Jung v Templeton HC Auckland CIV-2007-404-005383 [2009] NZHC 2064; [2010] 2 NZLR 255 (5 November 2009)

	Home \| Databases \| WorldLII \| Search \| Feedback High Court of New Zealand Decisions

This judgment was delivered by me on 5 November 2009 at 2.30 p.m. pursuant to Rule 11.5 of the

[1] Dr Jung and his wife bought a leaky home. They engaged the defendant, a barrister, to take proceedings in order to recover their losses. The defendant issued proceedings. A fixture was allocated for the claim. In March 2007, approximately four months before the fixture, the parties went to mediation. At the mediation Dr Jung agreed to settle the plaintiffs’ claim for $55,000. Shortly after the mediation, and on further reflection, the plaintiffs considered they should not have settled. The plaintiffs now sue the defendant. They allege that he breached the duty he owed to them as counsel to give proper and full advice, particularly at the mediation.

[2] The plaintiff Dylan Jung and his wife were born overseas but have lived in New Zealand for some time. Dr Jung, who gave evidence on behalf of both plaintiffs, has lived in New Zealand since 1994. He is a New Zealand citizen. He holds the degrees of Master of Engineering and Doctor of Philosophy from the University of Auckland. He has presented papers at conferences overseas.

[3] On 27 January 2003 the plaintiffs entered a contract to purchase Unit 2 at 5b Cleveland Road, Parnell for $625,000. The contract contained a special condition of sale providing them with a right of termination by notice by 4.00 p.m. on 4 February

2003 should they “in good faith be dissatisfied with any matter contained in [a report from a building inspector].”

[4] The plaintiffs instructed Mr Chris Underwood trading as Able Inspections to prepare the building report. Mr Underwood provided a report dated 29 January

2003. Although the report stated generally in the introduction “The unit is in good condition” it went on to describe remedial work to be considered. The remedial work then identified occupied the balance of the report and ran to two and a half pages.

[5] The plaintiffs spoke to the vendor about the report and tried to negotiate a reduction in price. The vendor declined. She provided evidence that a builder, Mr

Mulligan, had carried out certain remedial work at the unit before she had put it on the market.

[6] The plaintiffs instructed their solicitor at the time, Mr Ellis, to confirm the contract as unconditional and to bring the settlement date forward to 7 February to coincide with the settlement of the sale of the plaintiffs’ existing property.

[7] Within a few weeks after settlement the plaintiffs were dismayed to notice their unit at Cleveland Road leaked after rain. The plaintiffs’ unit is an upstairs unit. The owner of the downstairs unit Mr Thomas was also suffering similar problems with leaks.

[8] The plaintiffs and Mr Thomas decided to join forces. They first went to the Weathertight Homes Service. An independent assessor appointed by the Service, Mr O’Hagan, calculated the cost of repairing the plaintiffs’ unit at $125,000 plus GST, a total of $140,625. When the Weathertight Homes Services did not lead to a satisfactory resolution the plaintiffs and Mr Thomas instructed the defendant through Mr Ganda, a solicitor. Mr Thomas suggested the defendant as he had used him in the past.

[9] As the developer and original builder had gone into liquidation, the proceedings were initially issued only against the Auckland City Council. The plaintiffs and Mr Thomas together claimed $450,000. Later the claim was amended to join the body corporate as a plaintiff and Mr Underwood as an additional defendant. Mr Underwood in turn joined Mr Mulligan. The proceeding was allocated a fixture for seven days commencing 23 July 2007.

[10] The parties agreed to try to resolve the claim at mediation before the fixture. The mediation was conducted by Mr Sowerby, an experienced mediator. It was held on 19 March 2007. The defendant attended the mediation with the plaintiffs and Mr Thomas. The body corporate was represented by counsel Mr Baker. Mr Heaney and Mr Greenwood from Heaney and Co appeared for the Council. They were also accompanied by a building expert, Mr Trevor Jones. Mr Underwood appeared on

[11] To support their claim for damages at the mediation, the plaintiffs and Mr Thomas had obtained updated estimates from Astor Construction Limited for the cost of repairs to their units. Astor estimated $247,267 for the plaintiffs and

[12] The mediation commenced at 9.30 a.m. Dr Jung made an opening statement on behalf of the plaintiffs. He emphasised that he had done nothing wrong, and that the building report said that the unit was in good condition. The Council, supported by Mr Jones, argued that the plaintiffs’ and Mr Thomas’ claim for the repair cost was significantly overstated. More fundamentally, the Council took a hard line in response to the plaintiffs’ claim. The Council’s lawyers said the plaintiffs should not have proceeded with the purchase in light of the building report. The Council argued that it could have no liability to the plaintiffs because their claim would effectively be extinguished for contributory negligence. That point was debated between Mr Heaney and Mr Templeton at some length.

[13] During the course of the mediation the defendants made a number of offers, primarily directed at settling Mr Thomas’ claim. Mr Thomas was not interested in settling his claim without the plaintiffs also receiving something as he needed the plaintiffs to repair their unit, which was above his to ensure the water tightness of his own. Late in the piece, in the early evening, an offer of $110,000 was made to the plaintiffs and Mr Thomas on behalf of all defendants jointly. The parties and the mediator acknowledged that it was the last and best offer that was going to be made. Dr Jung and Mr Thomas agreed to split the $110,000 50:50 so that each received

$55,000. They agreed to settle on that basis. A settlement agreement was drawn up and completed. As part of the settlement the plaintiffs and Mr Thomas agreed to use the payment to repair their units and agreed that they would complete the repairs within four years.

