Fletcher v Boyle HC Christchurch AP No 31/00
[2001] NZHC 681
•27 July 2001
IN THE HIGH COURT OF NEW ZEALAND
CHRISTCHURCH REGISTRY AP NO 31/00
BETWEEN MARK WILLIAM FLETCHER
Appellant
AND CAVELL LEITCH PRINGLE AND BOYLE
First Respondent
AND CAMERON AND CO
Second Respondent
Date of Hearing: 27 April 2001
Judgment Released: 27 July 2001
Counsel: P J Dale for the Appellant
I J D Hall for the First Respondent
I D R Cameron and A Wilkie for Second Respondent
RESERVED JUDGMENT OF WILLIAM YOUNG J
Solicitors:
Grove Darlow & Partners, Auckland for Appellant
Weston Ward & Lascelles, Christchurch for First Respondent
Morrison Kent, Wellington for Second Respondent
Introduction
[1] This is an appeal against judgments delivered in the District Court at Christchurch on 5 July 2000 and 1 September 2000.
[2] In issue when the trial commenced in the District Court were:-
1. A claim by Cavell Leitch Pringle and Boyle, a Christchurch firm of solicitors, against Mark Walter Fletcher, its former client, for $7,687.49 for unpaid legal costs, together with interest and costs;
2. A counterclaim by Mr Fletcher against Cavell Leitch Pringle and Boyle for $103,000 by way of economic loss and $20,000 by way of non-economic loss for negligence together with interest and costs; and
3. A claim by Mr Fletcher against Cameron and Co, another firm of Christchurch solicitors, for damages for negligence.
[3] By the end of the trial, liability in relation to the claim by Cavell Leitch Pringle and Boyle against Mr Fletcher was no longer in dispute. So, in his judgment of 5 July 2000, the District Court Judge entered judgment for Cavell Leitch Pringle and Boyle against Mr Fletcher for $7,687.49 together with interest and costs. In the same judgment, the Judge dismissed the counterclaim by Mr Fletcher against Cavell Leitch Pringle and Boyle. In his second judgment, delivered on 1 September 2000, the Judge also dismissed the claim by Mr Fletcher against Cameron and Co. This was on procedural grounds in that the claim had been inappropriately brought by way of third party proceedings when the appropriate procedure would have been for Mr Fletcher to have joined Cameron and Co as a defendant to his counterclaim or to have commenced separate proceedings.
[4] Mr Fletcher now appeals against the dismissal of his claims against Cavell Leitch Pringle and Boyle and Cameron and Co.
The factual background
[5] The case concerns a property at 103 Papanui Road, Christchurch. At all material times it has been subdivided into four flats and has been operated by its owners, for the time being, as a rental property.
[6] On 19 October 1989, Mr Fletcher entered into an unconditional agreement for the purchase of the property for $155,000. The purchase was to be settled on 8 December 1989. Trustbank Canterbury was prepared to lend him $125,000. He had $10,000 in savings. He proposed to fund the balance of the purchase price with money lent to him by his parents.
[7] What was, at this point, a straight forward property transaction then became a little muddied.
[8] His agreement to purchase the property was superseded by an agreement between the vendor and his parents, Mr Wally Fletcher and Mrs Thelma Fletcher. This agreement was entered into on 4 or 5 December 1989, a matter of days before settlement was to take place in terms of the original contract. The purchase price was still $155,000. The transaction was funded by Trustbank Canterbury which advanced $126,100. Mr Fletcher did not contribute any money to the purchase. So the difference between the Trustbank Canterbury loan and the purchase price of $155,000 was met entirely by his parents.
[9] A most unpleasant dispute subsequently developed between Mr Fletcher and his parents over this transaction.
[10] Mr Fletcher was to claim, and his parents were to deny, that they had purchased the house as trustees for him on terms pursuant to which he was entitled to obtain title upon repayment to them of the money which they had contributed. His parents were to contend that they were the beneficial as well as the legal owners of the property.
[11] In late 1989, Mr Fletcher was involved in a matrimonial property dispute with his wife. Some of the $10,000 which he intended to contribute to the purchase price of the property was matrimonial property. It was suggested to him by his solicitor that it was unwise, in those circumstances, to proceed with the purchase of the property in the way originally envisaged. He said this is why his parents became involved and, in effect, stepped into his shoes in respect of the transaction.
[12] As I have indicated, the property consisted of four flats. It appears that the rental income from the flats was more than sufficient to meet the outgoings on the property.
[13] After the transaction was settled (on 8 December 1989) Mr Fletcher’s parents operated the property as a rental venture.
[14] Mr Fletcher’s matrimonial property dispute with his wife was not resolved until 19 June 1991. No immediate steps were then taken by Mr Fletcher to secure a transfer to him of the property.
[15] In early February 1994, Mr Fletcher’s mother wrote to him. In this letter she said:-
“The idea Wally has come up with in regard to the flats (and I have agreed) is for you to purchase them from us at just the same it cost us, hence, the photocopies of the original papers. We will have to make a deadline for you to arrange this because I will need the proportional amount of the residue after paying out the mortgage we had to take out before I can go ahead and look for something.”
By way of background to this letter, the marriage between Mr Fletcher’s parents had broken down and the letter was written in the context of Mrs Thelma Fletcher reviewing her options as to where she would live. This letter is certainly consistent with Mr Fletcher’s contentions as to his beneficial ownership of the property. It is fair to say, however, that it is also consistent with the explanation of the transaction which was later to be given on oath by his parents which was that, broadly, there was an understanding that the property would be transferred to Mr Fletcher but nothing in the nature of a legal obligation.
[16] There is some dispute between Mr Fletcher and his parents as to the events which occurred after this letter was sent. I need not review those events in this judgment. It is sufficient to say that on 29 July 1994 the parents entered into a contract to sell the property for $300,000 to a Mr and Mrs Harris. This was without the knowledge or assent of Mr Fletcher who did not learn about it until on or about 19 October.
[17] This transaction had been settled in early October 1994. So when Mr Fletcher was told about it (on 19 October) settlement had already occurred and Mr and Mrs Harris had paid $300,000 to Mr Fletcher’s parents. Mr Fletcher says that when his father told him about the sale he offered him $40,000 from the proceeds.
[18] On 20 October 1994, Mr Fletcher approached Cavell Leitch Pringle and Boyle and instructed it to lodge a caveat against the title. By this time, the transaction had been settled but the transfer to Mr and Mrs Harris had not been registered.
The caveat proceedings
[19] On Mr Fletcher’s instructions, Cavell Leitch Pringle and Boyle lodged a caveat against the title to the property.
[20] When the transfer to Mr and Mrs Harris was eventually lodged for registration, this triggered the statutory process provided for by s 145, Land Transfer Act 1952. The result was that Mr Fletcher’s caveat would lapse unless:-
1. Application for an order that the caveat not lapse was made to the High Court and notice was given accordingly to the Registrar within 14 days of Mr Fletcher having been notified of the application for registration of the transfer; and
2. An order that the caveat not lapse was made and served on the Registrar within a further period of 28 days.
[21] Accordingly, Cavell Leitch Pringle and Boyle, on behalf of Mr Fletcher, filed proceedings in the High Court at Christchurch. The defendants were Mr Wally Fletcher and Mrs Thelma Fletcher (that is, Mr Fletcher’s parents) and also Mr and Mrs Harris. The proceedings sought an order that the caveat not lapse. As well, Mr Fletcher pleaded various causes of action pursuant to which he sought an order requiring legal ownership of the Papanui Road property to be vested in him or, in the alternative, financial relief. There are different ways in which the net equity in the Papanui Road property could be calculated. For the purposes of this case, however, the assumption has been that the value of the net equity was $143,000. So the claim for financial relief was, in substance, a claim for $143,000. Notice of these proceedings was given to the District Land Registrar. So the requirements which I have referred to in paragraph [20.1] above were satisfied and, in the meantime, the caveat remained in place.
