Claims Resolution Service Ltd v Pfisterer

[2021] NZHC 1088

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2018-409-649

[2021] NZHC 1088

BETWEEN

CLAIMS RESOLUTION SERVICE LIMITED
Plaintiff

AND

LUCIA RENATE PFISTERER

First Defendant

AND

GRANT SHAND BARRISTERS AND SOLICITORS

Second Defendant

Hearing:

5 to 9 October 2020

Appearances:

A Barker QC and G Davis for the Plaintiff

M Smith and J Tocher for the First Defendant
A Darroch and J Thomson for the Second Defendant

Judgment:

21 May 2021

JUDGMENT OF HINTON J

This judgment was delivered by me on 21 May 2021 at 4:45 pm pursuant to Rule 11.5 of the High Court Rules

…………………………………………………………………… Registrar/Deputy Registrar

Solicitors/Counsel:

Andrew Barker QC, Auckland Canterbury Legal, Christchurch GCA Lawyers, Christchurch

Thorndon Chambers, Wellington Darroch Forrest Lawyers, Wellington

CLAIMS RESOLUTION SERVICE LTD v PFISTERER [2021] NZHC 1088 [21 May 2021]

TABLE OF CONTENTS

Background  [2]

Factual findings  [60]

Issues  [65]

Misleading conduct by CRSL by misrepresenting that it would provide

ongoing funding “in a timely manner”  [68]

Unconscionable bargain by CRSL  [82]

Breach of contract by CRSL  [99]

Independent quantity surveyor and lawyer  [102]

Requirement to seek instructions before issuing proceedings  [107]

No right to cancel or to damages  [113]

Breach of fiduciary duty by GSBS  [120]

Failure to obtain informed consent to act with conflicts of interest                  [124] Failure to advise on fee information and funding arrangements  [142] Failure to advise on commencement of litigation  [150] Failure to obtain and follow informed instructions on settlement  [153] Disclosure of confidential information  [157]

Breach of fiduciary duty by CRSL  [159]

Breach of duty of loyalty  [165]

Causing/assisting breaches of fiduciary duty by GSBS  [171]

Conclusion  [172]

[1]                  This proceeding arises out of the Canterbury earthquakes. It involves a claim by Claims Resolution Services Limited (CRSL) against Lucia Pfisterer for fees in the sum of $93,744.95. There is no dispute over the quantum of the fees but Mrs Pfisterer raises affirmative defences and counterclaims for misleading and deceptive conduct, unconscionable bargain, breach of contract by CRSL and breach of fiduciary duty by both CRSL and Grant Shand Barristers and Solicitors (GSBS). Mrs Pfisterer says that as a consequence no money is owing and she seeks damages against CRSL and GSBS.

Background

[2]                  As is well known, the Canterbury earthquakes of 2010-2011 caused significant destruction to property and buildings throughout the Canterbury region. Mrs Pfisterer owned and lived in a property in Opawa that suffered major damage. She had purchased the property in May 2009 for $351,500.00.

[3]                  Mrs Pfisterer had home insurance with AMI Insurance, whose liabilities were subsequently taken over by Southern Response Earthquake Services Ltd (Southern Response).

[4]                  Like many others in the wake of the Canterbury earthquakes Mrs Pfisterer faced difficulties processing her insurance claim.1 For over two years she dealt with the Earthquake Commission (EQC) and Southern Response trying to get coverage for her claim. She regularly called EQC asking for help and for them to accurately record all the damage to her house. Mould grew throughout her house and there were significant cracks in the walls and foundations. At one stage EQC told her that her house could be repaired for $20,000.00. She spoke to a builder who told her this was a very unreasonable estimate.

[5]                  On 4 June 2013, when EQC carried out another assessment of her house, they found the damage was over the cap and she was entitled to $117,136.82. She was paid this amount by EQC in September 2013. Her claim was then referred to Southern Response. On 8 December 2013 Southern Response estimated the cost of repairing

1      The fact such difficulties were generally suffered was referred to for example in Claims Resolution Service Ltd v Smith [2020] NZCA 664, at [33]; and Silvia Cartwright Report of the Public Inquiry into the Earthquake Commission (March 2020) at 11, 13, 15 and 193.

her house was $321,869.67. Mrs Pfisterer did not believe this was an accurate estimate or that Southern Response was listening to her. She was stressed and did not know what to do.

[6]                  In early 2012 Brian Staples, who had worked as a loss adjuster for EQC for six months, established a number of companies designed to facilitate resolution of homeowners’ claims against EQC and insurance companies. These companies included CRSL, Earthquake Services Ltd (ESL) and 8D Project Management Ltd (8D).   The first two companies were owned by Mr Staples.   8D was owned by     Mr Staples and Stephen Betts. The services offered by CRSL and ESL changed over time. At the relevant time, these companies together provided a claims resolution service. 8D was responsible for preparing damage reports and cost assessments for clients of CRSL and ESL. ESL or “Earthquake Services” was the name used on advertising materials, on forms and documents provided to clients, and on the company offices in Christchurch that clients would visit (the ESL offices). The company with whom the client contracted was CRSL.

[7]                  CRSL’s modus operandi was to advertise for clients on a “no win no pay” basis. They would take on the prosecution of a claim including negotiation with EQC and/or the insurer down to drafting of a statement of claim if proceedings were necessary. They would organise all necessary reports and provide what they referred to as a “one- stop-shop”. Where necessary the client would be referred to a lawyer who would file a statement of claim and see the matter through to its conclusion. The client would not incur any costs other than specified disbursements until they “won” their case at which point they would pay all legal and other costs incurred and pay a pre-agreed commission to CRSL.

[8]                  In late 2012, Grant Shand, a solicitor who already had considerable experience in earthquake claims, established GSBS which specialised in insurance litigation and in particular earthquake claims.

[9]                  At the relevant time it seems CRSL referred most of its clients to GSBS if litigation was required, although the number of referrals may have decreased materially later.

[10]              GSBS and CRSL had an informal agreement that GSBS would not bill their file until conclusion with the effect that generally their fees would be deducted from monies recovered from the insurer. Although there was no agreement to this effect, GSBS would sometimes also carry disbursements incurred by them, through to settlement.

[11]              GSBS rented office space from CRSL and, from a point after Mrs Pfisterer signed up with CRSL, contributed to some of CRSL’s advertising and PR costs.

[12]              It seems that what happened in Mrs Pfisterer’s case was not too different to the typical manner in which CRSL and GSBS operated.

[13]              By late 2013 Mrs Pfisterer was very concerned about the mould in her home and feeling desperate. Around late November or early December she said she saw an advertisement in a flyer that said “no win no pay”. She said the advertisement was for a company that claimed to help people resolve their insurance claims with low upfront costs and that the advertisement was associated with Mr Staples and ESL. The specific advertisement Mrs Pfisterer saw was not able to be identified. Mr Staples stated that there were a number of flyers in circulation at the time advertising ESL and CRSL. Mrs Pfisterer stated in her evidence that the prospect of “no win no pay” was the deciding factor that made her go to visit ESL.

[14]              On 4 December 2013, Mrs Pfisterer went to the offices of ESL. She met with Marie Hazledine-Barber who had been employed by CRSL since October 2012.    Ms Hazledine-Barber’s role was to meet with new clients and explain ESL and CRSL services generally, including the initial steps available to clients. Ms Hazledine-Barber remembered Mrs Pfisterer but did not have a clear recollection of all aspects of the meeting. Ms Hazledine-Barber stated that she had a standard approach for the initial meeting that she conducted with people and that she is confident she would have followed this approach when she met with Mrs Pfisterer. Ms Hazledine-Barber stated that she did not recall Mrs Pfisterer being visibly upset or distressed during their meeting. She also said Mrs Pfisterer seemed like an intelligent person.

[15]              Ms Hazledine-Barber said she would provide clients with an information sheet at that initial meeting. The information sheet had “Earthquake Services” written in large font on the top of the page. It included a section explaining the services offered by CRSL. It stated that CRSL would take on the prosecution of a client’s claim on a “no win no pay” basis for a percentage of the final settlement plus “all costs including, legal, quantity surveyor, independent reports and assessment costs.” The information sheet stated there were three levels of commission depending on the extent to which a client wished to fund disbursements as their claim progressed. These were:

(a)the “Partnership Programme”: the client would pay 8 per cent of the ultimate settlement as commission and pay various fixed service fees over the course of their claim such as the creation of a file for the legal team and related attendances ($2,500), and the cost of an Initial Damage Assessment (IDA) ($2,500);

(b)the “Jumpstart Programme”: the client would pay 10 per cent of the ultimate settlement as commission and would only pay some of the fixed service fees over the course of their claim; and

(c)the “Helping Hand Programme”: the client would pay 12 per cent of the ultimate settlement as commission but there would be no upfront costs as they would all be deferred until settlement.

[16]              A ‘win’ was not defined in the information sheet or in CRSL’s advertising materials.

[17]              Ms Hazledine-Barber said she would explain at the initial meeting that CRSL, ESL and 8D were set up by Bryan Staples after he left EQC and that these companies were a one-stop-shop for earthquake claims from initial assessment through to settlement. She said she would explain the first step in the process was to get an Initial Damage Assessment (IDA) of the person’s property prepared by ESL. As part of the IDA, clients would receive a report by a quantity surveyor of the cost to repair or rebuild their house. That report would be prepared by Mr Betts of 8D, who

Ms Hazledine-Barber said she would explain was CRSL’s in-house costing expert and was independent from EQC or the insurer.

[18]              Ms Hazledine-Barber stated she would then broadly describe the claims resolution service offered by CRSL. She would explain that CRSL offered a “no win no pay” service, the basic idea of which was that CRSL would provide whatever the client needed to get their claim settled in exchange for a percentage of the settlement at the end. She would set out the different commission levels available to clients and make it clear their service was not free, but that most of the fees were not payable until the end.

