SMY Luluaki Ltd v Paul Paraka Lawyers [2012] PGNC 72; N4685 (18 May 2012)

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DAMAGES – defamation – publication of defamatory statements in newspaper – distinction between awards of damages to individual persons and companies – whether proof of damage to reputation is necessary

This trial on assessment of damages for defamation arose out of publication in a newspaper of an article defamatory of the plaintiffs. The first plaintiff is a company involved in construction and management of community health projects and the second plaintiff is the company's sole director and shareholder. In earlier parts of the proceedings the plaintiffs, having consented to removal of the first defendant, a law firm, as a party, established a cause of action in defamation against the second defendant, the newspaper publisher (by trial), and the third defendant, the State (by default judgment). At this trial, the plaintiffs argued that publication of the article had the effect of destroying their reputations and that they had lost a substantial amount of business. They claimed damages of approximately K47.3 million.

Arlene Pitil v Rutis Clytus, Nancy Simeon, Margaret Luku and Islands Recruitment Management Services Enterprises Limited (2003) N2422
Arsenio Rodriguez Samiano v Roger Chris Dekuku (2001) N2057
David Coyle, Rimbink Pato & Alfred Manase v Loani Henao [2000] PNGLR 17
Kamea Gabe v Jack Clunn and Pacific Gold Studios Pty Ltd [1995] PNGLR 153
Lin Wan Xin and Lin Brothers Pty Ltd v Wang Yanhong, Xiao Zhichun and Lin Sheng (2001) N2160
Moresby Claim Adjustment Partners Ltd v Wyatt Gallagher Basset (PNG) Ltd [2003] PNGLR 24
PNG Aviation Services Pty Ltd v Michael Thomas Somare and The State (2000) SC658
PNG Aviation Services Pty Ltd, Douglas Neil Valentine, York Andrew Mendoza and Walter Andrew Lussick v Michael Thomas Somare and The State [1997] PNGLR 515
SMY Luluaki Ltd & Moses Luluaki v Paul Paraka Lawyers, Pacific Star Ltd & The State (2011) N4360
Tei Abal v Anton Parau [1976] PNGLR 251
Theresa Joan Baker v Lae Printing Pty Ltd [1979] PNGLR 16
Wayne Cross v Wess Zuidema [1987] PNGLR 361

M Luluaki in person, for the plaintiffs, with leave of the Court
R Mann-Rai, for the second defendant

1. CANNINGS J: This is an assessment of damages for defamation following an earlier determination of liability against two parties, the second defendant, Pacific Star Ltd, publisher of The National newspaper, and the third defendant, the State. The first defendant, Paul Paraka Lawyers, was removed as a party earlier in the proceedings and no determination of liability was made against it.

2. The first plaintiff, SMY Luluaki Ltd, is a company involved in construction and management of community health projects and the second plaintiff, Moses Luluaki, is the company's sole director and shareholder. The plaintiffs sued the defendants following publication of an article in The National about court proceedings the company and Mr Luluaki had instituted against the State for breach of contract.

3. Liability was established against Pacific Star following a contested trial, at which it was determined that the article contained defamatory imputations in respect of both plaintiffs and that none of the defences of fair comment, truth or qualified privilege applied. Liability was established against the State by default judgment (no defence having been filed) and confirmed by the court's rejection of an application to set aside the default judgment. The circumstances in which liability was established are set out in the judgment, SMY Luluaki Ltd & Moses Luluaki v Paul Paraka Lawyers, Pacific Star Ltd & The State (2011) N4360.

4. The article was on the top of page 4 in the Wednesday 8 December 2004 edition of The National. A teaser headline appeared on the front page: "Lawyers probe K16.3m claim PAGE 4". The same headline appeared in large print at the top of page 4:

State lawyers are puzzled over how an inflated claim of K16.3 million can be made against the State from a purported contract worth just K400,000.

Ironically, the proponent of this claim, SMY Luluaki Ltd, has been pursuing the claim seeking an out of court settlement for K16,226,160 with the offices of the Attorney-General and the Solicitor-General.

But lawyers appointed by the State to challenge every claim and award against the State have noted inconsistencies in the claim and had advised the Attorney-General Francis Damem and acting Solicitor-General Francis Kuvi not to settle the claim.

Instead, the government lawyers had opted to challenge a purported consented default judgment order endorsed by Justice Don Sawong on April 21, 2004, in Madang with the view of saving the State K16.3 million.

