ANZ BANK NEW ZEALAND LIMITED v FROST AND SUTCLIFFE [2014] NZHC 245

ANZ BANK NEW ZEALAND LIMITED v FROST AND SUTCLIFFE [2014] NZHC 245 [21 February 2014]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV 2013-404-001380[2014] NZHC 245BETWEEN ANZ BANK NEW ZEALAND LIMITEDPlaintiffAND FROST AND SUTCLIFFEDefendantHearing: 5 August 2013Appearances: M J Tingey/N F D Moffatt for plaintiffP Hunt/D Turnball for defendantJudgment: 21 February 2014JUDGMENT OF ASSOCIATE JUDGE ABBOTTThis judgment was delivered by me on 21 February 2014 at 4pm,pursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDateSolicitors:Bell Gully, AucklandMcElroys, Auckland[1] The plaintiff bank (ANZ) is suing the defendant law firm, Frost & Sutcliffe for damages of $1,179,927.22 that it claims it has suffered as a consequence of Frost & Sutcliffe having breached an undertaking given in a refinancing transaction.[2] Frost & Sutcliffe denies that it gave the alleged undertaking, but admits breaching its contract of retainer and a duty of care because it failed to carry outANZ's instructions. However, it says that its retainer was limited to carrying out those instructions and that its liability is limited to any loss falling within the scope of its duty.[3] ANZ has raised a preliminary challenge to two aspects of Frost & Sutcliffe'sdefence. Frost & Sutcliffe has pleaded two affirmative defences, namely lack of causation and contributory negligence. ANZ has applied to strike out the defence of contributory negligence, and for an order that Frost & Sutcliffe provide particulars of positive allegations made in the defence of lack of causation.1Background[4] ANZ, trading as the National Bank of New Zealand, made a loan of $976,000 in November 2005 to 21st Century Investments Ltd. 21st Century was in the business of buying, letting and selling residential properties. Its sole director was Mr Ha. The loan was secured by a first registered mortgage over a property at 10 Middlemore Road, Otahuhu, and by a guarantee given by Mr Ha.[5] 21st Century and Mr Ha were both clients of Frost & Sutcliffe.[6] In late 2005 and early 2006 ANZ and 21st Century/Mr Ha agreed to vary the terms of the loan, including the substitution of a property in Alfriston Road, South Auckland for the Middlemore Road property as security for the loan (to allow the Middlemore Road property to be sold).[7] After ANZ had approved the variation, Frost & Sutcliffe wrote to ANZ on 24 February 2006, requesting discharge of the mortgage over Middlemore Road.1 A pleading that ANZ would have suffered a loss regardless of any breach by Frost & Sutcliffe.[8] ANZ responded to Frost & Sutcliffe on 2 March 2006. It is accepted by the parties (at least for the purpose of this application) that ANZ sent two letters that day to Frost & Sutcliffe:(a) A general letter of instructions to act for it in the transaction; and(b) A letter enclosing discharge of the mortgage over Middlemore Road.[9] The general letter of instructions has not been found, but for the purposes of this application it has been accepted that it was in similar terms to a letter ofinstructions given at the time of the original loan and in accordance with the bank'sstandard instruction letter of the time.[10] No replacement mortgage was executed over the Alfriston Road property, andFrost & Sutcliffe did not provide ANZ with a solicitors' certificate in relation to there-arranged security. Nevertheless, it released the discharge of mortgage (with a transfer of Middlemore Road) to the purchaser, which allowed the sale of Middlemore Road to proceed. Frost & Sutcliffe then released the net proceeds of sale to 21st Century. The discharge of the mortgage over Middlemore Road was registered on 17 March 2006.[11] Frost & Sutcliffe accepts that it did not have authority from ANZ to release the discharge before it held the replacement security.[12] ANZ learned in about August 2008 that the mortgage had been discharged and no replacement security obtained over Alfriston Road. Frost & Sutcliffe hassince admitted that it had failed to carry out ANZ's instructions.[13] 21st Century was put into liquidation in October 2011. ANZ has filed a proof of debt as an unsecured creditor in the liquidation for $922,388.78. There is no prospect of any recovery from the liquidation. To the contrary, its liquidators have sought recovery of payments totalling $248,252.95 made to ANZ as a voidable transaction. Mr Ha was adjudicated bankrupt in August 2012. He has disclosed net liabilities in excess of $18 million.The respective arguments and issues for determinationStrike out of the contributory negligence defence[14] As already mentioned, Frost & Sutcliffe has admitted that it breached its contract of retainer because it failed to comply with ANZ's instructions, but says thatits liability for any loss that flows from that breach is subject to contributorynegligence on ANZ's part. 2[15] ANZ says that this defence cannot be raised in answer to a claim for breach of a strict contractual obligation, relying on the definition of "fault" in theContributory Negligence Act 1947 (the Act) and relevant case authorities. It says that its claim is for breach of a strict contractual obligation not to discharge its mortgage until two events occurred (replacement security had been executed and Frost & Sutcliffe had given its certificate that the security was available), neither of which occurred.[16] Frost & Sutcliffe says that its retainer did not impose a strict obligation, but merely a duty of care to take care. It also says that the defence is available in any event under the common law, by analogy with the Act. It says further that the defence should not be struck out as that will not reduce preparation or trial time as the same matters need to be traversed in relation to causation issues and to itsdefence to ANZ's negligence claim.[17] The issues to determine on this part of the application are:(a) Whether a defence of contributory negligence is available to Frost &Sutcliffe on the terms of ANZ's instructions (whether under the Act or by analogy); and(b) Whether there is anything to gain from making the order.2 Statement of Defence of Defendant to Statement of Claim, 30 April 2013, Second Affirmative Defence to All Causes of Action – Contributory Negligence – s 3(1) Contributory Negligence Act 1947 at [47]-[51].Particulars of defence of lack of causation of loss[18] Turning to the dispute over particulars, Frost & Sutcliffe has raised lack of causation of loss as a defence to all ANZ's causes of action.3 It pleads:4ANZ would have suffered some loss even if it had the security of a first registered mortgage over Alfriston Road.As particulars of that pleading it says:(1) ANZ would have suffered some loss due to a fall in the value of Alfriston Road as a result of the global economic crisis;(2) There would always have been a shortfall between:(a) The full amount 21st Century owed ANZ under the Loan Agreement; and(b) The proceeds of any recovery action against 21st Century and Mr Ha (which would have been nil, although legal costs would have been incurred) and the net proceeds of the sale of Alfriston Road after deduction of the costs and expenses of the sale.