SC1393
PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA NO 108 OF 2010

BETWEEN

MICKY AKAI
Appellant
 
AND

JOHN STANLEY REEVES
First Respondent

AND

MICHAEL NEWALL WILSON
Trading as Warner Shand Lawyers
Second Respondent

Waigani: Kandakasi, Makail, & Kariko, JJ
2014: 25th February & 05th September

SUPREME COURT APPEAL – Professional negligence – Solicitor/client relationship – Claim against lawyer – Breach of duty of care – Failure to prosecute claim – Failure to set matter down for trial – Claim dismissed for want of prosecution – Liability denied – Proof of.

LAWYER & CLIENTS – Professional negligence – Solicitor/client relationship – Duty of care – Duty to fairly represent interest of client – Conduct falling short of fairly representing interest of client constitutes breach of duty of care – Lawyer liable for damages – Professional Conduct Rules – Rule 8.

PRACTICE & PROCEDURE – Objection to competency – Leave to appeal – Whether grounds of appeal raised questions of fact – Leave not required – Grounds of appeal raised questions of mixed fact and law – Objection raised at hearing – Notice of competency – Failure to give notice – Appellant adversely disadvantaged and denied right to fair hearing – Objection dismissed – Supreme Court Rule, 2012 – Order 7, rule 15.

Facts

The appellant Mr. Micky Akai sued the respondents for professional negligence. He had earlier retained them to act for him in a claim against South Pacific Insurance (PNG) Limited for damages arising out of the insurance company's failure to settle a claim for compensation for loss of a house and personal effects due to fire. He alleged that, apart from issuing writ of summons proceedings, the respondents failed to help prosecute his claim with due diligence resulting in its dismissal. He thus claimed damages in terms of the value of his house and personal effects. 

The dismissal of his earlier proceeding was on the ground that he failed to establish liability. The trial Court also held, amongst others, that Mr. Akai was responsible for the delay by failing to give adequate instructions to the respondents to prepare for trial. The trial Court also found and that it was an abuse of process to claim the value of the house and personal effects against the respondents as such damages should be claimed against the insurance company. 

Mr. Akai appealed against the dismissal of his claim for professional negligence. The respondents objected to the competency of the appeal on two grounds. Firstly, the grounds of appeal raised questions of facts which required leave and Mr. Akai did not seek and obtain leave. Secondly, the grounds of appeal were based on matters that were not raised in the National Court. He was therefore estopped from raising them on appeal. 

Held:

1. Notwithstanding the time limit of 14 days to file a notice of objection to competency after service of the appeal under Order 7, rule 15 of the Supreme Court Rules, 2012, the Court has discretion to deal with any competency issue at any stage of the proceeding, prior to final judgment. In this case, Mr. Akai, has been adversely disadvantaged by the respondents' failure to give the requisite notice and has been denied the right to a fair hearing, especially when the appeal has been fixed for substantive hearing. Hence, the respondents are precluded from raising any objection to the competency of the appeal. Accordingly, the objections are dismissed.

2. In any case, if the Court were to consider the objection it would still dismiss it. Whilst the grounds appeared to challenge the trial judge's assessment of the evidence and his findings on the disputed facts, when considered in totality, the appeal turns on one issue. That is, whether the respondents were negligent. This is a question of mixed fact and law. 

3. The second ground of objection is dismissed as having no merit because Mr.Akai's counsel canvassed the issues raised in the grounds of appeal in his written submission filed on 20th April 2010.

4. Given that a claim for professional negligence against a lawyer is based on a relationship between a solicitor and his client, the respondents owed a duty of care to Mr. Akai. They had a duty to fairly represent his interest. Martha Limitopa v. The State [1988-89] PNGLR 364 referred to.

5. The trial judge erred when he relied on hearsay evidence and found that Mr. Akai failed to establish the respondents breaching the duty of care to fairly represent him and dismissed the proceeding.

6. The appeal is upheld, with the decision of the National Court being quashed; the proceeding reinstated; judgment on liability entered against the respondents and matter remitted to the National Court for trial on assessment of damages.

