Lawyers' obligations when advising on settlement offers
The High Court has considered lawyers’ obligations in relation to advice on settlement offers at mediation.
In Jung & Anor v Templeton (High Court, Auckland, Justice Venning, 5 November 2009, CIV 2007-404-005383) Dr Jung and his wife bought a leaky home and engaged the defendant, a barrister, to take proceedings to recover their losses.
The defendant issued proceedings and a fixture was allocated, but the parties subsequently attended mediation and Dr Jung agreed to settle the claim for $55,000.
The Auckland City Council had taken a hard line at the mediation, arguing that it could have no liability to the plaintiffs because their claim would effectively be extinguished for contributory negligence, as prior to purchase the plaintiffs had obtained a building report setting out two-and-a-half pages of remedial work required on the property.
Shortly after the mediation, the plaintiffs decided that they should not have settled. They sued the defendant, alleging that he had breached the duty he owed to them as counsel to give proper and full advice, particularly at the mediation.
An independent assessor appointed by the Weathertight Homes Service had calculated the cost of repairing the plaintiffs’ unit at $140,625, but an updated estimate from another source obtained prior to the mediation put the figure at $247,267.
The plaintiffs claimed that, in preparing for the mediation, in negotiating at the mediation and in advising Dr Jung to sign the settlement agreement (or in not advising him not to sign it), the defendant had breached the obligations he owed to the plaintiffs at general law and under section 28 of the Consumer Guarantees Act 1993 by not performing the legal services he provided carefully and skillfully.
The focus of the claim was on the defendant’s advice regarding the plaintiffs’ liability for contributory negligence.
Counsel for the plaintiffs argued that it was part of counsel’s duty to give firm advice or a firm recommendation either to accept or to reject an offer.
However, Justice Venning said that counsel in the position of the defendant attending a mediation conference with a client was obliged to give advice regarding the settlement offers made.
The defendant had done that, but there was no evidence that he had been expressly asked for a firm recommendation as to whether or not to accept the offer of $55,000.
The court concluded that the defendant had been correct in advising the plaintiffs that their claim was likely to be reduced by contributory negligence.
There was no negligence by the defendant and the claim was dismissed.
Catriona MacLennan
LawTalk 745, 1 March 2010