[19] ANZ says that this pleading does not inform it or the Court of the loss that Frost & Sutcliffe says ANZ would have suffered even if it had received the mortgage over the Alfriston Road property. It has sought further particulars of the pleading.[20] Frost & Sutcliffe says that an order should not be made as it is unable to provide the further particulars requested,5 because the quantum of the shortfall is incapable of precise determination and will be a matter for the Court after hearing evidence and submissions at trial. It contends that it has given ANZ fair notice of how it says the Court should approach the matter, and that that is sufficient to allow ANZ to prepare for trial.[21] The single issue for determination on this aspect of the application is whether an order is needed to inform the Court and ANZ of the case that ANZ must meet at trial.3 Statement of Defence of Defendant to Statement of Claim, 30 April 2013, First Affirmative Defence to All Causes of Action – Causation at [40]-[46].4 Statement of Defence of Defendant to Statement of Claim, 30 April 2013, at [46].5 Subject to anything that may emerge in discovery.The strike out applicationLegal principles for strike out[22] The Court has power under r 15.1 of the High Court Rules to strike out all or part of a pleading:15.1 Dismissing or staying all or part of proceeding(1) The court may strike out all or part of a pleading if it—(a) discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or(b) is likely to cause prejudice or delay; or(c) is frivolous or vexatious; or(d) is otherwise an abuse of the process of the court.[23] The principles that the Court applies in exercising this power can be found in the decision of the Court of Appeal in Attorney General v Prince & Gardner.6Counsel agreed that the following is a sufficient statement of those principles for the present case:(a) The Court proceeds on the basis that the facts pleaded in the statement of defence are true.(b) The defence will be struck out where it is clearly so untenable that it cannot succeed.(c) The jurisdiction is one to be exercised sparingly.(d) The Court can exercise this power even where it requires determination of difficult questions of law, requiring extensive argument.6 Attorney General v Prince & Gardner [1998] 1 NZLR 262 (CA) at 267.[24] Rule 15.1 expressly allows part only of a pleading to be struck out. Although strike out of part only is generally discouraged,7 it may nevertheless be justified where it could effect a substantial reduction in the time for preparation for trial, or duration of trial.8[25] Notwithstanding the Court's reluctance to entertain partial strike outapplications, the Court will nevertheless make an order in plain and obvious cases,9but there may be consequences in costs if it does not dispose of the case as a whole.10When is contributory negligence available in contract claims?[26] The starting point for a Court's ability to apportion responsibility for damage is s 3(1) of the Act:(1) Where any person suffers damage as the result partly of his own fault and partly of the fault of any other person or persons, a claim in respect of that damage shall not be defeated by reason of the fault of the person suffering the damage, but the damages recoverable in respect thereof shall be reduced to such extent as the Court thinks just and equitable having regard to the claimant's share in the responsibility for the damage:Provided that—(a) This subsection shall not operate to defeat any defence arising under a contract:(b) Where any contract or enactment providing for the limitation of liability is applicable to the claim, the amount of damages recoverable by the claimant by virtue of this subsection shall not exceed the maximum limit so applicable.[27] Section 3(1) is limited by the definition of "fault":11Fault means negligence, breach of statutory duty, or other act or omission which gives rise to a liability in tort or would, apart from this Act, give rise to the defence of contributory negligence.7 Whitman v Airways Corporation of New Zealand Ltd (1994) 8 PRNZ 155 (HC).8 Perriam v Wilkes HC Auckland CIV-2009-425-284, 6 October 2010 at [18].9 Hetherington v Faudet [1989] 2 NZLR 224 at 229 per Cooke P; Apple Fields Ltd v New Zealand Apple & Pear Marketing Board HC Wellington CP35/94, 21 April 1994.10 Apple Fields Ltd v New Zealand Apple & Pear Marketing Board, at [12]; Auckland City Council v Effuzi (International) Ltd HC Auckland CIV-2009-404-6044, 19 October 2011 at [105].11 Contributory Negligence Act, s 2.[28] The absence of any reference to breach of contract in the definition of "fault"has led courts to consider whether, and if so, in what circumstances, the defence can be available in breach of contract cases. In recent time the question has been answered on the basis of an analysis of contract claims according to whether the term allegedly breached imposes a strict obligation (where liability does not depend on negligence) as distinct from one which imposes an obligation to take care in fulfilling the term. 12[29] This categorisation has been adopted in New Zealand,13 and specifically applied in this Court.14[30] It seems now to be well established that s 3(1) of the Act will not apply where the claim is for breach of a strict contractual duty. In the leading contract text in New Zealand, the learned authors state: 15Where a defendant is liable only for breach of a strict contractual duty, so that there is no liability for negligence and on any view the defendant is notat "fault", the Act cannot then be raised as a defence to the plaintiffs' claim.