[22] Mr Fletcher swore an affidavit in support of the application that the caveat not lapse and affidavits from Mr Wally Fletcher, Mrs Thelma Fletcher and Mr and Mrs Harris were also lodged. I understand that Mr Fletcher’s case was also supported by another affidavit, from a Mr Doolan, which I have not seen. From the evidence, it appears that this affidavit referred to what were alleged to be admissions on the part of one, or other, of Mr Fletcher’s parents as to Mr Fletcher’s beneficial ownership in the property.
[23] In the affidavits Mr Fletcher’s position was advanced, broadly, as I have already outlined it although it was considerably amplified.
[24] In their affidavits Mr Fletcher’s parents denied that there was any trust. They said that they had originally anticipated that the property would be, in due course, transferred to Mr Fletcher but that there was no binding legal arrangement to that end and that he had, in effect, reneged on the understanding by engaging in a series of other car and property purchases.
[25] Mr and Mrs Harris said in their affidavits that they had had no notice of Mr Fletcher’s alleged interest in the property. They had, some time prior to July 1994, made an approach to purchase the property which had been rebuffed. In his affidavit, Mr Fletcher had suggested that this application had been rebuffed because his parents, at that time, acknowledged that the property was held beneficially for him. Mr and Mrs Harris denied that any such intimation was given to them at the time of their first approach in respect of the property and their denials as to this were supported by the evidence of Mr Fletcher’s parents.
[26] Following a defended hearing an order was obtained from Master Hansen (as he then was) that the caveat not lapse. This was on 1 December 1994.
[27] I gather from the evidence that the case between Mr Fletcher, as plaintiff, his parents as first defendants and Mr and Mrs Harris as second defendants was to be heard in February 1995. Unclear on the evidence is just how firm this fixture was. From what I have seen, discovery was not completed.
[28] Cavell Leitch Pringle and Boyle did not seal the order made by Master Hansen and serve it on the District Land Registrar within the period specified in s 145, Land Transfer Act 1952. That period expired on 15 or 16 December 1994.
[29] The result was that the transfer in favour of Mr and Mrs Harris was immediately registered.
[30] On 19 December 1994, Cavell Leitch Pringle and Boyle wrote to Mr Fletcher. At the time this letter was sent, Cavell Leitch Pringle and Boyle was not aware of the problem over the caveat. This letter contains the following comment:
“While not being able to guarantee success of your case, the writer advises that as long as your evidence supports your stance, then you have a good opportunity and a good chance of success to either obtain the property in your sole name or to at least gain a substantial amount of the proceeds.”
[31] The problem over the caveat came to light on 22 December 1994. On that day Cavell Leitch Pringle and Boyle obtained the leave of the Master to lodge a further caveat. As well, there was an obviously awkward and difficult meeting between Mr Fletcher and two partners in Cavell Leitch Pringle and Boyle. In the course of this meeting, it was indicated to Mr Fletcher that the firm was still prepared to continue to act for Mr Fletcher subject to Mr Fletcher agreeing not to sue Cavell Leitch Pringle and Boyle.
[32] Mr Fletcher claims that the Cavell Leitch Pringle and Boyle partners involved in the case sought to explain away the problem over the caveat by saying or suggesting that it was the primary responsibility of the Court to ensure that the District Land Registrar was notified of the making of the order. There are some indications in the documents which support, or at least are consistent with, what Mr Fletcher says as to this. If this was said to Mr Fletcher it was, to say the least, naughty. As any lawyer who practises in this field knows, it is the responsibility of the caveator to seal an order that a caveat not lapse and to serve that order on the District Land Registrar.
[33] Throughout the period which is under discussion, Mr Fletcher’s parents remained willing to settle the case for a payment of $40,000. At the meeting on 22 December 1994, the Cavell Leitch Pringle and Boyle partners involved discussed the value of Mr Fletcher’s claim against his parents. According to one of the partners, Mr Fletcher was told that “at best he could get $50,000.00 . . . but more likely in the vicinity of $44,000.00”. The other partner put it in slightly different terms namely that arguments available to his parents might “see him entitled to only about $50,000.00 if his claim was upheld”.
[34] In late December 1994, Mr Fletcher (acting on his own behalf) made a proposal to his parents in terms of which he suggested that the case be settled on a basis under which, inter alia, he was to be paid $50,000. This proposal was not accepted by Mr Fletcher’s parents.
[35] From early January 1995, Mr Fletcher dealt with Cameron and Co. The advice from Cameron and Co to him was that there was no point in lodging a second caveat pursuant to the leave granted on 22 December 1994 by the Master. That was plainly so. Mr Fletcher’s parents remained willing to settle the case for a payment of $40,000. An offer from Mr Fletcher’s parents to settle in the sum of $40,000 was still on the table. Mr Fletcher instructed Cameron and Co to settle broadly on the terms offered. His instructions to this effect were recorded in a letter from Mr Fletcher to Cameron and Co of 15 January 1995 but were subject to one important qualification:-
“I reserve the right to sue Cavell Leitch Pringle and Boyle and stress that under the circumstances they have placed me in, due to their neglect, payment of their account is not to be made. I will not make payment of any amount they claim. They will have to approach me, challenge or sue me if they require payment.”
[36] In the result, Mr Fletcher settled with his parents and received $40,000. This was in early February 1995. The settlement was on terms that expressed it to be in “full and final settlement” of all claims against his parents. In order to extricate himself from the proceedings with Mr and Mrs Harris, Mr Fletcher was required to pay them $3,000 by way of costs.
Pre-trial proceedings in District Court
[37] The history of these proceedings in the District Court is to say the least, unhappy.
[38] The proceedings were commenced in July 1995 when Cavell Leitch Pringle and Boyle sued Mr Fletcher for $7,687.49 by way of legal costs. Given the fiasco over the failure to seal and serve on the District Land Registrar the order that the caveat not lapse, the decision by Cavell Leitch Pringle and Boyle to issue proceedings to recover their fees seems to me to be a little surprising and unwise.
[39] During the second half of 1995 and early 1996, there was much debate between Cameron and Co and Mr Fletcher as to the appropriateness of a counterclaim against Cavell Leitch Pringle and Boyle and as to the quantum of any damages which might be claimed. The Cameron and Co position was that Cavell Leitch Pringle and Boyle had been negligent and that there was a defence to the action by Cavell Leitch Pringle and Boyle against Mr Fletcher. On the other hand, the Cameron and Co advice was that no loss could be proved to have resulted because, irrespective of the position over the caveat, it had remained perfectly open to Mr Fletcher to pursue the money claim against his parents who, as at January 1995, were in a position to met any judgment which could reasonably have been expected.
[40] In any event, and against the better judgment of the Cameron and Co partner dealing with the case, leave to file and serve a counterclaim was obtained on 23 January 1996.
[41] The litigation continued in a rather desultory way during the first half of 1996. During this time Mr Fletcher failed to comply with a direction that a list of documents be filed and served. The result was that his defence and counterclaim were struck out on 16 July 1996.
[42] An appeal to this Court against this decision was lodged and was successful with the result that the defence and counterclaim were reinstated.
[43] On 18 April 1997, Cavell Leitch Pringle and Boyle applied again to strikeout the counterclaim. This was on the basis that it disclosed no cause of action.
[44] This application was granted in a judgment which was delivered in the District Court on 23 July 1997. The key reasoning of the District Court Judge was expressed in this way:-
“In my judgment Mr Fletcher’s claim is clearly untenable and cannot possibly succeed, not because he has no cause of action against Cavell Leitch, but because he will be unable to prove any loss arising from that negligence. In making a “full and final settlement” of his claims against his parents as represented in the High Court proceedings, there has been a complete satisfaction of those claims. What he is now seeking to do is to relitigate those claims but sheet them home against his negligent solicitors. They can be liable only to the extent that the parents would have been liable. The parents’ liability has now been extinguished by settlement. Consequently Mr Fletcher cannot succeed against Cavell Leitch.”
