Wiliams v Hacking
[2017] NZHC 799
•27 April 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2016-404-2919 [2017] NZHC 799
BETWEEN GRAEME DENYS WILLIAMS
Plaintiff
AND
ROBERT ATHERTON HACKING First Defendant
RISHWORTH WALL & MATHIESON Second Defendant
SIMON ROBERT JEFFERSON Third Defendant
Hearing: 21 March 2017 Appearances:
R C Laurenson for Plaintff
P R Rzepecky and Sarah Ulmer for Third Defendant
No appearances for First and Second DefendantsJudgment:
27 April 2017
JUDGMENT OF ASSOCIATE JUDGE R M BELL
This judgment was delivered by me on 27 April 2017 at 3:00pm
pursuant to Rule 11.5 of the High Court Rules
………………………………………………….
Registrar/Deputy Registrar
Solicitors:
Nolans (Neil Mackie), Gisborne, for Plaintiff
Wynn Williams (Richard Hern), Auckland, for Third Defendant
Counsel:
Richard Laurenson, Wellington, for Plaintiff
Philip Rzepecky, Auckland, for Third Defendant
WILLIAMS v HACKING [2017] NZHC 799 [27 April 2017]
TABLE OF CONTENTS
Introduction [1] Agreements under s 21A of the Property (Relationships) Act 1976 [5] Facts [10] The causes of action against Mr Jefferson [34] Not Mr Williams’s lawyer [38]
Mr Jefferson not liable because Mr Williams received advice
from certifying lawyers [47]
A causation argument relating to the agreement of 28 February 2011 [65] Cross notices [66]
Outcome [68]
Introduction
[1] In February 2011 Mr Williams, the plaintiff, entered into two agreements under s 21A of the Property (Relationships) Act 1976 with his former wife. These are the second and third agreements. In August 2006 they had made an earlier agreement under s 21A. When he made the second and third agreements (which were in identical terms), he says that he acted on the advice of the defendants, all lawyers. Mr Williams was unhappy with the second and third agreements. He later successfully applied to the Family Court to have them set aside. Even though the agreements were set aside, Mr Williams says that he has suffered monetary losses of
$556,000. He sues the lawyers to recover those losses, plus general damages for stress and anxiety, saying that they gave him bad advice. He sues Mr Jefferson QC, the third defendant, for negligent misstatement in giving advice for the second agreement and for negligent misstatement, negligence and breach of contract for advice on the third agreement.
[2] Mr Jefferson applies to strike out. His case is that he was retained to represent the trustees of the Graeme Williams Family Trust, not Mr Williams
personally. The other defendants gave Mr Williams independent legal advice and certificates under s 21F of the Property (Relationships) Act: Mr Hacking, the first defendant, advised Mr Williams on the second agreement and Mr Rishworth, one of the second defendants, advised him on the third agreement. While he may have advised Mr Williams, Mr Jefferson did not give independent legal advice under s 21F and certify.
[3] Mr Jefferson applies under r 15.1(1)(a) of the High Court Rules on the ground that the statement of claim does not disclose any reasonably arguable cause of action against him. On such applications, it is standard to cite the principles in McGechan on Procedure at HR15.1.02:
(a) Pleaded facts, whether or not admitted, are assumed to be true. This does not extend to pleaded allegations which are entirely speculative and without foundation.
(b) The cause of action or defence must be clearly untenable.
(c) The jurisdiction is to be exercised sparingly, and only in clear cases.
This reflects the Court’s reluctance to terminate a claim or defence short of trial.
(d) The jurisdiction is not excluded by the need to decide difficult questions of law, requiring extensive argument.
(e) The Court should be particularly slow to strike out a claim in any developing area of the law, perhaps particularly where a duty of care is alleged in a new situation.
The authorities for these principles are Attorney-General v Prince1 and Couch v Attorney-General.2 While accepting these principles, Mr Laurenson for Mr Williams emphasised these matters, drawing on Couch:
Where the circumstances relied on by the plaintiff are capable of giving rise to a duty of care is the question for the court. If a duty of care cannot competently be excluded, the claim must be allowed to proceed. It is only that it is clear that the claim cannot succeed as a matter of law that it can be struck out.3
Causation is a matter for investigation because it is quintessentially a matter of fact.4
1 Attorney-General v Prince [1998] 1 NZLR 262 (CA).
2 Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725.
3 Couch, above n 2, at [2].
4 Couch, above n 2, at [38] and [39].
Care is required to ensure that all relevant facts are sufficiently known. In difficult cases, duty of care is no more suitable for peremptory assessment on assumed facts on questions of breach or damage. The sequence in which the elements of negligence are considered should not matter. Since considerations relevant to determination of duty of care are also relevant to breach of duty or causation and remoteness of damage, only high level and generalised legal policies may be suitable for consideration in relation to duty of care on strike-out. Consideration of the particular circumstances of the case may more properly be treated as bearing on the remoteness of damage or breach, by which ultimate responsibility under a duty of care owed by the defendant to the plaintiff is determined.5
[4] Those submissions emphasise the need for caution in a new case. That is relevant here, because neither counsel nor I are aware of any case in which a lawyer who has not certified under s 21F of the Property (Relationships) Act has been sued for negligent advice leading to the advisee entering into an agreement under s 21A.
Agreements under s 21A of the Property (Relationships) Act 1976
[5] Part of the context for this case is Part 6 of the Property (Relationships) Act which deals with agreements for the division of property between spouses and partners. Under s 21A, spouses or partners may, for the purpose of settling any differences between them concerning property owned by both or either of them, make any agreement they think fit with respect to the status, ownership and division of that property. Section 21F says:
21F Agreement void unless complies with certain requirements
(1) Subject to section 21H, an agreement entered into under section 21 or section 21A or section 21B is void unless the requirements set out in subsections (2) to (5) are complied with.
(2) The agreement must be in writing and signed by both parties.
(3) Each party to the agreement must have independent legal advice before signing the agreement.
(4) The signature of each party to the agreement must be witnessed by a lawyer.
(5) The lawyer who witnesses the signature of a party must certify that, before that party signed the agreement, the lawyer explained to that party the effect and implications of the agreement.