[19]              Ms Hazledine-Barber also said that she would always give clients a copy of the CRSL contract and encourage them to discuss it with a lawyer or with family before signing it. The contract included a schedule that set out the costs or category of costs a client would have to pay, including lawyer’s costs and court fees, and whether these costs would be paid up-front or deferred until settlement depending on which programme the client was on. Ms Hazledine-Barber would also tell clients that if litigation was necessary, Mr Shand did most of the claims on behalf of their clients as he was an expert insurance lawyer, but that they could use their own lawyer if they preferred.

[20]              Once this was explained, Ms Hazledine-Barber would see whether clients wanted to proceed with an IDA. Mrs Pfisterer ordered an IDA of her property at that meeting. She returned to the ESL offices the following day to pay for the IDA and to sign an authority form that gave ESL, CRSL and 8D authority to receive her information from EQC.

[21]              In her evidence Mrs Pfisterer stated that at the 4 December 2013 meeting she was not told by Ms Hazledine-Barber that ESL, CRSL and 8D were all related companies or owned by Mr Staples. She said she thought the experts who prepared the IDA were independent from ESL and the insurers, rather than only independent from the insurers. She said she was not told by Ms Hazledine-Barber to consult a lawyer before signing the contract, or that litigation was a possibility, or that Mr Shand did most of the legal claims against the insurance companies on behalf of CRSL’s

clients. Mrs Pfisterer also said she was not given a copy of the standard form contract, nor were the commission levels explained to her.

[22]              The IDA ordered by Mrs Pfisterer was issued by ESL on 16 January 2014. It described in detail the damage to Mrs Pfisterer’s house caused by the earthquakes. Like the information sheet, the front page of the IDA featured ESL’s logo and had “Earthquake Services” written in large font. The IDA referred to Mr Staples on both the front page and in the body of the report. A few weeks later, Mr Betts estimated the cost to repair the house at $816,340.14 and the cost to rebuild the house at

$946,710.61. Mrs Pfisterer collected the IDA and cost assessment on 18 February 2014 from the ESL offices. On 24 February 2014, she made an appointment for 28 February to return to the ESL offices and discuss her next options.

[23]              On 28 February 2014 Mrs Pfisterer learnt that the mould in her house was toxic black mould and she was advised to move out immediately. Her evidence was that she was very distressed and had not slept properly for months as she was “so upset, stressed and distressed about the state of our home, the mould, and my lack of money”. The same day she had her second meeting at the ESL offices where she met with Cheryl McLeish and Patsy Murray, two employees of CRSL, to discuss signing the standard form contract.  Ms  McLeish  had  worked  at  CRSL  since  early  2013.  Ms McLeish2 said she recalls her first meeting with Mrs Pfisterer, as Mrs Pfisterer told her she had to throw all of her clothes out due to the mould. Ms McLeish recalled Mrs Pfisterer appeared upset because she had to throw out her clothes but said she was not particularly stressed or crying.

[24]              In her evidence about the 28 February 2014 meeting, Ms McLeish stated that she conducted hundreds of meetings about the CRSL contract with clients in her time working there and the routine and explanation were always the same. She said that people were given another copy of the contract and reminded that they could get legal advice or have other people read it. Ms McLeish said she and other employees never put pressure on people to sign the CRSL contract as it was a significant commitment. She would tell clients that they could take a week or two and if they changed their

2      Sadly Mrs Murray was terminally ill and unable to give evidence.

mind and wanted to cancel the contract they could and they would only have to pay for any significant work already undertaken by CRSL at that time plus a minimum fee of $5,000 for cancellation.3

[25]              Ms McLeish said she was always very careful to ensure people understood the CRSL contract including that the client would need to pay the lawyer’s fees at settlement in addition to CRSL’s commission. She said she would talk through the process CRSL followed to get clients’ claims settled. She would advise clients that litigation was often required in order to settle their claims, as insurers and EQC were usually unwilling to engage with homeowners unless they sued them. Ms McLeish would say that CRSL  had  lawyers  for  the  client  to  use  and,  at  the  time  of  Mrs Pfisterer’s contract she would explain that Mr Shand had a great track record of running earthquake cases for homeowners. She advised he would charge CRSL clients on a 2B basis. She also said the client was quite welcome to use their own lawyer if they preferred.

[26]              Contrary to the standard practice Ms McLeish said she adopted, Mrs Pfisterer stated that in the 28 February meeting no-one told her to seek independent legal advice or explained the terms of the contract to her. She stressed that she did not understand the CRSL contract and said that no one explained the cancellation process to her or that the lawyer’s fees would be paid out of the settlement money, rather than by CRSL. Mrs Pfisterer also said no-one told her CRSL referred a lot of people to Mr Shand or that he charged on a 2B basis. Mrs Pfisterer said that during the meeting she asked whether many people had to go to court to settle their claims and Ms McLeish said they did but usually insurers would settle before that.

[27]              Mrs Pfisterer signed the CRSL contract that day. She chose the ‘Partnership Program” which involved an 8 per cent commission on the amount recovered and the highest upfront costs.

[28]              Under the contract CRSL accepted engagement to act on a client’s behalf in relation to their claim for damage and loss to their property. The CRSL contract also relevantly provided:

3      Clients could cancel on terms at any time up until resolution of their claim.

1. CRSL will:

e. Instruct other people to help with assessment and reports, and/or legal proceedings including independent assessors, quantity surveyors, lawyers or service agents ("third party services").

…

g. Seek instruction from the client before any third party assessment is undertaken, proceedings are issued or if there is an offer for settlement of the client's claim from an insurer or EQC.

…

i.Perform the above services competently and with reasonable care and skill or in accordance with the relevant law and regulations

…

[29]              From 28 February 2014 to 1 July 2014 Mrs Pfisterer’s claim was managed by CRSL. It seems some records were lost but a letter of demand to Southern Response was produced, dated 16 April and sent by Luke Gosset, another employee of CRSL. Also, on 23 April 2014 Mr Gosset wrote to Mrs Pfisterer advising that Southern Response were reviewing the matter and if their response was not satisfactory the likely course would be to file a claim in the High Court. He recorded that he was writing up information so their barrister could determine the best course of action. The letter set out the High Court filing fee and what would happen if proceedings were filed.

[30]              Mr Staples gave evidence that when Southern Response failed to adequately respond in a reasonable period of time, CRSL started drafting a statement of claim to be filed in the Christchurch Registry of the High Court. Mr Staples said it was unclear who from CRSL was responsible for drafting this  but  it was  likely  prepared  by Mr Gosset using a template prepared by Mr Shand.

[31]              Mr Shand stated he became involved in Mrs Pfisterer’s claim in June 2014. On 5 June 2014 he sent a revised version of the statement of claim back to CRSL along with an invoice for the filing fee. By email dated 6 June 2014, Gary Davis, a junior lawyer and employee of CRSL, informed Mrs Pfisterer that the court documents were ready for filing. He sent her the GSBS invoice for the filing fee and asked her to pay it if she wanted the claim filed in court. He said “please be aware that our lawyer,

Grant, will be here on Monday morning, so if you can make payment over the weekend he can file your claim then.” Mrs Pfisterer paid the filing fee to GSBS’s trust account and stated in a reply email dated 8 June 2014 to Mr Davis that she “would really like for the documents to be filed in court a.s.a.p.” She also texted Mr Shand direct, asking him to confirm receipt.

[32]              In her evidence, Mrs Pfisterer said no-one told her that CRSL had engaged GSBS or that GSBS were going to file a statement of claim. She said no one told her why litigation was necessary or discussed other possibilities like mediation.

[33]              On 9 June 2014, Southern Response wrote to Mrs Pfisterer informing her that her house was beyond economic repair and providing four settlement options. This letter included a ‘Detailed Repair/Rebuild Analysis’ (DRA) prepared by Arrow International, quantity surveyors engaged by Southern Response. The DRA estimated the cost to rebuild at $354,676.54 from which would be deducted the EQC payment of $117,136.82. This was significantly below the estimate provided by Mr Betts, noted above.

[34]              GSBS filed Mrs Pfisterer’s claim in the Christchurch High Court on 1 July 2014.  The statement of claim attached the IDA and cost assessment prepared by   Mr Betts for the IDA.

[35]              Prior to filing the statement of claim in her name, no-one from GSBS spoke to Mrs Pfisterer, or explained their terms of engagement.

[36]              On 10 July 2014 Ms Noor Hamid, a lawyer at GSBS, sent Mrs Pfisterer an email addressing terms of engagement, fees to be “paid in accordance with your agreement with CRS once you are successful”, and actions taken and to be taken. She attached GSBS’s terms, information for clients, and copies of the documents that had been filed in court. Ms Hamid stated part of her role was explaining to clients how settlement might work, including a breakdown of what would have to be paid to CRSL which in turn included the legal costs, cost of experts and CRSL’s  commission.    (Ms Hamid does not directly say in her evidence that she did this in Mrs Pfisterer’s case but it can be fairly inferred.)

[37]              Mrs Pfisterer stated that Ms Hamid did not break down the costs she would have to pay upon settlement. She acknowledged that Ms Hamid did explain what filing a court case meant.

[38]              From the filing of the statement of claim CRSL had limited involvement with Mrs Pfisterer’s claim. It was handled by GSBS.

[39]              Mrs Pfisterer’s claim progressed through case management conferences at the High Court. The conferences  were  attended  by  Mr  Child,  Mr  Morriss  and/or  Mr Ferguson from GSBS, and by Mrs Pfisterer. In these conferences, Wylie J and then Kós J expressed concerns over the risk of using Mr Betts as an expert witness when he had a connection to CRSL. On 28 November 2014 the Court ordered by consent that Mrs Pfisterer was to obtain another rebuild cost assessment and a geotechnical report that identified which foundations are necessary, if she disagreed with the geotechnical report provided by Southern Response.

[40]              In January 2015, Mrs Pfisterer engaged Red Quantity Surveying (Red QS) to provide a further report of the cost to rebuild her house. Red QS estimated the cost to rebuild the house would be $969,429.00, slightly higher than Mr Betts’ estimate, and very significantly higher than Arrow International’s assessment for Southern Response.