[45] This judgment was itself set aside by Panckhurst J when Mr Fletcher appealed, for the second time, to this Court. In his judgment, Panckhurst J set out the portion of the District Court Judge’s decision which I have recorded and then went on:-
“In my view it is unarguable that this reasoning was flawed. It involves a confusion in thinking in relation to the proposition that because the Appellant has entered into a “full and final settlement” with his parents he had sustained no loss and therefore his solicitors had nothing to answer for. That may or may not be the case. It depends upon evidence.
The Appellant will face the burden of establishing two matters, neither I suspect easy, in order to prove loss. They are first that the probabilities are his claim against his parents was worth more than the $40,000 for which it was settled. Second, that his decision to enter into a settlement with his parents was prudent. Otherwise the Appellant will not have mitigated his loss and, of course, the solicitors will not be answerable for any failure in that regard. However, as indicated earlier, at this point it is to be assumed that factually the Plaintiff’s case is sustainable which means in this instance that he can establish the two propositions to which I have just referred.”
[46] The case then took another twist with Mr Fletcher applying to join Cameron and Co as a third party to the proceedings and an order to this effect was made by consent on 10 November 1998. The purpose of the Cameron and Co claim was, in effect, to set a longstop against the contingency that it might be held that Mr Fletcher’s settlement with his parents had extinguished his right to sue Cavell Leitch Pringle and Boyle. It will be recalled that Mr Fletcher had made it clear to Cameron and Co, at the time when the settlement with his parents was being negotiated, that he reserved the right to sue Cavell Leitch Pringle and Boyle. In the event that a Court were to hold the settlement in fact extinguished any such right, then obviously there would be a scope for a claim for damages in negligence against Cameron and Co. The procedure adopted by Mr Fletcher’s solicitors in relation to the claim against Cameron and Co, however, was flawed. The claim was not appropriately brought by way of third party proceedings. The appropriate course of action was to join Cameron and Co as a defendant to the counterclaim. This procedural irregularity, however, was overlooked by the parties at the time and was not, in fact, recognised until very late in the piece.
The trial in District Court
[47] The case was tried in the District Court on 6, 7 and 8 June 2000.
[48] The procedure which was followed was that Cavell Leitch Pringle and Boyle went first and its witnesses addressed both its claim and its defence to the counterclaim. Mr Fletcher’s case was then heard. The Cameron and Co case was heard last.
[49] As will be apparent from what I have said already (see paragraph [1] above), two judgments were delivered.
First judgment - 5 July 2000
[50] The judge dealt primarily, in this judgment, with the claim by Mr Fletcher against Cavell Leitch Pringle and Boyle. He dismissed this claim for the following reasons:-
1. He was unimpressed by the strength of Mr Fletcher’s claim against his parents. This was expressed in various ways in the judgment. For instance, in relation to the contention that there was an express trust in respect of the property the Judge held:-
“For the purposes of the evidence in this case I therefore find there is no express trust in favour of [Mr Fletcher].”
He also held that there was no implied constructive or resulting trust. As to this he said, after reviewing the facts.
“[T]here is no room or reason for the law to find the existence of some non express trust. To the contrary to do so would visit a significant injustice on the parents. They had funded, maintained and administered this property. Apart from some labour contributed, and possibly the commercial acumen of finding the property the defendant had done nothing to secure it or enhance its value.”
These two conclusions then led to the Judge saying:-
“I therefore find that no trust existed in relation to this property of which [Mr Fletcher] was the sole beneficiary.”
2. The Judge then turned to issues of causation. He commenced his discussion of these issues in this way:-
“The sole significance to [Mr Fletcher] of the loss of his caveat was to deprive him of his ability to seek to have vested in him the fee simple of the property. That is what he says was his sole objective in, as he puts it, allowing his parents to purchase the property. If he could not lawfully make such a claim then the loss of the caveat has no effect on his rights. The only basis advanced for such a right is that he was the beneficiary of a trust, which the law would enforce, in his favour. I have found no evidence for that proposition.”
A little further on the Judge said:-
“On the evidence in this case I am satisfied that [Mr Fletcher] had no real prospect of securing the fee simple of the property. The caveat was at best a bargaining chip, which as Mr Callaghan explained might assist in producing a satisfactory monetary settlement with the parents.
Whether or not that would have been true, if the case against the parents had gone to trial we shall never know because [Mr Fletcher] elected to settle that claim for $40,000. I can only assess his chances on what is before me (Kitchen v Royal Air Force Association [1958] 1 WLR 563) subject to all just exceptions as to admissibility. I must not guess what might have been the outcome of the case against the parents, or draw inferences, which are not supported by unequivocal facts proved in this case.
Approaching the matter in that way I am satisfied that the only loss flowing from the failure to register the Court’s order was the prospect of the plaintiff acquiring the fee simple of the property. For the reasons I have given I am satisfied that this [was] no more than a far fetched possibility and not therefore a reasonably foreseeable loss.”
3. Further, the Judge held that Mr Fletcher was disqualified from pursuing Cavell Leitch Pringle and Boyle by reason of his settlement with his parents. I should put the Judge’s reasoning as to this in his own words. The Judge commenced by noting that Mr Fletcher’s :-
“[O]nly claim against the [Cavell Leitch Pringle and Boyle] is for a sum of money to compensate him for not being able to get title to the property.”
Having noted that, the Judge went on:-
“I have held that the negligent act of failing to register the Master’s order did not cause him to suffer those damages. The right to claim them from his parents, the persons whom he says held the property as trustees remained alive, and was pursued by him. At no time while those claims remained extant did [Mr Fletcher] seek to recover all or any part of those damages from [Cavell Leitch Pringle and Boyle], and without any notice to them, he instructed his solicitors to settle those proceedings largely on terms suggested by the parents. He chose between one of two mutually exclusive courses of action open to him.
In doing so he imposed a potential detriment on [Cavell Leitch Pringle and Boyle] from which they could not (without succeeding in this proceeding) escape. [Mr Fletcher] did this in the full knowledge that he had a possible remedy in damages against [Cavell Leitch Pringle and Boyle]. Indeed he adverted to it several times in his dealings with [Cameron and Co]. Having confined himself to proceedings against his parents, he then discontinued those proceedings for a sum of money. That put [Cavell Leitch Pringle and Boyle] in the position of being unable to seek indemnity against the parents in respect of any proceedings which he might have, but did not bring against [Cavell Leitch Pringle and Boyle]. It is now too late for [Cavell Leitch Pringle and Boyle] in this proceeding to seek to join the parents. They would simply plead accord and satisfaction and their defence would, in my view, by unanswerable. Thus by claiming in this piecemeal [way] [Mr Fletcher] has irretrievably compromised [Cavell Leitch Pringle and Boyle’s] rights. That is a true common law election which operates as a bar to [Mr Fletcher] succeeding against [Cavell Leitch Pringle and Boyle] (see Sargent v ASL Developments (1974) 131 CLR 634 at 655 per Mason J). In this sense the compromise of the proceeding against the parent extinguishes [Mr Fletcher’s] rights against [Cavell Leitch Pringle and Boyle] Buckingham v Trotter (1901) SR (NSW) 253.”
