N998

PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]

MOTOR VEHICLES INSURANCE (PNG) TRUST

V

SALEM

Mount Hagen
Woods J

25 July 1991
22 August 1991

LAWYERS - Lawyer and client relationship - Authority of lawyer - Scope of - Authority to compromise proceedings - Excepting collateral matters - No notice of limitation on authority - Compromise binding and enforceable.

PRINCIPAL AND AGENT - Authority of principal - Authority of lawyer to compromise proceedings - Scope of - Enforceability.

Held

A lawyer on the record is, inter alia, authorised to bind his client by compromise of existing proceedings on terms which do not involve collateral or extraneous matters unless the client has limited his authority and has communicated that limitation to the other party.
Little v Spreadbury [1910] 2 KB 658, followed.

Cases Cited

Little v Spreadbury [1910] 2 KB 658.

Statement of Claim

These were proceedings in which the defendant sought to enforce a contract, viz, an agreement to compromise legal proceedings.

Counsel

A Kandakasi, for the plaintiff.
P Kopunye, for the defendant.
Cur adv vult

22 August 1991

WOODS J: The defendant sustained injuries in a motor vehicle accident on 11 November 1987. Notice of the claim for damages was given to the plaintiff Trust in accordance with the provisions of the Motor Vehicle (Third Party Insurance) Act (Ch No 295) by Messrs J K Pakau, his lawyer. There were then letters between Joseph Pakau and the Trust making submissions on the quantum of the claim in an effort to settle the claim. And figures starting at K5,000 up to K10,000 were mentioned. In August 1988, Joseph Pakau by letter offered to settle the claim for K10,000 damages plus costs of K400. At first the Trust offered K7,500 to settle the matter. During the negotiations Joseph Pakau issued a writ of summons claiming damages out of the National Court and at this stage the Trust referred the matter to its lawyers, Messrs Young & Williams. Then, in April 1989, the Trust’s lawyers, Young & Williams, wrote to Joseph Pakau accepting the offer of settlement of K10,000.

However, at this stage it appears that the defendant had contacted a new lawyer although formal notice of this was not given to Young & Williams until October 1989 by letter and by notice of change of lawyers. The defendant’s new lawyer advised that the defendant did not now accept the settlement of K10,000 and made new offers for settlement.

The plaintiff Trust, through its lawyer, is now seeking enforcement of the agreement to settle the claim at K10,000 plus costs. The plaintiff claims that the letter dated 19 August 1988 from Joseph Pakau and the letter dated 4 April 1989 from Young & Williams comprise a binding agreement to settle entered into by the duly authorised agents for the respective parties.

Counsel for the defendant submits that at the time the lawyers for the plaintiff accepted the offer to settle at K10,000 the defendant had already executed an authority for the change of lawyers. However, even after that supposed authority was executed, Joseph Pakau had issued the summons for the claim and sent it onto the plaintiff. And it was still some months later before the Trust or its lawyer were advised of the change of lawyers. It was not until November 1989 that there was any suggestion that the defendant would not settle at the figures proposed and agreed to many months earlier. So we have here a lawyer acting on his client’s instructions to seek damages initially through negotiations to settle and then through the issue of legal process. Joseph Pakau could be accepted by the Trust as the authorised agent of the claimant. Negotiations started by reference to a figure of K5,000 but later went to K10,000. At all times the Trust and its lawyers were entitled to rely on Joseph Pakau being the agent of the claimant. And at the time the Trust accepted the offer of the claimant to settle at K10,000 the Trust had not been advised that Joseph Pakau was other than a lawful agent with the authority to negotiate on the claimant’s behalf.

There is no suggestion anywhere in the evidence that Joseph Pakau did not have the claimant’s authority to bind his client in negotiations. There was nothing to suggest any limitation of his authority.

The principle is that the authority of the lawyer or counsel to compromise is limited to the issue in the action, the settlement offered and accepted here involved no collateral matters that could be outside the scope of the agency.

The law is quite clear that solicitors and counsel have a general authority to effect a compromise in all matters connected with the suit in question and not merely collateral to it. And if they act within their apparent authority and the other party has no notice of any limitation on it the client will be bound thereby. There are numerous cases which emphasise the principle, however, I will refer to the case of Little v Spreadbury [1910] 2 KB 658 which states as follows: A client who induces his solicitor to believe that he has authority to compromise an action upon certain terms is bound by such compromise if the solicitor in making it reasonably believes that he has authority to do so although the client did not in fact intend to authorise a compromise upon those terms and did not understand the terms upon which it was proposed the compromise should be effective.

I also refer to Halsbury’s Laws of England, 4th ed, vol 44 "Solicitors", par 116 which notes that a solicitor whose name is on the record, is amongst other matters, authorised to bind his client by compromise of existing proceedings on terms which do not involve extraneous matters unless the client has limited his authority and has communicated that limitation to the other side and subject to the discretionary power of the court if its intervention by making an order is required to inquire into the circumstances and grant or withhold the intervention as it thinks fit and subject also to the client’s disability.

Any suggestion that the amount on which the negotiations were settled is grossly unjust or insufficient such that this Court should intervene is answered by the fact that negotiations actually started between K5,000 and K7,500, and the figure of K10,000 was the upper limit of the negotiations. A body like the plaintiff here and its lawyer and other lawyers must be able to rely on the traditional authority of a lawyer or counsel to have their client’s authority to act for the client and bind the client otherwise there could be no resolution of many matters. Claimants cannot be permitted to give authority then withdraw it at a whim by changing their minds after negotiations to settle have been conducted and concluded. Parties are entitled to expect reasonable negotiations and a reasonable attempt at resolution of settlement. To change ones mind after reasonable negotiations have concluded cannot be part of the reasonable process of negotiation and settlement.

I find that there was a binding agreement to settle between Joseph Pakau as lawyer for the claimant and Young & Williams as the lawyer for the Trust.

I declare that on or about 4 April 1989 the plaintiff and the defendant entered into an agreement in writing comprising the letters dated 19 August 1988 and 4 April 1989 whereby it was expressly agreed that the compromise of the claim by the defendant against the plaintiff was to be settled by payment of K10,400 to the defendant by the plaintiff.

Judgment for plaintiff.

Compromise agreement to be enforced.

_____________

Lawyer for the plaintiff: Young & Williams.
Lawyer for the defendant: Kopunye Lawyers.