[41]              In the middle of 2015, after Ms Hamid left GSBS, Mr Ferguson, a senior lawyer at the firm, became involved in Mrs Pfisterer’s claim. He met Mrs Pfisterer on 19 August 2015 and talked her through her claim against Southern Response. In his evidence, Mr Ferguson said he would prepare spreadsheets to break down and explain to Mrs Pfisterer the amount of her claim, the legal costs incurred so far and CRSL’s commission if they were to settle.  Mrs Pfisterer said that she does not remember   Mr Ferguson working  through  a  spreadsheet  with  her.  Mr  Ferguson  recalled Mrs Pfisterer being determined to get a cash settlement despite her insurance policy only providing for a rebuild of her house.

[42]              In a meeting on 21 August 2015 between Southern Response, their lawyers, Mr Ferguson and Mrs Pfisterer, Southern Response offered a settlement of $467,000,

provided Mrs Pfisterer presented a contract for the rebuild of the house. Mr Ferguson and Mrs Pfisterer went into a separate room for Mr Ferguson to take instructions. He then counter-offered to settle the claim for $575,000 with no condition to present a rebuild contract. Southern Response rejected this offer but said they may consider it if Mrs Pfisterer obtained a geotechnical report that differed from theirs. The main difference between the parties by this point was the type of foundations required in the rebuild. On the advice of Red QS Mrs Pfisterer’s claim was based on enhanced foundations, which Southern Response did not consider necessary based on the geotechnical report it had received.

[43]              After a further case management conference on 31 August 2015, Wylie J issued a Minute stating Mrs Pfisterer was in breach of the court order requiring her to provide a geotechnical report of the property. Mr Shand then engaged a geotechnical engineer, Mr Owen Thompson. Mr Thompson’s report was received on 28 October 2015. The report confirmed the need for enhanced foundations, supporting Mrs Pfisterer’s position.

[44]              On 9 November 2015 Mr Shand applied for a trial date. A four-day trial was allocated for 26 April 2016. Briefs of evidence were prepared and filed by both sides. Mr Ferguson said that in the lead-up to the trial he regularly spoke to Mrs Pfisterer about it, about how the key issue was the foundations and about the possibility of settlement before the trial. Mrs Pfisterer stated that this is not true and all that Mr Ferguson discussed with her was the danger of losing the trial.

[45]              On 1 March 2016, Mr Ferguson summarised the claim in an email to Mr Shand, saying Mrs Pfisterer’s bottom line was $710,000.00.

[46]              On the morning of 24 April 2016, two days before the trial was scheduled to commence, Mrs Pfisterer, Mr Shand and  Mr  Ferguson  exchanged  more  emails. Mr Shand emailed Mrs Pfisterer that same day that if she did not intend to rebuild her house it would be better to settle before the trial, as there was a risk the Court may only order Southern Response to  pay  for  the  work  if  the  rebuild  takes  place.  Mr Ferguson said he had made this clear to Mrs Pfisterer previously.

[47]              Later in the evening of  24  April,  following  further  discussions  between Mr Shand, Mr Ferguson, and the lawyers for Southern Response, Southern Response offered to settle on the basis that:

(a)Southern Response would pay cash of $500,000 (in addition to the EQC payment of $117,000);

(b)Southern Response would pay the cost of demolishing Mrs Pfisterer’s house estimated at $25,000; and

(c)Mrs Pfisterer would have no requirement to rebuild on the property, but if she elected to rebuild, Southern Response would pay the cost of building the enhanced foundations she wanted (estimated at

$303,346.00 by Red QS).

[48]              Mr Ferguson said he called Mrs Pfisterer to discuss the offer with her and recommended she accept it. He said the offer meant she would have the freedom to decide whether or not to rebuild and if she chose to rebuild she could get the foundation of her choice. Mrs Pfisterer asked to have 20 minutes to think about it. Mr Ferguson rang Mrs Pfisterer back 20 to 25 minutes later and his evidence was that she accepted the offer. In her evidence, Mrs Pfisterer initially stated that she did not accept the offer, but it was clear from her evidence overall that what she really meant was she accepted the offer but felt she had no choice other than to do so, and that she had been bullied into it. Mr Ferguson did not accept she had been put under unnecessary pressure. He said it is the reality of the Court process that late settlement offers come in and it is stressful.

[49]              Thirty minutes after accepting, Mrs Pfisterer sent Mr Ferguson an email saying she had decided to not accept the offer and expressed displeasure at being placed under time pressure. Mr Ferguson emailed back saying he had already communicated acceptance of Southern Response’s settlement offer. Mr Shand sent Mrs Pfisterer an email the following day, 25 April 2016, explaining the merits of settlement and how, in his view, it worked to her benefit. In the email Mr Shand said “if you want to now say that you did not communicate acceptance to Andrew then we cannot act for you.”

Mrs Pfisterer says she took that as meaning GSBS was no longer acting for her. It seems she did not respond.

[50]              Mr Shand emailed the High Court on 25 April 2016 saying the dispute was settled and asking them to vacate the hearing. Mr Shand and Mr Ferguson continued to negotiate the settlement agreement with Southern Response. In the first draft agreement sent by Southern Response there was no clause providing for payment of foundations. On 4  May  2016,  Mrs  Pfisterer  sent  an  email  to  Mr  Shand  and  Mr Ferguson asking “where is the deal you cancelled my trial for?”

[51]              Mr Shand sent Mrs Pfisterer an amended draft of the settlement agreement on 16 May 2016. Mrs Pfisterer informed him that she had terminated her retainer with GSBS and had instructed other lawyers. On 19 May 2016, Mrs Pfisterer’s new lawyer, Alistair Bowers emailed GSBS asking that they take no further steps on her claim.

[52]              On 23 May 2016 CRSL sent Mrs Pfisterer an invoice totalling $103,713.46 consisting of:

(a)CRSL charges of $1,568.40;

(b)CRSL commission of $46,000.00 (8% of amount recovered plus GST);

(c)GSBS’ fees of $32,868.00; and

(d)GSBS’ disbursements for expert witnesses of $23,276.88.

[53]              Mrs Pfisterer refused to pay the invoice. CRSL filed debt proceedings against Mrs Pfisterer in the District Court on 8 August 2016 seeking to recover the invoiced sum of $103,713.46 plus interest and costs.

[54]              Meanwhile on 7 June 2016 Mrs Pfisterer contacted the High Court saying that she had not agreed to settle her claim. The High Court released a Minute that day, directing Mr Shand to file a memorandum by 9 June 2016 explaining the position as he saw it. Mr Shand filed a memorandum on 7 June 2016. In the memorandum he said that Mrs Pfisterer had instructed GSBS to accept the offer from Southern Response

but “Mrs Pfisterer then apparently wanted to reconsider and refused to cooperate with finalizing (sic) the settlement.” He concluded by saying he has no further instructions from Mrs Pfisterer and that he sought an order to be removed as counsel. Mr Shand did not discuss the memorandum with Mrs Pfisterer before he filed it. The Court was not satisfied with this memorandum and asked Mr Shand to file an interlocutory application under r 5.41 of the High Court Rules 2016 supported by an affidavit formally withdrawing as counsel for Mrs Pfisterer. Mr Shand did so on 27 June 2016.

[55]              On 8 July 2016 Mrs Pfisterer filed a wide-ranging complaint against Mr Shand with the Lawyers Complaints Service of the New Zealand Law Society (NZLS). On 17 August 2017, the National Standards Committee (NSC) issued a determination finding that the fees charged by Mr Shand were reasonable but that he committed unsatisfactory conduct by failing to get Mrs Pfisterer’s authority to engage Structura Consultants and John Scarry Engineering experts. The NSC directed Mr Shand to write-off those disbursements from his invoice, being $1,017.75 and $5,893.75 respectively. His invoice to CRSL was reduced by $6,911.50 and therefore the amount CRSL  sought  to  recover  from  Mrs  Pfisterer  was  reduced  from  $103,713.46  to

$93,744.95.

[56]              Mrs Pfisterer filed a statement of defence and counterclaim denying the claimed amount was owing and making claims against CRSL and GSBS.

[57]              On 27 June 2017 Mrs Pfisterer instructed GCA Lawyers (GCA)4 to negotiate a better deal with Southern Response on her behalf. On 7 September 2017 Mrs Pfisterer settled with Southern Response on largely the same terms as those in the original settlement. She incurred about $56,364.00 in legal fees, and disbursements of $2,950.00, for attendances by GCA.

[58]CRSL paid GSBS its legal fees of $32,868.00 and disbursements, in total

$56,144.88., on or about 18 June 2018.

[59]              The decision of the NSC was appealed to the Legal Complaints Review Officer (LCRO). In a decision released on 14 September 2020, the LCRO determined that

4      Mr Bowers whom Mrs Pfisterer earlier instructed had unfortunately died in the interim.

Mr Shand was guilty of unsatisfactory conduct in the following ways: (1) failing to adequately describe the basis upon which his fees would be charged to Mrs Pfisterer;

(2) acting contrary to Mrs Pfisterer’s instructions by saying the proceeding had been settled and by continuing to discuss settlement with the insurer’s lawyers from 26 April 2016; (3) breaching his duty of confidentiality to Mrs Pfisterer in the memorandum filed in the High Court dated 9 June 2016.5 The LCRO confirmed Mr Shand’s fees were reasonable. It overturned the NSC by finding Mr Shand’s failure to obtain instructions from Mrs Pfisterer to engage certain experts did not amount to unsatisfactory conduct. Despite the reversal, the amount sought by Mr Shand from CRSL and therefore by CRSL from Mrs Pfisterer has remained at the reduced figure of $93,744.95.

Factual findings

[60]              To the extent that  there  were  inconsistencies  between  the  evidence  of  Mrs Pfisterer and the evidence of Ms Hazledine-Barber and Ms McLeish as to discussions leading up to and at the time of signing the CRSL contract, I prefer the evidence of the two employees. The view I formed of Mrs Pfisterer was that she was an intelligent assertive woman who whenever she understood a point might operate against her, erred in her own favour. Furthermore, in some instances, she maintained that position even when it was clearly wrong. The two CRSL employees on the other hand struck me as sincere witnesses who were not over-assertive and who were following what, as they themselves described, was a standard approach for which I accept they had been thoroughly trained. They both had some experience with CRSL by the time Mrs Pfisterer became involved. Such documentary evidence as there was, was also consistent with the evidence of Ms Hazledine-Barber and Ms McLeish and inconsistent with the evidence of Mrs Pfisterer, as will be readily apparent from my review of the background.