Cases cited:

Martha Limitopa v. The State [1988-89] PNGLR 364

Counsel:

 L Kari, for Appellant 
 M Wilson, for First Respondent
 S Wanis, for Second Respondent

JUDGMENT

05th September, 2014

1.	BY THE COURT: The appellant Mr. Micky Akai sued the respondents for professional negligence. He had earlier retained them to act for him in a claim against South Pacific Insurance (PNG) Limited for damages arising out of the insurance company's failure to settle a claim for loss of a house and personal effects due to fire. He alleged apart from issuing writ of summons proceedings, the respondents failed to help prosecute his claim with due diligence resulting in its dismissal. He thus claimed damages in terms of the value of his house and personal effects. 

2.	The trial judge dismissed the proceeding on the ground that Mr. Akai failed to establish liability and held that; (1) he was responsible for the delay because he failed to give adequate instructions to the respondents to prepare for trial; (2) he contributed to the dismissal because he failed to pay legal costs and disbursement; (3) the claim for the value of the house and personal effects against the respondents was an abuse of process because such damages should be claimed against the insurance company; (4) there was no evidence of court documents and the reasons of the judge who dismissed the earlier claim for want of prosecution to show why the claim was dismissed; and (5) the pleading in the statement of claim was inadequate. 

Claim for Professional Negligence

3.	Mr. Akai appeals against the dismissal of the proceeding and relies on nine grounds of appeal. The cause of action was the tort of negligence. The trial judge canvassed the relevant principles on the tort of negligence in his judgment and stated that, to succeed on a negligence claim it must be proven that:

•	The defendants (respondents) owed him a duty of care,
•	They breached that duty,
•	The breach caused him damage,
•	The type of damage was not too remote, and
•	He did not contribute to his own loss and detriment, by being contributory negligent or voluntarily assuming the risk.

4.	The trial judge also referred to the case of Martha Limitopa v. The State [1988-89] PNGLR 364, which held that the very nature of the relationship between a lawyer and his or her client is that the lawyer owes a duty of care to the client. It was also held in that case that an action against a lawyer by a client for breach of the lawyer's professional obligations is an action in tort because it arises from the relationship between the lawyer and the client. Hence, it is not the subject of a special contract where the duty is the subject of a special contract. The Court further held that, the duty of care of a lawyer is measured by the standards which apply to the profession as a whole. Parties have no issues with these principles but take issue with their application to the facts, particularly on the question of any breach of the duty and the measure of any damages arising there-from. 

Competency of Appeal

5.	The respondents object to the competency of the appeal on two grounds on the basis of which they submit the appeal should be dismissed. Firstly, they claim the grounds of appeal raise questions of fact for which leave is required but no leave was sought and obtained. Secondly, they claim the grounds of appeal were not raised in the National Court. Therefore, Mr. Akai is estopped from relying on them on appeal.

6.	The respondents' objection is without notice. Order 7, rule 15 of the Supreme Court Rules, 2012 imposes a duty on the respondents to file and serve a notice of objection to competency within 14 days after service of the appeal. The notice is to put the appellant and the Court on notice of the respondents' intention to seek dismissal of the appeal on grounds of incompetence. The respondents did not explain why they were unable to give the required notice. 

7.	Notwithstanding the time limit of 14 days to file a notice of objection to competency after service of the appeal, the Court has discretion to deal with any issues of competencies of appeals at any stage of the proceeding, prior to final judgment. In this case, Mr. Akai, has been adversely disadvantaged by the respondents' failure to give the requisite notice and has been denied the right to a fair hearing, especially when the appeal has been fixed for substantive hearing. For these reasons, the objection is dismissed.

8.	In any case, if the Court were to consider the objection, it would still dismiss it. Whilst the grounds of appeal appear to challenge the trial judge's assessment of the evidence and his findings on the disputed facts, when considered in totality, the appeal turns on one issue. That is whether the respondents were negligent. This is a question of mixed fact and law for two reasons. Firstly, the Court is invited to determine the nature of relationship between the parties. As the claim is based on negligence, the Court will need to determine the elements of negligence. We have briefly alluded to them and their determination is a question of law. Secondly, the Court is invited to make a finding of fact in relation to whether the respondents owed a duty of care and breached it. We are satisfied leave is not required and the appeal is properly before us. 

