The appellate courts have confirmed the test for liability of lawyers who negligently advise on property transactions.
There must be clear proof the loss would have not been incurred had the lawyer given proper or competent advice, according to Wilson Harle partner Gary Hughes and solicitor Gracey Campbell.
The pair have prepared a report discussing two recent cases – Tauranga Law v Appleton and Blackwell v Chick – in which the courts focused primarily on causation of the loss in situations where negligence has already been proven.
“New Zealand courts have affirmed that a high threshold should be maintained in professional negligence claims by clients – there must be a material connection between the lawyer's breach of duty and the loss incurred,” their report said.
“Disgruntled clients will have to show that, had they been properly advised, they would have changed their course of action.”
In Tauranga Law v Appleton the Supreme Court ruled that because the client would have gone ahead with the decision regardless of the lawyers’ advice, the firm was not liable for the client’s lost deposit, even though it was found to have breached its duties.
The Court of Appeal relied on the Supreme Court’s Appleton decision to look more closely into the causation test in Blackwell v Chick.
“The lawyers’ negligence - duty of care - side of things isn’t really what comes up in the cases we talked about particularly, because in both cases it was accepted that the lawyers had not given the advice they should have,” Campbell told NZLawyer.
“In these cases it was whether the negligence had actually caused the loss, and particularly the Blackwell decision sets out really nicely the test – that you are looking for a real and substantial connection between the failure to provide the advice and the loss,” she said.
“If a client is determined to proceed with a bad or high risk transaction, part of the test is, to avoid being negligent, a lawyer has to strive really quite hard to point out and reinforce risks to a client,” Hughes said.
“But if they’ve done that, and the client is determined to go ahead anyway, these cases reinforce that the client would find it quite hard to say the lawyer would be liable for the loss.”
As a development, last Friday the Supreme Court granted leave to appeal from the Court of Appeal decision on the issue of whether the negligence of the lawyers caused the appellants’ loss Blackwell v Chick, Campbell said.
So the highest court will have another bite at this yet, but “it will be some months before we get to see the Supreme Court’s decision on this point.”