship – duty of care – lawyer’s duty to be diligent – whether tort of negligence established.

The plaintiffs are PNG citizens who were the owners of freehold land in a provincial town. They agreed to sell the land to a non-citizen, “Johnny”, for K1 million and engaged the defendants as their lawyers, who were also engaged by Johnny, to draft a contract of sale and attend to other legal matters to settle the transaction. A contract of sale between the plaintiffs as vendors and Johnny as purchaser was executed on 13 October 2016. As it was freehold land and the purchaser was a non-citizen, it was necessary for the land to be converted to leasehold title. The defendants engaged a real estate firm to arrange the conversion. Twelve months after the execution of the contract, the conversion was not forthcoming. The plaintiffs were aggrieved by the delay and blamed the defendants for not pursuing the matter diligently. They commenced these proceedings against the defendants on 27 October 2017, claiming “damages for loss of business opportunities from the long delay in releasing the purchase price to the plaintiffs”. It transpired that the title was converted to leasehold on 22 September 2017 and the new State Lease was in the possession of the real estate firm in early October 2017; however, the real estate firm decided not to make the lease available to the plaintiffs and the defendants, due to an unresolved dispute with the plaintiffs. Settlement eventually took place on 15 December 2017. The plaintiffs received the proceeds of sale on 5 January 2018. The plaintiffs maintain that the defendants delayed completion of the transaction without reasonable excuse and the unreasonable delay has caused loss of business opportunities, and therefore the defendants are liable in damages.

Held:

(1) The statement of claim was vague and did not expressly plead any particular cause of action, which raised the issue whether, though there was no motion before it, the Court should exercise the discretion under Order 12 rule 40(1) of the National Court Rules to on its own motion order that the proceedings be dismissed.

(2) Though desirable, it is not essential that every element of every cause of action be expressly pleaded in a statement of claim. What is essential is that the statement of claim read as a whole discloses a cause of action in sufficiently clear terms to put the defendant on notice as to the claim that it has to meet. The proceedings were not summarily dismissed under Order 12 rule 40(1).

(3) To establish a cause of action in negligence a plaintiff must prove the elements of the tort: (a) the defendant owed a duty of care to the plaintiff (b) the defendant breached that duty (acted negligently), (c) the breach of duty caused damage to the plaintiff, and (d) the type of damage was not too remote.

(4) Most elements were non-contentious. The second was not, and the plaintiffs failed to prove that the defendants were negligent. The proceedings were dismissed, with costs.

Cases Cited

The following cases are cited in the judgment.

Amaiu v Yalbees (2020) SC2046
Kuman v Digicel (PNG) Ltd [2013] 1 PNGLR 97
Magiten v Tabai (2008) N3470
Martha Limitopa v The State [1988-89] PNGLR 364
Paul Tarato v Sir Tei Abel [1987] PNGLR 403
Takai Kapi v Maladinas Lawyers (2003) N2323
Vulupindi v Gideon (2006) N3925
Yakasa v Piso [2014] 1 PNGLR 90

Counsel:

T Sirae, for the Plaintiffs
J Kihanges, for the Defendants

4^th January, 2023

1. CANNINGS J: The plaintiffs are PNG citizens who were the owners of freehold land in Kokopo, Section 6 Lot 14. They agreed in 2016 to sell the land to a non-citizen known locally as “Johnny”, for K1 million and engaged the defendants, known generally as Warner Shand Lawyers, as their lawyers. The defendants were also engaged by Johnny to draft a contract of sale and attend to other legal matters to settle the transaction.

2. A contract of sale between the plaintiffs as vendors and Johnny as purchaser was executed on 13 October 2016. As it was freehold land and the purchaser was a non-citizen, it was necessary for the land to be converted to leasehold title under the Land (Ownership of Freeholds) Act 1976. The defendants engaged a local real estate firm, New Dawn, to arrange the conversion.

3. Twelve months after the execution of the contract, the conversion was not forthcoming. The plaintiffs were aggrieved by the delay and blamed the defendants for not pursuing the matter diligently. They commenced these proceedings against the defendants on 27 October 2017, claiming “damages for loss of business opportunities from the long delay in releasing the purchase price to the plaintiffs”.

4. It transpires that the title was converted to leasehold on 22 September 2017 and the new State Lease was in the possession of New Dawn in early October 2017. However, New Dawn did not make the lease immediately available to the plaintiffs and the defendants.

5. Settlement eventually took place on 15 December 2017. The plaintiffs received what was due to them (the balance of the purchase price after deduction of the defendants’ fees and disbursements) on 5 January 2018.