The lawyers have prepared all necessary documents and are ready to counter the consented default judgment, which Mr Damem and Mr Kuvi had denied knowledge of any settlement of the State's liabilities.

This is just one of the many court challenges taken out by the State-appointed lawyers who had saved over K500 million from the public purse through investigations they have been instructed to carry out since April last year.

[The] Attorney-General has been the man behind the reviews of all the claims and awards against the State, and his lawyers had so far done a commendable work in their efforts to reduce the State's liability which stands close to K1.5 billion in both civil and land matters.

The claim by SMY Luluaki Ltd was launched against the State on June 13, 2003, claiming damages of K800,000 for alleged breach of contract following a purported letter of acceptance dated March 27, 2002 from the director of the office of the Rural Development Mathew Tepu, who accepted the company's offer to construct 100 septic tanks around Madang town. The value of the contract was only up to K400,000.

However on Dec 10, 2002, the acting deputy director of the Department of Planning and Rural Development Samuel Pulipet wrote to SMY Luluaki advising that the letter of acceptance was null and void for breaches of Public Finances (Management) Act.

It was noted that SMY Luluaki did not carry out any work or implemented the construction of the 100 septic tanks at any time even to this date.

The State lawyers had found that the letter of acceptance was for the construction of only 100 septic tanks for a value of up to K400,000 only, but for reasons only known to SMY Luluaki, and the claim was double in its statement of claim.

The lawyers investigating the claim also noted that there was no public tender of the contract, which is contrary to normal practice and law, and further found that the company had not carried out any form of work to claim the Office of the Rural Development Project Funds.

In the meantime, the State lawyers are seeking options to refer the principal of SMY Luluaki, Moses Luluaki, for possible prosecution under the laws of the country for attempting to defraud the State millions of kina using a claim which is otherwise illegal and without legal basis whatsoever.

7. It was determined in the judgment on liability that the article imputed by insinuation, viewed from the perspective of a reasonable person reading it:

8. The article was thus defamatory of the plaintiffs and much of it was found at the trial to be untrue. In particular it was found that the default judgment referred to in the article was properly and regularly entered with the knowledge and consent of the Solicitor-General, for good and sufficient legal reasons, following a hearing at which the State was represented by senior counsel. It was misleading for the article to describe the judgment as a "purported" consent judgment and state that "Mr Damem and Mr Kuvi had denied knowledge of any settlement of the State's liabilities". It was misleading and false to state that the plaintiffs were making a claim of K16.3 million as in the month before the article was published the plaintiffs were negotiating with the Solicitor-General to settle the default judgment for only K762,000.00.

9. The imputations that SMY Luluaki Ltd had not done any of the work it had been contracted to do and that its business was conducted in an unlawful and irregular manner, were based on the false premise that SMY Luluaki Ltd had done no work and breached the public tender requirements of the Public Finances (Management) Act before entering the contract. A substantial amount of preparatory work (soil testing, purchase of assets etc) had been done for purposes of the contract, which appeared to have been entered into on behalf of the State by a senior governmental official after following standard contract procedures.

10. As to the defamatory imputation that Mr Luluaki had attempted to defraud the State this was an unfair comment as it was based on an assertion that State lawyers were "seeking options" to refer him for possible prosecution for attempting to defraud the State of millions of kina that had no truthful factual foundation.

11. There are two defendants and there are two separate causes of action, one against Pacific Star, which published the defamatory article and one against the State, which is vicariously liable for the defamatory statements made by its officers, the then Attorney-General Mr Damem and the then Acting Solicitor-General Mr Kuvi. As the causes of action are separate the defendants are not joint tortfeasors, ie they have not been found jointly liable for committing the same wrongful act. Therefore their liability to the plaintiffs needs to be separately assessed.

12. As for the plaintiffs, they are closely connected but their separate legal status needs to be preserved as the court made separate findings in the earlier judgment about the manner and extent to which they were defamed. Another reason for treating them separately is that the approach to assessment of damages for defamation varies according to whether the plaintiff is a corporation or an individual human person.

1 DAMAGES PAYABLE BY PACIFIC STAR AGAINST THE FIRST PLAINTIFF, SMY LULUAKI LTD

14. Unlike a human person a company has no feelings and is not entitled to be compensated for personal suffering. However, a company might have a reputation, injury to which will give rise to a right to damages. A company will also be entitled to aggravated damages if the defendant has defamed the company in bad faith, and it will also be compensated for direct monetary losses caused by publication of defamatory statements about the company.