[31] The learned authors cite both English and New Zealand authority for this proposition. In Barclays Bank Plc v Fairclough Buildings Ltd16 the English Court of Appeal considered the point in relation to the English equivalent to the Act and found that a building contractor who failed to comply with statutory regulations was in breach of the building contract and that this was breach of a strict contractual duty. The court commented:17The very imposition of a strict liability on the defendant is to my mind inconsistent with an apportionment of the loss.12 Forsikringsaktieselskapet Vesta v Butcher [1986] 2 All ER 488 at 508.13 Mouat v Clarke Boyes (1992) 2 NZLR 559 at 564 (albeit obiter); followed in Hanmore v GanleyHC Auckland CP1038/91, 1 May 1995.14 Altimarloch Joint Venture Ltd v Moorehouse HC Blenheim CIV-2005-406-91, 3 July 2008 (overturned on appeal but not on this point).15 Burrows, Finn and Todd Law of Contract in New Zealand (4th ed, LexisNexis, Wellington, 2012) at 21.2.5(a).16 Barclays Bank Plc v Fairclough Buildings Ltd [1995] QB 214 (CA).17 At 233.In Vining Realty Group Ltd v Moorehouse,18 the Court of Appeal held that the Act was not available because it found that there was a misrepresentation (amounting to a term of the contract), and liability under s 6 of the Contractual Remedies Act 1979 did not involve negligence.19How does this apply to solicitors' contracts of retainer with lenders, andundertakings that are required ?[32] This point has been examined by the English Court of Appeal in several cases in recent years, particularly in relation to contracts of retainer of solicitors by lendinginstitutions and the construction of the lenders' instructions to, and undertakings provided by, the solicitors. 20 The essential question before the Court in these caseswas whether the solicitors' duties were absolute obligations or were qualified by animplied duty to use reasonable care and skill.[33] Commentators have summarised the outcome of these cases as follows:(a) Professional retainers do not normally impose strict duties to achieve a specified result. Instead, a strict duty will be imposed only where justified by an express undertaking or by necessary implication from the facts. Otherwise the retainer will be construed as imposing a duty of care. 21(b) An instruction to a professional will normally be construed as defining scope of the duty of care rather than imposing a strict duty unless it is clear that the instruction is intended to create an independent strict duty.2218 Vining Realty Group Ltd v Moorehouse (2010) 11 NZCPR 879 (CA).19 At [66]. See also Onepath (NZ) Ltd v BACS Investments & Insurance Ltd (2011) 16 ANZ Insurance Cases 87,398 at 90-147.20 See Midland Bank Plc v Cox McQueen [1999] PNLR 593 (CA); Barclays Bank Plc v Weeks Legg & Dean (a firm) [1999] QB 309 (CA); Zwebner v The Mortgage Corporation Ltd [1998] PNLR 769 (CA); Mercantile Credit Co Ltd v Fenwick [1999] Lloyd's Rep PN 408 (CA); UCB Corporate Services Ltd v Clyde & Co [2000] Lloyd's Rep PN 653 (CA).21 Greaves & Co (Contractors) Ltd v Baynham Meikle & Partners [1975] 1 WLR 1095 (CA) at 1100 per Lord Denning MR as cited in M Simpson QC Professional Negligence and Liability(Informa Law, London, 2013) at 1.28.22 Mortgage Express Ltd v Newman & Co [1996] PNLR 603 (Ch D) and Barclays Bank Plc v Weeks Legg & Dean (a firm), above n 20, as cited in Simpson, at 1.30.(c) Most cases have concluded that the duties imposed on solicitors by express instructions from lending institutions and the undertakings that the institutions require are qualified (by a duty to use reasonable care and skill) rather than absolute obligations, and it is likely to be a rare case where a court will impose an absolute obligation.23(d) Notwithstanding that it is likely to be in rare cases only, the court will find that a solicitor's obligation is strict (and regardless of whether thesolicitors were at fault) where that is the proper construction of the retainer.24[34] The nature of the instruction must be assessed by reference to the words used and the context of the particular case.25 Nevertheless, it is useful, as a background to the assessment of the present case, to review briefly the nature of the instructions andthe factors that the Courts took into account in construing the lenders' instructionsand the undertakings that were required in the cases to which counsel have referred me:(a) In Mortgage Express Ltd v Newman & Co26 the plaintiff lenderinstructed the defendant's solicitors to investigate any discrepancies inits instructions or difficulties regarding title, and required the solicitors to report that they had undertaken this investigation and to confirm that the title was good and could safely be accepted as security. The solicitors failed to identify and report on a discrepancy in the price of the property and the existence of short term tenancies. The Court held that this was a breach of duty of care, rather than a breach of strict duty, and that a defence of contributory negligence could be raised.23 J Powell and R Stewart (eds) Jackson & Powell on Professional Liability (7th ed, Sweet & Maxwell, London, 2012) at 11–009 and 11– 0010.24 Zwebner v The Mortgage Corporation Ltd, above n 20, as cited in Powell, at 11-009.25 Midland Bank Plc v Cox McQueen, above n 20, at 605 – see further below at [34](d) of the judgment.26 Mortgage Express Ltd v Newman & Co, above n 22.(b) In Barclays Bank Plc v Weeks Legg & Dean27 the Court considered three cases where the plaintiff bank required standard form undertakings from solicitors acting for purchasers of land that sums received either from the bank or from the purchasers (different between the three cases) would be applied solely for acquiring a good marketable title to the property. The solicitors provided the bank witha standard form undertaking that the bank's funds would be appliedsolely to acquire a good marketable title. In each case the bank did not obtain a title which provided satisfactory security. The Court held that the undertakings were not absolute, but imposed a qualified obligation to obtain what a reasonably competent solicitor, acting with proper skill and care, would accept as a good marketable title. The Court took into account that the solicitors (acting for the purchaser)were unable to investigate the vendor's title, or whether theconveyance was properly executed by the vendor, and in suchcircumstances the purchaser's solicitors "should not readily beassumed to have accepted liability".28 In delivering one of the judgments, Millet LJ said:29It is inconceivable that the parties should expect a solicitor to assume a more onerous obligation to the bank, which is not its client and is not being charged for his services, than he has assumed towards his own client.