Cleary v Ewart & Ewart
[2015] NZHC 1190
•29 May 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2014-404-1672 [2015] NZHC 1190
BETWEEN WILLIAM GEORGE GRAHAM
CLEARY Plaintiff
AND
EWART & EWART Defendant
Hearing: 12 May 2015 Appearances:
Ms P Fee and Mr L Fraser for applicants
Mr L Herzog for respondentJudgment:
29 May 2015
JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE [on Application for Order for Particulars]
This judgment was delivered by me on
29.05.15 at 4 pm, pursuant to
Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
CLEARY v EWART & EWART & ANOR [2015] NZHC 1190 [29 May 2015]
Introduction
[1] The defendants apply for particulars of the claim brought against them by the plaintiffs. The claim is currently embodied in the amended statement of claim, filed on 11 May 2015.
[2] In order to clarify the plaintiff’s causes of action, it is necessary to set out the
background to the plaintiff’s claim.
Background
[3] On or about 7 June 2013, the plaintiff entered into an agreement with a Fijian company, Vunabaka Bay Fiji Limited (the vendor), an agreement which the plaintiff described as an “Option Deed”. The Option Deed conferred on the vendor the right to sell to the plaintiff a section of land in Fiji for USD 550,000. Pursuant to the agreement, the plaintiff paid USD 165,000 seemingly as a deposit on the purchase price that would be payable if the vendor exercised the Option Deed and the transaction proceeded to settlement. The Option Deed also referred to and incorporated an agreement for sale and purchase containing various covenants by the parties. Further, the sale and purchase agreement would govern the terms upon which the vendor would sell and the plaintiff would buy the land if the option was exercised.
[4] The plaintiff was not apparently advised by solicitors when he entered into the Option agreement. It appears that the vendor was advised by Fijian solicitors at all material times.
[5] The plaintiff alleges that the vendor subsequently invited him to relinquish the Option. The plaintiff alleges that on 11 April 2014, he entered an oral agreement with the vendor for the vendor to buy out his interest in the Option agreement for USD 440,000.
[6] The plaintiff further alleges that on 15 April 2014, he instructed the defendants to draft an agreement with the buy-out terms.
[7] The plaintiff also alleges that by 6 May 2014, the vendor had decided not to proceed with the buy-out. He claims that he told his solicitor, John Ewart, that it was now his wish to continue with the Option agreement. At this stage, the plaintiff alleges that John Ewart, the solicitor acting in the defendant firm, advised him that the Option Deed “confers no rights on you at all”.
[8] The plaintiff further alleges that on 19 May 2014, John Ewart provided the following verbal advice to the plaintiff:
(a) The Option Deed did not confer any rights on the plaintiff.
(b) The Option Deed could be cancelled by Vunabaka at any time. (c) Should Vunabaka cancel the Option Deed it could withhold
repayment of the option price paid of $USD 165,000.00
[9] The plaintiff alleges that on 20 May 2014, John Ewart advised him that the vendor had “cancelled the option deed”, was “refunding the option price of USD 165,000.00” and was “just exercising rights that the document gives them”.
[10] I should add in relation to the last allegation that Mr Ewart denies ever advising the plaintiff that the vendor could cancel the agreement or the Option Deed.
[11] The plaintiff says that on 26 May 2014, the defendant told him that the claim against the vendor was probably restricted to recovery of the Option fee and that he, the plaintiff, should execute the settlement deed which the vendor’s solicitor had prepared.
The causes of action
[12] There are two causes of action pleaded. The first is a claim in negligence. The second is described as an alternative cause of action for negligence and or breach of fiduciary duty.
First cause of action
[13] The first cause of action alleges that the plaintiff provided “negligent advice”,
as pleaded in paragraph 12 of the submissions:
12.In breach of the duty of care the plaintiff provided negligent advice in any or all of the following respects:
(a) the Option Deed did confer rights on the plaintiff as set out in the Option Deed.
(b) the Option Deed did not give Vunabaka the right to cancel it at any time.
(c) the Option Deed did not give Vunabaka the right to withhold repayment of the Option Price if it cancelled the Option Deed.
(d) that the plaintiff should execute the settlement deed because any claim against Vunabaka for cancelling the Option was only for the return of the Option Price.
[14] Pausing at that point, it will be noted the ambiguous way in which the above pleading is set out. What seems to be clear, from the position that Mr Herzog explained to me at the hearing on 12 May 2015, was that the primary claim is that Mr Ewert wrongly advised that the agreement did not confer any rights on the plaintiff when, in fact, the agreement did provide such rights. Paragraph 12, to accurately reflect this position, should have said something along the lines that the various advice that Mr Ewert is alleged to have given was wrong and negligently provided.