After referring to a number of decisions including Allison v KPMG [2000] 1 NZLR 560 and discussing the particular rules which apply in a case of joint tortfeasors, the Judge went on :-
“[W]here as here [Mr Fletcher] had asserted rights in equity against his parents and believed he had rights in tort against his former solicitors arising out of the same transaction they should have been brought in the same proceeding. This is a long established requirement and in my view applicable in this case (see Henderson v Henderson (1843) 3 Hare 100 at p 114-115) where Sir James Wigram VC said:
“The Court requires the parties to that litigation to bring forward their whole case and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest but which was not brought forward only because they have from negligence, inadvertence, or even accident omitted part of their case. [as emphasised by the District Court Judge]”
The Judge also referred to New Zealand Social Credit Political League v O‘Brien [1984] 1 NZLR 84 which he saw as apt to the circumstances of the present case. The Judge said:-
“[Mr Fletcher] had the option of suing either or both of his parents and/or Cavell Leitch. He chose to sue only his parents. When he failed by his own choice to get all he thought he was entitled to from his parents he now sues (and by way of counter claim) Cavell Leitch for the balance, and puts in issue their conduct and good faith.
Given that specific performance was no longer available after the caveat lapsed, the relief claimed in [Mr Fletcher’s] claim against his parents (damages) was identical to the relief claimed against [Cavell Leitch Pringle and Boyle]. Although the causes of action were different (breach of trust and negligence) the claims related to the same property and shared common questions of fact. They ought, in my view, to have been either brought in the same proceedings or two concurrent sets of proceedings. They were not and for these additional reasons also [Mr Fletcher] fails against [Cavell Leitch Pringle and Boyle].”
[51] The judgment of 5 July 2000 dealt also, albeit briefly, with the two other claims which were before the Court: first the claim by Cavell Leitch Pringle and Boyle for its fees and, secondly, the claim by Mr Fletcher against Cameron and Co.
[52] As I have indicated, the claim for fees was not, in the end, resisted and judgment was entered in favour of Cavell Leitch Pringle and Boyle for the amount claimed together with interest and costs.
[53] When the Judge came to deal with the claim by Mr Fletcher against Cameron and Co he focused solely on the procedural point which I have already mentioned, that is that the claim was inappropriately brought by way of a third party notice. The Judge, rightly in my view, was of the view that the third party procedure was inappropriate and he explained why. He then concluded his judgment by saying:
“I make three observations:-
(a) The evidence has been fully heard and I am in a position to give a judgment on the defendant’s claims against Cameron and Co were it not for this fatal procedural error.
(b) The error is not of the defendant’s making. He has throughout relied on his lawyers, none of whom seems to [have] adverted to the unavailability of the third party procedure. If the claim is now to be struck out on the procedural grounds and relitigated on a properly constituted notice of proceeding and statement of claim then I will have to consider carefully who should bear any wasted costs (see Harley v McDonald [1999] 3 NZLR 454). I urge counsel to find some acceptable agreed way for now proceeding to judgment.
(c) If the defendant’s claims were to be struck questions of estoppel may arise against the defendant which no doubt would affect the position of his legal advisors.
It may be no more difficult than agreeing to the filing of a notice of proceeding and statement of claim against Cameron & Co in the same terms as the existing third party statement of claim together with an agreed order that such proceeding be amalgamated with [this claim] and disposed of on the evidence heard in that proceeding.
Counsel have ten working days from the receipt of this judgment to consider the matter. If memoranda are not received within that time and agreement reached the defendant’s claim against the third party will be struck out on the grounds that it is improperly constituted.”
[54] The procedural point was not raised by Mr Cameron, on behalf of Cameron and Co. Throughout, Cameron and Co addressed the claim against it on its merits. The procedural issue was raised by the Judge for the first time in this judgment.
Second judgment of the District Court -1 September 2000
[55] Mr Fletcher’s solicitors did not take up the invitation of the Judge to resolve sensibly the procedural imbroglio over the third party proceedings for which they were responsible. Instead, his counsel argued that the Judge could deal with the case in terms of the existing pleadings. Counsel for Cameron and Co declined to consent to the case being dealt with on this basis. Anticipating that the Judge was going to be against him on the procedural issue, counsel for Mr Fletcher invited the Judge, in any event, to make findings of fact and liability to cover the eventuality that the Judge’s conclusion on the procedural issue might later be reversed on appeal. The Judge declined to accept that invitation.
[56] Having referred to that background and to the memoranda which had been filed, the Judge, in his second judgment, concluded by saying:
“I am therefore satisfied that the only course open to me in this proceeding is to enter judgment for the third party against the defendant. Because of the possibility that such a judgment may raise questions of issue estoppel per rem judicatam, I will defer formally entering such judgment for ten working days from date of the receipt by the defendant of these reasons for judgment. This would enable the defendant to consider his position and seek to take any steps he may be advised are appropriate.”
[57] By letter of 15 September 2000, Mr Fletcher’s solicitors indicated that no further submissions could be made and that the appropriate course was for the judge to enter judgment. Judgment was duly entered.
Overview of issues on appeal
[58] Mr Fletcher has appealed against both Cavell Leitch Pringle and Boyle and Cameron and Co.
[59] I will deal first with the position in relation to the appeal against Cameron and Co.
[60] The claim against Cameron and Co has always been advanced on the footing that it need only be considered if Mr Fletcher’s rights, as against Cavell Leitch Pringle and Boyle, are held to be prejudiced by reason of the settlement with his parents. As will become apparent, I propose to allow the appeal against Cavell Leitch Pringle and Boyle and I am of the view that Mr Fletcher’s rights against Cavell Leitch Pringle and Boyle were not adversely affected by reason of the settlement. It follows that there is no occasion, therefore, for me to address the possible liability of Cameron and Co to Mr Fletcher.
[61] Accordingly, I need not determine whether it was appropriate for the Judge to dismiss the claim against Cameron and Co on procedural grounds. It is fair to say, however, that my present inclination is to the view that it may have been open to the Judge to have treated the proceedings against Cameron and Co as if they were in the nature of a counterclaim with Cameron and Co added to the proceedings not as a third party but as a counterclaim defendant. From the moment Cameron and Co was joined, the proceedings were conducted on the basis that Mr Fletcher could pursue the claims specified in the statement of claim against Cameron and Co and no complaint as to the procedure was raised by Cameron and Co. Indeed, the point was raised for the first time by the Judge in his judgment of 5 July 2000. I am very reluctant to regard procedural infelicities as going to jurisdiction.
[62] That said, however, the only issues which I need to determine are those raised by Mr Fletcher’s appeal against Cavell Leitch Pringle and Boyle. It is to those issues which I now turn.
Overview of issues as between Mr Fletcher and Cavell Leitch Pringle and Boyle
[63] There can be no doubt that Cavell Leitch Pringle and Boyle was negligent.
[64] The primary issue in the case, as I see it, was whether this negligence caused Mr Fletcher any loss.
[65] The situation thrown up by this case is reasonably familiar, at least when viewed at a high level of generality. The position of a litigant in relation to a case is prejudiced by the negligence of his or her solicitors. That litigant then sues his or her former solicitors. How are the damages to be assessed?
[66] Some lawyers and judges are attracted to the approach that the court trying the claim for damages should, in effect, try the initial claim. For instance, in Johnson v Perez (1988) 166 CLR 351, Brennan J in a dissenting judgment said at 372:-
“If [the plaintiff] would have failed in the original action he has lost nothing; if he would have succeeded, he has lost what he would have received at the time he would have received it; if the action would have been compromised, he has lost what he would have been paid in settlement at the time when he would have been paid. Or, if it is doubtful whether or not he would have succeeded in the action and it is not probable that the action would have been compromised, the Court assessing the damages must determine as best it can on the balance of probabilities whether the plaintiff would have succeeded (and, if so, to what extent) or failed.”
This can be regarded, broadly, as involving a trial within a trial approach.