(c) In Zwebner v Mortgage Corporation Ltd30 the defendant lender required, and the third party solicitors provided, a standard form report as to title which included an undertaking that all appropriatedocuments "will be properly executed on or before completion". One of the solicitors' clients forged a signature on the release of amortgage. The High Court found that the undertaking was a clear and unqualified warranty that the mortgage deed had been properly executed (being a strict contractual duty) and that the solicitors could27 Barclays Bank Plc v Weeks Legg & Dean (a firm), above n 20. It is interesting to note that the Court did not have to consider whether a defence of contributory negligence was available.28 At 328.29 At 328.30 Zwebner v Mortgage Corporation Ltd, above n 20.not advance a claim of contributory negligence.31 The Court ofAppeal upheld the High Court's decision, and expressly distinguishedthe case from its earlier decision in Barclays Bank Plc v Weeks Legg & Dean on the basis that the signatories in Barclays were not the clients of the solicitors.32(d) In Midland Bank Plc v Cox McQueen,33 a customer of the defendant solicitors, Mr Duke, sought finance from the bank. The bank instructed the solicitors to obtain the signatures of both Mr and Mrs Duke to security documents and to explain the implications of a mortgage to the bank. The bank required the solicitors to provide a certificate that they had explained the transaction to Mrs Duke (she was not a client of the solicitors). Mrs Duke's signature on aguarantee was forged. The Court construed the instructions as imposing a qualified rather than an absolute duty to obtain MrsDuke's signature, commenting that in the absence of clear termsneither party could be taken to have intended that the solicitors should answer for the fraud of a customer where it could not be detected by exercising all proper care.34 The Court commented on "the extremelylimited value of precedent on a question of the construction of adocument",35 and distinguished both Zwebner and Barclays:36Those cases are interesting illustrations of the approach ofthe Court to the construction of a solicitors' retainer, but therespective texts and context were significantly different from the relevant material in this case. Neither decision governs this case.The Court also noted the strong reliance of counsel for the bank on the decision in Zwebner, but noted that it should not be given wide application, adding:3731 At 514.32 Zwebner v Mortgage Corporation Ltd, above n 20.33 Midland Bank Plc v Cox McQueen, above n 20.34 At 598 per Lord Woolf MR.35 Midland Bank Plc v Cox McQueen, above n 20, at 605 per Mummery LJ.36 At 605 per Mummery LJ.37 At 603 per Lord Woolf MR.If commercial institutions such as banks wish to impose an absolute liability on members of a profession they should do so in clear terms so that the solicitors can appreciate the extent of their obligation which they are accepting....unless the language used in a retainer clearly has this consequence, the Court should not be ready to impose obligations on solicitors which even the most careful solicitor may not be able to meet.(e) In UCB Corporate Services Ltd v Clyde & Co38 the plaintiff bank instructed the defendant solicitors to act for it in a commercial loan transaction. The solicitors were instructed to obtain a personalguarantee from the borrower's directors. A guarantee was duly signedbut did not include the name of the borrower. The borrower subsequently defaulted, but the omission of its name in the guaranteerendered it unenforceable against the guarantors (the borrower'sdirectors). The solicitors admitted negligence but claimedcontributory negligence on the part of the bank. The bank's standardform instructions required the solicitors to obtain an enforceable security. The court followed its decision in Midland that the nature of the contract of retainer was to be determined as a matter of the construction of the instructions, as conveyed to a reasonable person having the background knowledge reasonably available to the parties at the time of the contract. The court again distinguished Zwebner,and adopted the reasoning in Midland that the language was not sufficiently clear and unequivocal to impose a guarantee or warranty,so as to put the solicitors in the position of the bank's insurer against a failure to realise its security (even if the purpose of the bank's instructions was to record the bank's expectations):39In my judgment, on the fact of this case the judge came tothe right conclusion. The terms of the bank's writteninstructions did not impose an absolute obligation on the solicitors to obtain an enforceable guarantee. They merely required that the solicitors should do all that could reasonably be expected of them to achieve the desired result; in other words and in substance, the familiar implied duty to use professional skill and care in and about obtaining the execution of the written document, or category (3) duty as38 UCB Corporate Services Ltd v Clyde & Co, above n 20.39 At [55],[56].categorised by Hobhouse J in Forsikringsaktieselskapet Vesta v Butcher (supra). The fact that the breach of the implied term was admitted did not convert it into a breach of an absolute obligation.The purpose of the bank's standard conditions may wellhave been (as Miss Andrews contended) to record the bank'sexpectations from its solicitors. However, if UCB wished to impose an absolute liability on those solicitors it invited to undertake its work, it should have done so in clear and unequivocal terms, so that those solicitors could appreciate the extent of the obligation they were undertaking. If a bank seeks to impose a guarantee or warranty or to ensure that the solicitors will assume the role of insurer against a failure to realise its security, then the solicitors must be put in a position where they are able either to withdraw from providing such services in each and every transaction or to charge at a suitable commercial rate to take account of the risk.Did Frost & Sutcliffe's contract of retainer and particularly ANZ's stipulations as to release of the discharge impose a strict obligation?[35] The application to strike out can only succeed if ANZ's instructions of 2March 2006 impose a strict obligation on Frost & Sutcliffe in respect of release of the discharge of mortgage. The parties agree that whether the retainer imposed a strict duty or merely a duty to take reasonable care turns upon the proper construction of the relevant terms of the retainer.