[61]              I do not consider much turns on it but I similarly accept the evidence of     Ms Hamid and reject the evidence of Mrs Pfisterer where there is any relevant dispute. I considered Ms Hamid to have been thorough and earnest in both the work that she

5      Shand v Pfisterer [2020] NZLCRO 167.

did for Mrs Pfisterer and the evidence that she gave. As with the CRSL employees, where there were differences, the documents supported her evidence.

[62]              To take an example of the differences with the CRSL staff, Mrs Pfisterer was adamant that she had not been told that litigation was a possibility and that she had not given instructions to file proceedings. Ms Hazledine-Barber and Ms McLeish both say they explained that litigation was a possibility (something I would have thought was obvious in any event). The CRSL information sheet at least implied that litigation was a possibility. The CRSL standard form contract, of which I accept Mrs Pfisterer was given a copy by Ms Hazledine-Barber at her first meeting, referred to instructing of lawyers. The letter from Mr Gosset of CRSL clearly recorded the likely need to file a claim in the High Court and discussed what would happen regarding such a proceeding. Mrs Pfisterer herself paid the filing fee and said she would like the documents to be filed in court asap. Yet in her evidence, Mrs Pfisterer would not even accept that the reference to a court filing fee suggested that the matter may go to court.

[63]              Mrs Pfisterer also placed significant emphasis on no-one having told her about the relationship between ESL, CRSL and 8D.  Yet,  in addition to the evidence of  Ms Hazledine-Barber that she had so informed Mrs Pfisterer at the outset (which again I accept), there was an obvious overlap between those entities, including in terms of Mrs Pfisterer’s description of the advertisement she saw, the name of the offices she attended, the IDA, and the ESL authority form she signed which authorised all three companies to act on her behalf. Mrs Pfisterer also knew and accepted that she was told she was engaging a one-stop-shop. I accept the submission for CRSL that it was made very clear to Mrs Pfisterer that these entities were all inter-related and related to Mr Staples. If she somehow had not taken that on board, that is only because, and here I also accept the CRSL submission, their inter-relationship was immaterial to her.

[64]              Some of the other factual differences are specifically addressed where they arise.

Issues

[65]              Mrs Pfisterer does not take issue over the quantum of the fees claimed by CRSL or over whether she had a “win” in terms of the CRSL contract. The quantum of

GSBS’s fee has already been tested and found by the NSC and upheld by the LCRO as being fair and reasonable and there is no evidence to suggest Mrs Pfisterer did not win her case against Southern Response. In fact the evidence is fully consistent with her having done so, whichever way a “win” is defined.

[66]              The focus of this case is on the affirmative defences and counterclaims raised by Mrs Pfisterer. I consider each in turn in the order advanced by Mrs Pfisterer’s counsel, Mr Smith, in opening, concluding with breach of fiduciary duty by GSBS and CRSL. In closing Mr Smith reversed the order, arguing the fiduciary allegations first. However I agree with Blanchard J’s comments in Paper Reclaim Ltd v Aotearoa International Ltd,6 that when parties have formed a contract (which is the case at least between Mrs Pfisterer and CRSL) the correct approach is first to decide exactly what they have agreed upon. I therefore follow the order adopted by Mrs Pfisterer in opening, so that pleadings more closely associated with the contract are considered first.

[67]The issues are:

(a)whether CRSL engaged in misleading conduct by misrepresenting to Mrs Pfisterer that it was paying Mr Shand’s fees in a timely manner;

(b)whether the CRSL contract is an unconscionable bargain;

(c)whether CRSL breached its contract with Mrs Pfisterer;

(d)whether GSBS breached its fiduciary duties to Mrs Pfisterer; and

(e)Whether CRSL owed and breached fiduciary duties to Mrs Pfisterer.

6      Paper Reclaim Ltd v Aotearoa International Ltd [2007] NZSC 26, [2007] 3 NZLR 169, at [31].

Misleading conduct by CRSL by misrepresenting that it would provide ongoing funding “in a timely manner”

[68]              In opening, this issue was framed by Mr Smith on the footing that CRSL misrepresented it was a “true litigation funder” when a joint venture alleged to exist between CRSL and GSBS meant it was not.

[69]              In closing, the argument was reframed. Reference was no longer made to a joint venture and Mrs Pfisterer did not allege that CRSL held itself out to be a “true litigation funder”.

[70]              Instead Mrs Pfisterer alleges that CRSL represented it would be providing advocacy services that included ongoing funding of her claim which would include timely payment by CRSL of all costs as they arose for payment. That was said to be a misrepresentation because, although ultimately liable to pay GSBS’s fees and disbursements, CRSL was not paying these costs “in a timely manner”.

[71]              Mr Smith submits that the alleged misrepresentation is misleading or deceptive conduct under the Fair Trading Act 1986 (FTA) and that as a result the contract should be voided pursuant to s 43 of that Act.  To  be  granted  relief  under  this  section Mrs Pfisterer must show that CRSL’s conduct or statements were misleading and that this misleading conduct caused her to suffer loss.7

[72]              Mr Smith further submits that the alleged misrepresentation was a breach of CRSL’s fiduciary duty of loyalty to her. This pleading is a curious one, perhaps aimed at circumventing the need to establish loss under the FTA. I question whether there is such a cause of action. In any event, because my finding is based on fact, I deal with the two related arguments at this point.

[73]              For particularisation of the representation, Mr Smith relies on the information sheet which said the “Partnership Programme” agreement was designed to allow clients “to pay some of the costs as they go”, helping CRSL “by reducing the impact on our resources”. Mr Smith submits this was a misrepresentation as CRSL was not in

7      Red Eagle Corporation Ltd v Ellis [2010] NZSC 20, 2 NZLR 492, at [29].

fact funding the litigation as the claim progressed. He submits that rather, Mr Shand and Mr Staples had an agreement that payment of the legal fees and disbursements would be deferred until the claim settled.

[74]              It is not pleaded or argued that there was any oral representation on the part of CRSL. Mr Smith submits rather that the inference from the document relied upon was reinforced by CRSL’s failure to disclose its funding arrangements with GSBS in the meetings Mrs Pfisterer had with CRSL employees.

[75]              I am not satisfied there is sufficient evidence to conclude that the alleged representation was in fact made by CRSL. CRSL agreed to provide its services on the basis that, with the exception of specific agreed payments to be made by Mrs Pfisterer, there would be no cost to her unless and until she won. The written contract failed to even expressly state that CRSL would ultimately bear the cost of legal fees and disbursements if Mrs Pfisterer “lost” but that was necessarily implicit and was accepted by all parties to be the case. However, in my view it was not represented or implicit that CRSL would be paying all legal fees and expenses “in a timely manner”. In particular I do not consider that much can be read into the statement in the information sheet relied on by Mr Smith.

[76]              I also agree with Mr Barker QC for CRSL that it would not have been reasonable for Mrs Pfisterer to interpret the sentence in the way alleged or to rely on an unclear statement in the information sheet alone when she had two in-person meetings with CRSL representatives and signed a written contract. As noted already, it is not pleaded that the CRSL employees made any such representation.

[77]              Further, even if there were a representation that payments would be made by CRSL as matters proceeded, it was probably correct at the time of the contract. I agree with Mr Smith’s submission that there was an agreement with Mr Shand, though not necessarily with other lawyers, that payment of Mrs Pfisterer’s legal fees would be deferred, but I do not agree that this extended to disbursements. At the time the information sheet was provided to Mrs Pfisterer, I consider CRSL would have been expecting to pay more disbursements than it ultimately did in the period leading up to settlement. Mr Shand said in cross-examination that his payment of disbursements

was just how things worked out and Mr Staples seemed surprised when it was put to him that Mr Shand had paid disbursements. He said maybe Mr Shand paid them but there was no arrangement like that.

[78]              The finding that there was no misrepresentation disposes of both the claims under s 43 and for fiduciary breach, so far as the latter might apply.

[79]The argument under s 43 also fails for other reasons.

[80]              First for a misrepresentation to be actionable under the FTA, there must be a clear  nexus  between  the  misrepresentation  and  the   pleaded   loss   suffered.8  Mrs Pfisterer must show the representation induced her to enter into the CRSL contract, or at least was one of the reasons she did so.9  It was clearly material to   Mrs Pfisterer that she did not have to pay fees and other costs in the interim herself, other than the disbursements that were specifically agreed, and that she would not have to pay at all if she did not win. But whether the fees were paid in an ongoing or timely manner by CRSL would not in my view have been an operative factor for Mrs Pfisterer in entering the contract.

[81]              Finally, Mrs Pfisterer claims that as a consequence of the pleaded misrepresentation she was entitled to cancel or void the CRSL contract under s 43 of the FTA, in practical terms extinguishing liability to pay CRSL the debt it seeks. This would require her to show that loss has occurred as a result of the misrepresentation, but there was no resulting loss. From Mrs Pfisterer’s perspective the net effect was the same. She did not have to pay the relevant fees and expenses (other than those she specifically agreed to pay) until she “won”. Who carried the legal fees in the interim between CRSL and GSBS did not impact on her.

8      Goldsboro v Walker [1993] 1 NZLR 394, at 401.

9      Red Eagle Corporation Ltd v Ellis, above n 7, at [29].

Unconscionable bargain by CRSL

[82]              This claim was not articulated until closing10 when Mr Smith submitted that Mrs Pfisterer was at a special disadvantage due to her mental state and financial position, and that the CRSL contract unconscionably took advantage of this.

[83]              In Gustav, the Supreme Court approved a statement of principles on the law on unconscionable bargains set out by the Court of Appeal.11 The Supreme Court summarised the law as:12

“Equity will intervene when one party in entering into a transaction, unconscientiously takes advantage of the other. That will be so when the stronger party knows or ought to be aware, that the weaker party is unable adequately to look after his own interests and is acting to his detriment.”