[67] The same problem was addressed in the leading English decision Kitchen v Royal Air Force Association [1958] 1 WLR 563. It will be recalled that this judgment was referred to by the Judge in this case in his judgment (see paragraph [50.2] above). In that case, Lord Evershed MR said at 574-575:-
“I come last to what may be the most difficult point of all; namely, assuming that she has established negligence, has the plaintiff proved anything other than nominal damages? It is necessary to say something of the nature of the problem which (as I understand the law) the Court has to solve in determining the measure of damages in such a case as this. Mr O’Connor’s point is that we have now to consider the question of liability as between the plaintiff and the electricity company (or their successors) as though it were a distinct proceeding within the present action; and Mr O’Connor says that, if we find on balance against the plaintiff, that is to say, that she fails in her claim against the electricity board (considered as if it were a separate and existing proceeding), then it follows that her damage is no more than nominal. If that is the right approach it must follow that in any case, such as the present the result expressed in terms of money is always all for the plaintiff or nothing. I cannot, for my part, accept that as the right formulation of the problem.
If, in this kind of action, it is plain that an action could have been brought, and if it had been brought that it must have succeeded, of course the answer is easy. The damaged plaintiff then would recover the full amount of the damages lost by the failure to bring the action originally. On the other hand, if it be made clear that the plaintiff never had a cause of action, that there was no case which the plaintiff could reasonably ever have formulated, then it is equally plain that the answer is that she can get nothing save nominal damages for the solicitor’s negligence. I would add, as was conceded by Mr Neil Lawson, that in such a case it is not enough for the plaintiff to say:
Though I had no claim in law, still I had a nuisance value which I could have so utilised as to extract something from the other side and they would have had to pay something to me in order to persuade me to go away.
But the present case falls into neither one nor the other of the categories which I have mentioned. There may be cases where it would be quite impossible to try “the action within the action” as Mr O’Connor asks. It may be that for one reason or another the action for negligence is not brought till, say, 20 years after the event and in the process of time the material witnesses or many of them may have died or become quite out of reach for the purpose of being called to give evidence.
In my judgment, what the Court has to do (assuming that the plaintiff has established negligence) in such a case as the present, is to determine what the plaintiff has by that negligence lost. The question is has the plaintiff lost some right of value, some chose in action of reality and substance? In such a case, it may be that its value is not easy to determine, but it is the duty of the Court to determine that value as best it can.”
[68] There are, on my appreciation, differences of emphasis between the approaches of Lord Evershed MR and Brennan J in that I detect in the judgment of Brennan J a rather greater willingness to determine issues on the basis of a “trial within a trial” approach than is apparent from the judgment of Lord Evershed. The Court must, on any approach, have regard to what the Court of Appeal in Morrison Morpeth v Hanrahan (unreported, CA 81/93, judgment delivered 17 December 1993) referred to as “the probable outcome of litigation”.
[69] Whether the trial judge adopts a trial within a trial or a loss of a chance approach is likely to be heavily influenced by the way in which the case is presented. This too is apparent from the Morrison Morpeth case. In that case, the plaintiff did not advance a loss of a chance claim in the trial court and expressly disclaimed such an approach in the Court of Appeal.
[70] In the present case, Mr Fletcher, might be thought to have been inviting the District Court Judge to conduct a trial within a trial. Indeed, in large measure, his case was that if his case had gone to trial in 1995 he would have won and that, if the caveat had not lapsed, he would have gone to trial. So he was seeking what Lord Evershed would have described as being “an all for the plaintiff approach”. But it is also clear enough that at the very least his claim also encompassed a loss of a chance argument and that this was recognised by counsel for Cavell Leitch Pringle and Boyle and Cameron and Co. It was also recognised by the Judge who referred to and relied on Kitchen.
In Kitchen Lord Evershed MR referred to an “all for the plaintiff approach”. The converse of that approach would be to conclude, on the balance of probabilities, that the plaintiff would have lost his or her case and, on that basis, conclude that there was no loss. Such an approach could be called, perhaps loosely, an “all for the defendant approach”. As I read the judgment in the District Court, the Judge, in fact, principally dealt with the case on the basis of loss of a chance principles but there are perhaps elements of an “all for the defendant approach” in the judgment. For this reason, I should make it clear that I am of the view that an “all for the defendant approach” could not be regarded as appropriate. As will become apparent, Cavell Leitch Pringle and Boyle in its statement of defence, admitted that Mr Fletcher’s parents held a net equity in the property of $143,000 for him. I consider that to be an admission that Mr Fletcher’s underlying claims were sound. At trial, Mr Fletcher did not call all the evidence which was available to him (at least on his contention) which supported the existence of a trust. His parents were not called to contradict his evidence. So the Judge in the District Court was not really in a position to try and thus reject, on a notional basis, the case which Mr Fletcher could have run against his parents in 1995.
[72] I am also of the view that an “all for the plaintiff approach” is not appropriate. If Mr Fletcher wished to conduct his case on the footing that he would, inevitably, have won, against his parents, he should have called in the District Court all (or at least a good deal) of the evidence which he alleged was available to him to support his claim. In any event, irrespective of the strength of his case against his parents, there were always going to be pressures on him to settle albeit, for reasons which I am about to come to, he would have been better positioned to resist those pressures if the caveat had been sustained. So, the probabilities are that the case would have been settled even if the caveat had been sustained.
[73] This suggests to me that the appropriate basis for approaching causation is on a loss of a chance approach. Even on such an approach, there were arguments available to Cavell Leitch Pringle and Boyle in support of the contention that there was no loss:-
1. Mr Fletcher had little prospect of obtaining title to the Papanui Road property ahead of Mr and Mrs Harris. By the time the caveat was lodged, they had paid $300,000 for the property. They had borrowed $250,000 which was to be secured against the title to the property. Although Mr Fletcher believed that his parents had put Mr and Mrs Harris on notice of his prior interest in the property on the earlier occasion when Mr and Mrs Harris had sought to purchase it, this was denied by his parents and by Mr and Mrs Harris and was always going to be difficult (and probably impossible) to prove. So, according to Cavell Leitch Pringle and Boyle, if Mr Fletcher had gone to trial against Mr and Mrs Harris he would have lost.
2. Accordingly, in reality, his only claim of substance was for financial relief against his parents.
3. This claim against his parents was unaffected by the loss of the caveat. His parents were in a position to meet any judgment which he could conceivably expect to have obtained.
[74] Recognising, as I do, the force of those considerations, it still seems to me to be reasonably obvious that the loss of the caveat did, in fact, have an adverse impact on Mr Fletcher’s bargaining position. I say this for the following reasons:-
1. Mr Fletcher plainly acted on the basis that the caveat was of significance. Otherwise he would not have bothered lodging a caveat and would not have taken proceedings in the High Court to sustain it once the s 145, Land Transfer Act procedure was invoked when the transfer to Mr and Mrs Harris was lodged for registration.
2. Until the Cavell Leitch Pringle and Boyle personnel involved discovered, on or about 22 December 1994, the nature of their bungle there was no suggestion from them that it was pointless or silly or a waste of money setting out to sustain the caveat. So the contention advanced at trial in the District Court by Cavell Leitch Pringle and Boyle that the caveat was of no moment strikes me as sitting very strangely with that firm’s conduct of the case between October and December 1994.
3. The contention that Mr Fletcher had no hope of success in terms of obtaining a transfer to him of the property also has an uncomfortable hindsight feel to it. If Mr Fletcher’s claim vis-a-vis the property was untenable, the caveat should not have been sustained on 1 December 1994. On the facts asserted by Mr Fletcher, he had a beneficial interest in the property. Mr and Mrs Harris also had an equitable interest in the property although not a legal interest (as the transfer to them had not been registered). So the case would have fallen to be determined in accordance with the rules which apply between competing equitable interests. The usual rule is that where the equities are equal, the first in time prevails. Assuming that Mr Fletcher’s allegation as to a trust could be sustained, his equitable interest in the property was first in time. It may have been open to argument whether the equities were equal but I do not see Mr Fletcher’s position as to this as being untenable. Further, I recognise that Mr and Mrs Harris had paid the purchase price by the time the caveat was lodged. But from their point of view the Papanui Road property was simply an investment. They never moved in. Their interest in the property was purely financial and, if they had lost the property, they could have been compensated fully and adequately in a financial way. So there seems to me to have been no necessarily fatal impediment to an order that the property be transferred to Mr Fletcher with his parents making full compensation (and restitution) to Mr and Mrs Harris. This is not to say that Mr Fletcher’s position vis-a-vis Mr and Mrs Harris was strong. But it seems to me to be wrong to suggest that it was untenable. It plainly did not strike the Master as being untenable in December 1994.