[36] The context in which the instructions are given must be considered. 21stCentury/Mr Ha had told ANZ that it wished to sell the property at 10 MiddlemoreRoad that had been provided as security for ANZ's loan in November 2005. Frost &Sutcliffe, who acted generally for 21st Century and Mr Ha, and had acted on the financing in November 2005, wrote to ANZ on 24 February 2006 requesting discharge of the Middlemore Road mortgage to allow the sale to proceed. That letter reads:RE: 21st Century Investment Limited10 Middlemore Road, OtahuhuDischarge of Mortgage No. 66862122We write to advise that our client has an unconditional sale on the above property which is subject to a mortgage in favour of your Bank.Settlement is due on 3 MARCH 2006 and we request, therefore, you attend to a discharge of the mortgage and forward us the same to be available to us on that date. Would you please advise us of the amount required by you to satisfy all amounts secured by the mortgage on that date.We undertake that we will receive the documents from you on the basis that we will not deal with them in any way, until we have accounted to you for all monies as advised by you are required to be repaid under the security of the mortgage.[37] ANZ then instructed Frost & Sutcliffe to act on its behalf (as well as for 21stCentury/Mr Ha).[38] Frost & Sutcliffe accepts that ANZ's instructions were given, at least in part,in its letter of 2 March 2006 enclosing the discharge of mortgage. That letter reads:1. In terms of your letter dated 24/02/2006 we enclose:Memorandum of Discharge for Mortgage Number 6686212.2.2. Replacement Security – The above documents are forwarded to you on your undertaking that you will not release the documents and on the basis that the release/discharge document is not effective, until our replacement security has been executed and your certificate for our security over the property at 1265 Alfriston Road, Alfriston, Auckland is available (refer to our letter dated 02/03/2006 for instructions).3. No repayment required – The Bank does not require repayment of any monies in relation to this transaction.[39] ANZ says, and Frost & Sutcliffe does not dispute, that the reference in paragraph 2 of this letter to a further letter dated 2 March 2006 was a reference to a standard letter of instructions issued by ANZ. Although both parties accept it was likely that ANZ would have given Frost & Sutcliffe such a letter, Frost & Sutcliffe has no record of having received it, and ANZ does not have a copy of the letter as sent. ANZ says that its practice is to put both letters in the same envelope. For the purposes of this application Frost & Sutcliffe has accepted that ANZ's standard letterof instructions forms part of the contract of retainer. Again, ANZ is unable to produce the specific form of the letter of general instructions, but has been able to find the template letter of instruction used by ANZ in March 2006.40 That template contains as a general term of the letter of instruction:40 Produced in evidence as Exhibit A to the second affidavit of E R Harrison, sworn 31 July 2013.If there is no drawdown of funds, but replacement security has been provided to the Bank in return for a discharge of existing security, then you must not release the existing security until the new security is signed and theBank has received your solicitors' certificate.[40] The template document also contains the form of the solicitors' certificatethat the solicitors are required to provide. The material terms of that certificate (which is in identical terms to the certificate required by ANZ, and provided by Frost & Sutcliffe, at the time of the advance in November 2005) are:As solicitors appointed to act for the Bank, I/we certify and irrevocably undertake that:1. Compliance with Instructions: I/we have acted and will act inaccordance with the Bank's instructions dated Todays Date (Ref:Reference Number) to the standards of a prudent and competent solicitor in the circumstances of this transaction to provide the Bank with valid and enforceable securities, deeds and agreements (whichwe have not amended without the Bank's prior written consent) inaccordance with those instructions.2. Exclusion: I/we do not certify as to, or otherwise accept responsibility for, the pre-printed and/or pre-completed contents ofthe Bank's forms including any financial details inserted by the Bank, except as set out in the Bank's instructions.3. Execution: As far as I/we am/are aware, having made enquiries and taken action to the standards of a prudent and competent solicitor in the circumstances of this transaction, each party (other than the Bank) has validly executed the securities, deeds and agreements to which it is a party.4. Capacity: As far as I/we am/are aware, having made enquiries and taken action to the standards of a prudent and competent solicitor in the circumstances of this transaction, there are no limitations on the contractual capacity of the parties to enter into the securities, deeds and agreements and execution of those documents is not in excess of the powers of the parties.5. Documents Explained: As far as I/we am/are aware, having made enquiries and taken action to the standards of a prudent and competent solicitor in the circumstances of the transaction, The nature and the effect of the provisions of the securities, deeds and agreements have been explained to the parties.[41] Counsel for ANZ accepted that, as a general principle, professional retainers do not normally impose strict duties to achieve a specified result,41 but submitted that a clear express undertaking will nevertheless be regarded as imposing a strict duty to perform what was undertaken.42 He submitted the case was analogous toZwebner where the court found a clear and express instruction that was intended tocreate an independent strict duty: ANZ's instruction in relation to release of thedischarge was clear and unambiguous and Frost & Sutcliffe accepted that instruction by proceeding to deal with the discharge. It followed that Frost & Sutcliffe accepted liability for failure to follow the instruction, irrespective of its fault.