[14] Dr Jung said that a short time after the mediation he realised that agreeing to the settlement was a mistake. He blamed the defendant for that. The plaintiffs then issued these proceedings against the defendant.

[15] The plaintiffs claim that in his preparation for the mediation, in negotiating during the course of the mediation conference, and in advising Dr Jung to sign the compromise settlement agreement (or by not advising him not to sign it), the defendant breached the obligations he owed the plaintiffs at general law and under s 28 of the Consumer Guarantees Act 1993 by not performing carefully and skilfully the legal services he provided to the plaintiffs.

a) the defendant ought either to have refused to permit the conference to continue when the Council raised the contributory negligence point based on the Able report when that had not been pleaded by the Council, or ought to have responded to the Council and advised Dr Jung that the Council’s point had no substance because the plaintiffs were not aware of the serious defects subsequently discovered that were the basis of their claim and they were entitled to rely on the Able report that the unit was in good condition;

b) the plaintiffs’ repair costs and those of Mr Thomas in the circumstances of the claim differed substantially and the defendant ought not to have advised Dr Jung to accept a written agreement which did not state the share of the funds to which the plaintiffs were entitled or that made the plaintiffs jointly liable with Mr Thomas for the cost of all repairs;

c) the defendant ought to have explored with Dr Jung the question of whether the plaintiffs were able to procure the balance moneys needed

to carry out all the repair work to their unit within the time limit of four years.

[17] During the course of his opening submissions Mr Dugdale confirmed that the plaintiffs accept that neither b) nor c) were causative of loss. The focus of the plaintiffs’ claim was on a) and particularly the defendant’s advice regarding the plaintiffs’ liability for contributory negligence.

[18] In the pleaded claim the plaintiffs claim $375,000 being the sum of $430,000 claimed by both the plaintiffs and Mr Thomas in the proceedings against the Council less the sum of $55,000 received by way of settlement. However, in closing submissions Mr Dugdale confirmed the plaintiffs’ claim was to be $204,000 made

Plaintiffs’ claim	$310,000
Less settlement	$55,000
which leaves a balance of	$255,000
less a 20 percent discount to reflect the nature of the plaintiffs’ claim as a claim as for loss of chance	$51,000
	$204,000

[19] Although nothing turns on the point given the conclusions I have reached, the

20 percent discount should have been applied first before deducting the payment received, leading to a further reduction in the value of the claim to $193,000.

[20] Evidence for the plaintiffs was given by Dr Jung, Mr Williams, who is a building consultant and gave evidence confirming the basis of the plaintiffs’ claim against the Council, Mr Ellis, who was the solicitor for the plaintiffs when they purchased the unit and Mr Shorrock. Mr Shorrock provided an updated estimate of the cost of repairs.

[21] The defendant gave evidence himself and called evidence from Mr O’Hagan, Mr Baker and Mr Thomas (who were both at the mediation), and Mr Keyte QC who gave evidence of the general standards of a reasonable counsel in these situations.

[22] As noted, the plaintiffs’ claim was focused on the allegation set out at [16] a). In his succinct way, Mr Dugdale identified the issue in this case as the correctness or otherwise of the plaintiffs’ argument that there was no risk the Court would find the plaintiffs had acted unreasonably (and were thus contributory negligent) such as to warrant the defendant encouraging the plaintiffs to agree to forego most of their claim. Mr Dugdale accepted that if the point was decided against the plaintiffs their case must fail.

[23] Although resolution of that issue is effectively determined by a finding of whether the plaintiffs faced a risk of reduction of their claim for contributory negligence, it is helpful to first consider the obligations on the defendant in the particular circumstances of this case.

[24] The plaintiffs’ claim is in both negligence and for breach of s 28 of the Consumer Guarantees Act 1993. For present purposes there is no difference in the standard to apply: Gault on Commercial Law (1994-2008) – at 28.04.

The standard of care to be applied in negligence actions against an advocate is the same as that applicable to any other skilled professional who has to work in an environment where decisions and exercises of judgment have to be made in often difficult and time constrained circumstances. It requires a plaintiff to show that the error was one which no reasonably competent member of the relevant profession would have made.

[26] An error of judgment or even getting it wrong will not inevitably lead to a finding that a barrister has been negligent: Saif Ali & Another v Sydney Mitchell & Co (a Firm) and Others [1980] AC 198 per Lord Salmon at 231:

The barrister is under no duty to be right; he is only under a duty to exercise reasonable care and competence. Lawyers are often faced with finely balanced problems. Diametrically opposite views may and not infrequently are taken by barristers and indeed by judges, each of whom has exercised reasonable, and sometimes far more than reasonable, care and competence. The fact that one of them turns out to be wrong certainly does not mean that he has been negligent.

[27] In relation to advice concerning settlement, the same general principles apply, even though the barrister is acting outside the pressure occasioned by the need to make an immediate decision in the courtroom. The general principle that settlements are to be encouraged and that advice regarding settlement involves a judgment was recognised in Kelley v Corston [1998] QB 686:

Settlements of litigation are to be encouraged, and as early as possible. ... One specific feature relating to all settlements needs attention. Every lawyer in practice and every judge knows that there is no such thing as the case which is bound to succeed. Experience shows that cases with the brightest prospects of success somehow fail and it is difficult to underestimate the value of the certainty provided by a settlement as opposed to the continuing risks of litigation through to judgment. This factor alone should militate against successful proceedings based on criticism of advice leading to a settlement.