15. In PNG Aviation Services Pty Ltd v Michael Thomas Somare and The State (2000) SC658 the plaintiff company, which had been defamed by the Prime Minister in a series of newspaper advertisements (eg it was a 'disreputable foreign owned company', it had 'tried repeatedly to mislead and cheat the government', it had 'failed to live up to the conditions of an agreement' with the government, it had 'deliberately and with criminal intent sought to defraud the PNG Government) regarding its role in the sale and purchase of government aircraft, was, on appeal, awarded by the Supreme Court (Salika J, Sevua J, Sakora J):

(b) K100,000.00 aggravated damages (as the Prime Minister made the statements without bona fides or good faith); and

16. In Moresby Claim Adjustment Partners Ltd v Wyatt Gallagher Basset (PNG) Ltd [2003] PNGLR 24 the Supreme Court (Amet CJ, Kapi DCJ, Sakora J) dismissed an appeal by a defendant against which the National Court (Kandakasi J) had awarded damages of K50,000.00 for injury to reputation of a plaintiff company and K40,500.00 for direct monetary losses. 17. The unlawful defamatory material that the defendant in that case published to the Insurance Commissioner included allegations that the plaintiff, a competitor in the insurance industry, was 'breaching the labour laws, engaging unqualified expatriates and offering employees of insurance companies bribes and inducements to obtain work'.

19. The total award of damages against Pacific Star in favour of SMY Luluaki Ltd is therefore K10,000.00.

2 DAMAGES PAYABLE BY PACIFIC STAR AGAINST THE SECOND PLAINTIFF, MOSES LULUAKI

20. The Supreme Court in David Coyle, Rimbink Pato & Alfred Manase v Loani Henao [2000] PNGLR 17 indicated that the purposes of an award of damages for defamation in favour of a human plaintiff are:

21. The practice in PNG has been for the court to award a global sum that reflects all those factors rather than, as in the awards in favour of corporate plaintiffs, apportion particular amounts to them. In Coyle v Henao the Supreme Court (Los J, Jalina J, Kirriwom J) dismissed an appeal against an award of K50,000.00 made by Woods J in the National Court in favour of the respondent, Loani Henao, a prominent lawyer and former president of the PNG Law Society who had been defamed by members of a rival law firm in a letter to the Attorney-General. They contended that Mr Henao was prepared to engage in improper, unethical, dishonest conduct and to assist a client make false allegations in court proceedings that he knew to be false.

22. The decision in Coyle showed that damages can be aggravated or mitigated by, for example:

23. In PNG Aviation Services Pty Ltd, Douglas Neil Valentine, York Andrew Mendoza and Walter Andrew Lussick v Michael Thomas Somare and The State [1997] PNGLR 515 the National Court (Sheehan J) awarded K100,000.00 damages to each of three directors of the plaintiff company who were defamed by the Prime Minister in a series of newspaper advertisements. The plaintiffs were described as disreputable foreigners, completely untrustworthy and dishonest and being parties to a deliberate, criminal attempt to defraud the Government of Papua New Guinea and involved in a corrupt association with the Leader of Opposition, Paias Wingti. These were shown at the trial to be false allegations. Their company successfully appealed against the award of damages in its favour of K50,000.00, the Supreme Court increasing the award to K1.7 million, as explained above, in PNG Aviation Services Pty Ltd v Michael Thomas Somare and The State (2000) SC658. However, there was no appeal against the award of K100,000.00 in favour of each of the directors, Messrs Valentine, Mendoza and Lussick, so it remains a useful benchmark.

24. In Lin Wan Xin and Lin Brothers Pty Ltd v Wang Yanhong, Xiao Zhichun and Lin Sheng (2001) N2160 the defendants published in letters to various government authorities a number of defamatory statements against the first plaintiff, a Chinese businessman with investments in Port Moresby, alleging that he was a convicted criminal, an adulterer, a thief, a drug dealer, an evil man involved in bribing various officials, an arsonist and that he illegally possessed firearms and was involved in illegal human smuggling of Chinese nationals into PNG and illegal issuing and renewal of visas. The National Court (Sevua J) awarded the plaintiff K50,000.00.