[42] Counsel based this submission on the absence of any qualitative aspect to the instruction, which might permit ambiguity or doubt about the firm's ability to carryit out, and hence introduce a qualified obligation to use reasonable care: the instruction required only that the replacement security be executed (not that it wasenforceable) and that Frost & Sutcliffe's certificate was available. The first aspectwas within Frost & Sutcliffe's knowledge and control, given that 21st Century and Mr Ha were its clients, and the second aspect was similarly so as the instruction referred only to availability of the certificate and not that it be correct (the purpose of providing the certificate was to give ANZ the basis for seeking recourse if it later turned out that there was a defect in the replacement security, and it was only at that point that the duty of care applied).[43] Counsel also submitted that the English cases relied upon by Frost & Sutcliffe offered little assistance and should be distinguished not only on the language and context of the obligations, but also because under the English system of land tenure the solicitors were required to review far more matters in relation to checking title than is the case in New Zealand (given indefeasibility of title under the Torrens system of land registration). Further, it was an important consideration in several of the cases that the solicitors should not be held to be guarantors of proper execution by persons who were not their clients. 4341 Simpson, above n 21, at 1.28.42 At 1.29.43 Barclays Bank Plc v Weeks Legg & Dean (a firm), above n 20.[44] Turning to the reluctance of courts to strike out pleadings if they do not dispose of matters, counsel said that ANZ undertook not to pursue its claim in negligence if the defence of contributory negligence was struck out in relation to the claim in contract, and that that would result in a substantial reduction in the discovery needed, and in the time required both for preparation and for trial itself. 44[45] Counsel for Frost & Sutcliffe argued that ANZ's instruction in respect of thereplacement security had to be construed as part of the contract of retainer as a whole, including the general instruction letter and the certificate provided with those instructions. He argued that when construed in context, the terms for release of the discharge did not impose a strict obligation but were an integral part of the contract of retainer, and were qualified by express stipulation of the standard of care of a prudent and competent solicitor in the certificate.45 He submitted that there was nothing in the language of the instructions,46 or in Frost & Sutcliffe's actions inresponse to them to show that ANZ intended to impose a strict duty or that Frost & Sutcliffe was willing to accept one.47 He argued that ANZ's approach that theinstructions in relation to the replacement security should be construed independently of the rest of its instructions (thus imposing liability irrespective of fault on the part of Frost & Sutcliffe) would have wide ranging implications for solicitors (imposing liability on solicitors even where they had exercised the care and skill of a prudent and competent solicitor). He said that the Court should follow the approach of the English Court of Appeal that solicitors should not be held to guarantee or warrant a particular outcome in the absence of express and clear language in the contract of a retainer.[46] Counsel submitted that strike out should also be refused on the grounds that Frost & Sutcliffe would still be able to pursue contributory negligence under common law, and in relation to its negligence claim (because the latter was still before the Court). He argued that by this application ANZ was endeavouring to44 Plaintiff's Submissions in Support of Applications to Strike Out the Respondent's SecondAffirmative Defence and for Further Particulars, 22 July 2013, at [23].45 Clause 1 of the Certificate, see [40] above.46 Adding that the uncertainty about the terms of the general instruction letter was another reason not to strike out.47 Arguing that this was a reason for distinguishing Zwebner v Mortgage Corporation Ltd, above n 20.avoid answering for its conduct in this case, and that was an important aspect of the dispute for Frost & Sutcliffe.Discussion[47] I adopt, with respect, the comments in Midland to the effect that the nature of the obligation must turn on the words used and their context.48 For the purpose of the present application I will assume that the contract of retainer did include the certificate usually required by ANZ as part of its general instructions to solicitors.[48] The language of the letter enclosing the discharge mortgage is clear and unequivocal. The instruction not to release the discharge unless replacement securityhad been executed and Frost & Sutcliffe's certificate in respect of the transaction wasavailable could not have been given more explicitly. I am mindful of the comments made in the English authorities that the courts should be slow to pass the whole of the risk of breach over to a solicitor in the absence of clear language. However, I do not accept that the consequence of strict liability needs to be stated expressly. Frost & Sutcliffe could not have been in any doubt as to what it was required to do about the discharge, or the consequence of failing to follow that instruction. Release wasdependent on matters that were within Frost & Sutcliffe's knowledge and control, and did not require any exercise of judgment as to the validity of execution or the availability of its certificate. Judged objectively, this leaves no room for Frost &Sutcliffe's argument that the parties did not intend this to be a strict obligation.[49] The correctness of this construction is supported by posing the counter- factual position, that the instruction was limited by a duty of care. It is inconceivable that a prudent and competent solicitor would release the discharge if the two requirements of execution of the replacement mortgage and availability of the certificate were not met.[50] There is nothing in principle to prevent the parties from intending that there be a strict obligation with respect to some aspects of the retainer, and qualifiedobligations in respect of other aspects. I find persuasive ANZ's argument that the48 Midland Bank Plc v Cox McQueen, above n 20, at 605 per Mummery LJ.matters covered by the certificate (relating to the validity and enforceability of the security) were separate to the obligation in respect of release of the discharge. This is consistent with the distinction made in some of the cases between the obligation imposed by a clear and unequivocal undertaking and a certificate as to performance of matters relevant to validity and enforceability.