[28] In Griffin v Kingsmill [2001] Lloyd’s Rep PN 716, a case referred to by Mr

63. The circumstances in which barristers and solicitors have to exercise their judgement vary enormously. On the one hand decisions have frequently to be made in court with little time for mature consideration or discussion. That is a situation familiar to any advocate. It is one in which it may be very difficult to categorise the advocate’s decision as negligent even if later events provide it to have been wrong. Or in a very complex case it may be that in advising settlement too much weight is given to some factors and not enough to others. Here again a difficult judgement has to be made; and unless the advice was blatantly wrong, i.e. such as no competent and experienced practitioner would give it, it cannot be impugned and the prospects of successfully doing so would seem very slight.

[29] It cannot be said the issues were particularly complex in the present case. In Griffin’s case the Court of Appeal also emphasised that where there was time for consideration the advice should reflect that consideration.

[30] Nevertheless, a client’s decision to settle at mediation and a barrister’s (or solicitor’s) advice regarding settlement at mediation or otherwise will involve a variety of considerations apart from the strict legal position. As was noted by the New South Wales Court of Appeal in the case of Studer v Boettcher [2000] NSWCA

A lawyer’s advice to a client to make or reject an available compromise is commonly not concerned only with the client’s rights, obligations and hopes. Usually, other matters must also be considered. For example, it is often impossible to predict the outcome of litigation with a high degree of confidence. Disagreements on the law occur even in the High Court. An apparently strong case can be lost if evidence is not accepted, and it is often difficult to forecast how a witness will act in the witness-box. Many steps in the curial process involve value judgments, discretionary decisions and other subjective determinations which are inherently unpredictable. Even well- organized, efficient courts cannot routinely produce quick decisions, and appeals further delay finality. Factors personal to a client and any inequality between the client and other parties to the dispute are also potentially material. Litigation is highly stressful for most people and notoriously expensive. An obligation on a litigant to pay the costs of another party in addition to his or her own costs can be financially ruinous. Further, time spent by parties and witnesses in connection with litigation cannot be devoted to other, productive activities. Consideration of a range of competing factors such as these can reasonably lead rational people to different conclusions concerning the best course to follow. Advice to compromise based on a variety of considerations is not negligent if a person exercising and professing to have a legal practitioner’s special skills could reasonably have given that advice.

[31] The recent decision of the House of Lords in Moy v Pettman Smith [2005] 1

All ER 903 is also instructive as to the extent of the advice counsel must give when the issue of settlement is considered.

[32] Moy brought proceedings for medical negligence against a health authority. The authority admitted liability but denied its negligence had caused any loss or damage. At a pre-trial review leave was given for each party to adduce evidence of a medical expert, provided the report was disclosed by a specific date. Evidence not so disclosed would be inadmissible without leave. The deadline expired without the solicitors having obtained the medical report. Six weeks later the solicitors received

a favourable medical report. The claimant sought to vacate the trial date and to adduce further evidence. The applications were dismissed. The authority paid

£150,000 into Court. The claimant, who had been advised by counsel that the floor of his claim was £200,000, did not accept the payment in. At the door of court, the authority advised counsel the offer of £150,000 was open until the judge entered court. Counsel told the claimant she was hopeful the judge would admit the medical report, which would support the claim for £200,000 or more. She advised him he would be better to proceed with the action rather than accept the £150,000. Her advice was based on her view, which she did not expressly spell out to the claimant, that there was a slightly better than even chance the judge would give leave to adduce the medical evidence, and that the claimant would have the possibility of a claim in negligence against his solicitors if the application were unsuccessful. She also considered the possibility of accepting the offer and suing the solicitors for the balance of the claim, but regarded that as the course of last resort and did not discuss it with the claimant.

[33] After preliminary discussions in Court, it became apparent the application to adduce the medical report was unlikely to succeed. There was a short adjournment during which the authority stated it was willing to settle at £120,000, less the costs incurred from the date of the initial payment into Court. Counsel advised the claimant to accept the reduced offer. He did so and subsequently brought proceedings for negligence against the solicitors. Counsel was later joined on the ground that she had been negligent in not advising him to accept the £150,000. The judge gave judgment against the solicitors for £210,000, but held that counsel had not been negligent. On appeal the majority of the Court of Appeal accepted the Judge's finding that counsel had not been negligent in her assessment of the prospects of success of the application to adduce the medical evidence, but held she had been negligent in failing to give the claimant sufficiently detailed advice, and was therefore liable for a proportion of the damages payable to the claimant.

[34] The majority of the Court of Appeal effectively held that by failing to tell Mr Moy that her assessment of the chances of getting the evidence in the report admitted was 50:50, counsel was negligent.