[84]              There is no exhaustive list of circumstances amounting to a special disadvantage, but generally it will be established where one party is at a special disadvantage compared to the other party.13 The Court of Appeal in Gustav found that circumstances amounting to a special disadvantage include “ignorance, lack of education, illness, age, mental or physical infirmity, stress or anxiety, but other characteristics may also qualify depending upon the circumstances of the case.”14 At least one later judgment of the Court of Appeal has stated that impecuniosity may be a special disadvantage.15

[85]              Mrs Pfisterer’s evidence was that she was stressed and distressed and had not slept for months at the time she went in to sign the CRSL agreement. She had just found out her house had toxic black mould. However, relevant to Mrs Pfisterer’s mental state, Ms Hazledine-Barber said that she did not recall Mrs Pfisterer being visibly upset during their meeting three months prior to signing of the contract, nor did she think that Ms Pfisterer did not understand what she was being told about the contract. More materially, at the time of the contract Ms McLeish recalls Ms Pfisterer

10     As a result there was no written submission for CRSL and the point was only briefly addressed orally.

11     Gustav & Co Ltd v Macfield Ltd [2007] NZCA 205, at [30]; endorsed by the Supreme Court in

Gustav & Co Ltd v Macfield Ltd [2008] NZSC 47.

12 At [6].

13     Commercial Bank of Australia v Amadio (1983) 151 CLR 447 (HCA), at 462.

14     Gustav & Co Ltd v Macfield Ltd [2007] NZCA 205, at [30].

15     Barnes v Barnes [2012] NZCA 255, (2012) 29 FRNZ 46, at [48].

being upset that she had to throw her clothes out due to the toxic mould, but she does not recall Mrs Pfisterer being particularly stressed or crying at any point.

[86]              Apart from her being stressed, I do not consider Mrs Pfisterer was otherwise disabled or disadvantaged. As I have said my impression of her and of the evidence overall is that she was an intelligent, capable woman with a mind of her own. While she was no doubt not in a position to wholly fund proceedings herself, she did not submit evidence that showed her financial situation amounted to special disadvantage such as that in Barnes, where the Court found Mrs Barnes had run out of money to support her children and was relying on social welfare.16 Mrs Pfisterer said her work as an ESOL teacher had dried up but she had also already received the payment from EQC. She chose the programme that involved the highest up-front payments and the lowest commission at the end.

[87]              Nor do I view this case as comparable to Moffat v Moffat where the Court of Appeal found that the wife was at a special disadvantage due to her stress and anxiety, coupled with her ignorance of the value of her interest in the family home and the fact that she did not get independent legal advice.17 Mrs Pfisterer knew her insurance claim had been undervalued by Southern Response and that the issue in her claim was what the quantification of her right to indemnification would be. Also, before signing the contract, Mrs Pfisterer had already had discussions with CRSL staff twice and been advised to take legal advice on both occasions.

[88]Overall, I am not persuaded Mrs Pfisterer was at a special disadvantage.

[89]              Even if Mrs Pfisterer’s stress level amounted to a special disadvantage, she must show that CRSL knew, or at least ought to have known of her special disadvantage and that CRSL unconscionably took advantage of her state.18 Based on the evidence of Ms Hazledine-Barber and Ms McLeish I do not consider CRSL had actual knowledge of special disadvantage.

16 At [49].

17     Moffat v Moffat [1984] 1 NZLR 600 (CA), at 605.

18     Nichols v Jessup [1986] 1 NZLR 226 (CA), at 235.

[90]              The courts have held that a party may have constructive knowledge of the other party’s special disadvantage where there is a gross disparity in value in a transaction,19 as in such circumstances the stronger party ought to have known the other party was in a position of weakness.

[91]              In my view there was no gross disparity in value in the transaction, such that CRSL should have been aware of a special disadvantage, nor do I consider that viewed overall the agreement was unfair. I note, although accepting that it is not directly relevant, Mrs Pfisterer herself said in evidence she thought it was “fair” at the time of entering into it. In saying that she refers to CRSL’s making “timely payments”, but I have already said that whether that was part of the contract or not made little difference to the value of the contract to her. Further, CRSL had in any event secured the deferred fee payment arrangement to her advantage.

[92]              Mrs Pfisterer gained material advantages from  her  contract  with  CRSL.  Mr Staples had relevant experience with EQC which would have been reassuring. She signed up to a one-stop-shop of key personnel to resolve her claim. She was to be represented by CRSL itself down to the point where litigation was required, if it was.

[93]              It was also advantageous to Mrs Pfisterer to have legal fees set by CRSL on a 2B scale basis. She was clearly told by Ms McLeish, which I accept, that was the basis for those fees. While Mrs Pfisterer no doubt did not understand at the time what 2B costs meant, that does not matter in terms of assessing the bargain. It meant that the fees were likely to be, and in my view were, significantly under what would have been typically charged, as illustrated by the charges made by GCA, Mrs Pfisterer’s second firm of lawyers for a lesser scope of work.

[94]              Most importantly Mrs Pfisterer did not have to pay anything except for specified disbursements unless and until she “won”. While CRSL did not have to fund Mrs Pfisterer’s legal fees in the interim, it would have expected to outlay disbursements, would have had material overheads and in any event it was ultimately liable (in entirety) if there was not a win, or if for any reason Mrs Pfisterer did not pay. CRSL was therefore assuming a material risk of carrying the legal and other costs

19     At 231.

either for a period after settlement was reached (in the event of court proceedings such as this) or having ultimate responsibility for them. While this was not the risk that arises in litigation devoid of the back-up of an insurance policy, it is a significant risk nonetheless: one that has been realised in this case, and no doubt in others.

[95]              In assessing that risk, Mr Smith submitted it was almost inevitable where there was an insurance contract and a valid claim, that some payment would be made such that the client had “won”, that seriously reducing the benefit of the contract. I agree that “no win no pay” is ambiguous. In the present case there is no question but that Mrs Pfisterer did win. But in many cases a client might not win. It is not a matter that requires determination here. But clearly a win would not be assessed by receipt of a sum of money alone. Presumably at the least, the net proceeds received by a client would need to exceed the net they would have received under any offer that preceded the CRSL contract. Arguably a win would require something materially more. Any ambiguity would likely be interpreted against CRSL. In my view the “no win no pay” covenant was a very material hedge for clients. The fact that Mrs Pfisterer did win does not change the value of that key term of the CRSL contract to her at the time she entered into it. And her evidence was that was what attracted her to enter into the contract.

[96]The payment of 8 per cent commission has to be seen in that overall light.

[97]              There is no evidence of any equivalent or preferable fee/funding arrangement available to Mrs Pfisterer. While GSBS did carry costs in the interim for CRSL and it seems for other clients, there is no evidence they would have done so for Mrs Pfisterer. In particular there was no evidence to suggest Mr Shand would have agreed to a “no win no fee” contract, or that anyone else was offering those terms. In fact Mr Shand made it clear that he gained significant reassurance from the fact that CRSL agreed to pay his costs whatever the result.

[98]              For the above reasons I find that CRSL did not unconscionably take advantage of Mrs Pfisterer when she entered the contract.

Breach of contract by CRSL

[99]              Mrs Pfisterer alleges that the following contractual duties were breached by CRSL:

(a)the duty under clause 1(e) of the contract to only instruct “independent” quantity surveyors and lawyers; which it is alleged Mr Betts and GSBS were not; and

(b)the duty, under clause 1(g), to “[s]eek instruction from the client before any… proceedings are issued”, which it is alleged did not happen before the proceeding was filed on 1 July 2014.

[100]           Mrs Pfisterer submits that these breaches of contract by CRSL allow her to cancel the contract under s 37 of the Contract and Commercial Law Act 2017 (CCLA), She also seeks damages for the legal costs she incurred to GCA.

[101]           There was originally a third composite pleading of breach of clause 1(i) of the contract by CRSL, namely that CRSL failed in some unspecified respects to perform its services “competently and with reasonable care and skill or in accordance with the relevant law and regulations”. However, this was not ultimately advanced.

Independent quantity surveyor and lawyer

[102]           I find, as Mr Barker argues that in the context of the CRSL contract, ‘independent’ meant independent of EQC and the insurance industry. It was clear from the evidence that independence from EQC and the insurance industry was important to homeowners who were burnt-out by, and suspicious of, those entities. There was no suggestion that Mr Betts or Mr Shand were other than independent of EQC and insurers, and on that basis alone, there was no breach.

[103]           In terms of Mr Betts, the contract cannot have meant independent of CRSL because, as I have already found, before the contract was signed, it was made plain to Mrs Pfisterer  by  CRSL  staff  that  Mr  Betts  was  in-house.   I  have  accepted    Ms Hazledine-Barber’s evidence that she would have explained to Mrs Pfisterer (as

she says she always did) that Mr Betts was in-house with CRSL and was part of CRSL’s one-stop-shop for resolving earthquake claims. I reject Mrs Pfisterer’s evidence that “Marie” never mentioned Mr Betts to her. I am quite satisfied that Mrs Pfisterer knew before signing the contract that Mr Betts was not independent of CRSL.

[104]           In any event Mr Betts’ task was limited to completion of the IDA. After the claim was filed, an independent expert was engaged so that, even on Mrs Pfisterer’s interpretation, clause 1(e) of the contract was satisfied.

[105]           In terms of Mr Shand, I consider that while he was clearly not wholly independent of CRSL because he was someone to whom at that time they usually referred clients if litigation was required, he was nonetheless “independent” in the sense of his ability to represent Mrs Pfisterer. This is a matter that is discussed further in connection with fiduciary duties.

[106]           I find therefore there was no breach of clause 1(e) of the CRSL contract, either in respect of instruction of Mr Betts or of Mr Shand.

Requirement to seek instructions before issuing proceedings

[107]           The proceedings were filed by GSBS on 1 July 2014. They had been drafted substantially by CRSL. Mr Smith submits that CRSL failed to seek instructions for the issue of proceedings prior to 1 July 2014.