5 Couch, above n 2, at [43].
[6] Under s 21H, the court has a discretion to declare that an agreement may have effect, either wholly or in part, if it is satisfied that non-compliance has not materially prejudiced the interests of any party. Even if an agreement satisfies the requirements of s 21F, under s 21J the court may set the agreement aside having regard to all the circumstances, if it is satisfied that giving effect to the agreement would cause serious injustice.
[7] In Coxhead v Coxhead the Court of Appeal dealt with the requirements of independent legal advice under the version of the legislation in force before the 2001 amendments took effect. It still applies:6
… [T]he requirement under subs (5) of independent legal advice is no mere formalism. Each party must receive a professional opinion as to the fairness and appropriateness of the agreement at least as it affects that party’s interest. The touchstone will be the entitlement that the Act gives, and the requisite advice will involve an assessment of that entitlement, and the weighing of it against any other considerations that are said to justify a departure from it. Advice is thus more than an explanation of the meaning of the terms of the agreement. The implications must be explained as well. In other words, the party concerned is entitled to have an informed professional opinion as to the wisdom of entering into an agreement in those terms. This does not mean, however, that the advisor must always be in possession of all the facts.
[8] It is an accepted principle in law as well as in practice that the lawyer who certifies must be the lawyer who gives the independent advice under s 21F(2).7
Mr Laurenson contested this, but s 21(5) makes it clear that the lawyer who certifies must be the one who gives advice under s 21F(3).
[9] In Wells v Wells,8 Simon France J listed certain helpful principles as to the assessment of “serious injustice” under s 21J, drawing in part on the Court of Appeal’s decision in Harrison v Harrison.9 While he was dealing with a contracting out agreement under s 21, he noted among other things that serious injustice gives a broad discretion which must be exercised in light of the policy underlying the
legislation; resultant disparity of outcome at the time of separation is relevant in
6 Coxhead v Coxhead [1993] 2 NZLR 397 (CA) at 404.
7 See Robert Fisher (ed) Fisher on Matrimonial and Relationship Property (online looseleaf ed, LexisNexis) at 5.69.
8 Wells v Wells [2006] NZFLR 870 (HC) at [37].
9 Harrison v Harrison [2005] 2 NZLR 349, [2005] NZFLR 252 (CA).
compromise cases; and a comparison to the outcomes that would be ordered if the
Act were applied is relevant.
Facts
[10] Mr Jefferson accepts that at trial Mr Williams may be able to prove the facts pleaded in the statement of claim. He has not filed a statement of defence. There is no affidavit evidence, but by consent counsel provided a bundle of documents with helpful information.
[11] For many facts I have drawn on the judgment of the Family Court which set aside the second and third agreements.10 The defendants in this proceeding are not bound by the Family Court decision because they are not parties to it or privies under any estoppel rule. While s 50(1) of the Evidence Act 2006 provides that a finding of fact in a civil proceeding is not admissible in another civil proceeding to prove the existence of a fact that was in issue in the original proceeding in which judgment was given, for the strike-out application the Family Court judgment is still relevant. If Mr Williams was able to obtain findings of fact in his favour in the Family Court,
arguably this court may find the same way.
[12] Mr Williams is a hill country farmer on the East Coast. He and his wife married in March 1990. There are three children of the marriage. They separated in August 2006, and the marriage was dissolved in December 2008. At separation the relationship property to be divided between Mr and Mrs Williams was worth
$779,784 (excluding personal and family chattels). A half share was $389,892. There were also assets held in a family trust, the Graeme Williams Family Trust, but these were not relationship property. Mr Williams was one of the trustees. After a mediation Mr Williams and his wife entered into the first agreement under s 21A in August 2006. This provided that Mrs Williams was to receive:
(a) a property at Tokomaru Bay worth $220,000;
(b) a half share in another property at Tokomaru Bay worth $156,250;
10 Williams v Williams [2015] NZFC 4905.
(c) a Mazda utility motor vehicle; and
(d) a payment of $600,000 from Mr Williams.
[13] Personal family chattels were divided by agreement between the parties. Mr Williams paid the costs of the mediator. In addition, a section at 95 Winifred Street at a beach north of Gisborne, owned by the Graeme Williams Family Trust was to be settled on a new trust known as the Pukelooki Trust. The trustees of the new trust were to be Mr and Mrs Williams and a Ms Jefford of Tolaga Bay, farmer. Under the trust, Mr Williams was to have a life interest, Mrs Williams was to have a life interest if she survived him, and the final beneficiaries were to be their three children. At the time of the mediation the Winifred Street property was worth
$940,000.
[14] Mr Williams says that the terms of this agreement were generous to his wife but he wanted to be fair to her and he wanted to forestall potential claims by her. Mr Williams’s consistent position has been that he stands by the first agreement. Mrs Williams was not, however, satisfied with it. In May 2009 she applied to the Family Court to set aside the first agreement and for orders for the division of relationship property. In March 2010 she also applied under s 182 of the Family Proceedings Act in respect of property belonging to the Graeme Williams Family Trust. The trustees (including Mr Williams as trustee) were made parties to the proceeding.
[15] While the wife’s applications are in fairly general form it appears from the Family Court judgment that the wife’s case was that the settlement under the first agreement was not adequate for several reasons. She contended that she had a claim to the Winifred Street property under s 182 of the Family Proceedings Act 1980, claims under s 9A of the Property (Relationships) Act in respect of the Williams family hill country farm property (which was not relationship property) either by the application of relationship property or by her actions adding to an increase in value of that property, alternatively a sustenance claim under s 17 and an economic disparity claim under s 15. According to paragraph 38 of the statement of claim, Mrs Williams applied to set aside the first agreement on these grounds:
(a) it did not reflect an agreement reached at mediation on 22 August
2006;
(b)it was not a fair and just division of relationship property according to the law;
(c) it did not deal with the total relationship property;
(d) it did not deal properly with her claims for ongoing children’s
expenses, spousal maintenance or economic disparity; (e) it was entered into because of a mistake;
(f) she signed it under duress;
(g) she did not receive adequate legal advice; and
(h) giving effect to the agreement would cause her serious injustice.