[35] Counsel's appeal to the House of Lords was allowed. Their Lordships did not accept counsel was required to give advice as to the prospects of success at that level of detail required by the majority of the Court of Appeal. Lord Hope said:

[21] ... the question whether the advice was wrong and negligently wrong has to be tested in the light of the facts that were known when the advice was given. It is difficult to see why the advice can be said to have been negligently wrong if the assessment on which it was based was not negligent. Moreover it is the substance of the advice, not the precise wording used to convey it, that needs to be examined in order to judge whether it was negligent. The significance of Ms Perry's failure to tell Mr Moy that the prospects of getting the evidence in were 50:50 has to be measured against what she did tell him, which was that she was hopeful that the judge would admit the evidence.

[22] I am reluctant to differ from the views expressed by the judges in the Court of Appeal. But it does seem to me, with great respect, that they judged her actions too harshly when account is taken of all the circumstances. Their decision might have been supportable if it had been based on some reliable evidence to the effect that the advice which she gave was of a kind which no barrister of her standing and experience would have given in the circumstances. But, for reasons that are not difficult to understand, there was no such evidence.

Lord Carswell, after referring with approval to the decision of Anderson J in the

Since the decision in the Arthur JS Hall case advocates have been liable to their clients for negligence in the same way as other professional persons. It would not be in the interests of those clients if they were compelled by the effect of over-prescriptive decisions to adopt a practice of defensive advocacy in the conduct of litigation or advising litigants about the course to be taken. I would indorse the view expressed by Brooke LJ in the Court of Appeal, to which I have already referred, that it would be unfortunate if they felt that they had to hedge their opinions about with qualifications. It would be equally unfortunate if another effect of the same syndrome were to be an abdication of responsibility for decisions relating to the conduct of litigation and a reluctance to give clients the advice which they require in their own best interests. Nor do I consider that to give clients a catalogue of every factor which might affect the course of action to be adopted, on the lines of that suggested in argument by [counsel], would be a productive discharge of advocates' duty to give them proper advice.

[36] In this case the plaintiffs chose not to call evidence from a practitioner as to the general standard of care expected of a barrister in such circumstances. Mr Dugdale referred to passages from Midland Bank Trust Co Ltd v Hett Stubbs &

Kemp [1979] Ch 384; Griffin v Kingsmill and Saif Ali to the effect such evidence is not required. But As the House of Lords observed in Moy at [19]:

Where a claim is brought for professional negligence the court will usually expect to be provided with some evidence to enable it to assess whether the relevant standard of care has been departed from. No such evidence was adduced in this case. Judges, recalling how things were when they were in practice, no doubt feel confident that they can do this for themselves without evidence. But judges need to be careful lest the decision in the case depends on the standard they would set for themselves. If this were to happen, it would vary from judge to judge and become arbitrary.

[37] In cases involving professional negligence of barristers there may be no need to call expert evidence to prove the case, for the reasons articulated in the cases referred to by Mr Dugdale, but the expert evidence of a practitioner in the nature of that given by Mr Keyte QC is admissible if it is likely to provide “substantial help” to the fact finder: s 25 Evidence Act 2006. In this case the Court has found it of substantial help to have evidence from Mr Keyte QC, a practitioner experienced in conducting mediations as to the steps a reasonably competent barrister might take when giving advice regarding offers of settlement made during mediation.

[38] Mr Dugdale submitted that the evidence of the defendant (and to an extent the evidence of Mr Keyte QC) was to the effect that except in exceptional circumstances, counsel had no obligation to advise a client against accepting a settlement and was justified in leaving the decision whether to settle or not to the client. He argued that was wrong, and that it was part of counsel’s duty to give firm advice or a firm recommendation either to accept or reject an offer. There is support for the proposition that a client is entitled to clear advice. In the case of Griffin Lord Justice Kay at [108] said:

Litigants do require clear advice. There is little point in obtaining the opinion of counsel if counsel is not prepared to give the client the benefit of his experience and expertise. Nothing in the conclusions I have reached in this case would discourage the giving of such robust advice provided it was given with proper care. Indeed an indecisive opinion in circumstances which would lead a reasonably competent practitioner to give clear and positive advice might in itself be viewed as negligent.

[39] However the question is whether the requirement for clear advice extends to a requirement to give a firm recommendation to accept or reject an offer. Certainly counsel in the position of the defendant attending a mediation conference with a

client is obliged to give advice regarding the settlement offers made. But the defendant did that. He gave advice to the plaintiffs regarding the settlement offers. The advice included the risk of a finding of contributory negligence and the likely costs of the High Court proceedings. If he had been expressly asked for a firm recommendation whether to accept the offer of $55,000 or not he may well have been under an obligation to give such a recommendation. However there is no evidence he was expressly asked for such a recommendation.

[40] As the New South Wales Court of Appeal said in the case of Studer at [75]:

Broadly, and not exhaustively, a legal practitioner should assist a client to make an informed and free choice between compromise and litigation, and, for that purpose, to assess what is in his or her own best interests. The respective advantages and disadvantages of the courses which are open should be explained. The lawyer is entitled, and if requested by the client obliged, to give his or her opinion and to explain the basis of that opinion in terms of which the client can understand. The lawyer is also entitled to seek to persuade, but not to coerce, the client to accept and act on that opinion in the client’s interests. The advice given and any attempted persuasion undertaken by the lawyer must be devoid of self-interest. Further, when the client alone must bear the consequences, he or she is entitled to make the final decision.