[15] It is next alleged that, as a result of the defendant’s negligent advice, the plaintiff, in reliance on the advice, executed the settlement deed. As a result, the plaintiff lost the opportunity to settle the agreement for sale and purchase of Lot 38 and therefore suffered a USD 950,000 loss.
[16] The pleading of the cause of action is defective. The purposes for which the plaintiff retained the defendants are not pleaded. It does not set out why the advice given was negligent. I have already noted that, presumably, the advice referred to in paragraph 12 of the amended statement of claim is alleged to be incorrect. It is implicit in the amended statement of claim that the advice that the defendant gave about the binding nature of the Option Deed and annexed agreement for sale and purchase was wrong. Further, the advice that the plaintiff should execute the settlement deed was not justified. Thus, in both cases, the solicitor allegedly fell below the standard required of a reasonably competent practitioner.
[17] Because it is alleged that the advice in paragraph 12 was incorrect, it is therefore stated that the advice given at paragraph 7 of the amended statement of claim was also incorrect. However, apart from pleading that the defendant’s advice was wrong in saying that no rights were conferred by the Option Deed, the plaintiff does not say what those rights were. In order to understand the claim, the defendants need to know what those rights were. This information must be provided to decide the question of inaccuracy and negligence. The Court and opposing counsel require that information to understand the plaintiff’s case. The proposition that the Option Deed conferred rights on the plaintiff is at the heart of the first cause of action. The plaintiff alleges he was induced to execute the settlement agreement and therefore suffered loss because the advice given was wrong (along with other advice specified in paragraph 7 of the amended statement of claim). The plaintiff states at paragraph
13 that it was “as a result of the defendant’s negligent advice” that he took those
steps.
[18] Rule 5.26 of the High Court Rules states that the statement of claim must show the general nature of the plaintiff’s claim to the relief sought. The overriding requirement is the interest of justice, which includes the need for the Court and the defendant to know the nature of the claim made.1 It was stated in A M Satterthwaite
& Co Ltd v Knight Tailors Ltd.2
[19] While there are a number of cases in which it has been said that the principles of law when applied to the facts alleged entitling a plaintiff to relief need not be stated, the absence of reference to the legal results contended for by the plaintiff may well place a defendant in a prejudicial situation or alternatively lead to a much longer trial of an action than is necessary. In my view, it is incumbent upon the plaintiff to identify the rights that he claims were the subject of negligent advice and, in particular, to provide greater particulars of the rights which he says the Option Deed conferred on him. The documents which are produced are substantial in length. To ensure that the parties identify correctly the precise issue, which this
part of the pleading brings into play, I consider that the plaintiff ought to be required
1 Andrew Beck and others McGechan on Procedure (online looseleaf ed, Brookers) at
[HR5.26.05].
2 A M Satterthwaite & Co Ltd v Knight Tailors Ltd HC Christchurch CP 16/86, 9 May 1986 at
2.
to identify the provisions of the agreement which he relies upon and which he is referring to in paragraph 12(a) of the amended statement of claim.
[20] Mr Herzog claimed that if the plaintiff were to be required to point to the provisions of the Option Deed which give rise to his rights, he would have to specify every clause in the contract. That submission is in error. There will be certain provisions of the contract which contain the primary rights of the plaintiff and other ancillary-type provisions which are concerned with the machinery for putting those rights into effect. I consider that if the plaintiff’s advisors approach this matter in a commonsense way, there will be no difficulty in deciding what is required to be supplied.
Valuation particulars
[21] Mrs Fee was of the view that the pleading of the first cause of action was also defective because, she said, it did not give sufficient particulars of the market value of USD 1.5 million, which the plaintiff alleges the property was worth. She said that the plaintiff ought to be ordered to identify whether the valuation relied upon was for bare land or with a house or other improvements on it, and also the date at which the market value was attributed to the property.
[22] I consider that the form part of the claim does not require further particularisation. It is implicit that the plaintiff was buying a bare block of land and it is the value of that property which the statement of claim refers. In response to Mrs Fee’s objection that it would not be possible for her to give sufficient instruction to a valuer engaged to assist the defendant, I suggest proceeding on the assumption that the loss is attributable to a rise in value of the bare land. This provides a sufficient platform for a valuer’s opinion.