9.	There is no merit in the second ground of objection because from our perusal of Mr. Akai's counsel's written submission filed on 20th April 2010, the issues raised in the grounds of appeal were canvassed by counsel. The submission focussed on the main issue of Mr. Reeve's absence at trial and the tendering of his affidavit at trial. That evidence supported Mr. Akai's case that he was always ready and willing to go to trial to prove his claim against the insurance company. 

Merits of Appeal

10.	Mr. Akai submits that the respondents were negligent because they breached their duty to fairly represent his interest when they did not set the matter down for trial. He says, upon giving instructions to the respondents and paying a deposit of K2,000.00 for legal costs in 1988 they were required to take all steps necessary to have his claim prosecuted with due diligence from issuance of proceedings, through to fixing the matter for trial, conducting the trial, get to final judgment and finally satisfaction of any judgment in his favour. This, the respondents failed to do save only to issue writ of summon proceedings on 11th January 1989. Those proceedings were dismissed for want of prosecution on account of the respondents' failures. 

11.	Further, he points to the affidavit of Mr. Reeve to show that the trial judge erred when he failed to consider it and instead, accept the evidence of Mr Michael Wilson. Mr. Akai submits that Mr. Reeve was a key witness. He was the lawyer who had the conduct and carriage of his claim and had direct knowledge of the circumstances surrounding the dismissal of his earlier claim. The matters deposed to in Mr. Reeve's affidavit were uncontroverted and as such they should have been accepted by the trial judge. Mr. Akai submits that Mr. Wilson's evidence was hearsay as he was not the counsel who had the carriage and conduct of his then claim. Hence, his evidence should have been rejected but was erroneously not. 

12.	The respondents denied the claim against them at the trial and raised a number of defences. These could be summarised in terms of:

•	Firstly, the solicitor/client relationship between the parties was terminated when Mr. Akai failed to give adequate instructions.

•	Secondly, if there was a contract between the parties, it was repudiated by Mr. Akai's failure to give adequate instructions.

•	Thirdly, the solicitor/client relationship was terminated because Mr. Akai failed to pay legal fees and disbursement.

•	Fourthly, the claim against the insurance company was frivolous and was bound to fail because there was insufficient evidence to prove it.

•	Finally, the cause of action arose in March 1995 and the proceeding was filed in April 2001. The claim was statute-barred under the Frauds and Limitations Act, 1988 because it was filed after the time limit of six years had expired.

13.	As we noted earlier, except for the defence of time-bar, the trial judge accepted the first four defences and dismissed the proceeding. They form the basis of the appeal. To determine whether the respondents were negligent, the Court will have to go back in time to when the application for want of prosecution, which was in 1996. Justice Andrew was the National Court Judge who dismissed the claim for want of prosecution. His Honour accepted that Mr. Akai "was consistently seeking to have a date for hearing fixed but was frustrated by the defendant who was attempting to locate its key witness." This was from April 1993 to August 1994. There was however, little or no explanation for the delay from 1989 to 1993. 

14.	In defending the trial judge's decision, the respondents as noted claim that Mr Akai failed to give them adequate instructions. In particular, they claim that Mr. Akai did not provide them with a copy of the relevant insurance policy. They say that document was a crucial piece of evidence to establish liability. Without it, the matter could not be set down for trial. They further submit that Mr. Akai was un-contactable and as a result, they were unable to obtain instructions from him. Further, they claim Mr. Akai failed to pay their legal fees and disbursements. Furthermore, they claim that the claim was frivolous and was bound to fail due to no evidence of insurance policy. 

15.	At the heart of the dispute is Mr. Akai's claim that a key witness of the defence did not attend and give evidence at trial. This witness was the first respondent Mr John Reeve. He was the lawyer who had conduct and carriage of Mr. Akai's earlier claim against the insurance company, which was dismissed for want of prosecution in 1996. There is no dispute that Mr. Reeve did not attend trial but his affidavit sworn on 29th February 1996 in opposition to the application for want of prosecution was tendered by consent. It formed part of the evidence for the defence case and was before the trial judge. It is in the bundle of documents annexed to Mr Paul Pori Yange's affidavit sworn and filed on 03rd November 2009 and tendered as exhibit "D1". 