[41] The short answer to the complaint that the in present case the defendant did not give a positive recommendation whether to settle or not is that he was never asked for one. In the circumstances of this case his duty was to assist the plaintiffs, through Dr Jung, to make an informed and free choice whether to accept the offer of

$55,000 in settlement or not. The issue is whether the client has been provided with sufficient information from which he can make the ultimate decision whether to settle or not: the lawyer is retained to advise the client, not to decide for the client: Dew v Richardson [1999] QSC 192. As the House of Lords confirmed in the case of Moy, counsel is not obliged to give a recommendation couched in terms of a percentage likelihood of success. Each case must be judged on its circumstances. In the present case the defendant gave advice to Dr Jung regarding settlement. The issue is whether the advice was wrong.

[42] That logically leads to consideration of the ultimate issue, whether the defendant’s advice the plaintiffs were at risk of a finding of contributory negligence, was wrong (and if wrong, negligently so).

[43] Mr Dugdale submitted the plaintiffs were not at risk of a finding of contributory negligence (or if they were, it was so minor as to not be a material risk), because they had acted reasonably in the circumstances as were apparent to them at the time. He submitted that the defendant had fallen into error by considering the degree of reduction for contributory negligence (which he assessed at between about

10 percent and 50 percent) without first considering whether the plaintiffs had acted reasonably so that they would not be held to have been contributory negligent.

[44] The purchaser of a building who later complains of defects in it can be guilty of contributory negligence either by failing to avail themselves of the opportunity of an inspection or, having availed themselves of an inspection, by failing to act reasonably in response to it: Bowen & Anor v Paramount Builders (Hamilton) [1977] 1 NZLR 394, 413; Mount Albert Borough Council v Johnson [1979] 2 NZLR

234 at 241–242 and Morton v Douglas Homes Ltd [1984] 2 NZLR 548 at p 580 (although Hardie Boys J found that the facts of that case did not support such a finding).

[45] Mr Dugdale referred to Hooker v Stewart [1989] 3 NZLR 543, 547 as support for the proposition that a person in the position of the plaintiffs is only required to act reasonably. Whether they have done so is a question of fact in the circumstances of each particular case. The test of reasonableness is whether a prudent person would have acted to safeguard their own interests in the same way as the plaintiff in the same circumstances.

[46] Mr Dugdale argued that in the present case the plaintiffs had acted reasonably to protect their own interests when purchasing the property by including clause 15 in the agreement for sale and purchase and by obtaining the report from a building inspector. He submitted they were entitled to take from the building inspector’s

report the fact that the property was in good condition and had acted reasonably in confirming the contract. He submitted that in the circumstances there was no prospect of a Court making a finding of contributory negligence against them.

[47] The question is what steps a reasonable person in the plaintiffs’ position would have taken to safeguard their interests upon receipt of a building report in the terms of the Able report.

[48] While the report in its brief introductory comments observed that the unit was approximately six years old and said “the unit is in good condition” it then went on to identify a significant number of items that needed remedial work. The report was detailed in relation to the remedial work it identified. Where the writer considered the remedial work was minor that was identified. It is implicit that some of the work was more than minor. There were a number of features of the report which suggested the building had problems with water or moisture ingress and potential leakage problems. They were not noted as minor. In particular the report noted the following:

– Parapet cladding around parapet on second floor is cracked (possible water leak area).

- Moisture readings taken in skirting board on the north east corner of the room – 20%.

- Particle board flooring has been replaced along the north side of the room due to previous water damage.

- Unable to determine the condition of framing timbers around rot in door jambs.

[49] On receipt of that report, Dr Jung did not contact Mr Underwood, the report writer, to discuss the leakage, moisture or rot issues, or the remedial work in general. Nor did he make a copy of the report available to his solicitors and discuss it with them before confirming the contract as unconditional. The most Dr Jung seems to have done on receipt of the report is to have contacted the vendor and sought a reduction in price.

[50] During his evidence Dr Jung said on a number of occasions that he considered the remedial work to be no more than cosmetic. But he was unable to provide an explanation as to why he considered it to be cosmetic given the nature of the problems identified in the report. A reasonable party receiving that report should have been concerned at the water tightness issues. At the least a reasonable person would have been put on inquiry and should have followed up the potential leaking/water damage problems highlighted in it, by making further enquiries or at least discussing the report, either with the report writer or their solicitor.

[51] There was some dispute about the sequence of events and at what stage the plaintiffs’ then solicitors Ellis Law received a copy of the Able report. Dr Jung’s evidence was that he did not have a fax machine and relied upon the real estate agent to fax and receive faxed documents on his behalf.

[52] Mr Ellis gave evidence of his dealings with Dr Jung regarding the purchase. Understandably, Mr Ellis’ recollection was largely based on the file notes made at the time. Mr Ellis confirmed that where file notes were typewritten they would have been prepared from handwritten notes made at the time. There are two important file notes disclosed in the Ellis Law files. First, a file note at 9.30 a.m. on 3 February

2003 recording the sale of Dr Jung’s existing property had been made unconditional and noting that, in regard to the purchase of the unit:

Dylan states his finance is okay. I required that he have his bank provide me with confirmation of that. He was concerned about where to live between his sale and purchase as the sale has been moved to 07 February. I said that if things were unconditional I could arrange for the sale and the purchase to take place on the same day. We discussed the conditions he indicated that he would fax me a building report there were minor problems but he was generally satisfied with the building. I was clear that he instructed me to go unconditional at that time.