[16] In support of her allegation that she entered into the agreement under duress, she alleged that Mr Williams had been sexually, verbally and physically abusive to her during their marriage and those effects remained with her as to the mediation on
22 August 2006.
[17] For that proceeding, Mrs Williams had new solicitors and instructed an Auckland barrister with relationship property expertise. The second defendants are Gisborne solicitors. Mr Rishworth of that firm handled the matter for Mr Williams. The second defendants had not acted for Mr Williams on the first agreement. They instructed Mr Hacking, an Auckland barrister experienced in relationship property work. When the Graeme Williams Family Trust became involved, the trustees (including Mr Williams) instructed another firm of Gisborne lawyers. They in turn instructed Mr Jefferson, also an Auckland barrister with relationship property experience.
[18] During 2010 and up to a mediation on 4 February 2011 Mr Hacking shared information and conferred with Mr Jefferson. The bundle of documents includes:
(a) a letter dated 24 May 2010 from Mr Rishworth to Mr Hacking containing important information which was copied to Mr Jefferson;
(b) an email from Mr Williams to Mr Hacking and Mr Jefferson dated
28 May 2010 which includes, “Thank you both for representing me.”
(c) a letter from Mr Hacking to Mr Jefferson dated 21 May 2010 providing documents for the proceeding and proposing that the two meet to confer;
(d)reference to a lengthy meeting between Mr Jefferson and Mr Hacking on 27 May 2010 to discuss the case;
(e) an email from Mr Williams to Mr Hacking dated 30 June 2010 which included:
So as I understand it once you and Simon have a clear and accurate picture of the whole set-up you will be able to deduce whether or not the settlement she received was fair.
(f) an opinion by Mr Hacking to Mr Williams’s solicitors of 20 August
2010, copied to Mr Jefferson;
(g)an opinion by Mr Hacking to Mr Williams dated 9 December 2010 which was copied to Mr Jefferson;
(h) an email by Mr Jefferson to Mr Hacking of 10 December 2010 in
response stating, “Very helpful letter. Thank you.”
(i)a letter of 20 January 2011 by Mr Jefferson to his instructing solicitors advising that he had “brainstormed” with Mr Hacking a range of potential outcomes;
(j)a letter of 1 February 2011 by Mr Hacking to Mr Jefferson with draft documents for the mediation.
[19] The general tenor of Mr Hacking’s advice was that Mr Williams was at a significant risk of the 2006 agreement being set aside by the court and Mrs Williams would receive more extensive relief than she had received under the 2006 settlement. Mr Jefferson’s letter to his instructing solicitors suggests that he agreed with that assessment.
[20] An email of Mr Williams dated 17 January 2011 and a letter of 19 January
2011 to Mr Hacking show that he was not necessarily convinced of the risk.
[21] At the mediation in Auckland on 4 February 2011, Mr Hacking represented Mr Williams and Mr Jefferson represented the trustees of the Graeme Williams Family Trust, one of whom attended. Terms for a new agreement were negotiated. Mr Williams was to pay his former wife a further $70,000. She was to receive certain further family chattels: several paintings, a horse and a horse float. The property at 95 Winifred Street was to be transferred to or re-settled upon a new trust, or the Pukelooki trust was to be varied so that the wife and the children would be the beneficiaries of the trust. That was in full and final settlement of the proceedings then pending in the Family Court, of all claims that Mr and Mrs Williams might have against each other under the Property (Relationships) Act, the Family Proceedings Act or any other enactments. A handwritten “Heads of Agreement” was drawn up. This is the second agreement. The parties were Mr and Mrs Williams. The trustees of the Graeme Williams Family Trust were not. Mr Williams signed the agreement and Mr Hacking gave a certificate under s 21F. Mrs Williams signed the agreement and her solicitor gave a similar certificate.
[22] Mr Williams pleads that before he signed the agreement he asked
Mr Jefferson:
How paying a further million dollars to a woman I know is a liar, thief and manipulator of the children is a better option than going to Court?
Mr Jefferson’s alleged response is that he had read all the evidence and Mr Williams had a liability to his former wife of $1.1 million. When Mr Williams challenged him that Mr Jefferson was only saying so because Mr Hacking was saying that, Mr Jefferson replied that he had, independently of Mr Hacking, come to the same
conclusion and that the lawyer who had originally acted for Mrs Williams on the first agreement had got it wrong. Mr Williams then signed the agreement.
[23] It was agreed on 4 February 2011 that the handwritten heads of agreement would be converted into a formal agreement which would also be signed by Mr and Mrs Williams and certified at a later date.
[24] On 7 February 2011, Mr Jefferson learnt that Mr Williams was greatly distressed at the mediation and the heads of agreement. Mr Jefferson spoke to Mr Williams by telephone and again on 8 February 2011. Mr Williams stated that he did not want to sign the proposed agreement. Mr Williams also said that he had no confidence in Mr Hacking. Mr Williams wrote to Mr Jefferson on 17 February 2011. This resulted in a meeting in Auckland on 25 February 2011.
[25] Before that meeting, Mr Jefferson sent an email indicating that he had reviewed matters. While there were aspects as to the way in which the matter had unfolded at the mediation, the outcome was still good and legally supportable. He had earlier reached the view independently of Mr Hacking that Mrs Williams had been short-changed by the first agreement, and significantly so. His email referred to various provisions under the Property (Relationships) Act.
[26] At the meeting on 25 February 2011, Mr Williams sought Mr Jefferson’s advice whether he could refuse to complete the formal typewritten agreement which Mrs Williams’s solicitors had provided following the mediation. Mr Jefferson advised that Mr Williams was bound to enter into the agreement and that in any event he should do so because the terms of the agreement recorded the handwritten heads of agreement of 4 February 2011 which were legally sound. Mr Jefferson reiterated this advice in an email of 23 February 2011.
[27] On 25 February, Mr Jefferson sent an email to Mr Rishworth indicating that Mr Williams was contractually bound to sign notwithstanding his misgivings, and he intended to reinforce that. Mr Jefferson is also said to have advised other trustees of the Graeme Williams Family Trust that Mr Williams was bound by the handwritten heads of agreement and that the terms were in any event legally sound. Those
trustees in turn passed that advice on to Mr Williams. Mr Williams says that he
relied on that advice when he went to the second defendants’ office on 28 February
2011 and signed the agreement. Mr Rishworth witnessed the agreement and gave the certificate under s 21F. That is the third agreement.
[28] For his advice to Mr Williams between 7 and 25 February 2011, Mr Jefferson sent an account to his instructing solicitors. While the bill was payable by the trustees, Mr Williams says that he paid it himself.