25. Another case in which an award of K50,000.00 was made in favour of an individual plaintiff is Arlene Pitil v Rutis Clytus, Nancy Simeon, Margaret Luku and Islands Recruitment Management Services Enterprises Limited (2003) N2422. The defendants, who formerly employed the plaintiff circulated cc copies of her letter of termination to the Secretary of the Department of Labour and Employment and the Investment Promotion Authority, claiming that amongst other things that she was an illegal immigrant and had been illegally employed in the country for several years without a work permit, had purposely and obviously made a mockery of the country's laws for purposes of tax evasion and conspired with her husband in an attempt to defraud the defendant company. The National Court (Kandakasi J) noted that the material was highly defamatory and had been circulated to government authorities who would have inevitably formed a negative opinion of the plaintiff. Her standing in the community was tarnished with no good reason. There was no evidence of the actual financial loss she had suffered but the court accepted her evidence that the publication of the allegations had injured her feelings and caused her mental distress and pain.

26. In contrast to the above series of cases in which individuals were awarded substantial sums of K50,000.00 or K100,000.00 is the decision in Arsenio Rodriguez Samiano v Roger Chris Dekuku (2001) N2057 where the plaintiff, a Department of Agriculture officer, was awarded by the National Court (Injia J) damages of only K2,000.00. The defamatory material was in a letter sent by the defendant, another departmental officer, to his superiors alleging that the plaintiff was the leader of a smear campaign against him. The court held that the letter appeared to have not significantly diminished the plaintiff's standing and reputation in the minds of those to whom the letter was sent as he was offered a new contract after publication of the defamatory material. Another mitigating factor was that the court found 'some degree of justification' in the defamatory statements as evidenced by the fact that after being re-employed the plaintiff's employment was terminated due to poor performance. The award in Samiano was more in line with those in the earlier post-Independence cases, which are summarised in the following table.

DAMAGES FOR DEFAMATION, HUMAN PLAINTIFFS, 1975-1995

No	Case	Details	Damages
1	Tei Abal v Anton Parau [1976] PNGLR 251, National Court, Frost CJ	At a political meeting attended by many villagers in Enga the defendant told the crowd that the plaintiff was 'in the pay of the Europeans. He received two or three thousand dollars from them. That's why he supported provisional citizenship. The watch he is wearing was given to him by the Europeans. He is not fit to represent the people.' The court took into account the gravity of the allegations, including bribery, and that the plaintiff, a member of Parliament, was a public figure, and that the statements were widely broadcast within the province. Mitigating factors were that the statements were made in the heat of the moment, were not premeditated and were not repeated; and the level of earnings in PNG was also a relevant consideration, as the award of damages was being made against an individual defendant.	K1,000.00
2	Theresa Joan Baker v Lae Printing Pty Ltd [1979] PNGLR 16, National Court, Wilson J	A letter to the editor was published in a regional newspaper, referring to the author's visit to a fashion boutique in Rabaul and defaming the proprietor of the boutique by stating 'I walked into Theresa's last week and the most odious, revolting creature greeted me, but it was with sarcastic criticism from behind the counter ... When I realised I was trying to be fed, I realised that the creature was the owner itself.' In assessing damages the court noted that an apology published two weeks later was a meagre one and that the statements, although not reasonably expected to be taken seriously by all readers, were published widely in the local area and made the plaintiff, a well known and reputable businesswoman whose business relationships were founded on mutual trust and respect, an object of ridicule. The plaintiff was entitled to come to court to vindicate her reputation.	K6,000.00
3	Wayne Cross v Wess Zuidema [1987] PNGLR 361, National Court, Bredmeyer J	An action for defamation was brought by a prominent, successful and respectable businessman in Kimbe to whom the defendant, the Provincial Works Manager, wrote a letter, copied to four other people, accusing him of using 'Mafia tactics' to get a sewerage pump at his hotel fixed, by directly calling the Secretary for Works. The court held that the letter was defamatory as it was suggesting that the plaintiff was involved in standover tactics involving bribery of public officials. The assessment of damages reflected the fact that the letter was circulated to a number of government authorities and could affect the plaintiff's reputation and standing and his business interests. A mitigating factor was that the defamatory statements were not published in the mass media.	K4,000.00.
4	Kamea Gabe v Jack Clunn and Pacific Gold Studios Pty Ltd [1995] PNGLR 153, National Court, Brown J	The defendants recorded and published an album by Clockwork Orange that contained a song entitled "Tiny Bubbles", with obscene and highly offensive lyrics (eg 'Kamea the elderly man, the Elevala dog') that referred to the plaintiff (an elderly man from Elevala village) and alleged that he practised perverted sexual proclivities involving young children. In assessing damages the court emphasised the solatium function of an award of damages to a human plaintiff who is the victim of defamation: compensation for mental suffering. There was clear evidence that the song was widely played at Motuan villages and he had suffered shame, humiliation and ridicule for more than two years. He was a Rahobada in Motuan society and was the innocent victim of a cheap trick.	K6,000.00