16.	On close examination of Mr. Reeve's affidavit, we note that, Mr. Reeve did not mention anything about the need for Mr. Akai to provide the insurance policy to him. On the other hand, he deposed that Mr. Akai was always and willing to go to trial on his claim and the delay was caused by the insurance company not being able to locate its witness who was said to be living in three different countries, namely Australia, Croatia and Cambodia. 

17.	At paragraph 10 of his affidavit, Mr Reeve deposed that "The Plaintiff (Mr. Akai) has not been prevaricating but has at all times been concerned to have these proceedings brought to a hearing as soon as possible." He further deposed at paragraph 11 that "In my respectful view the Plaintiff (Mr. Akai) has done all that is reasonable to prosecute his claim." If that were so, then it would mean that since 1989, Mr. Akai was ready to go to trial. In essence this was the evidence Mr. Reeve gave when he opposed the application for want of prosecution. 

18.	But Justice Andrew found that there was little or no explanation for the delay from 1989 to 1993. If Mr. Akai was ready to go to trial, what did the respondents do to set the matter down for trial? In any given case, before a matter is set down for trial, there are certain pre-trial matters that must be completed. They are firstly, locating the witnesses, secondly, obtaining their statements about the case and thirdly, if the trial is by affidavits, preparing, settling, executing, filing and serving the affidavits. Fourthly, if the opposing party's witnesses are to be cross-examined on their affidavits, filing and serving notices to cross-examine them and finally, the obtaining of a trial date. There is no evidence from the respondents that they have attended to any of these matters between 1989 and 1993. 

19.	The reasons given by the respondents that Mr. Akai was un-contactable and as a result, they were unable to obtain instructions from him, that he failed to pay legal fees and disbursement and that the claim was frivolous and bound to fail because of no evidence of insurance policy are, in our view, irrelevant because they were not the reasons given by Mr. Reeve when he opposed the application for want of prosecution. Mr. Reeve was not called to give evidence retracting what he had earlier deposed. There is also no affidavit evidence from Mr. Reeve retracting from his earlier affidavit. In the circumstance, there is compelling evidence supporting a finding that Mr. Akai was always ready and willing to go to trial but for the lawyer's failures. 

20.	We accept Mr. Akai's submission that, Mr. Wilson's evidence is hearsay because he was not the counsel who had the carriage and conduct of his claim against the insurance company from 1989 to 1996. His evidence should not have been accepted. Hence, we are satisfied that the trial judge erred when he accepted Mr. Wilson's evidence and dismissed the proceeding.

21.	If the insurance company had difficulty locating its witness, as Justice Andrew had noted, that is not a matter for the respondents to be concern with. They were obliged to act on the instructions of Mr. Akai whose instruction was to set the matter down for trial. If they did get a date for trial but had to vacate it as deposed to by Mr. Reeve in his affidavit, there is no other evidence that he had prepared, filed and served Mr. Akai and his witnesses' affidavits on the lawyers for the insurance company. Thus, even if they had secured a trial date, there was absolutely no evidence to establish the claim due to the lawyer's failure to seek, secure and bring the required evidence into Court.

22.	The respondents' claim that their preparation had been hampered by the lack of Mr. Akai's contact details can be resolved in this way. There is evidence from Mr. Akai and his wife that he was using the postal address of his wife as his forwarding address. We refer to the letters of 21st October 1992 and 25th March 1993 which were sent to Mr. Reeve. They bore the postal address of C/- Rachael Akai of P O Box 174, Rabaul, East New Britain Province. In her affidavit, Mrs. Akai deposed that she typed most of Mr. Akai's letters that were sent to Mr. Reeve. This means that from October 1992 onwards, the respondents had Mr. Akai's contact details. This evidence contradicts the respondents' claim that Mr. Akai had no contact details. We are satisfied that Mr. Akai had a forwarding address but there is no evidence that the respondents wrote to him on this address or at all to obtain further information to prepare affidavits for trial including the insurance policy. 