[108]           I interpret clause 1(g) as referring only to instruction as to the issue of proceedings, not instruction as to the content of the statement of claim. In the latter regard in any event I consider Mrs Pfisterer knew the material details of her claim, having been provided with the IDA and cost assessment on which it was based.

[109]           I find as a matter of fact that CRSL did seek instruction from Mrs Pfisterer before proceedings were issued on 1 July 2014, contrary to Mrs Pfisterer’s evidence. Mrs Pfisterer was advised in her initial meeting with Ms Hazledine-Barber that litigation was a possibility and Ms McLeish told her that proceedings would likely be necessary in order to get Southern Response to meaningfully engage with her claim.

Materially, she was then further advised of the need for proceedings by Mr Gosset in his email of 23 April 2014. She was asked to pay a filing fee for the statement of claim by email of 6 June 2014 from Mr Davis. He attached the GSBS invoice. She responded to Mr Davis by email on 8 June 2014 asking that the documents be filed as quickly as possible.

[110]           Mrs Pfisterer also knew that Mr Shand was attending to filing of the claim as she paid the filing fee to GSBS and texted Mr Shand saying she had paid and asking him to confirm receipt.

[111]           In my view Mrs Pfisterer’s email of 8 June alone, and certainly the evidence overall, is sufficient to amount to instructions to issue proceedings.

[112]           I note further that Mrs Pfisterer was sent a copy of the statement of claim on 10 July 2014 after the claim had been filed on 1 July 2014. Receipt of it did not provoke any comment from her. Based on my assessment of Mrs Pfisterer’s evidence in the witness box, I have no doubt that if she had a comment that was negative or corrective, she would have made it at the time.

No right to cancel or to damages

[113]           Even if either of these two allegations amounted to a breach of contract by CRSL, they were not essential terms of the contract, nor were they breaches that substantially reduced the benefit of the contract to Mrs Pfisterer. Therefore they were not breaches that entitled cancellation under s 37(2)(a) or (b) of the CCLA as claimed.

[114]           Under s 37(2)(a) a party may cancel a contract where the other party has breached a term that is expressly or impliedly essential to the cancelling party. The Supreme Court in Mana Property Trustee Ltd v James Developments Ltd held that at the time of contracting, the parties must have agreed that the term is essential to the cancelling party.20 Mrs Pfisterer submits clauses 1(e) and 1(g) of the contract are impliedly essential as they concern the proper handling of the legal proceeding filed in her name.

20     Mana Property Trustee Ltd v James Developments Ltd [2010] NZSC 90, [2010] 3 NZLR 805, at [25].

[115]           I disagree. The essential terms of the CRSL contract were that CRSL would help Mrs Pfisterer settle her dispute with Southern Response and that she would incur limited upfront costs and virtually none if  she lost. Even if  it were essential to     Mrs Pfisterer that any expert was to be wholly independent from CRSL, that clearly was not agreed as an essential term by CRSL. Nor can it be said that it was an agreed essential term of the contract that CRSL seek instructions from Mrs Pfisterer before issuing proceedings – especially in light of Mrs Pfisterer’s contention that before signing the contract no one from CRSL even discussed the prospect of litigation against Southern Response with her.

[116]           Nor can it be said that the alleged breaches of the CRSL contract substantially reduced the benefit of the contract to Mrs Pfisterer under s 37(2)(b)(i) of the CCLA. Mrs Pfisterer suffered no loss due to these alleged breaches. Mr Smith does not submit that were it not for any breach of contract her settlement would have been any greater than was negotiated for her by GSBS. Nor does Mr Smith submit that Mrs Pfisterer’s costs would have been any less than charged, were it not for any breach. The settlement ultimately reached with Southern Response as negotiated by her new lawyers was materially the same as the one reached by GSBS.

[117]           For the same reasons Mrs Pfisterer was not entitled under s 37 of the CCLA to cancel her contract with CRSL.

[118]           I note further that Mrs Pfisterer’s claim for damages does not marry up with the breaches she pleads. She seeks an award of $56,364.87 for specific damages for the legal costs she incurred following her termination of the GSBS retainer, which have no causative link to the alleged breaches of the CRSL contract. There is nothing to say, for example, that because Mr Betts (who was replaced in any event) was not independent, Mrs Pfisterer had to hire GCA to reach the same settlement she had reached long beforehand.

[119]           I find against Mrs Pfisterer on the pleaded breaches of contract by CRSL and find that in any event there would be no remedy available to her.

Breach of fiduciary duty by GSBS

[120]           Mrs Pfisterer’s pleading and opening was that numerous individual fiduciary duties were breached by GSBS as follows:

(a)failure to provide full disclosure to her of potential conflicts of interest associated with the joint venture, and to only proceed with her fully informed consent to the operation of the joint venture;

(b)failure to provide fee information before charging fees to her;

(c)failure to advise her on the funding/fee arrangements that were available to her, and on the terms and effect of the conditional fee arrangement that GSBS proposed, before charging fees to her;

(d)failure to advise her before filing the proceeding on the alternatives to litigation that were available;

(e)failure to obtain her informed instructions before filing the proceeding;

(f)failure to follow her informed instructions, and acting without instructions/contrary to her instructions;

(g)placing undue/unnecessary pressure on her to settle her insurance claim/case;

(h)disclosure of her confidential client information;

(i)charging unfair and unreasonable fees; and

(j)preferring GSBS’s own interests over Mrs Pfisterer’s interests.

[121]           However, the argument as it proceeded in closing was reframed to what seemed to be five breaches of fiduciary duty alleged against GSBS and the joint venture submission was, as discussed earlier, abandoned. The argued breaches were:

(a)failure to obtain informed consent to act with conflicts of interest;

(b)failure to advise on fee information and funding arrangements;

(c)failure to advise on commencement of litigation;

(d)failure to obtain and follow informed instructions on settlement; and

(e)disclosure of confidential client information.

[122]           Mrs Pfisterer seeks as relief declarations that it would be inequitable for GSBS to recover from her the legal fees and certain of the disbursements that are claimed from her.   She also seeks awards of general and specific damages in the sums of

$50,000 and $66,939.96 respectively. The specific damages represent in the main the legal fees Mrs Pfisterer incurred following her termination of  GSBS’s  retainer on  25 April 2016 up until she finally settled her insurance claim with Southern Response.

[123]           Mr Smith’s submissions on this issue in particular were very wide-ranging and due to the late changes, there was often no matching submission from other counsel.

Failure to obtain informed consent to act with conflicts of interest

[124]           The key point raised by Mrs Pfisterer in this regard is that Mr Shand had a conflict of interest of which he failed to inform her, arising out of the “business relationship” he shared with Mr Staples. The argument was that the business relationship created a personal interest on the part of Mr Shand, said to have the potential to compromise his loyalty to Mrs Pfisterer, and also that the business relationship meant Mr Shand had  divided  loyalties  between  Mrs  Pfisterer  and  Mr Staples.

[125]           There is no doubt that the relationship between a solicitor and client is inherently fiduciary in nature. As Richardson J said in Sims v Craig Bell & Bond the reposing of trust by the client is automatically assumed.21

21     Sims v Craig Bell & Bond [1991] 3 NZLR 535 (CA), at 543.

[126]           There are two aspects of the paramount obligation of good faith owed by a lawyer to their client which are relevant in this context:

(a)the question of conflict between a lawyer’s duty to their client and their own personal interest; and

(b)the question of conflict between their separate duty to their client and to another party (normally another client) when they attempt “to serve two masters at the same time in the same transaction".22

[127]           I consider first the nature of the relationship between Mr Shand and CRSL. As noted, the typical case of divided loyalties arises where a lawyer is trying to serve two mistresses, to adapt Richardson J’s terminology. It is not contended that CRSL was a client of Mr Shand’s. It is also no longer contended that Mr Staples and CRSL were in a joint venture, another situation where divided loyalties would commonly arise.23 Rather the submission is that they had a “business relationship” that created conflicts of interest.

[128]           I consider that the joint venture submission was appropriately abandoned. CRSL and GSBS were not engaged in a joint venture. There is no settled common law meaning of what will constitute a ‘joint venture’, but there generally needs to be some mutual trust and confidence and profit sharing.24 In Chirnside v Fay, the Supreme Court, having discussed how the parties had shared feasibility calculations, negotiated to purchase a site, progressed consents and worked together to gain a tenant, said:25

A joint venture will come into being once the parties have proceeded to the point where, pursuant to their arrangement and understanding, they are depending on each other to make process towards the common objective.

[129]           There was no profit sharing between Mr Shand and CRSL, nor mutual trust and confidence of the kind referred to by the Supreme Court.

22     Farringdon v Rowe McBride & Partners [1985] 1 NZLR 83, at 87.

23     No case was put to me involving a lawyer in that context.

24     United Dominion Corporation v Brain Pty Ltd (1985) 157 CLR 1, at 10; (1985) 60 ALR 741, at 746.

25     Chirnside v Fay [2006] NZSC 68, [2007] 1 NZLR 433, at [91].

[130]           Clearly Mr Shand and Mr Staples were, at least at the relevant time, in a close working relationship. CRSL referred most of its clients to Mr Shand and there was some cross-over in their work, for example CRSL prepared the initial draft of a statement of claim using Mr Shand’s template. They had an agreement as to the basis on which Mr Shand would charge fees, namely on a 2B scale. There was an agreement that Mr Shand would not bill fees until conclusion (but no agreement that he would carry disbursements). Mr Shand rented office space from CRSL. Mr Shand even contributed to Mr Staples’ advertising costs although this did not start until  after Mrs Pfisterer’s contract was signed. However there was no profit sharing nor anything similar. There was no obligation on the part of CRSL to refer clients to Mr Shand nor any obligation on him to take any individual client. There is no suggestion that either was in any position of influence over the other. CRSL directed clients to other lawyers as well as Mr Shand; and Mr Shand did not rely solely on Mr Staples to provide his firm with work. Ultimately this was a close referral relationship, closer than, but not dissimilar, to many. It could not fairly be described in my view as a “business relationship”.