[51] I do not see that the terms of the certificate change the conclusion. I accept that the certificate would only be available after Frost & Sutcliffe had investigated and satisfied itself on the matters covered by the certificate, and that its performance of that aspect of the instructions was subject to a duty of care. However, that is not to say that the instruction as to release of the discharge was also qualified by that duty.[52] Similarly, I do not see that this finding will create great difficulties for solicitors given the clear and unambiguous terms of the instruction. It did not require the solicitor to make a judgment on the steps to be taken before release of the discharge. It is of an entirely different nature to the solicitor having to establish facts where a judgment could be involved. The authorities make it clear that it would be a different matter if the instruction had been not to release the discharge until you have obtained a valid security over the Alfriston Road property.[53] I find that this is one of the rare cases (as in Zwebner) for imposing strict liability. Frost & Sutcliffe can have been in no doubt as to the obligations imposed on it as a consequence of the terms of delivering the discharge to it. In those circumstances it must have been taken to have accepted the risk of liability in theevent that it dealt with the discharge other than as required by ANZ's explicitinstructions.[54] ANZ's claim is for breach of this obligation in the contact of retainer. In lightof this finding that it is a strict obligation, the affirmative defence of contributory negligence is not available.[55] Frost & Sutcliffe say that it is important to retain its defence of contributory negligence to allow it to pursue a case that ANZ acted imprudently in making itsdecisions first to lend to 21st Century, and then to vary the lending and security. Counsel submitted that the strike out application was an attempt to prevent that legitimate inquiry, that should not be countenanced. Although that may be a consequence of strike out, I do not see this point as requiring refusal of an order which is otherwise appropriate. If there is anything in this point, it may still be open to Frost & Sutcliffe as part of its general defence on causation. I make no finding on that.[56] Counsel for Frost & Sutcliffe also argued that its defence of contributory negligence should not be struck out because it was available in a breach of contract claim by analogy. Although this defence is not currently pleaded, counsel indicated that Frost & Sutcliffe would amend its defence to this effect, if necessary. For thisargument he relied on comments made by Cooke P as to the courts' willingness torecognise concurrent liability in tort and contract for breach of professional duties,49and in particular his comment in Mouat v Clarke Boyce:50What is most appropriate to the particular facts may be granted: ... As a corollary, apportionment in accordance with true responsibility will always be available when required by the justice of the case. It does not depend solely on the Contributory Negligence Act, although that Act may be used as an analogy in developing case law in fields not covered by it.[57] Cooke P relied on Day v Mead51 as support for his comment. However, in that earlier decision, Cooke P had qualified his comment as to the attraction of the same duty of care arising in both tort and contract by saying that that was subject to any special contractual term.52[58] In the circumstances I find that the strict obligation in respect of the discharge of the mortgage, imposed by the terms of this contract of retainer, excludes any application of common law principles by way of analogy.49 See Day v Mead [1987] 2 NZLR 443 (CA); followed in Mouat v Clarke Boyce, above n 13;Everest v McEvedy [1966] 3 NZLR 348 (HC); Taylor v Scofield Peterson [1999] 3 NZLR 434.50 Mouat v Clarke Boyce, above n 13, at 566.51 Day v Mead, above n 51.52 Counsel for Frost & Sutcliffe also referred to comments by Gault J in Mouat v Clarke Boyce, above n 13, at 574-575, but I do not read them as saying anything substantially different to Cooke P.[59] I turn now consider whether or not I should strike out the defence given that it will not dispose of the claim.[60] Counsel for ANZ argued that the defence should be struck out in relation to the contract claim. He said that if this occurred, ANZ would withdraw its claim in negligence, and rely solely on the breach of contract. In that event, substantially less time will be required in preparation, and in duration of trial. He referred to the inquiry that will become unnecessary if contributory negligence is not in issue.53 In this case there will be no need to examine:(a) What was done or not done by ANZ;(b) Whether there was a departure from the standard of a reasonable person; and(c) What causative potency ANZ's actions had in relation to the damagesuffered.[61] Counsel for Frost & Sutcliffe submitted that the Court should not strike out this affirmative defence as it would have negligible impact on the proceeding as a whole: the Court will still have to determine arguments on causation and mitigation of loss. He argued that there is need for very similar discovery on those matters, and there will be little saving of preparation or trial time.[62] Even allowing for ANZ's undertaking to amend its claim and remove itsclaim in negligence, it is unclear, as yet, how the strike out will affect discovery or the time needed for trial, given that Frost & Sutcliffe will still be defending the breach of contract claim on the grounds of lack of causation and quantum of loss. There will need to be discovery on those issues, and they will need to be addressed at trial. Nevertheless, and bearing in mind the width of the potential inquiry for53 Referring to the comparative assessment that is required as between ANZ and any other party (such as Mr Ha) and the scope of that inquiry, as set out in Findlay v Auckland City Council HC Auckland CIV-2009-404-6497, 16 September 2010 at [60] and [64].contributory negligence,54 it is likely that there will be a reduction in matters of inquiry, and hence time in discovery, preparation and trial.