[29] Mr Williams was not satisfied with the agreements made in February 2011. He instructed his original solicitors, who had acted for him in 2006. They in turn instructed other Auckland counsel, also relevant relationship property experience. In September 2011 he applied to the Family Court to have the agreements of February
2011 set aside, and for orders determining the parties’ relationship property and division. The respondents were Mrs Williams and the trustees of the Graeme Williams Family Trust. The application was heard in December 2014 and March
2015. Judgment was given on 15 June 2015.11 Mr Williams succeeded
comprehensively.
[30] The Family Court Judge found that Mr Williams was a reliable and credible witness. On the other hand, he found that Mrs Williams had fabricated evidence so as to commit perjury. He rejected much of her evidence on credibility grounds. That related not only to the complaints of being under duress when she entered into the agreement of August 2006, but also to her claims for increased relief. In assessing Mrs Williams’s entitlements as at August 2006, the Judge rejected all her claims, for example, that Winifred Street was relationship property, that she had any claim under s 9A or s 17 in respect of the hill country farm property, that she had any claims by reason of economic disparity and that she was entitled to any spousal maintenance.
[31] While the handwritten agreement of 4 February 2011 is called a “Heads of Agreement”, the Judge found that it was a complete and comprehensive contract which reserved nothing for ongoing consideration, enquiry, or negotiation. The
typewritten agreement of 28 February 2011 was on exactly the same terms, and was
11 Williams v Williams [2015] NZFC 4905.
accordingly also a complete and comprehensive contract. He held that both agreements were void under s 21F, that Mr Hacking (who gave advice and certified the agreement of 4 February 2011) had not given adequate advice, and the agreement of 28 February 2011 failed because Mr Rishworth had not given adequate advice. The Judge refused to give effect to the agreements under s 21H. He also held that even if the agreements had satisfied the requirements of s 21F, the agreements should be set aside under s 21J because giving effect to the agreements would cause serious injustice to Mr Williams. He made consequential orders for Mrs Williams to pay back the $70,000 and return the chattels and for the property at 95 Winifred Street to be transferred back to the trustees of the Graeme Williams Family Trust. The judgment does not expressly refer to Mr Jefferson.
[32] The orders of the Family Court were intended to return Mr Williams to the same position as under the agreement of August 2006. He says that Mrs Williams has not repaid him the $70,000 ordered by the Family Court. In addition, the expenses he incurred on Mrs Williams’s application to set aside the August 2006 agreement were wasted costs. He has as well incurred further legal costs in having the second and third agreements set aside.
[33] Given the Family Court Judge’s finding that the agreement of 4 February
2011 was complete, it is curious that the parties agreed that a typewritten agreement in exactly the same terms should be signed and witnessed afresh. A more common approach is to make a typewritten transcript of a hand-written agreement and to circulate it among the parties without it being signed again. From Mrs Williams’s point of view, the third agreement may have given her an apparent extra layer of protection. She and her advisers may have believed that even if the handwritten agreement could be attacked, it would be much harder to do so if the agreement were re-signed afresh. If so, that assumption was mistaken. Even so, Mr Williams is likely to have incurred greater costs in having both agreements set aside than if there were only one.
The causes of action against Mr Jefferson
[34] Mr Williams’s statement of claim has three causes of action against Mr Jefferson: negligent misstatement, negligence and breach of contract. The negligent misstatement cause of action is directed both at the advice Mr Jefferson gave at the mediation on 4 February 2011 and at the advice he gave between
7 February and 23 February 2011. The causes of action in negligence and breach of contract are directed only at the advice he gave between 7 February 2011 and
23 February 2011 (that is, before the third agreement). While there is no doubt that a barrister owes a duty of care in tort to his or her client,12 I wondered how Mr Jefferson could be sued in contract in the absence of any contractual relationship between a barrister and his or her client. Mr Laurenson protested that that point had not been taken in the strike-out application and he had not come armed with argument on it. I therefore do not probe that aspect further. What is common to all three causes of action is the claim that Mr Jefferson failed to meet the standard of care required of a competent lawyer when advising a client whether to enter into an
agreement under s 21A of the Property (Relationships) Act.
[35] As the allegation of substandard advice is common to all of the causes of action, it is convenient to consider the strike-out application with particular emphasis on the claim for negligent misstatement. That cause of action covers both Mr Jefferson’s advice before the 4 February 2011 agreement and the 28 February agreement. The standard of care required for all causes of action is likely to be the same. If Mr Williams has an arguable case against Mr Jefferson under negligent misstatement, his other causes of action are likely to stand up as well. It is unlikely that the cause of action in negligence adds anything. Mr Jefferson is not sued for mishandling his client’s affairs but for giving poor advice on which Mr Williams acted.
[36] Mr Jefferson says that Mr Williams does not have any cause of action against him because:
(a) it was not reasonable for Mr Williams to rely on his advice;
12 Lai v Chamberlains [2006] NZSC 70, [2007] 2 NZLR 7.
(b) he did not owe Mr Williams any duty of care; and
(c) anything he said to Mr Williams after the 4 February 2011 agreement was not capable of causing Mr Williams any loss.
[37] Those submissions do not require the court to make factual findings in the absence of evidence. I am not, for example, invited to make contestable findings as to factual causation (such as “all or nothing” findings as to what Mr Williams would have done if he had received sound advice13). Instead, Mr Jefferson’s submissions raise these matters of law:
(a) Up to and including the mediation of 4 February 2011, Mr Jefferson acted for the trustees of the family trust, not for Mr Williams personally. There can be no liability for any damage suffered by a non-client; and
(b)Mr Jefferson is in any event shielded from liability from any advice given for both the second and third agreements, because Mr Williams took independent advice from other lawyers before signing those agreements and those lawyers certified under s 21F.
Not Mr Williams’s lawyer
[38] Mr Jefferson says that up to and during the mediation of 4 February 2011 his clients were the trustees of the Graeme Williams Family Trust, not Mr Williams personally. He owed duties to the trustees in relation to Mrs Williams’s claims against the trust assets (particularly under s 182 of the Family Proceedings Act
1980). Mr Williams had his own lawyer (Mr Hacking) at the mediation.