[53] The note suggested the lawyers did not have, at that time, a copy of the report before them. Dr Jung considered the report disclosed minor problems. He was wrong, and without discussing the issues with the building inspector was not entitled to take that view. Nevertheless, in reliance on Dr Jung’s instructions Mr Nicholls, a solicitor in Mr Ellis’ firm, wrote to the vendor’s solicitors that day, 3 February, to confirm the purchase as unconditional. He also requested settlement be brought forward to Friday 7 February as Dr Jung had wished.

[54] The next file note was made at 9.00 a.m. on 4 February 2003. It records an attendance between Dr Jung and his wife with Mr Ellis:

Dylan denied that he instructed me to go unconditional and pointed to various problems in the building report. After the discussion he indicated that he was satisfied with the building report and really he was simply looking for a reduction in the purchase price to compensate him for what he thought would be significant cost to him for sum [sic] cosmetic rectification.

We pointed out to him that the exterior of the building was the responsibility of the Body Corporate and that his Body Corporate levies would go towards getting that fixed.

He appeared satisfied with that. I had his wife execute the transfer of their property they are selling on 07 February at that time.

[55] The note suggests that initially at least, Dr Jung had experienced a change of heart. He may have realised the report disclosed more serious issues than he had at first appreciated. Somewhat surprisingly Dr Jung suggested that that file note was “set up” or manufactured after the litigation had commenced. That is an extraordinary suggestion. Mr Ellis was called as a witness for the plaintiffs. Having heard Mr Ellis give evidence I accept the file note was made following a meeting between Dr Jung, his wife and Mr Ellis at 9.00 a.m. on 4 February. It is entirely consistent with the events unfolding as at that time and is also consistent with the instructions that Dr Jung had given the previous day as actioned by the letter from

Mr Ellis’ firm. There was no reason for the solicitor to write that letter if he did not have the plaintiffs’ express instructions. It is also consistent with what Dr Jung did on receipt of the report, which was to contact the vendor with a view to seeking a reduction in the purchase price.

[56] The next item of relevance from the solicitors’ file is a fax cover sheet from Barfoot and Thompson dated 4 February recording, on the fax transmission details, that it was sent to Mr Ellis’ firm at 10.46 a.m. on 4 February, after the meeting between the plaintiffs and Mr Ellis. The fax cover sheet records:

The reference to late yesterday must have been a reference to late on 3 February. The attachment was a fax from the vendor dated 2 February 2003 responding to a number of points the real estate agent had raised, with the vendor, I infer at Dr Jung’s request, arising from the building report.

[57] Unfortunately the real estate agent has died. But the logic of the sequence of the file notes, the written communications and events suggests that the vendor’s written response was not made to Dr Jung (as he did not have a fax and was reliant on the real estate agent) until late on 3 February. But by that time he had already instructed his solicitors to make the purchase unconditional. Mr Ellis’ evidence was that the fax, particularly the vendor’s response was not discussed with Dr Jung until

[58] If the plaintiffs instructed their solicitors to make the contract unconditional before receiving the vendor’s response to their queries about the property arising from the report, then that makes the position worse from their point of view. But even if the plaintiffs had the response from the vendor before confirming the contract, the vendor’s response itself raised almost as many questions as it answered. While the vendor said she did not think the mention of cracks was a major issue as there had been no leak indications in the areas noted and did not think the moisture reading was of any consequence given the area was rebuilt under strict supervision, the plaintiffs made no attempt to clarify why there was still a moisture reading of 20

percent some six months after the repairs had been carried out (as was apparent from the documentation the vendor made available) and if repair work had been carried out why was there still rot in the wooden door frame. Next, the vendor’s letter did not refer to the issue of the parapets which the report identified as a possible source of leaking. Further, the plaintiffs accepted the vendor’s assertion as to the work done and that any repair costs were going to be minor without speaking to the building inspector further or taking advice about that.

[59] The Able inspection report revealed moisture ingress problems that the plaintiffs should have taken further. The obvious people with whom to discuss the details of the problems were the report writer and the plaintiffs’ lawyer. The plaintiffs chose not to discuss the report with either. Instead Dr Jung simply tried to negotiate a reduced price with the vendor. Even if the plaintiffs had the vendor’s response prior to confirming the contract was unconditional that would have raised other concerns and suggested a further chain of inquiry to a reasonable person.

[60] Further, Mr Ellis’ file discloses he received a copy of the s 36 certificate from the body corporate dated 4 February. The earliest he could have received that was the 4^thFebruary. It attached copies of minutes recording individual units were responsible for the cost of individual water ingress and egress problems with leaks. By going unconditional on 3 February, the plaintiffs put themselves in the position where they could not avail themselves of that information. It seems the plaintiffs were anxious to confirm the contract as unconditional and bring the settlement forward as they had to vacate their previous property on 7 February.

[61] In the circumstances, I have no doubt that if this case had proceeded to trial the Council would have successfully raised a claim of contributory negligence against Dr Jung. Given the authorities of, for example, Hartley v Balemi HC AK CIV-2006-404-002589 29 March 2007 Stevens J and Body Corporate No. 189855 v North Shore City Council HC AK CIV02005-404-005561 25 July 2008 Venning J, the level of the plaintiffs’ contributory negligence would have been between 25 and

[62] It follows I conclude that the defendant, rather than being wrong to advise the plaintiffs their claim was likely to be reduced by way of contributory negligence, was correct in that advice. In suggesting the contribution was likely to be between

10 and 50 percent he may have been conservative. It could well have been higher. Given the way Mr Dugdale framed the plaintiffs’ case, that disposes of the claim. However, I briefly address the specific pleading of negligence.