23.	Mr. Akai's evidence was that he could not provide the insurance policy because it was destroyed along with other personal items in the fire. If this was accepted, then there would be no point in the respondents insisting on it. Since Mr. Akai claims that the insurance company was the insurer, a best option was for the respondents to issue a notice to produce to it produce the policy or better still, issue a summons for production. If the respondents had formed a view that the claim was frivolous and bound to fail given the lack of the policy, there is no evidence that they informed Mr. Akai of this position and perhaps suggesting to him to retain another law firm should he wish to pursue the claim. In any event we fail to see how could the lawyers have accepted instructions and issued proceedings, if indeed the claim was bound to fail. We are unable to find evidence of letters sent by Mr. Reeve to Mr. Akai on the above stated address to that effect or any other communication in these terms when one was called for.

24.	Similarly, we are unable to find evidence of invoices of their legal costs sent to Mr. Akai on the above stated address. In any case, Mr. Akai says that he paid a deposit of K2, 000.00 and arranged with Mr. Reeve to pay the balance out of the proceeds of the judgment in the event that the claim is successful. Furthermore, if the respondents claimed that their services were terminated by Mr. Akai's failure to pay the legal costs, we are unable to find evidence of a letter sent to Mr. Akai advising him of the termination of their services with a statement of their reasons for taking that step.

25.	We endorse the point made by the trial judge that a claim for professional negligence against a lawyer is based on the relationship between a solicitor and his client. There is a duty of care owed by a lawyer to his client because of the special nature of the relationship: see Martha Limitopa (supra). We add that a lawyer is the expert in the law, thus is obliged to properly advise the client and fairly represent the client's interest from start to finish. 

26.	In our jurisdiction, the Professional Conduct Rules, Rule 8 defines the duties of a lawyer to the client. Amongst others is the duty to "treat a client fairly and in good faith........" and the duty to "........ 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." 
 
27.	In our opinion these duties set the standard upon which lawyers are to conduct themselves when representing clients. Any conduct below the standard amounts to negligence. Where a lawyer is retained to represent a client and any conduct falling short of fairly representing the interest of the client constitutes a breach of care. 

28.	In this case, we have found that there was no evidence that the respondents attended to the pre-trial matters between 1989 and 1993. We have also found that there was no evidence that the respondents sent letters to Mr. Akai on a postal address he gave or use any other form of communication to request him to provide further instructions and the policy. We have further found that there was no evidence that the respondents sent letters to the same postal address or at all to inform Mr. Akai of the claim being frivolous and bound to fail. Finally, we have found that there was no evidence that the respondents sent a letter or any communication to Mr. Akai advising him of the termination of their services on account of his failure to pay their costs. 

30.	In our view, given that a claim for professional negligence against a lawyer is based on a relationship between a solicitor and client, when Mr. Akai instructed and the respondents accepted his instructions to act for him against the insurance company, they owed a duty of care to him. They had a duty to fairly represent his interest and were obliged to fix the matter for trial in due and appropriate compliance of the pre-trial and listing processes. The failure by the respondents to attend to the above stated matters constitutes a breach of the duty to act fairly and in good faith, and the duty to be frank and open with Mr. Akai about his chance of success on the claim. We are satisfied that the trial judge fell into error when he found that Mr. Akai failed to prove negligence and dismissed the proceeding. 

31.	For the fore going reasons we would uphold the appeal, quash the decision of the National Court and order a reinstatement of National Court proceeding. Then in exercise of our discretion under section 16 (c) & (d) of the Supreme Court Act, we would substitute the decision of the National Court with an order that judgment on liability be entered against the respondents, and remit the matter to the National Court for trial on assessment of damages.

Order

32.	The orders of the Court are:

1.	The appeal is upheld.

2.	The decision of the National Court of 27th July 2010 is quashed.

3.	The proceeding is reinstated.

4.	Judgment on liability is entered against the respondents with damages to be assessed. 

5.	The matter is remitted to the National Court for trial on assessment of damages.

6.	The respondents shall pay the appellant's costs of the appeal. 

______________________________________________________________
PNG Legal Services:	Lawyers for the Appellant 
Warner Shand Lawyers:	Lawyers for the Respondents