[131]           The next question is whether that relationship nonetheless led to Mr Shand having a personal interest in potential conflict with representing Mrs Pfisterer. It is a core fiduciary responsibility of a lawyer not to act in circumstances where they have a personal interest in a transaction.26 A personal interest will arise where the lawyer stands to receive some benefit either directly or indirectly as a result of the transaction, outside the usual remuneration for their professional services.27 This has been found to have occurred for example, where a lawyer makes a loan to their client and earns a secret profit on the interest rate and arrangement fee without the client’s knowledge, or where the lawyer has shares or has a financial interest in a company connected to a transaction on which they are acting.28 If the lawyer stands to make a prospective personal advantage, even if the client will benefit from it, it must be disclosed to the client.29 While a personal advantage may be prospective it must be greater than theoretical.30

26     Witten-Hannah v Davis [1995] 2 NZLR 141 (CA), at 149.

27     Farrington v Rowe McBride & Partners, above n 22, at 89.

28     Swindle v Harrison [1997] 4 All ER 705 (CA).

29     Clark Boyce v Mouat [1993] 3 NZLR 641 (PC), at 648.

30     Farrington v Rowe McBride & Partners, above n 22, at 89.

[132]           Mr Shand’s personal interest in the transaction was not clearly articulated by Mr Smith, but I take him to contend that Mr Shand had a personal interest in the repeat work that he would gain from CRSL.

[133]           I am not persuaded that retaining or having the prospect of bulk referral of work in itself amounts to a personal interest or prospective personal advantage in a transaction. It does not go far beyond the usual expectations of remuneration for professional services. Renting premises from CRSL is also not a personal advantage and nor do I consider the payments towards advertising, if relevant in this case, to amount to a personal advantage. The position would be quite different if the rent were on a concessionary basis, or payments were being made to Mr Shand. Overall I do not consider Mr Shand had a personal interest of the sort that gives rise to a fiduciary obligation of disclosure. The facts of this case can be clearly distinguished from the caselaw examples referenced above.

[134]           I next consider whether this was a case of divided loyalties. The relationship between Mr Shand and CRSL was not one where Mr Shand could be said to owe CRSL a fiduciary duty or any obligation in particular other than, on acceptance of the referral of Mrs Pfisterer, to charge her on a scale 2B basis and to not bill the file until conclusion.

[135]           Further, the rule from the Lawyers: Conduct and Client Care Rules 2008 (the Client Care Rules) on which Mr Smith’s argument appears to be based, rule 5.5, provides that a lawyer must not engage in a business or professional activity other than the practice of law where that activity could reasonably be expected to compromise their professional obligations. I do not consider that Mr Shand’s working relationship with CRSL could fairly be described as a business or professional activity other than the practice of law. It is more fairly part of his practice of law.

[136]           Mr Smith has not pointed me to any case comparable to this one where a lawyer has been found to have divided loyalties. He relies in particular on the case of Clairs Keeley (a firm) v Treacy. 31 The question of fiduciary duty was not even directly at issue in that case. The Court was considering a question of maintenance and

31     Clairs Keeley (a firm) v Treacy [2003] WASCA 299.

champerty. As part of the complex fact scenario, a law firm had entered into a costs agreement with a litigation funder which provided that the funder would only pay 80 per cent of ordinary fees in the event the action was unsuccessful but would pay 125 per cent of ordinary fees if the action was successful. Under the funding agreement, this extra cost would be passed onto the client in the event of success, plus a 35 per cent commission of the settlement or award. The fee arrangement was set out in the solicitor’s retainer and was sent to the litigation funder for it to sign, not the client. The retainer also set out a tri-partite agreement between the solicitor, the litigation funder and the client. The ‘tri-partite agreement’ was not disclosed to clients. One member of the Court noted that failing to advise the client that it is contrary to his interests to pay fees above the scale, was a breach of the solicitor’s fiduciary duty to their client. Further, the litigation funder could review the adequacy of a proposed settlement. If it disputed the adequacy of the settlement and ended up in disagreement with the client, the litigation funder could insist upon the opinion of senior counsel being taken by the solicitors. The Court stated, again, that needed to be disclosed.

[137]           The present case is not comparable to Clairs Keeley. In the latter the solicitor had contractual obligations to the litigation funder that were clearly contrary to the interests of their clients to whom they owed a fiduciary duty. The billing matters that were agreed between GSBS and CRSL,  were  not  contrary  to  the  interests  of  Mrs Pfisterer.

[138]           Mr Smith also relied on a publication by the US Chamber Institute for Legal Reform32 of a paper which referred to anecdotal evidence that funders and lawyers recognise a conflict and that they therefore advise clients to seek independent legal advice on the terms of a funding agreement. Mr Smith appeared to be suggesting that divided loyalties arise here out of the terms of the CRSL contract alone. While a conflict may well arise in some such cases, I do not consider any arises here. Mr Smith suggested a conflict might arise, for example, on settlement where GSBS might exert pressure to settle to secure a “win” for the benefit of CRSL, whereas it may be in Mrs Pfisterer’s interests to go onto a hearing. However, I agree with the opposing

32     Michael Legg “Litigation Funding in Australia: Identifying and Addressing Conflicts of Interest for Lawyers” (US Chamber Institute for Legal Reform, February 2012) at 29.

argument that there was no such conflict of interest. All three parties had a common interest of securing a “win”.

[139]           I note further that Mrs Pfisterer knew the key aspects of the CRSL/GSBS relationship particularly from CRSL staff. In particular, she knew before Mr Shand was engaged that Mr Shand did most of CRSL’s legal work.

[140]           I do not consider this was a case where there were divided loyalties on the part of Mr Shand.

[141]           I therefore conclude that Mr Shand/GSBS did not have a conflict of interest in acting for Mrs Pfisterer.

Failure to advise on fee information and funding arrangements

[142]           Mr Smith argues that failure by GSBS to provide full information as to their own fees until after filing the statement of claim, and even then not properly explaining 2B costs, amounted to a breach of fiduciary duty. I disagree.

[143]           Even where a relationship is fiduciary, not all obligations between the parties are fiduciary.33 The scope of the professional rules is relevant in a broad sense but a fiduciary duty arises where there is a potential conflict of interest between the client and the professional and not just on any breach of the rules, negligence, or error on the part of a solicitor. If it were otherwise, particularly given the standard consequences of a breach of fiduciary duty, namely that as a general rule no loss needs to be proven, few professionals would ever be able to recover their fees.

[144]           Mrs Pfisterer had been told by CRSL she was to be charged fees by GSBS on a 2B costs scale and that is the basis on which she was charged. GSBS was late providing their terms of engagement and even then it seems did not provide the full information required by the Client Care Rules. The NSC found that amounted to a breach of the Rules. But there was no conflict of interest in that regard and no breach

33     Chirnside v Fay, above n 25, at [15].

of fiduciary duty. This was not a situation of a lawyer charging above scale or at a premium, without disclosure.

[145] Mr Smith’s second submission in this regard is that where a retainer involves a conditional fee arrangement (strictly regulated by the Lawyers and Conveyancers Act 2006) a solicitor must inform a client of any other appropriate arrangements that might be available, including legal aid. Mr Smith conceded this was not a conditional fee arrangement but submitted that the principles apply regardless. He provided no authority for that proposition. His submission was that it is imperative that a solicitor provide “the necessary fee information” for the client to make an informed decision as to whether the funding fee arrangement is in their best interests which in most circumstances will require the solicitor to provide information on alternative funding/fee arrangements. Again he cites no authority.

[146]           Mr Smith goes on to say that the circumstances surrounding the CRSL contract meant that GSBS could not discharge its duties of loyalty and diligence without advising on the “serious risks” involved in Mrs Pfisterer engaging GSBS on the basis of that funding arrangement. First, the business relationship meant that the CRSL contract raised the potential for a conflict of interests. Second, he says the terms of the CRSL contract were so one-sided that GSBS could not in good faith accept instructions to act on the basis of that agreement without first providing appropriate advice to Mrs Pfisterer in that respect.

[147]           Mr Smith highlights the significance of Mr Shand’s evidence that he would on some occasions do deferred fee work for non-CRSL clients and says GSBS never raised this possibility with Mrs Pfisterer. Nor did GSBS discuss with Mrs Pfisterer whether she might qualify for legal aid and if so the implications of that for her or whether GSBS could help Mrs Pfisterer negotiate a bespoke fees arrangement with CRSL, consistently with Mr Staples evidence that CRSL was open to considering other fee arrangements in appropriate cases. Failing to raise and discuss any of these funding issues and possibilities, GSBS is said to have acted in breach of the fiduciary duties it owed to Mrs Pfisterer.

[148]           I agree that GSBS should have explained the terms of the CRSL contract to Mrs Pfisterer even though that contract had already been signed before GSBS was instructed, to ensure that she understood its effect and it seems they did not do so in full. However for the reasons already stated above, while that may have been a breach of duty, I do not consider it to have been a breach of fiduciary duty.

[149]           In terms of the real focus of Mr Smith’s argument, while a cautious lawyer might provide fuller advice, I do not consider GSBS had a duty to advise Mrs Pfisterer on alternatives to the CRSL contract unless the contract was clearly unfavourable to her. On the evidence available I would be unable to say it was. I also do not agree that Mr Shand was required or had a duty to offer Mrs Pfisterer a deferred fee arrangement or other favourable terms. The fact that a lawyer is prepared to offer concessionary terms to some clients, does not create an obligation to offer them to others. The reality is there was no evidence of any alternative funding arrangement for Mrs Pfisterer.

Failure to advise on commencement of litigation

[150]           Mr Smith submits that solicitors have a fiduciary duty to obtain informed instructions from their clients on “important matters” such as the commencement of litigation, and that GSBS breached that duty. He submits also that Mr Shand should have advised Mrs Pfisterer on the alternatives to litigation that might have been available to her, presumably referring to mediation, negotiation and similar.