4. It is perfectly obvious that the caveat was a matter of concern to Mr Fletcher’s parents and to Mr and Mrs Harris. If this were not so, they would not have opposed the application that the caveat not lapse. With the caveat in place, the consequences for the parents if they lost the case brought by Mr Fletcher were likely to be severe given that they would then be responsible for costs, and possibly restitution and damages, as far as Mr and Mrs Harris were concerned.
5. The evidence as to the imminence of the fixture in the High Court is unclear. There are suggestions in the evidence that a fixture was arranged for February 1995. Whether this is so and, if it was, whether such a fixture could have been held onto once the lapse of the caveat meant that the claim was simply about money are both unclear. In the mid 1990s the existence of a caveat which had been sustained pending further order of the court tended to provide real impetus to the underlying litigation.
6. Finally, the psychological impact of the lifting of the caveat cannot be ignored. In the District Court Mr Fletcher claimed that he had a special affinity to and affection for the Papanui Road property. I regard these claims as rather odd and take them with a large grain of salt. I have, however, been left with the view that Mr Fletcher seems to have been able, in late 1994, to rationalise in his own mind his apparently unfilial litigation against his parents on the basis that his claim was primarily for the property and not against them for money. The lapsing of the caveat knocked away that psychological crutch and, in this sense, significantly impaired his bargaining position vis-a-vis his parents.
[75] For reasons already indicated, I think that the case falls, fundamentally, to be assessed by reference to the loss of a chance principles discussed in Kitchen. In the context of this case what is required to be compared is the value of the chance which Mr Fletcher would have had if the caveat had been sustained as against the value of the chance which he had once it lapsed. This involves a consideration of his bargaining position as it was, with the caveat lapsed, as against his bargaining position as it would have been if the caveat had not been allowed to lapse.
[76] So I see the case as being, in essence, a claim by Mr Fletcher for damages to compensate him for the impairment to his bargaining position caused by the lapsing of the caveat. This is pretty much the way Panckhurst J saw the claim (at least as I interpret his judgment). Viewed in this light, Mr Fletcher’s claim is not an attempt to litigate against Cavell Leitch Pringle and Boyle the claim against his parents which he had settled.
[77] Unfortunately, however, aspects of the way in which the case was pleaded and argued partly obscured what the case was really about. This is surprising to me because Panckhurst J, in his judgment, did direct the attention of the parties to what is, in reality, the fundamental issue. He also helpfully indicated how the pleadings might be amended to bring that issue to the surface:-
“To my mind the counterclaim is not helpfully formulated, to the extent that it does not indicate how and why the absence of the caveat precluded the Appellant from achieving a full settlement with his parents. Often a solicitors’ negligence will result in the loss of a cause of action where, for example, a time limit is overlooked. In such cases therefore causation is clear cut. Here the negligence sounded only with regard to the ongoing existence of a caveat. It would therefore, I suggest, have been helpful if the counterclaim indicated in clearer terms how it was suggested the non-existence of the caveat precluded an adequate settlement with the parents and, thereby, that loss was caused to the Appellant for which the solicitors may be answerable. Counsel who appeared for the Appellant, I hasten to add, did not prepare the counterclaim. His intention is to amend it, if the appeal is successful.”
[78] An amended counterclaim was filed. Unfortunately, however, the suggestion made by Panckhurst J that the causation allegations be pleaded was not adopted. Further, Mr Fletcher’s loss was pleaded in terms of being:-
(a) The opportunity to recover legal ownership of the property from DW and TM Fletcher; and
(b) Equity in the property held by DW and TM Fletcher in the sum of $143,000.
[79] The way in which point (a) is expressed (“opportunity to recover legal ownership . . .”) is consistent with a loss of a chance approach. The way point (b) is expressed (“[e]quity in the property . . .”) does seem to invite a trial within a trial approach. As well, Mr Fletcher was, unquestionably, adopting an “all for the plaintiff” approach. So it is not entirely surprising, therefore, that the Judge in the District Court saw the claim as being, in essence, an attempt to relitigate the case against the parents which was settled in February 1995. As well, this unhappily general pleading served to divert attention away from what I have already indicated to be the essence of the case, namely that the claim was best viewed as being for impairment of bargaining position. My criticisms, however, are not confined to the way in which Mr Fletcher’s case was presented. The arguments advanced by Cavell Leitch Pringle and Boyle were very diffuse. It is understandable that they would be seen by the Judge as inviting the Judge to adopt an “all for the defendant” approach. But the arguments were put in such a diffuse way that it is also understandable that counsel for Mr Fletcher did not fully recognise that there was a striking inconsistency between aspects of the Cavell Leitch Pringle and Boyle arguments which were being advanced and the admission in the pleadings to which I have already referred and to which I will refer shortly again. The Judge was not told (or reminded) of the fact that Cavell Leitch Pringle and Boyle had admitted, in its statement of defence, the assertion that Mr Fletcher had a net equity of $143,000 in the property.
[80] I have indicated already why I think that Mr Fletcher’s bargaining position was impaired. In part this is because I am of the view that in any negotiations between Mr Fletcher and his parents and Mr and Mrs Harris, a sustained caveat would have been a significant factor. But the more significant issues in the case relate to the psychological factors to which I have referred. The reality is that Mr Fletcher could have gone to trial against his parents if he had been minded to do so. On his evidence, he did not feel able to do so given that the claim was, with the lapsing of the caveat, just about money. Is it right that Cavell Leitch Pringle and Boyle should be responsible for what might be regarded as being the psychological impact of their negligence? This point has given me occasion to pause. However, no argument as to it was advanced by Mr Hall for Cavell Leitch Pringle and Boyle. In other words, Mr Hall did not contend that any loss suffered by reason of Mr Fletcher’s apparent psychological incapacity to carry on the litigation was too remote or lay outside what was reasonably foreseeable. Further, given the intra-family nature of the dispute, I think that it would have been reasonably apparent to the Cavell Leitch Pringle and Boyle people dealing with Mr Fletcher in late 1994 that the existence of the claim to the property and the position of Mr and Mrs Harris as defendants, meant that Mr Fletcher was able to rationalise his actions as being directed to the property rather than as being an unfilial and undignified attempt to extract money from his parents.
[81] What I have said so far indicates, broadly, the reasons why I propose to allow the appeal against Cavell Leitch Pringle and Boyle. I turn now, however, to deal specifically with the reasons given by the Judge (although not in the order in which he dealt with them) for dismissing the claim.
Did the settlement between Mr Fletcher and his parents preclude a claim for damages against Cavell Leitch Pringle and Boyle?
[82] It really follows from what I have already said, that Mr Fletcher’s settlement of the claim against his parents does not preclude his claim against Cavell Leitch Pringle and Boyle.
[83] I simply do not see anything in the nature of an election. Mr Fletcher’s bargaining position was impaired as a result of the negligence of Cavell Leitch Pringle and Boyle. His position is that the settlement reached broadly reflected that impaired bargaining position. Settling on that basis does not seem to me to be an election against suing Cavell Leitch Pringle and Boyle for damages to compensate him for the impairment of his bargaining position which, on his case, led him to settle the case at $40,000. The cases referred to by the Judge seem to me to refer to situations so far removed from the position which confronted Mr Fletcher in February 1995 as to be of no moment in this context.