6. The plaintiffs maintain that the defendants delayed completion of the transaction without reasonable excuse and the unreasonable delay has caused loss of business opportunities, and the defendants are liable in damages.

7. The defendants deny those claims and the matter has progressed to trial. Two issues arise:

(1) What is the cause of action and has it been adequately pleaded?

(2) Have the plaintiffs established a cause of action against the defendants?

(1) WHAT IS THE CAUSE OF ACTION AND HAS IT BEEN ADEQUATELY PLEADED?

8. This threshold question must be posed because by any objective standard the statement of claim is vague. It consists, apart from the prayer for relief, of only 12 paragraphs. That is not necessarily a bad thing. Brevity can be a virtue in a statement of claim. But it can also be proof of inadequacy. This statement of claim does not expressly plead any discrete cause of action. This raises the issue, although there is no motion before the Court to this effect, whether I should exercise the discretion under Order 12 rule 40(1) of the National Court Rules to, on the own motion of the Court, order that the proceedings be dismissed.

9. Order 12 rule 40(1) states:

Where in any proceedings it appears to the Court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings—

(a) no reasonable cause of action is disclosed; or

(b) the proceedings are frivolous or vexatious; or

(c) the proceedings are an abuse of the process of the Court,

the Court may order that the proceedings be stayed or dismissed generally or in relation to any claim for relief in the proceedings.

10. At the trial, I asked the plaintiffs’ counsel Mr Sirae what the cause of action was and he did not give me a straight answer. It was only after some prodding that he mentioned the word negligence. So it is, that the cause of action said to be pleaded is the tort of negligence.

11. Is that cause of action disclosed in the statement of claim? What standards should be applied in answering that question? Strict standards? Or loose or liberal standards? The Supreme Court has in recent times addressed these issues in a series of cases including Kuman v Digicel (PNG) Ltd [2013] 1 PNGLR 97, Yakasa v Piso [2014] 1 PNGLR 90 and Amaiu v Yalbees (2020) SC2046.

12. At the risk of over-generalising, the Supreme Court is favouring a less than strict approach. The following passage from Kuman v Digicel indicates the sort of standard that must be met:

Though desirable, it is not essential that every element of every cause of action be expressly pleaded in a statement of claim. What is essential is that the statement of claim read as a whole discloses a cause of action in sufficiently clear terms to put the defendant on notice as to the claim that it has to meet.

13. In this case, key words such as ‘negligence’, ‘duty of care’ and ‘failure to exercise reasonable care’ are not used in the statement of claim. However, it is clearly pleaded that the delay in completion of the transaction is attributable to the defendants. Paragraphs 7 to 10 state:

Since the date of executing the contract for sale and purchase, the plaintiffs and the purchaser have been waiting for the defendant to have the title converted for almost one year, without any reasonable explanation as to the delay in the defendants’ obligation to have the title converted.

Due to the long delay the plaintiffs attended to the Department of Lands and Physical Planning and discovered that the title had been converted on the 22^nd of September 2017 and was collected by an agent of the defendant on or about the 6^th of October 2017.

The defendant thereafter continued to delay the completion of the sale and purchase of the plaintiffs’ land although the title of the subject land had been converted and collected on the 6^th of October 2017.

There has been no reasonable excuse from the defendant to the delay in the completion of the sale and purchase agreement when the plaintiffs and their lawyer (new lawyer engaged to follow up the matter) queried with the defendant.

14. Emphasis on the alleged absence of “reasonable” explanation or excuse and alleged “unreasonable” conduct by the defendants give rise to a reasonable inference that what is being pleaded sufficiently (albeit barely adequately) is the tort of negligence. I am satisfied that the tort of negligence is disclosed in sufficiently clear terms to put the defendants on notice as to the claim that they had to meet.

15. It is a borderline case, but I have decided not to summarily determine the proceedings under Order 12 rule 40(1)(a). The cause of action is the tort of negligence, and it has been adequately pleaded.

(2) HAVE THE PLAINTIFFS ESTABLISHED A CAUSE OF ACTION AGAINST THE DEFENDANTS?

16. To establish a cause of action in negligence the plaintiffs must prove the elements of the tort:

(a) the defendants owed a duty of care to the plaintiffs;

(b) the defendants breached that duty (acted negligently);

(c) the breach of duty caused damage to the plaintiffs; and

(d) the type of damage was not too remote (Magiten v Tabai (2008) N3470).

17. As to (a), the very nature of the relationship between lawyers and their clients is that the lawyer owes a duty of care to the client (Martha Limitopa v The State [1988–89] PNGLR 364; Takai Kapi v Maladinas Lawyers (2003) N2323).