[63] The allegations of negligence against the defendant can be broken down as follows.

[64] Mr Dugdale submitted that the defendant had not prepared adequately by researching the law on the contributory negligence point. The defendant gave evidence that he had researched the law on contributory negligence and considered the point. He was not seriously pressed in cross-examination on that evidence. I accept his evidence that he researched the point before advising Dr Jung on the issue of contributory negligence. The defendant was clearly alive to the issue of contributory negligence. Although the Council had not expressly pleaded contributory negligence, it had been referred to in a memorandum for the Court for a pre-hearing conference, had been pleaded by Mr Underwood and had been the subject of discussions between counsel for the Council and the defendant in the months leading up to the mediation. The defendant was aware contributory negligence was in issue and had considered it. The defendant correctly identified the two principal issues facing the plaintiffs as their quantum (based as it was on a generous estimate) and contributory negligence.

[65] There was a faint suggestion during Dr Jung’s evidence that the defendant had not adequately prepared him for the mediation. There is no basis for that. The defendant’s evidence, supported by Mr Thomas, was that the defendant met with Dr Jung and Mr Thomas on a number of occasions in preparation for the mediation.

The defendant discussed the prospect of mediation generally (its advantages and disadvantages and what was involved in a mediation) with both Dr Jung and Mr Thomas before they agreed to go to mediation. He then met Dr Jung and Mr Thomas specifically to prepare for the mediation on two occasions. The defendant met Mr Thomas and Dr Jung on Wednesday 14 March 2007 and on the Sunday immediately before the mediation, 18 March 2007. The meeting on 18 March lasted for approximately four hours. At that meeting the defendant warned Mr Thomas and Dr Jung that he did not consider it likely a satisfactory settlement would be achieved at mediation given the hard-nosed approach of the Council to that stage and the weaknesses in their respective cases (in the case of Mr Thomas, the defendant had a concern about a limitation issue) but nevertheless the defendant considered there were benefits in going to mediation in that it would be useful to gauge the strength or weaknesses of the parties’ cases. The defendant also raised with Mr Thomas and Dr Jung the difficulty of the quantum of their claim given that they were relying on estimates only.

[66] Quantum was a major issue for the plaintiffs and Mr Thomas. When the matter was before the Weathertight Homes Resolution Service Mr O’Hagan had assessed the work required to repair the plaintiffs’ unit at $140,625 including GST. When the proceedings were issued, the plaintiffs and Mr Thomas obtained an estimate of the cost of repairs from Astor. Mr Thomas had a connection with Astor. Astor provided an estimate, either for free or at a very generous discount. Their initial estimate was $197,267 for the work required to repair the plaintiffs’ apartment. For the purpose of the mediation Astor increased the estimate by $50,000 to $247,267. Astor also increased its estimate by $50,000 for Mr Thomas’ claim as well. That was apparent from the estimates and undermined the credibility of the plaintiffs’ claim in relation to quantum. It was a point that was not lost on counsel for the Council at the mediation.

[67] Importantly, the defendant discussed the problem of the inspection report with Dr Jung on 18 March and suggested Dr Jung should emphasise the reference to the unit being in good condition. Dr Jung’s notes from the meeting are consistent with that advice.

[68] At the pre-mediation meeting the defendant also discussed with Dr Jung and Mr Thomas that they would have to fund the balance of the moneys needed to cover the actual repair costs to carry out the repairs to their units.

[69] The criticism that the defendant was not prepared for the mediation and did not prepare the plaintiffs for it has no basis in the evidence.

[70] Nor is there anything in the complaint that the defendant failed in his obligations by permitting the conference to carry on, on the basis of an unpleaded assertion of contributory negligence or that he should have advised Dr Jung that the contributory negligence point had no substance.

[71] As noted, all parties, including the defendant and Dr Jung, through the defendant’s advice knew prior to the mediation conference that although it had not pleaded it, the Council was going to raise the issue of contributory negligence. The trial was still four months away. While the Council would have been required to obtain leave to amend its pleadings to include contributory negligence, it is inevitable leave would have been granted if the matter had not settled at mediation. There was no need to walk out of the mediation when contributory negligence was raised. It was a point that the defendant was aware of and that he had prepared Dr Jung to respond to.

[72] Further, for the reasons discussed above, the defendant would in fact have been wrong if he had advised Dr Jung that, as is pleaded, the contributory negligence point had no substance. It was overstating the plaintiffs’ case to suggest they could rely on the very general statement the unit was in good condition. When that comment was read in the context of the entire report it was no more than an observation of the general state of the unit. It was seriously qualified by the detailed remedial work the report went on to identify.

[73] Nor is there anything in the point that the defendant ought not to have advised Dr Jung to accept an agreement that did not expressly state his share of the

settlement or that made him liable with Mr Thomas to repair their units. During the course of cross-examination Dr Jung accepted that prior to the agreement being concluded he and Mr Thomas had agreed between themselves that the $110,000 being offered would be split 50:50 $55,000 each. Further, the fact that Dr Jung and Mr Thomas are jointly responsible to carry out the remedial work is not causative of any loss from Dr Jung’s point of view. Mr Thomas confirmed he has carried out the repairs to his unit, which, subject to a minor section, is completed. He is awaiting completion of Dr Jung’s repair work before finalising the last repair work. The plaintiffs have not sustained any loss as a result of the requirement they carry out remedial work on their unit.

