In our October 2012 litigation update we reported on a decision of the High Court that a solicitor who made inaccurate representations on behalf of his client in an email was found not liable for breaching the Fair Trading Act 1986 (FTA). The Court of Appeal has now (in Poplawski v Pryde  NZCA 229) partially overturned that decision, finding that the High Court was wrong to conclude that a reasonable person would not have been misled by the email, despite acknowledging that the email was in fact inaccurate and misleading.
The appellant's solicitor had sent an email to the solicitor for the other side which described a related transaction as 'unconditional', following which the appellant paid over $350,000. The relevant transaction did not settle and the funds were lost.
Justice Whata had found in the High Court that the relevant email was capable of being misleading (a conclusion which the Court of Appeal agreed with). In describing the related agreement as 'unconditional', the solicitor's email omitted key information.
Justice Whata had then gone on to examine whether a reasonable person in the appellant's position would have been likely to be misled, in order to establish whether the FTA had been breached. Finding in favour of the respondent, he concluded that a reasonable person would not be misled, as:
- The email was sent to the appellants' solicitor and it was accordingly reasonable to assume the solicitor would recommend further due diligence be undertaken
- The appellants and their solicitor were aware of the defendant's client's financial position and the need for security
- The appellants had access to legal advice.
The Court of Appeal disagreed with the High Court over the relevance of these factors in establishing breach of section 9 of the FTA. It found that it was reasonable of the appellants and their solicitor to rely upon the contents of the email and that "...the fact that the email was sent from one lawyer to another would engage the expectation that communications between lawyers will be full and frank".
Overall, the Court of Appeal found that there was a breach of section 9 of the FTA because the email was misleading and it was reasonable to rely on it. The appellants' knowledge and the fact that there was access to legal advice was seen by the Court of Appeal as being matters more properly considered in determining any award rather than whether there has been a breach.
Despite a difference in approach as to breach, the High Court and the Court of Appeal arrived at the same conclusion in determining responsibility once breach was established: the appellants should bear 50% of the loss due to their contribution to the loss through neglect of their own interests. The solicitor and his firm were therefore found jointly and severally liable for $175,000 plus costs.
The decision shows that solicitors (no less than their clients) must be cautious as to whether their communications with another party may be misleading, and cannot rely on the fact that the other party is legally advised to absolve them of responsibility, as the other party may be entitled to rely upon such representations. On the other side of the coin, it remains dangerous for parties to blindly rely on statements by others.