Note Primosso Holdings Ltd v Alpers

In the case of Primosso Holdings Ltd v Alpers, the Court of Appeal in Wellington considered an appeal brought by Weston Ward & Lascelles Ltd, a firm of solicitors, against the refusal of Chisholm J to strike out a cause of action in negligence brought against them by Primosso Holdings Ltd. Primosso had lent money to clients of Weston Ward & Lascelles Ltd, who subsequently became unable to repay the loans. Primosso claimed that Weston Ward & Lascelles Ltd facilitated the loans despite knowing matters that made the clients unsuitable borrowers. The appeal was concerned with whether the claim in negligence was arguable.

The primary legal issue before the Court of Appeal was whether there was an arguable duty of care owed by the solicitors to the lender in circumstances where the solicitors facilitated loans to clients who subsequently defaulted. The Court considered whether such a duty of care was established in law or if it represented a radical extension of the existing principles of negligence. The Court found it challenging to accept the notion of a duty of care in these circumstances, particularly if the solicitors were alleged to have been complicit in the fraud.

The Court of Appeal held that the claim in negligence was not arguable, primarily because it would require a radical extension of the law to establish a duty of care in these circumstances. The Court found that if the allegation was of actual knowledge of the fraud, the proper cause of action would be deceit, not negligence. The Court did not accept the proposition that solicitors or any other agents had a duty to investigate whether their clients might be acting deceitfully towards third parties. The Court allowed the appeal and struck out the amended statement of claim but deferred the effect of this order to allow Primosso Holdings Ltd the opportunity to replead in deceit. The Court made it clear that any new statement of claim should not include causes of action in negligence.