[84] The Judge suggested in his judgment that if Mr Fletcher wished to sue Cavell Leitch Pringle and Boyle he should have left the proceedings against his parents in place and prosecuted the claim against Cavell Leitch Pringle and Boyle in tandem with those proceedings. This suggestion, however, does not sit particularly easily with Mr Fletcher’s complaint that the negligence of Cavell Leitch Pringle and Boyle made it impracticable for him (for psychological reasons) to continue to prosecute the claim against his parents.
[85] As well, for reasons already given, I do not see his claim against Cavell Leitch Pringle and Boyle as an attempt (illegitimate or otherwise) to relitigate the claim against his parents which he settled in 1995.
[86] There was no pleading by Cavell Leitch Pringle and Boyle of any failure to mitigate loss. However, some complaints about the settlement were made at the trial in the District Court. So I should, therefore, record that I see nothing amounting to a failure to mitigate loss on the part of Mr Fletcher. Cavell Leitch Pringle and Boyle, in late December 1994, gave advice to Mr Fletcher to the effect that his claim was probably worth only $50,000 even if he was successful. Given that, it would not lie in the mouth of Cavell Leitch Pringle and Boyle to claim that the settlement at $40,000 was unreasonable.
[87] In any event, I do not see the settlement as being necessarily of fundamental significance in relation to the assessment of loss. On my preferred approach to the case, the damages awarded to Mr Fletcher should reflect the impairment to his bargaining position caused by the loss of the caveat. The settlement at $40,000 is of evidential significance as it provides a pointer to the value of his bargaining position after the lapse of the caveat. In fact, as I will indicate later, it is really the only evidence as to the value of that bargaining position. However, if I was of the view that the unimpaired bargaining position of Mr Fletcher was worth say $100,000 and that his impaired bargaining position was worth $60,000, the appropriate award of damages would be $40,000. The damages to which Mr Fletcher would be entitled, on that set of assumptions, would therefore be uninfluenced or unaffected by arguments as to failure to mitigate.
[88] It follows from what I have said that I disagree with the reasoning of the District Court Judge which I have set out in paragraph [50.3] above.
Did Mr Fletcher suffer a loss as a result of the negligence of Cavell Leitch Pringle and Boyle and if so in what sum should it be quantified?
[89] It really also follows from what I have said that I disagree with the approach taken by the Judge which I have recorded in paragraphs [50.1] and [50.2] above.
[90] In deference, however, to the reasons given by the Judge, I should say something more on this score.
[91] The Judge concluded, as a matter of fact, that there was no trust in relation to the Papanui Road property. I should put this finding in context. For reasons already given, there was no requirement for the Judge to try, on a notional basis, the claim which was available to Mr Fletcher, prior to the February 1995 settlement, against his parents. However, if he was of the view that such claim was fundamentally unsound and therefore had no, or only a nuisance value, then this would necessarily lead to the conclusion that there was no loss. This is, indeed, what the Judge held.
[92] I am satisfied that the Judge’s conclusions to this effect cannot stand. There are a number of reasons for this:-
1. Paragraph 8 of the amended counterclaim asserted that Mr Fletcher’s parents held for him a net equity in the property of $143,000. This allegation was admitted by Cavell Leitch Pringle and Boyle. So the Judge has found against Mr Fletcher on an allegation which was formally admitted by Cavell Leitch Pringle and Boyle.
2. I agree that one or two of the submissions made on behalf of Cavell Leitch Pringle and Boyle in the District Court and a few questions asked of Mr Fletcher in cross-examination did apparently involve a challenge to his claim to sole beneficial ownership of the Papanui Road property. For instance, at one point, it was suggested that the property was held three ways beneficially, one-third for Mr Fletcher and two-thirds for his parents. But, as I have already indicated, the submissions on behalf of Cavell Leitch Pringle and Boyle and the conduct of its defence to the counterclaim generally were extraordinarily diffuse and some of the submissions made by counsel for Cavell Leitch Pringle and Boyle reiterated the admission in the pleadings. For instance, in his written opening, counsel for the plaintiff said of Mr Fletcher:-
[T]hat if he pursued the matter to Court he would have succeeded in obtaining damages for breach of trust from his parents in selling a property for which he had the whole beneficial interest.
The closest that counsel for Cavell Leitch Pringle and Boyle came to reneging on the admission in the pleadings was expressed in this way in closing submissions:-
Perhaps the Court could approach this view that really this was a type of joint venture in the end. The parents put all the capital into the property. Fletcher had an interest. Any profitable settlement was going to be divided three ways. That is self-evident from the offer of 31 December 1994 in which Fletcher, in endeavouring to settle with his parents, reached the figure which basically recognised one-third to him and two-thirds to the parents representing the fact that they had put their money in as individuals.
I interpose to say that I do not regard this submission as being tenable. The February 1994 letter from Mr Fletcher’s mother to him is inconsistent with the contention that there was a three-way split envisaged between Mr Fletcher and his parents. No such contention was ever advanced by the parents. But, in any event, counsel for Cavell Leitch Pringle and Boyle immediately seems to have retreated from this contention because he went on:-
However, to assess the situation on the pleadings that the non-registration of the caveat caused a loss. The chance of success if Fletcher had pursued his claim in the High Court and bearing in mind that it was ready for trial and a fixture would have been available in February 1995 and the only matters at large, according to Fletcher, were the presentation of witnesses who would go to court and prove that there was a trust in existence and he was the beneficiary of that Trust.
. . .
If Fletcher, as he has asserted so confidently in his evidence, had all the witnesses available to prove his case, why did he not pursue it?
He could have proved, on his contention, that his parents knowingly and wilfully defrauded him in their position as Trustees as they owed a duty of honesty and loyalty to him. He would have to have proved that they were in breach and the damages would have flowed as set out in the earlier submissions and equitable compensation would be awarded against defaulting trustees.
He chose not to. He made no attempt to reduce or mitigate his loss by going to trial.
3. I think it follows from all of this (and from my perusal of the submissions as a whole and the transcript of the hearing) that the admission made in the statement of defence to the amended counterclaim should be regarded as standing.
4. It would have been plainly unjust to have allowed any amendment to the defence so as to take out the admission. Mr Fletcher gave evidence for himself but called no other witnesses. His brief of evidence lists a large number of people who could have been witnesses (according to him) had his case against his parents gone to trial. He summarised in his brief the evidence which he would have called from them. One of these witnesses (Mr Doolan) provided an affidavit in support of the application that the caveat not lapse. If his underlying contention that he was, in truth, the beneficial owner of the property had not been admitted in the statement of defence, I would have expected Mr Fletcher to have called some at least of those witnesses.
5. In any event, the only evidence on the point was that of Mr Fletcher. He was unshaken in cross-examination on his contentions as to the trust. Cavell Leitch Pringle and Boyle elected not to call his parents to give evidence in accordance with the affidavits which they had sworn in the caveat proceedings. So his evidence was uncontradicted. As I have indicated, the February 1994 letter from Mr Fletcher’s mother to him is inconsistent with the suggestion that there was an underlying agreement as to a three way split. In those circumstances, I simply do not see how the conclusion could be reached that there was no trust.
6. The fact that Mr Fletcher was able to obtain a settlement of $40,000 from his parents even without the caveat seems to me to be inconsistent with the conclusion that his claim, supported by a caveat, would have been of no or negligible value. Reference should also be made to the considerations which I have listed in paragraph [74] above.
[93] The Judge recognised in his judgment the reality that the caveat, if sustained, would have been a bargaining tool. He did not carry that through into his conclusions as to damages. Further, he did not address the impact of the lapsing of the caveat on Mr Fletcher’s psychological ability to maintain the litigation against his parents.