[39] The starting point is that a lawyer generally owes a duty to his or her client. In Allied Finance and Investments Ltd v Haddow & Co, Cooke J said:14
… the relationship between two solicitors acting for their respective clients does not normally of itself impose a duty of care on one solicitor to the client
13 Benton v Miller & Poulgrain [2005] 1 NZLR 66 (CA).
14 Allied Finance and Investments Ltd v Haddow & Co [1983] NZLR 22 (CA) at 24.
of the other. Normally the relationship is not sufficiently proximate. Each solicitor is entitled to expect that the other party will look to his own solicitor for advice and protection.
[40] Similarly, in Brownie Wills v Shrimpton, Tipping J said:15
Solicitors owe single-minded duties to their clients. Pursuit of those duties must recognise any applicable duty to the Court or any applicable ethical duty of a professional kind. It will not usually be sound as a matter of policy to impose a duty of care on a solicitor in tort in favour of someone who is not the solicitor’s client. The will cases are an obvious exception, but they are in a special category. There can obviously be no conflict of interest between testator and intended beneficiary; each seeks exactly the same outcome.
[41] Notwithstanding that starting point, the courts have recognised cases where a lawyer owes a duty of care to a non-client. In Radisich v Templeton, Randerson J gave examples: certificate cases, disappointed legatees and some other limited exceptions.16
[42] In that case the plaintiff entered into a relationship property agreement with his partner. Each was represented by their own lawyers. The agreement was void because it had not been certified under s 21F of the Property (Relationships) Act. The plaintiff sued both his own lawyer and his partner’s lawyer in negligence. Randerson J held that the partner’s lawyer did not owe any duty of care to the plaintiff.
[43] Notwithstanding that general approach, Mr Williams has an arguable case in the circumstances of his pleaded claim that Mr Jefferson did assume a duty to advise him carefully, even though Mr Williams had his own lawyer. Obiter statements in the Court of Appeal’s decision in Brownie Wills v Shrimpton support Mr Williams.17
In that case a firm of solicitors acted for a company. The company’s bank instructed the solicitors to act on its behalf as well as the company to obtain signatures of directors to a guarantee for the company’s debt. One director, not a client of the firm of solicitors, signed the guarantee without seeking or receiving any advice from the
law firm. The Court of Appeal held that the law firm did not owe any duty of care to
15 Brownie Wills v Shrimpton [1998] 2 NZLR 320 (CA) at 328-329.
16 Radisich v Templeton [2009] 3 NZLR 276 (HC) at [22]-[23].
17 Above n 15.
the director, a non-client, but its judgments indicate the circumstances in which the law firm might have come under a duty of care to advise the director. Blanchard J said.18
A plaintiff who sues in tort alleging economic loss arising from negligent advice given to the plaintiff by the defendant, including a failure to give advice, needs to prove actual reliance upon the defendant’s advice or that the absence of advice from the defendant led the plaintiff to believe it was safe to proceed. Of greater importance in this case, the plaintiff must also show that it was reasonably foreseeable in the circumstances that the plaintiff would rely on the defendant as adviser in the way and to the extent that he did; and that it was accordingly reasonable for the plaintiff to do so. Whether that was so in turn depends upon whether the reliance was induced by the conduct of the defendant in assuming or appearing to assume responsibility for advising the plaintiff. Foreseeable reliance is thus an element in proximity.
Tipping J said:19
And:20
The fundamental starting point in the present case is that there was no contract of retainer between Mr Wills and Mr Shrimpton. None was alleged, let alone established. Thus Mr Wills assumed no liability in contract to Mr Shrimpton in relation to the execution of the guarantee. Yet it is said he owed him a duty in tort. The question is not one of concurrent duties, but rather why, when no contractual duty was undertaken, it would nevertheless be fair, just and reasonable to impose an equivalent duty in tort. If a solicitor chooses to give advice on a business occasion and reliance is foreseeably placed on that advice, the solicitor is deemed to have assumed responsibility for getting the advice right. Any failure to give a sufficient explanation following such assumption of responsibility will constitute a breach of duty. But where no advice has been given, there must be some other basis for holding that the solicitor has assumed a responsibility to advise. In the absence of any indication by Mr Shrimpton that he was relying on Mr Wills, and an acceptance of responsibility to advise [sic] by Mr Wills, there can be no foundation whatever of finding a fiduciary relationship.
If there is a solicitor involved in a transaction, it is not uncommon for the participants to blame the solicitor if something goes wrong. In such circumstances, if the party seeking redress from the solicitor is not that solicitor’s client, and the complaint lies in a failure to act or advise, it is necessary to find some clear and principled basis for saying that there was sufficient proximity between solicitor and non-client to raise a duty of care.
Assumption of responsibility is the conventional touchstone upon which the proximity issue is determined in circumstances such as the present. Without an assumption of responsibility to act on the part of the solicitor it is hard to
18 Above n 15, at 324.
19 Above n 15, at 327-328.
20 Above n 15, at 329-330.
see any rationale for finding proximity and thus liability in tort for not acting. Similarly, as a matter of policy, absence of any assumption of responsibility to act will ordinarily lead to a finding of no duty to act.
(Emphasis added)
[44] The following matters support Mr Williams’s arguable case that there was the required proximity and that Mr Jefferson assumed responsibility to him for the advice he gave at the mediation:
(a) The interests of Mr Williams and the Graeme Williams Family Trust were aligned: they were both concerned to resist the claims made by Mrs Williams.
(b)While Mr Williams and the trustees had separate representation, they co-operated in opposing Mrs Williams.
(c) Mr Hacking provided extensive information to Mr Jefferson. The two barristers met to discuss the case. Mr Hacking sent his opinion for Mr Williams to Mr Jefferson who apparently concurred with it.
(d)Mr Williams’s correspondence reflects his understanding that both lawyers were acting together in the interests of himself and the trustees.
(e) The mediation on 4 February 2011 was no mere social occasion. A
serious transaction was being negotiated.
(f) Consistent with the co-operation leading up to the mediation, Mr Williams looked to Mr Jefferson as someone with considerable expertise in relationship property disputes for advice whether he should enter into the second agreement, when he had misgivings as to the competence and advice of his own lawyer.
(g) Mr Jefferson would understand from Mr Williams’s enquiry that
Mr Williams was looking to him for advice.