18. If the defendants were negligent, clearly, their conduct caused the plaintiffs damage or detriment, as they did not have the benefit of the proceeds of sale of the property until a long time after the date they say it should have been available to them. So (c) is satisfied.

19. That sort of damage is not too remote. So (d) is satisfied.

20. All elements of negligence except the second, (b), are clearly in existence. The only contentious issue is whether the defendants breached their duty of care to their clients. Were they negligent? Did they fall short of the standard of care required? These are all different ways of asking the same thing: has the second element of the tort of negligence been proven?

21. As Brunton AJ pointed out in Martha Limitopa v The State [1988-89] PNGLR 364:

The duty of care that a lawyer has is not measured against standards that may be considered reasonable for labourers, or carpenters, or nurses, or community schoolteachers, or research biochemists.

22. The standard of care lawyers must exercise in dealing with their client’s cases is measured in accordance with the standards of the profession: the lawyer must act skilfully and diligently at all times. Section 3 of the Professional Conduct Rules states:

It is the duty of a lawyer ... to be competent in all his professional activities.

23. Section 8 of the Professional Conduct Rules also helps to circumscribe the duty of a lawyer to their client. It states:

(1) A lawyer shall treat a client fairly and in good faith, giving due regard to—

(a) the dependence by the client upon him and his special training and experience; and

(b) the high degree of trust which the client is entitled to place in him.

(2) A lawyer shall always be frank and open with his client and with all others so far as his client's interest may permit and shall at all times give his client a candid opinion on any professional matter in which he represents that client.

(3) A lawyer shall take such legal action consistent with his retainer as is necessary and reasonably available to protect and advance his client's interests.

(4) A lawyer shall at all times use his best endeavours to complete any work on behalf of his client as soon as is reasonably possible.

(5) If a lawyer receives instructions from a client and it is or becomes apparent to him that he cannot do the work within a reasonable time, he shall so inform his client.

(6) A lawyer shall not—

(a) take unnecessary steps or do his work in such a manner as to increase his proper costs to his client; or

(b) accept instructions which are beyond his competence.

(7) A lawyer shall, when in his client's best interests, seek his client's instructions to endeavour to reach a solution by settlement out of court rather than commence or continue legal proceedings.

24. I have carefully examined the conduct of the defendants, in their handling of what should have been a simple conveyancing transaction, against those standards, bearing in mind that the onus of proving the case rests on the plaintiffs.

25. I am not satisfied that the plaintiffs have proven that the defendants were negligent. There is evidence, and I find as a fact, that the defendants engaged New Dawn to arrange the conversion of title on 23 September 2016 (which was before the date of execution of the contract of sale). There is no evidence that New Dawn delayed the making of the application. It took 12 months for the substitute lease to be granted and registered but there is no evidence that that apparent delay is attributable in any way to the defendants’ lack of diligence. Nor is there any evidence that a delay of that magnitude is unreasonable or unusual or anything out of the ordinary.

26. It was submitted by Mr Sirae that New Dawn was the agent of the defendants, that an agent-principal relationship existed, and that the defendants are bound by the conduct of their agent. I have no difficulty with those propositions in principle (Paul Tarato v Sir Tei Abel [1987] PNGLR 403, Vulupindi v Gideon (2006) N3925). But they do not assist the plaintiffs if they cannot show that New Dawn was negligent; and that is the case here. It has not been proven that New Dawn was guilty of a lack of diligence.

27. Once the substitute lease was in possession of New Dawn in early October 2017, they failed to hand it over immediately because of an ongoing dispute with the plaintiffs. New Dawn claimed that the plaintiffs owed them a 5% commission (K50,000.00). New Dawn claimed that they were engaged by the plaintiffs to find a purchaser for the land and that they found Johnny and that it was because of their work that the plaintiffs and Johnny were able to make a deal for the sale of the land to Johnny.

28. There is ample evidence that the defendants, through their consultant David Lidgett, were frustrated by the lack of willingness of New Dawn and the plaintiffs to negotiate their ongoing dispute. The defendants were doing their best in difficult circumstances to get the plaintiffs and New Dawn to meet and talk. The defendants acted reasonably, not negligently.

29. Settlement took place on 15 December 2017, a little over two months after New Dawn had taken possession of the lease. This delay was not caused by the defendants. The second element of negligence is not established. This means that the plaintiffs have failed to prove their case. The proceedings must be dismissed, with costs.

ORDER

(1) The proceedings are entirely dismissed.

(2) The plaintiffs shall pay the defendants’ costs of the proceedings on a party-party basis which shall if not agreed be taxed.

________________________________________________________________
McGregor & Associates Lawyers: Lawyers for the Plaintiffs
Inua Lawyers: Lawyers for the Defendants