[94] There is one other matter which I should address. It will be recalled that Mr Fletcher had originally intended to put into the purchase of the Papanui Road property $10,000 which represented his savings. It was suggested in the District Court by Cavell Leitch Pringle and Boyle that these savings had not been disclosed to Mr Fletcher’s former wife in the matrimonial property proceedings. In his judgment, the District Court Judge made some comments about this - comments which were generally adverse to the position of Mr Fletcher. But I see no relevance in the issue. As it turned out, Mr Fletcher did not put his $10,000 into the Papanui Road property. So it could not be said that the trust he asserted was created as a device to defraud his former wife. In any event, Mr Fletcher’s position in evidence was that the $10,000 in savings had been disclosed. There was no substantial evidence to the contrary, certainly not enough to warrant the rejection of Mr Fletcher’s evidence. The long and the short of it is that I do not see this controversy as having any real materiality to the issue I must determine on this appeal.
[95] As I have indicated, I think that the way the case was presented to the Judge means that his attention was diverted from what I think are the real issues. But, for the reasons which I have given, I am of the view that the decision dismissing the claim against Cavell Leitch Pringle and Boyle cannot stand.
[96] What should I do about it? Given the unhappy history of this litigation and the fact that this is the third appeal to this Court in relation to a claim which is for a comparatively modest amount, it is obviously essential that I decide the case now rather than remit it to the District Court for rehearing. This means that I must assess damages myself.
[97] Damages in this context must be assessed on an A - B basis where A represents the position that Mr Fletcher would have had if the caveat had not lapsed and B represents the position in which he was after the lapse of the caveat.
[98] The $40,000 paid by Mr Fletcher’s parents to settle the claim is not (for reasons already given, see paragraph [87] above) necessarily decisive in terms of my assessment of the dollar figure to be attributed to B. It does, however, provide a convenient starting point for assessment. The problem with the assessment of the B figure is that once the caveat lapsed, the litigation was solely between Mr Fletcher and his parents and was confined to money. I think that the psychological pressures associated with the intra-family nature of the dispute means that this aspect of the equation cannot be addressed solely in terms of an assessment of the probabilities of success for Mr Fletcher if he had gone to trial. In the absence of any other evidence as to the appropriate figure to attribute to B, I propose to act on the basis that the $40,000 received did represent Mr Fletcher’s bargaining position vis-a-vis his parents once the caveat had lapsed.
[99] In terms of my assessment of the value of the bargaining position which Mr Fletcher would have had if the caveat had been sustained, there are four significant features which have to be allowed for:-
1. It is highly likely that Mr Fletcher would not have been required to pay costs to Mr and Mrs Harris. With the caveat lapsed, Mr and Mrs Harris plainly had the whip hand as against Mr Fletcher and were able to insist upon a payment by him to them of $3,000. If the caveat had not been lapsed, and Mr Fletcher had settled with his parents, I am of the view that Mr Fletcher would have been able to disengage himself from the litigation without being required to make any payment to Mr and Mrs Harris.
2. It is likely that Mr Fletcher would have been able to rationalise his actions in his own mind as being associated primarily with the property and this means that he would have been prepared to go to trial against his parents and Mr and Mrs Harris unless he received something appreciably better than the offer for $40,000 which was then on the table.
3. Mr Fletcher’s prospects of succeeding on his primary allegations against his parents were in the order of 50 per cent. He had, in his favour, the context in which his parents came to acquire the property (effectively stepping into his shoes at the very last minute in relation to the purchase). There was also, in his favour, the February 1994 letter which he had received from his mother which seems to me generally to support his case. As well, there seems to have been at least some supporting evidence available to him. Correspondence originating with the solicitor who acted for him in December 1989 rather suggests that she would have supported his case. There was also some other evidence available to him in the form of admissions made by one or other of his parents as to his beneficial ownership of the property. Some evidence to this effect was provided at the caveat proceedings in December 1994. From the point of view of the parents, the consequences of losing the case, particularly if Mr Fletcher was able to obtain an order vesting the property in him, would have been financially significant because they would have wound up with liabilities to Mr and Mrs Harris at least for costs and probably for damages as well. On the other hand, his parents denied his primary allegations. Their explanation of the transaction was perhaps sufficiently close to that of Mr Fletcher to enable them to explain away some of the extrinsic factors which he relied on. Further, at no time, was there the sort of accounting which I as a Judge would expect to see between trustees and a beneficiary in relation to a trust (albeit that it might be unreasonable to expect such an accounting to occur in relation to a trust of the sort alleged here). I accept that my assessment of Mr Fletcher’s prospects of success at only 50% represents, from the point of view of Mr Fletcher, an extremely deep discount given the admission by Cavell Leitch Pringle and Boyle of the underlying merits of his claim. But the realities are that this would have been a case of oath against oath and such cases are always unpredictable. Placing myself in the position of a lawyer advising Mr Fletcher, I would, I am sure, have seen his case as being closely balanced in terms of probable success.
4. Although I am satisfied that Mr Fletcher would have been prepared to go to trial against his parents and Mr and Mrs Harris in the absence of a better offer, the pressures on him to settle would still have been very real and I believe that if an offer significantly better than $40,000 had been made by his parents, the probabilities are that he would have settled.
[100] In those circumstances, I think it is appropriate to assess damages on the assumption that the case would have settled in accordance with my view as to Mr Fletcher’s prospects of success. The family nature of the litigation means that a settlement was always highly likely even if the caveat had been sustained. It seems reasonable to assume that settlement would reflect the probabilities of success which each of the parties had in relation to the litigation along with the risks which they faced. On that basis, I assess Mr Fletcher’s bargaining position, with the benefit of a non-lapsed caveat, as being, vis-a-vis his parents $71,500 (ie half of $143,000) and vis-a-vis Mr and Mrs Harris as being in a state of equipoise, in other words, that he would have wound up with no liability to them.
[101] The corollary of this is that I value the impairment of his bargaining position as being $34,500. As to $31,500, this represents the difference between what he received from his parents ($40,000) and the $71,500 figure which I have just mentioned. The balance ($3,000) represents the costs which he paid to Mr and Mrs Harris but which he would not have been required to pay, on my assessment of the probabilities, if the caveat had not been allowed to lapse.
[102] Mr Fletcher has also sought $20,000 by way of damages for stress and anxiety. I have no doubt that the problem over the caveat did cause his subsequent stress and anxiety. But this must be assessed in the context of a situation which was inherently extremely stressful - a situation in which he was locked in most unpleasant litigation with his parents. I think that a modest award is appropriate under this head and I fix damages, in this respect, in the sum of $5,000.
Disposition
[103] The result is that:-
1. I allow the appeal by Mr Fletcher against Cavell Leitch Pringle and Boyle.
2. I enter judgment for Mr Fletcher against Cavell Leitch Pringle and Boyle in the sum of $39,500 together with interest at the rate of 11% (which is the rate fixed by the Judge in relation to the Cavell Leitch Pringle and Boyle judgment against Mr Fletcher) from 1 February 1995 until today.
3. I dismiss the appeal by Mr Fletcher against Cameron and Co.
4. I reserve all questions of costs. Subject to there having been any payment in or Calderbank letter which is material, I am minded to order Cavell Leitch Pringle and Boyle to pay costs to Cameron and Co (who were joined because of the argument which Cavell Leitch Pringle and Boyle ran unsuccessfully as to the effect of the settlement) and for Cavell Leitch Pringle and Boyle to pay the costs of Mr Fletcher. I am also inclined to fix costs in respect of both trial and appeal to avoid any further necessity to trouble the District Court with the case. I will, however, defer decision on all issues associated with costs until I receive memoranda from the parties, from Mr Fletcher within 14 days, from Cavell Leitch Pringle and Boyle within a further 14 days and from Cameron and Co within a further 14 days.
0
4
0