(h)Had Mr Jefferson been concerned only to protect the interests of the family trustees, he might have refused to answer and instead referred Mr Williams to his own lawyer.
(i)In confirming the advice given by Mr Hacking as a position that Mr Jefferson had come to independently, Mr Jefferson was assuring Mr Williams that it was safe to act on his advice.
[45] There is nothing in these circumstances that weakens Mr Jefferson’s fiduciary duty to his own clients, as their interests were aligned with Mr Williams’s. Unlike the facts in Brownie Wills v Shrimpton, it is arguable that Mr Jefferson did voluntarily assume responsibility for advising Mr Williams correctly. There are no policy issues that count against finding a duty of care. While Mr Jefferson was strictly not Mr Williams’s lawyer, he was very much a part of the team of professional advisors to whom Mr Williams could and did look for guidance.
[46] This analysis is not required for the advice Mr Jefferson gave between 7 and
23 February 2011 leading up to the third agreement. That is because Mr Williams did become Mr Jefferson’s client, as Mr Jefferson recognised when he sent a bill for his advice.
Mr Jefferson not liable because Mr Williams received advice from certifying lawyers
[47] Mr Jefferson says that he cannot be liable to Mr Williams for his advice that led Mr Williams to enter into the agreements, because before signing the agreements, Mr Williams received advice from lawyers who certified under s 21F of the Property (Relationships) Act. The submission was deployed in three ways:
(a) For the reasonable reliance element of the cause of action in negligent misstatement, it was not reasonable for Mr Williams to rely on Mr Jefferson's advice, when he had to receive advice from a certifying lawyer under s 21F.
(b)As a matter of policy, there was no duty of care, given the statutory requirements under s 21F for a valid relationship property agreement.
(c) As a matter of causation at law, a non-certifying lawyer does not cause any loss if the advisee acts on his advice, but another lawyer has certified under s 21F.
It is easier to understand the argument as raising a single principle of law, but one which may be raised at different steps in a claim. In raising the principle in a strike out application, Mr Jefferson’s submission assumes that all other conditions for liability are satisfied.
[48] On the assumed facts the principle can apply to Mr Williams’s claim against Mr Jefferson only if Mr Williams received bad advice from both Mr Jefferson and the certifying lawyer. If Mr Jefferson gave sound advice, but Mr Williams disregarded it and acted on poor advice of the certifying lawyer, Mr Jefferson would not be liable. If Mr Jefferson gave bad advice, but the certifying lawyer gave sound advice, Mr Williams would not have entered into the agreement and there would be no loss. In either of these two cases, on the facts there would not be any claim against Mr Jefferson and it would not be necessary to consider the principle raised here. So the question is: if two lawyers give bad advice to the plaintiff who enters into a bad agreement relying on their advice, is one of the lawyers exempt because the other has given a certificate under s 21F?
[49] The starting point is that concurrent tortfeasors may be liable where there is a coincidence of separate acts giving rise to different causes of action, the combined effect of which caused the loss in issue.21 That includes claims in negligent misstatement.22 Where different advisors give advice in succession about the same matter, the first advisors do not have a defence because the later advisors gave bad
advice. That can be seen in building defects litigation. I take as an example Bonney v Cottle.23 The purchasers of a leaky house sued a range of defendants including the
directors of a building certifying company, two certified building inspectors, the
21 The Koursk [1924] P 140 (CA) at 159-160.
22 Allison v KPMG Peat Marwick [2000] 1 NZLR 560 (CA) at [15].
23 Bonney v Cottle HC Auckland, CIV-2010-404-427, 24 November 2011.
directors of a building inspection company engaged by the vendors (whose report was given to the plaintiffs) and a building inspection company the plaintiffs engaged before buying the property. All were potentially liable in negligent misstatement. While some of the defendants in that case were removed from the proceeding, no defendant raised as a defence that someone else also gave bad advice to the plaintiffs. In building defects litigation, territorial authorities are frequently sued for negligent misstatement in the issue of code compliance certificates under the
Building Act 2004.24 The issue of those certificates does not give a defence to others
who may also be liable for negligent misstatement, such as designers and authors of producer statements.
[50] Territorial authorities sued for the negligent issue of the code compliance certificates are alert to whether purchaser/plaintiffs did obtain pre-purchase reports before buying a property. They apply to join authors of any pre-purchase report for contribution claims under s 17 of the Law Reform Act 1936. If the purchasers have not obtained a pre-purchase report, the authorities run a contributory negligence defence. The territorial authorities do not plead that they are relieved from liability for their own negligence because the plaintiffs did obtain a pre-purchase report.
[51] The fact that one defendant gives advice within a statutory framework, whose purpose is to protect the interests of the advisee, does not change the position. I adapt the car mechanic example used by Lord Devlin in Hedley Byrne & Co Ltd v Heller and Partners Ltd.25 A car has defective brakes. The owner arranges for a mechanic to fix them. The mechanic does not repair the brakes properly and negligently advises the owner that the brakes are in working order. The owner takes the car to a vehicle testing station to obtain a warrant of fitness.26 By mistake the testing station does not spot the brake defect and negligently issues a warrant of fitness. Relying on both the word of the mechanic and the warrant of fitness, the owner drives the vehicle but the brakes fail and the vehicle is damaged. Even though vehicle testing stations operate within a statutory framework under which
they issue warrants of fitness to vehicle owners (statements that the vehicle complies
24 Building Act 2004, ss 91- 95.
25 Hedley Byrne & Co Ltd v Heller and Partners Ltd [1964] AC 456 (HL) at 516.
26 Land Transport Rule: Vehicle Standards Compliance 2002, cl 7, cl 9, cl 10.2(2).
with certain requirements), that régime of inspection and advice does not relieve the mechanic from his liability in tort for carrying out defective repairs and assuring the owner that the brakes worked.
[52] Policy does not give any ground to limit the scope of this duty of care. After all, the purpose of s 21F of the Property (Relationships) Act is to protect the interests of the spouse or partner entering into the relationship property agreement, not the interests of non-certifying legal advisors.