[151]           I have already found that Mrs Pfisterer did give instructions to CRSL to file the statement of claim (and in my view did know the nature of the claim being filed having received the IDA). The statement of claim was drawn up with a GSBS template and Mr Shand had corrected it before filing. He obviously knew it was being filed and knew Mrs Pfisterer wanted it filed. Nonetheless I agree that GSBS did not comply with rule 13.3 of the Client Care Rules which requires a lawyer to obtain their client’s instructions on significant decisions. But, like the failure to provide retainer information, this was not a breach of fiduciary duty. There was no conflict or loyalty issue at stake. The cases referred to by Mrs Pfisterer do not assist her. Four Aces Cleaning Establishment Ltd v Barrell concerns a lawyer’s contractual obligation not

to exceed the scope of their authority.34 Ellis v Legal Complaints Review Officer concerns a lawyer’s obligation under the Rules to obtain instructions.35 Neither of these cases frame the lawyer’s obligation to obtain instructions as a fiduciary duty.

[152]           Any failure of GSBS to obtain informed instructions from Mrs Pfisterer before filing the statement of claim is not a breach of fiduciary duty. The same reasoning applies to the alleged failure to advise on mediation and other alternatives to litigation, a proposition that in any event would seem to be somewhat clutching at straws.

Failure to obtain and follow informed instructions on settlement

[153]           Mr Smith submits that lawyers have a fiduciary duty to obtain and follow the instructions of their client on settlement and that GSBS breached this duty by pressuring Mrs Pfisterer into accepting the settlement and continuing to negotiate the terms of settlement once she told them she would not accept it.

[154]           I find on the basis of the evidence set out earlier that Mr Ferguson of GSBS did obtain and follow informed instructions from Mrs Pfisterer before confirming settlement with Southern Response. I do not accept that Mrs Pfisterer was pressured into settlement, or that she had not had adequate advice about it.  I consider that   Mrs Pfisterer was provided with sufficient information and advice for some time beforehand, to anticipate the likely scope of a settlement. While it would have been preferable for Mr Ferguson to allow Mrs Pfisterer more time, it is very common that time is short when a fixture is pending and very common for insurers to negotiate at the last minute. I do not consider that GSBS was in breach of duty in this regard.

[155]           In any event, while lawyers have an obligation under the Client Care Rules to obtain instructions on settlement, a breach of that obligation per se does not amount to a breach of fiduciary duty, and did not here. There was no conflict arising for the reasons I have set out earlier. Again, the cases referred to by Mr Smith do not frame

34     Four Aces Cleaning Establishment Ltd v Barrell HC Whangarei A27/82, 3 October 1990.

35     Ellis v Legal Complaints Review Officer [2013] NZHC 3514, [2014] NZAR 220, at [83]-[89].

the duty as a fiduciary duty, rather as a professional obligation or rule under the Client Care Rules.36

[156]           By continuing to negotiate the terms of settlement GSBS acted without instructions, in fact contrary to instructions, which was a breach of the fiduciary duty of loyalty or good faith. However even where a lawyer has breached a fiduciary duty it is still necessary to show it was causative of loss.37 This was a breach that had no causative effect and that therefore does not sound in the remedies sought by Mrs Pfisterer. Southern Response agreed not to enforce the “settlement agreement” and so it came to an end.

Disclosure of confidential information

[157]           Mr Smith says that GSBS breached confidence by filing the memorandum on 7 June 2016 regarding settlement, after Mrs Pfisterer had terminated their instructions.

[158]           As above I agree that filing of the memorandum was a breach of the fiduciary duty of loyalty or good faith, but one without consequence or remedy at least on the basis sought by Mrs Pfisterer.

Breach of fiduciary duty by CRSL

[159]           In her pleading Mrs Pfisterer alleged that CRSL owed and breached the following fiduciary duties:

(a)to not publish misleading or deceptive statements;

(b)to provide full disclosure to Mrs Pfisterer of potential conflicts of interest associated with a “joint venture” and to only proceed with Mrs Pfisterer’s fully informed consent to the operation of the joint venture;

(c)to not prefer its own interests over Mrs Pfisterer’s interests;

36     R v McLoughlin [1985] 1 NZLR 106 (CA) at 107 per Hardie Boys J; and Hall v R [2015] NZCA 403, [2018] 2 NZLR 26, at [65]-[77].

37     Gilbert v Shanahan [1998] 3 NZLR 528 (CA).

(d)to not cause breaches of fiduciary duty by GSBS; and

(e)to take steps to see that the fees and disbursements that GSBS intended to charge to Mrs Pfisterer were appropriate.

[160]           Again  the  argument  was  materially  reframed  in  closing.   Ultimately   Mrs Pfisterer alleges that CRSL breached:

(a)a duty to not publish misleading or deceptive statements (already considered above);

(b)a duty of loyalty; and

(c)a duty not to cause or assist fiduciary breaches by GSBS.

[161]           The relationship between Mrs Pfisterer and CRSL is not inherently fiduciary and furthermore it is contractual. A fiduciary duty can arise in a contractual relationship but, as the Privy Council said in Clark Boyce v Mouat, a fiduciary duty cannot be prayed in aid to enlarge the scope of contractual duties.38

[162]            Mr Smith submits that a relationship that is not inherently fiduciary may nonetheless be a fiduciary relationship where it is analogous to inherently fiduciary relationships.39 He says that the relationship between CRSL and Mrs Pfisterer is analogous  to  the  fiduciary  relationship  of  agent  and  principal.  CRSL  owes  Mrs Pfisterer fiduciary obligations as she was in a vulnerable position, she reposed significant trust and confidence in CRSL to resolve her insurance claim and the ‘Partnership Programme” implies some sort of partnership agreement between them. Mr Smith submits the relationship was akin to an agent/principal relationship as the CRSL contract empowered CRSL to instruct third parties on Mrs Pfisterer’s behalf. CRSL was also performing tasks very close to tasks of a legal nature, such as drafting a statement of claim.

38     Clark Boyce v Mouat [1993] 3 NZLR 641 (PC) at [648].

39     Liggett v Kensington [1993] 1 NZLR 257 (CA), at 281.

[163]             In my view, as Mr Barker submits, there is no requirement here to supplement the contractual duties owed by CRSL to Mrs Pfisterer with fiduciary duties. There are express clauses in the contract that require CRSL to protect Mrs Pfisterer’s interests such as those that require CRSL to engage independent experts, to obtain her instructions before instructing third parties, to perform their services with all reasonable skills. Therefore while Mrs Pfisterer was entitled to repose trust and confidence in CRSL, this was no more trust and confidence than that which was specifically contemplated under the CRSL contract.

[164]           In case I am wrong in my conclusion and CRSL did owe fiduciary duties, I briefly consider the breaches argued below.

Breach of duty of loyalty

[165]           Mr Smith argued that CRSL had an obligation to act in good faith and to not act for its own benefit without the informed consent of Mrs Pfisterer “as principal”. The argument proceeded on the basis that CRSL had to disclose “the business relationship” between GSBS and itself to Mrs Pfisterer and recommend she seek independent advice before signing the CRSL contract.

[166]           On this issue I have already found there was no conflicting “business relationship” between CRSL and GSBS and do not consider more need be said. Further Mrs Pfisterer was told that Mr Shand was regularly engaged and I do not see any conflict in the rental arrangement. She was also told twice to seek legal advice before signing the contact. There was no necessity to tell her of the contribution to advertising as there was none at the time of signing.

[167]           The second key issue raised is that the entities involved other than CRSL, that is ESL and 8D, were owned or part-owned by Mr Staples and this was not disclosed to Mrs Pfisterer. Mrs Pfisterer said that CRSL was therefore standing to gain not just in terms of the 8 per cent commission but also in terms of any profit that might be made by those other entities and was in breach of fiduciary duty.

[168]           On this point, I have already held that Mrs Pfisterer knew before signing the contract that these were all inter-linked companies. I consider that there was sufficient

disclosure to amount to informed consent of these matters. In the case of ESL it was very evident that it was at one with CRSL as the initial brochure was headed “Earthquake Services” and there were various references to it in the documentation. The office to which Mrs Pfisterer first went had signage showing “Earthquake Services Ltd”. Also it was part of the CRSL contract that it was providing a one-stop- shop.

[169]           In terms of 8D, Ms Hazledine-Barber of CRSL told Mrs Pfisterer (and I have accepted Ms Hazledine-Barber’s evidence) that Mr Betts was their in-house expert. Mrs Pfisterer knew she was paying a fee for Mr Betts’ report and knew the amount of that before she signed the CRSL contract. Again it was made clear to Mrs Pfisterer that this was a one-stop-shop and I consider it would have been clear that the different entities were in some way under the control of Mr Staples. I do not see that there is any divergence of interests between Mrs Pfisterer and CRSL in this regard. The structure was set up in such a way as to, overall, benefit the client, and the cost to the client, including the fee to 8D, was known at the outset.

[170]           There seemed to also be a submission (amongst may other points that were touched upon) that CRSL breached its fiduciary duty by failing to advise Mrs Pfisterer that she could instruct any solicitor she wished and that this was a fiduciary breach. Consistent with my finding above I accept the evidence of the CRSL witnesses that Mrs Pfisterer was told she could instruct any solicitor she wished, which disposes of this point.

Causing/assisting breaches of fiduciary duty by GSBS

[171]           Mr Smith also argued that CRSL assisted breaches of fiduciary duty by GSBS. There was little provided by way of particulars or argument on this point. In any event, CRSL had no part to play in the two established breaches of fiduciary duty by GSBS or no part that was causative or would qualify as assisting. This defence/counterclaim therefore fails.

Conclusion

[172]           I find that GSBS breached its fiduciary duty of loyalty and good  faith  to  Mrs Pfisterer in continuing to negotiate the terms of settlement and filing a memorandum in Court after their instructions had  terminated,  but  find  against  Mrs Pfisterer on the remedies sought and otherwise find against her affirmative defences and counterclaim.

[173]Judgment is entered for CRSL in the sum of $93,744.95.

[174]           CRSL claimed interest and costs in terms of its contract on which no submissions were made on behalf of Mrs Pfisterer.

[175]           Subject to confirmation that the interest claim is not contested, the plaintiff and counterclaim defendant are to file memoranda within two weeks setting out the interest calculation and any argument as to costs, and the defendant is to file a memorandum within a further two weeks. Any reply to the defendant is to be filed within five working days.

Hinton J