[74] The last point taken is that the defendant ought to have explored with Dr Jung whether he was able to procure the balance of moneys needed to carry out the entirety of the work needed in respect of the unit within four years. The defendant’s evidence, which was not challenged on the point, was that he had discussed the need for the parties to be able to fund the balance of the work required to carry out their repairs at the meeting on 18 March prior to the mediation. Further, the settlement document provided for the repairs to be carried out within 18 months but after discussion with Dr Jung that period was expressly extended, at Dr Jung’s request, to the period of four years. As noted Mr Dugdale did not pursue this allegation as causative of a loss in any event.

[75] During the course of the mediation, when Dr Jung and Mr Thomas met privately with the defendant (and Mr Baker for the body corporate) the defendant advised Dr Jung that there was a risk the Court could reduce his claim by up to 50 percent for contributory negligence. For the reasons given above, that advice was correct.

[76] The defendant also discussed the issue of quantum with Dr Jung and Mr Thomas. The defendant sought to clarify the likely quantum by speaking to Mr O’Hagan during the lunch break. The defendant recorded Mr O’Hagan’s revised figure as $161,000 for the plaintiffs’ work. The Council’s expert Mr Jones

suggested something between $90 – 110,000 was the range. When the final offer of

$110,000 was put to the parties, the issue of contributory negligence was again discussed generally between the defendant, Dr Jung and Mr Thomas. Mr Thomas’ evidence was that the defendant told them that if they did not want to accept it they could go to Court. He then advised Dr Jung of the cost of doing so. The defendant encouraged Dr Jung to speak to his wife. Dr Jung then used his cellphone and spoke to someone in Korean. I infer the call was to his wife. The defendant made it clear to Dr Jung and Mr Thomas that each of them had to make their own choice regarding settlement. Once they confirmed they wished to accept the offer he spoke to each of them separately. The defendant told Dr Jung he thought the offer was low but it was for Dr Jung to decide whether or not to accept the offer.

[77] The offer was low, at least on the defendant’s assessment. Dr Jung’s claim of

$310,000 in these proceedings is premised on the Astor price of $247,000 for repairs together with an allowance of approximately $60,000 for legal fees, the Prendos report, supplementary reports, rental accommodation and working drawings. But those additional costs are overstated. Dr Jung accepted the Prendos accounts totalled about six thousand dollars. There is no evidence of the length of time which the plaintiffs may have to vacate the unit for repairs to be carried out. Although working drawings were claimed, the figure for that was included as a component of the quotation for repairs generally. In all the circumstances the costs are more likely to be closer to $30,000 with the repair costs being closer to Mr O’Hagan’s revised estimate of $161,000. That puts a total value on the Jung’s claim of about $190,000. Allowing for general litigation risks and costs and a 50 percent contributory negligence finding the figure of $55,000 was still less than the plaintiffs might have expected to achieve at Court, assuming they could prove their claim. The defendant told Dr Jung he thought the offer was low. Given the litigation risks and the cost of taking the matter further, the offer was not so low as to require the defendant to advise Dr Jung positively against it. If the Council’s estimate of costs was correct, the plaintiffs’ claim would have been between $120,000 – $140,000 in total for example. As Mr Keyte said:

it would have been a very brave barrister indeed to have given such adamant advice, don’t enter this, take it to court, rather than pointing out the pros and cons but leaving it to the client to make the final decision ... all I can really

[78] Dr Jung did not ask for a recommendation. The defendant gave Dr Jung advice about the settlement. He was right to advise Dr Jung there was a risk his claim would be reduced for contributory negligence, and by up to 50 percent. The defendant provided Dr Jung with all the information and advice the plaintiffs needed to make a fully informed decision. This is not one of those rare and exceptional cases where the settlement was so obviously to the plaintiffs’ disadvantage that the defendant had a duty to advise against it. Indeed, in the circumstances, and having regard to the other intangibles including the uncertainty of quantum and Dr Jung’s credibility, there was a real risk for the plaintiffs in proceeding. The additional costs of going to trial would also have been an important factor in the plaintiffs’ decision to settle. The evidence is that Dr Jung was struggling to pay the defendant’s accounts for the work done to date, let alone for the preparation for trial. To the stage of the mediation Dr Jung had been assisted by Mr Thomas paying half of the defendant’s accounts but, as noted, Mr Thomas was anxious to settle and did not want to take the matter further.

[79] For all those reasons the defendant’s advice to Dr Jung that he was at risk of a reduction in his claim on the basis of contributory negligence was correct. He was not negligent in that advice nor in his representation of the plaintiffs in the proceedings generally or at the mediation. The claim must be and is dismissed.

[81] Costs on a 2B basis would be appropriate but I formally reserve the issue of costs in case there is any matter that I am not aware of. If there is, counsel can file a memorandum. If there are no issues, the defendant can seal a costs order on a 2B

basis together with disbursements as fixed by the Registrar (I certify costs for second

High Court of New Zealand Decisions

Jung v Templeton HC Auckland CIV-2007-404-005383 [2009] NZHC 2064; [2010] 2 NZLR 255 (5 November 2009)