[53] Mr Rzepecky did not cite any authority to show that as a matter of law a non- certifying lawyer has been held exempt from liability, because another lawyer had given a certificate under s 21F. On this aspect, the submission for Mr Jefferson is novel. Although Mr Rzepecky did not cite it, there is an authoritative general dictum that gives some support for his submission. In Caparo Industries plc v Dickman, Lord Oliver said:27
What can be deduced from the Hedley Byrne case, therefore, is that the necessary relationship between the maker of a statement or a giver of advice (the “adviser”) and the recipient who acts in reliance upon it (the “advisee”) may typically be held to exist where (1) the advice is required for a purpose, whether particularly specified or generally described, which is made known, either actually or inferentially, to the advisor at the time when the advice is given; (2) the adviser knows, either actually or inferentially, that his advice will be communicated to the advisee, either specifically or as a member of an ascertainable class, in order that it should be used by the advisee for that purpose; (3) it is known either actually or inferentially, that the advice so communicated is likely to be acted upon by the advisee for that purpose without independent inquiry, and (4) it is so acted upon by the advisee to his detriment. That is not, of course, to suggest that these conditions are either conclusive or exclusive, but merely that the actual decision in the case does not warrant any broader propositions.
(Emphasis added)
Lord Oliver’s third condition, that the advisor knows that the advisee will act on the advice without independent enquiry, is support for Mr Jefferson, because he can argue that because s 21F required Mr Williams to take independent advice, he knew
that his advice would not be acted upon without independent enquiry.
27 Caparo Industries plc v Dickman [1990] 2 AC 605 (HL) at 638.
[54] With great respect there are however difficulties with that part of Lord Oliver’s dictum. It is not clear how he derived the “without independent enquiry” requirement from Hedley Byrne. If anything, Hedley Byrne does not help. Lord Devlin said:28
In my opinion, the appellants in their argument tried to press Donoghue v Stevenson too hard. They asked whether the principle of proximity should not apply as well to words as to deeds. I think it should, but as it is only a general conception it does not get them very far. Then they take the specific proposition laid down by Donoghue v Stevenson and try to apply it literally to a certificate or a banker’s reference. That will not do, for a general conception cannot be applied to pieces of paper in the same way as to articles of commerce or to writers in the same way as to manufacturers. An inquiry into the possibilities of intermediate examination of a certificate will not be fruitful.
Lord Pearce said:29
The reason for some divergence between the law of negligence in word and that of negligence in act is clear. Negligence in word creates problems different from those of negligence in act. Words are more volatile than deeds. They travel fast and far afield. They are used without being expended and take effect in combination with innumerable facts and other words. Yet they are dangerous and can cause vast financial damage. How far they are relied on unchecked (by analogy with there being no probability of intermediate inspection – see Grant v Australian Knitting Mills Ltd) must in many cases be a matter of doubt and difficulty.
The other speeches in Hedley Byrne do not deal with the matter at all.
[55] In Caparo Industries counsel for the unsuccessful respondent submitted on the intermediate examination principle under Donoghue v Stevenson30 to argue for proximity where there cannot realistically be any intervening examination between a defendant’s work and the plaintiff’s use of that work.31 In that case, there was no possibility of intervening examination: the defendants had audited a company’s accounts, but the shareholder plaintiff was in no position to assess the accuracy of their work. That is different from arguing for no proximity on the basis of independent inquiry. The House of Lords gave other reasons for finding that the
auditors did not owe a duty of care to the plaintiff shareholder. No other speech in
28 Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 at 525.
29 At 534.
30 Donoghue v Stevenson [1932] AC 562 (HL) at 599.
31 Caparo Industries, above n 27, at 612.
Caparo referred to any requirement for knowledge of reliance without an independent enquiry. Lord Oliver did not elaborate on the content of “without independent enquiry”. He did hedge matters somewhat:
“The necessary relationship may …typically be held to exist…” and
“That is not, of course, to suggest that these conditions are either conclusive
or exclusive…”
[56] In James McNaughton Paper Group Ltd v Hicks Anderson & Co,32 the English Court of Appeal held that accountants who had prepared draft accounts for a company which was the subject of a takeover did not owe any duty of care to the company making the takeover bid. One reason was that the accountants could not be expected to know that the plaintiff would rely on the accounts without further enquiry. It was only one of a number of factors counting against the plaintiff. The Court of Appeal does not appear to have treated the knowledge of no further enquiry as a stand-alone condition to be satisfied. Aside from that, I am not aware of other cases on knowledge of no further inquiry.
[57] As Lord Oliver’s dictum in Caparo was obiter and not supported by the other judgments in that case, it may be thought not to carry much weight. It cannot be dismissed so easily. New Zealand appellate courts have quoted him: North Shore City Council v Attorney-General (The Grange), Carter Holt Harvey Ltd v Ministry of Education and Invercargill City Council v Southland Indoor Leisure Centre
Charitable Trust.33 In each of these cases, the appellate courts were stating the test
for proximity in negligent misstatement claims in general terms without addressing in particular whether the advisor knew that the advice was to be acted on without independent enquiry. The recitals of Lord Oliver’s dictum were accordingly obiter. Nevertheless, these courts would not have stated the requirement unless they considered it to be the law. At first instance it cannot be disregarded. All the same, there is no guidance from appellate decisions as to the specific content of Lord
Oliver’s requirement.
32 James McNaughton Paper Group Ltd v Hicks Anderson & Co [1991] 2 QB 113 (CA), decided only five months after Caparo.
33 North Shore City Council v Attorney-General (The Grange) [2012] NZSC 49, [2012] 3 NZLR
341 at [189]; Carter Holt Harvey Ltd v Ministry of Education [2016] NZSC 95, [2017] 1 NZLR
78 at [80]; Invercargill City Council v Southland Indoor Leisure Centre Charitable Trust [2017] NZCA 68 at [85].
[58] His requirement for the advisor to know that the advisee is likely to act on the advice without independent inquiry has its parallel in the question of intermediate examination in negligence claims against manufacturers and repairers. In Donoghue v Stevenson Lord Atkin said:34
… by Scots and English law alike a manufacturer of products, which he sells in such a form as to show that he intends them to reach the ultimate consumer in the form in which they left him with no reasonable possibility of intermediate examination, and with the knowledge that the absence of reasonable care in the preparation or putting up of the products will result in an injury to the consumer’s life or property, owes a duty to the consumer to take that reasonable care.
