[2013] NZLCRO 7

LCRO 109/2011

Concerning an application for review pursuant to section 193 of the Lawyers and Conveyancers Act 2006

Concerning a determination of Auckland Standards Committee 3


Managing Partner of CCM

TT as the Managing Partner of CCJ

The Auckland Standards Committee 3

The New Zealand Law Society

The names and indentifying details of the parties in this decision have been changed.

Application for review of a determination by Auckland Standards Committee to take no further action in respect of a complaint that the practitioner should not have encouraged the applicant (the complainant) to pursue proceedings, and the complainant would not have done so had he been properly advised as to the merits of claim at the practitioner — outset did nothing to dissuade complainant from pursuing action and did not provide any form of report or opinion in which causes of action and potential remedies were critically examined — when shortcomings in pleadings and evidence were exposed, practitioner persuaded complainant to settle for a sum substantially less than applicant believed he could expect — whether Standards Committee erred in considering practitioner's conduct was not negligent or incompetent to such a degree as to reflect on practitioner's fitness to practice and did not give rise to professional shortcomings under Lawyers and Conveyancers Act 2008.


TR has applied for a review of a determination by Auckland Standards Committee 3 in respect of a complaint by him and his wife (although the Standards Committee determination referred to TR only as the complainant) about NI.


The decision of the Standards Committee was to take no further action in respect of the complaint about NI's conduct in pursuing a claim on their behalf against CCI Limited (CCI).


The core of TR and TS's complaint against NI is that they should not have been encouraged or advised to pursue the proceedings against CCI, and would not have done so if they had been properly advised as to the merits of their claim from the outset.


I have set out in the following paragraphs the background facts to TR and TS's complaint in some detail. This is necessary to ensure that the relevant facts which I have taken into account in completing this review are recorded.


TR and TS, through their family trust, were engaged in the development of a property which involved the extension and renovation of an existing house and a subdivision of the site. They then intended to construct a new house on the subdivided site. Property development was the sole activity in which TR and TS were engaged at the time.


To obtain the relevant resource consents from the Council, it was necessary to submit a report from a soil consultant to establish whether or not the site was contaminated by pesticides, as the property was in an area of Henderson where large scale horticultural activity had occurred in the past.


TR and TS engaged CCI to carry out soil sampling and to provide that report. The reports provided by the firm were that there was a level of contamination which would not be accepted by Council, and that remediation was necessary. This would clearly increase the costs of the development project.


TR and TS were concerned at the methodology utilised by the firm in its testing program and had doubts as to the correctness of the recommendations in the reports. They therefore sought a review of the report from another firm of consultants whose opinion was that CCI had been negligent in their methodology and in the advice provided.


In September 2007 TR and TS approached CCJ for advice as to their remedies against CCI. They spoke to TT by phone and then delivered all of the documentation relevant to the matter.


At the same time they engaged in correspondence with CCI who in a letter dated 19 October 2007 rejected the review of their report as incomplete, biased, factually incorrect and false in its conclusions. They stood by their report and recommendations but nevertheless waived a portion of their fee in response to the complaints. In addition, they suggested that one option available to TR and TS was to engage other consultants in connection with the development.


TT referred the matter to NI who reviewed the material and in a file note dated 5 October 2007 stated in the first paragraph “[t]his is a breach of contract and professional negligence claim.”


In the same file note, NI identified the likely claims to be for: -

  • a) Recovery of CCI's fees ($2,382.54)

  • b) Loss of profits arising from the delay in completion of the development calculated at 9% per day on $500,000.00 for the period from 8 February 2007 to 14 July 2007 ($19,23288); and

  • c) General damages for the period 5 May 2007 to 11 June 2007 ($7,800.00).

It would seem that these figures had been calculated and provided by TR and TS.


The file note then included a heading: “Do our clients have a claim?” and continued:

It appears they do. In the in-house Counsel letter dated 14.06.07, they deny all responsibility and the “failure to take in [sic] due care and perform due diligence”. Ironically, this is what they failed to do by my two hour review of the paperwork.


He then recorded the proposed strategy in respect of the claim in the following way:

We will have a meeting with both [TR and TS] next week and set out where we shall head with this claim. I consider the best approach is to draft up a quick Statement of Claim to lodge in the District Court here in [Auckland] and attach that to a letter to in-house counsel. Depending on our clients' views on whether their claim can be elevated to a higher status (and the quantum increased) we should follow this action and attempt to gain a settlement out of this company for between $15,000.00 and $20,000.00. We should also tell them to notify their solicitors in our initial letter.


NI then met with TR and TS on 11 October 2007. He made a comprehensive file note of that meeting which included the following paragraphs: 1

  • 1. At first [TT] joined us, he explained the situation and said that he will always be the supervisor in charge, but he will leave it up to me to take instructions and to file a claim for now…

  • 6. Our instructions are that our client is happy to go to Court. They will do so based on principle and to stop [CCI] from being negligent to others in the community. They are rather wealthy and do not need the money and can afford to go to Court.

  • 7. I explained the litigation risks and the pitfalls in going to a hearing and I let them know my recommendation is that we file proceedings, after attaching a draft Statement of Claim to a Calderbank letter seeking a substantial settlement figure otherwise; we will take the matter to Court. Given [CCI] are a worldwide network of offices and have a professional name to protect, it is my prediction that they will likely fold to any pressure we have on them to settle the claim.

  • 8. However, there is always the risk that they won't and will want to bring it to trial…

  • 13. The major damages to this cause here is the time frame of the development has been delayed substantially. The designers working on the extension now and the plans are two to three months behind. The house just about could have been built by now if the Resource Application was made back in March. The report and recommendations should have taken two weeks and be finished by mid to late March.

  • 14. The fact that the retesting took place meant that this timeframe couldn't be met…

  • 16. [TR] has worked out that they expect $100,000.00 profit from this development and that this six month delay has cost them upwards from $19,000.00 (at 9% per annum).

  • 17. Overall their damages claim will include stress and inconvenience of about $7,500.00 (which I told them was realistic) bringing up to $30,000.00.

Legal Costs
  • 18. I didn't give them a quote and told them I couldn't give them a quote, but I would have thought preparing for a District Court one day trial with three or four witnesses would cost in excess of $15,000.00. To bring the matter to the level of attempting to settle it pre proceedings would be about $5,000.00 in itself.


NI then proceeded to draft the Statement of Claim with assistance from TU, a consultant to the firm. On 27 March 2008 the draft proceedings were sent to CCI under cover of a letter advising that TR and TS were “open to a sensible settlement offer from your company to avoid litigation”. He advised that he had instructions to file the Statement of Claim should there be no response within 14 days of the letter.


The company responded by letter dated 4 April 2008 and denied liability. The firm's legal counsel also drew NI's attention to the provisions of its contract with TR and TS in which liability was limited to five times fees paid. She also advised that the firm would vigorously defend the matter and would be seeking...

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