[23] However, I agree with Mrs Fee that the date at which the USD 1.5 million is attributable to the property is of importance. There may well have been some volatility in the land valuations and while the property may have had a value of USD
1.5 million at one point that valuation may not be the relevant one. I therefore agree that the plaintiff ought to be required to particularise the date of the valuation which,
in turn, involves him offering some assessment of the date at which the settlement would have taken place which is the date at which his loss would have been fixed.
Second cause of action
[24] The second cause of action refers back to the verbal agreement that the plaintiff says he entered into for the vendor to buy out his interest in the Option Deed. The claim is made that he instructed the defendant to draw up a written agreement to “affect the sale of his interest in acquiring Lot 38”. In regard to that task, it is pleaded that the defendant had an obligation to exercise reasonable care and skill and owed a fiduciary to the plaintiff to act in the plaintiff’s best interest. In paragraph 18, it is pleaded that the defendant failed to draft an agreement to affect the sale.
[25] The position which the defendant takes is that the vendor decided not to proceed with the Option buy-out agreement. Which party’s view proves to be correct in relation to this issue is a matter which will be determined on the evidence at trial. Plainly, if the position is as the defendant alleges, the reason why a written agreement was not entered into was because the vendor declined to enter into such an agreement, or at least indicated that he would not be proceeding with the arrangement.
[26] The second aspect of paragraph 18 concerns the alleged breach of fiduciary obligation. It is alleged that the defendant communicated to the solicitor for the vendor the following matters:
1. That [the vendor] had no obligation to sell Lot 38 to the plaintiff.
2. That should [the vendor] not exercise the option it “does not appear to have any obligations to refund the option fee”.
[27] It is the allegation of the plaintiff that his solicitor, the defendant, should not have made those statements to the solicitor for the vendor. In the course of submissions, I asked Mr Herzog whether it was alleged that the solicitor acting for the vendor did not appreciate that his client had no obligation to sell Lot 38, pursuant to the Option Deed prior to the defendant telling him that that was the position under
the Deed. Mr Herzog said that that was not the allegation which the plaintiff put forward.
[28] It is difficult to see how a right of compensation could arise when the plaintiff apparently accepts that what the defendant said to the vendor’s solicitor was what the vendor’s solicitor already believed. However, I bear in mind that the application before me is one seeking particulars and all that the Court needs to be concerned with is whether the statement contained in the amended statement of claim is intelligible and casts in such a way that the defendant will not be embarrassed in framing a defence to it. The first alleged breach of fiduciary obligation would seem to meet that standard and no order is required. Likewise, the second part of the alleged communication that the defendant made to the vendor’s solicitor is plainly enough stated and no elaboration seems to be needed.
[29] The second cause of action also makes reference to an email that Mr Ewart sent to the plaintiff, stating that the vendor had cancelled the Option Deed, was refunding the option price and was “just exercising rights that the document gives them”.3 This is followed by paragraph 20 which claims as a result of the defendant’s negligence and breach of fiduciary duty, the plaintiff lost the opportunity to settle the agreement for USD 440,000 less the sum of USD 165,000 which the plaintiff had
already paid. The plaintiff is therefore claiming USD 275,000. Again, the causal link between the defendant’s alleged breaches and the fact that the plaintiff was unable to close an agreement with the vendor is going to be a matter that is disputed on the facts at trial. The position that the defendant takes, I believe, is that the vendor might have made an oral proposal that there be such a buy-out agreement but later declined to commit to that in writing. At that point, any possibility of a buy-out was extinguished. If the defendant’s version is accepted, then it would be more difficult for the plaintiff to causally link the solicitor’s statements with the plaintiff’s failure to close a buy-out agreement. However, looking at the way in which the second cause of action is pleaded, overall, I consider that it provides adequate information to the defendant to enable it to understand what case it is required to meet. I do not consider that any further particulars are required in that regard.
Summary
[30] I have concluded that in order to properly inform the defendant and the Court as to the nature of the case which the plaintiff brings, it is necessary for there to be an order for particulars requiring the plaintiff to particularise the source of the rights that he implicitly asserts, in paragraph 12(a), arose under the Option Deed by referring explicitly to the clauses of the contract relied upon. The particulars are to be provided within 15 working days.
Costs
[31] In my view, the plaintiff ought to pay the costs of this application on the ground that costs should follow the outcome of the application and the applicant has had success in at least part of the application he has made.4 Costs are to be on a 2B
basis together with disbursements as fixed by the Registrar.
J.P. Doogue
Associate Judge
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