(Emphasis added)
[59] Jull v Wilson & Horton Ltd settled the New Zealand approach where a defendant alleges a reasonable expectation of intermediate inspection. Richmond J said:35
In these circumstances I think that the authorities (other than Cathcart v Hull (supra)) should be regarded as deciding no more than the negative proposition that proximity will not be destroyed by a possibility of examination falling short of a “reasonable probability”. I do not think that any of these cases oblige me to adopt the converse and affirmative proposition that proximity will be destroyed if there is a reasonable probability of intermediate examination. I therefore proceed to consider whether the test of reasonable probability is an adequate one to exclude a plaintiff from the “neighbour” category.
And:
In a sentence which has often been quoted Professor Goodhart said:
It is difficult to see why a person who has created a dangerous situation should be held not liable on the ground that it has not been abated by another whose duty it was to do so (57 Law Quarterly Review 163).
In my opinion such a person cannot shelter behind a reasonable expectation of intermediate inspection unless the expectation was strong enough to justify him in regarding the contemplated inspection as an adequate safeguard to persons who might otherwise suffer harm.
The Court of Appeal has applied that test in building defects cases: Bowen v
Paramount Builders (Hamilton) Ltd,36 Stieller v Porirua City Council.37
34 Donoghue, above n 30, per Lord Atkin at 599.
35 Jull v Wilson & Horton Ltd [1968] NZLR 88 (SC) at 96, 97.
[60] If knowledge of absence of independent enquiry under Lord Oliver’s dictum is part of New Zealand law as to negligent misstatement, it makes sense for the knowledge requirement to be the same as required for intermediate examination under Donoghue v Stevenson. After all defendants are often sued both in negligence and negligent misstatement, as in building defects cases. It would be unnecessarily complex to apply a different knowledge test for each cause of action.
[61] The point reached now is that at trial Mr Jefferson may be able to argue that the test for proximity stated by Lord Oliver in Caparo is sound law in New Zealand and that he could confidently expect Mr Williams to make further enquiry, because some lawyer other than Mr Jefferson would give Mr Williams independent advice and certify accordingly under s 21F of the Property (Relationships) Act. But I cannot say on a strike-out application that such a defence is bound to succeed. The law is not clearly established. While there is obiter appellate support for Lord Oliver’s test, no court has specifically examined knowledge of absence of independent enquiry in the context of a s 21A agreement. The content of any such defence has still to be fixed. There are arguments of principle and policy that require consideration: there does not seem to any sound reason for excusing one bad advisor, because the plaintiff also relies on another bad advisor; and proper standards may be maintained if professionals giving advice are required to exercise due care, even if their advice may be subject to independent scrutiny.
[62] On the pleaded facts, it is not certain that the defence would succeed, even if it is sound in law. As to Mr Jefferson’s advice at the mediation on 4 February 2011, the facts are not within the paradigm contemplated by Lord Oliver: advice by first advisor, followed by enquiry by independent second adviser, followed by action in purported reliance. Mr Williams’s case is that he received advice from Mr Hacking who ultimately certified the second agreement. But Mr Williams had doubts as to that advice. He looked to Mr Jefferson for advice whether he should sign the agreement. Mr Jefferson, in effect, became the independent enquiry for
Mr Hacking’s advice. Mr Jefferson told Mr Williams that he had reached his view
36 Bowen v Paramount Builders (Hamilton) Ltd [1977] 1 NZLR 394 (CA).
37 Stieller v Porirua City Council [1986] 1 NZLR 84 (CA).
on Mr Williams’s case independently. Mr Jefferson advice went directly to whether
Mr Williams should accept Mr Hacking’s advice whether to sign the agreement.
[63] As to the agreement signed on 28 February 2011, it is arguable that Mr Rishworth’s advice was not independent of Mr Jefferson’s, because Mr Jefferson contacted Mr Rishworth to explain why it was in Mr Williams’s interests to sign the agreement. Mr Rishworth was likely to defer to the advice of a QC with specialist knowledge of relationship property law.
[64] Given the pleaded arguable facts and the uncertainty as to the law, it would not be safe to strike out any of the causes of action against Mr Jefferson on the basis that other lawyers gave advice and certified under s 21F.
A causation argument relating to the agreement of 28 February 2011
[65] Mr Rzepecky submitted that Mr Jefferson had not caused Mr Williams to enter into the agreement on 28 February 2011. Mr Jefferson’s advice to Mr Williams did no more than provide Mr Williams with the opportunity to attend Mr Rishworth’s office, but Mr Williams’s decision to enter into the agreement was a result only of Mr Rishworth’s advice, not Mr Jefferson’s. That is really a submission as to the facts and can only be determined at trial. Insofar as it goes to the law, it does not allow for the possibility that Mr Williams could take account of the advice of both Mr Jefferson and Mr Rishworth. Further, documents in the agreed bundle show that Mr Jefferson communicated with Mr Rishworth to influence his advice to Mr Williams.
Cross notices
[66] After the hearing Mr Hacking served a cross-claim against the second defendants and Mr Jefferson. Counsel submitted as to the effect of the cross-claims.
[67] The cross-claim is not relevant to this decision. The cross-claim seeks contribution against Mr Jefferson as concurrent tortfeasor. If I had found for Mr Jefferson he would have been removed from the proceeding and the cross-claim
would languish. I have decided the strike-out application on the basis that Mr Williams does have tenable causes of action against Mr Jefferson, without regard to any cross-claims.
Outcome
[68] On the basis of Mr Williams’s pleadings, which are assumed to be capable of proof, and the agreed bundle of documents, I have found that Mr Williams does have arguable claims against Mr Jefferson. The merits of the claims have still to be heard. This decision does not find that Mr Jefferson was negligent in fact or that he did breach any professional duty to Mr Williams.
[69] I make the following orders:
(a) The strike-out application is dismissed.
(b)By 26 May 2017, Mr Jefferson is to file and serve a statement of defence to Mr Williams’s statement of claim and a statement of defence to any statements of claim by other defendants.
(c) The Registrar is to arrange a first case management conference.
Before the conference, counsel are to confer as to amended pleadings, discovery, exchange of evidence and anticipated hearing times.
(d) Mr Jefferson is to pay Mr Williams’s costs on the application. If the
parties cannot agree costs, memoranda may be filed.
……………………………………
Associate Judge R M Bell
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