27. The awards of damages in each of the above cases reflect the court's consideration of the circumstances of each case. It is difficult to compare the cases but it is fair to say that in the period since 1995 the damages awarded have been significantly higher than in the earlier cases. Arsenio, decided in 2001, where the award was K2,000.00, is an exceptional case where the special circumstances warranted only a notional amount of damages. Awards of K50,000.00 (eg Coyle, Lin Wan Xin and Pitil) are not uncommon so I think it is fair to say at the outset that the plaintiff, Mr Luluaki, a reasonably prominent businessman in the local community, who has been defamed in the mass media, should be awarded damages in the tens of thousands of kina rather than less than K10,000.00.

28. Given the gravity of the defamatory statements made against the human plaintiffs in PNG Aviation Services, which warranted an award of K100,000.00 to each of the three directors which were more specific and hurtful than in the present case, and even considering that those assessments were made 15 years ago, in 1997, and taking into account the effect of inflation in the national economy, I don't think an award of more than K100,000.00 could reasonably be justified. So I am going to work within a range of K10,000.00 to K100,000.00 and consider the aggravating and mitigating aspects of the case.

31. Having considered those factors and comparing this case with the others referred to, a substantial award of damages is required to protect and vindicate Mr Luluaki's personal and business reputation, to provide a solatium for his wounded feelings and to compensate him for his past and prospective losses. This is a case that has both aggravating and mitigating features, warranting an award around the middle of the starting point range of K10,000.00 to K100,000.00. Having noted that the most common award in similar cases is K50,000.00, I consider that that is the appropriate amount here. I therefore award K50,000.00.

32. The claim against the State suffers from a lack of evidence. Liability has been entered on the presumption that the article in The National was based on defamatory statements made by the Attorney-General and/or the Acting Solicitor-General. Apart from that there was little to go on. I will therefore award only a nominal amount of damages in the sum of K5,000.00.

33. This part of the claim will be dealt with in the same way as the claim by SMY Luluaki Ltd against the State. Only notional damages are warranted. I award the same sum, K5,000.00.

34. Damages awarded against each defendant in favour of each plaintiff are summarised in the following table.

35. Interest will be awarded at the rate of 8 per cent per annum on the total amount of damages under Section 1(1) of the Judicial Proceedings (Interest on Debts and Damages) Act Chapter No 52. Interest is calculated from the date of filing of the writ, 23 March 2009, to the date of this judgment, a period of 3.13 years, by applying the following formula:

36. For example, interest on damages payable by the second defendant to the first plaintiff will be K10,000.00 x 0.08 x 3.15 = K2,520.00. All awards of interest are shown in the following table.

37. 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. In this case there is no clear winner. The plaintiffs have on the one hand succeeded in obtaining an award of damages but on the other hand have succeeded in convincing the court that only a very small proportion of an extravagant claim for K47.3 million had merit; the vast bulk of the claim was without merit. In these circumstances it is appropriate that the parties bear their own costs.

_____________________________
Lawyers for the plaintiffs : Nil
Warner Shand Lawyers: Lawyers for the Second Defendant
Solicitor-General: Lawyer for the Third Defendant

DAMAGES AWARDED
Recipient	Damages to be paid by 2nd defendant, Pacific Star	Damages to be paid by 3rd defendant, the State	Totals
1st plaintiff, SMY Luluaki Ltd	K 10,000.00	K 5,000.00	K 15,000.00
2nd plaintiff, Moses Luluaki	50,000.00	5,000.00	55,000.00
Totals	K 60,000.00	K 10,000.00	K 70,000.00

INTEREST AWARDED

Recipient	Interest to be paid by 2nd defendant, Pacific Star	Interest to be paid by 3rd defendant, the State	Totals
1st plaintiff, SMY Luluaki Ltd	K 2,520.00	K 1,260.00	K 3,780.00
2nd plaintiff, Moses Luluaki	12,600.00	1,260.00	13,860.00
Totals	K 15,120.00	K 2,520.00	K 17,640.00

National Court of Papua New Guinea

SMY Luluaki Ltd v Paul Paraka Lawyers [2012] PGNC 72; N4685 (18 May 2012)