[63] However, even if the strike out will not dispose of the case as a whole, or even the key issue of causation, that is not an argument for declining to strike out the defence in this case, given my finding that it is clearly not available. I will turn now to the second, and related, aspect of the application, namely particulars of loss.The request for an order for further particulars[64] ANZ seeks particulars at this stage of the losses that Frost & Sutcliffe says ANZ will incur regardless of its breach of instructions. It says that not only is it entitled to know the case against it, but also that it is inevitable that there has been some loss (the Alfriston property had to have some value). Counsel submitted that Frost & Sutcliffe had conceded the inevitability of some loss in the pleading of itsaffirmative defence, and it ought to be required to put "peg in the ground" on the value of that "loss in any event". Counsel argued that it was reasonable for ANZ toseek the particulars because if the amount was quantified, discovery would be limited to the value of the loss of the Alfriston property, and the inquiry at trial would be reduced to (limited) expert evidence. He submitted that Frost & Sutcliffe was resisting provision of the particulars only because the particulars would give ANZ the opportunity to obtain judgment for the undisputed loss. Counsel said that if ANZ was able to seek judgment for the undisputed loss it might elect not to pursue the disputed balance. In either event, time for discovery and preparation for trial would be reduced substantially.[65] Counsel further submitted that Frost & Sutcliffe's pleading of its affirmativedefence was improper if it in fact has no information to support its positive allegation that the value of Alfriston Road had fallen.[66] Counsel for Frost & Sutcliffe replied that its affirmative defence was not an admission of causation or loss, but was merely pointing to issues over causation. He said that the affirmative defence did not alter the onus on ANZ to prove its loss, and54 Identified in Findlay v Auckland City Council, above n 53.the affirmative defence raised specific issues about that loss. He said that the amount of the loss that ANZ would have suffered even if it had the security of a first registered mortgage was a matter for determination by the Court. He said that it was incapable of precise determination ahead of trial as it required resolution of a number of hypothetical questions, including:(a) The date that ANZ would have realised its security after 21stCentury/Mr Ha had defaulted;(b) The amount of 21st Century's debt at that time;(c) The price that the Alfriston Road property would have fetched at the date of sale, taking into account the effect of the global economic crisis;(d) Any sums that were likely to have been recovered from 21stCentury/Mr Ha;(e) ANZ's costs of pursuing 21st Century/Mr Ha (given that these would have been incurred in any event); and(f) The cost and expenses of sale of the Alfriston Road property.[67] Counsel submitted that some of these questions (such as legal costs involved in pursuing 21st Century/Mr Ha) might be established by discovery, but ultimately the loss would be a matter for assessment by the Court after considering all the evidence and the parties' submissions. Counsel submitted that all that Frost &Sutcliffe was required to do was to provide fair notice of how it says that the Court should calculate the shortfall, and that it was not necessary to provide the particulars sought to enable ANZ to prepare properly for trial.[68] The primary purpose of pleadings is to define the issues, so as to inform the parties in advance of trial of the case they have to meet, so as to enable them to takesteps to deal with it.55 This principle is often framed in terms of saying that a trial by ambush is not acceptable. The High Court Rules reflect this principle in their provisions for the pleading of statements of claim56 and statements of defence.57 The pleading must give particulars of time, place, amounts, names of persons, nature and dates of instruments, and other circumstances sufficient to inform the Court and other parties of the claim or defence. In an often cited authority, the Court of Appeal has said that this needs to be:58... sufficient to enable a reasonable degree of pre-trial briefing and preparation.[69] ANZ's claim is for loss suffered by reason of the breach of its instructions toFrost & Sutcliffe not to release the discharge of the mortgage over the Middlemore Road property. If Frost & Sutcliffe had carried out its instructions, that mortgage would have been discharged and ANZ would have held a first mortgage over the Alfriston Road property. The loss, therefore, that ANZ has suffered from a breach of the retainer is the value of the security over the Alfriston Road property. ANZ mustestablish that loss. I accept that the matters raised in Frost & Sutcliffe's affirmativedefence are matters that must be taken into account in that inquiry. However they are not matters that are capable of precise quantification, but are matters for the Court to assess based on the evidenced adduced at trial, and after considering theparties' respective submissions.[70] I find that Frost & Sutcliffe has raised these matters sufficiently to inform the Court and ANZ of the case that ANZ must meet. I accept that, with the exception ofany specific information that may come out of ANZ's discovery, Frost & Sutcliffehas provided such particulars as are currently available, and the factual basis for its assertions is a matter for evidence at trial. I find that the existing pleading gives ANZ sufficient particulars of the affirmative defence to allow it to prepare properly for trial.55 Farrell v Secretary of State [1980] 1 All ER 166 (HL).56 High Court Rules, r 5.26(b).57 Rule 5.48(5).58 Waterhouse v Fortex Group Ltd CA179/98, 30 November 1998.[71] Whilst I accept that ANZ would like to have greater definition at this point, so as to allow it to seek judgment for any undisputed sum, I accept the submission for Frost & Sutcliffe that the undisputed sum cannot be determined definitively at this point, as the amount of any drop in value is a matter for the Court to determine following trial.Decision[72] For the reasons I have given I determine the two aspects of ANZ's applicationas follows:(a) Frost & Sutcliffe's affirmative defence of contributory negligence isstruck out in respect of the cause of action in contract, subject to ANZ filing and serving an amended statement of claim removing its claim in negligence within 15 working days of this decision. Leave is reserved to ANZ to seek further time if for any reason it is not practicable to do so within this timeframe.(b) ANZ's application for further particulars of Frost & Sutcliffe'spleading in paragraph 46 of its Statement of Defence is dismissed.(c) As both parties have had some success, I make no order as to costs.____________________Associate Judge Abbott