LEPIONKA & COMPANY INVESTMENTS LIMITED v GIBSON SHEAT [2023] NZHC 1981

LEPIONKA & COMPANY INVESTMENTS LIMITED v GIBSON SHEAT [2023] NZHC 1981 [27 July 2023]IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYI TE KŌTI MATUA O AOTEAROATE WHANGANUI-A-TARA ROHECIV-2021-485-301[2023] NZHC 1981BETWEEN LEPIONKA & COMPANYINVESTMENTS LIMITEDPlaintiffAND GIBSON SHEATDefendantHearing: 29 May – 2 June 2023Appearances: J G Miles KC, S J Leslie and J A Laing for the PlaintiffD P H Jones KC, C L Bryant and G J Luen for the DefendantJudgment: 27 July 2023Publicly released: 19 September 2023JUDGMENT OF COOKE J(Preliminary question)Table of ContentsThe facts [6]LCIL's arguments [41]Were the requirements for a contract met? [43]Was the agreement subject to contract? [48]Assessment [54]Contract subject to condition concerning independent advice [61]The argument [62]Were such duties still owed? [69]Did Gibson Sheat meet its obligations? [74]The arguments collectively [90]Waiver [92]Conclusion [93][1] In these proceedings the plaintiff, Lepionka & Company Investments Limited(LCIL) sues its former solicitors, Gibson Sheat, in negligence.1 It alleges that GibsonSheat provided it with negligent advice in connection with lots it had purchased in aproposed lifestyle-block subdivision near Havelock North, Hawke's Bay. It seeksdamages for amounts in excess of $4 million.[2] Contracts for the purchases of lots had been entered by LCIL in early 2014.Gibson Sheat were instructed in early 2015 when problems with the developmentemerged. LCIL then took steps to protect its position in reliance on Gibson Sheat'sadvice. Issues then arose in relation to the advice that Gibson Sheat had provided.LCIL was by then in litigation with other entities associated with the subdivision.LCIL and Gibson Sheat engaged in a number of exchanges about the position in late2015. In early February 2016 Gibson Sheat advised that it could no longer act forLCIL in the circumstances, and notwithstanding a Court of Appeal hearing that wasshortly to take place. Replacement counsel were then instructed to appear for LCILon the appeal.[3] After the hearing the parties reached an agreement intended to resolve theirdifferences, however. The key question now to be determined by the Court is whetherthat agreement involved a full and final settlement of any claims that LCIL had againstGibson Sheat.[4] Gibson Sheat unsuccessfully applied for summary judgment on the basis thatthe proceedings had been so settled.2 The Court subsequently ordered that the questionof whether the proceedings had been settled would be the subject of a separatequestion, however.3 That is the matter that has proceeded before me.[5] There are essentially four key questions:(a) whether an oral agreement was reached between the parties on29 February 2016, intended to be final and binding, and covering allessential terms;1 The statement of claim advances a claim in contract, and a claim in tort.2 Lepionka & Company Investments Ltd v Gibson Sheat [2022] NZHC 242.3 Lepionka & Company Investments Ltd v Gibson Sheat [2022] NZHC 1488.(b) whether the oral agreement was conditional on the agreement beingformally recorded in writing;(c) whether the agreement was subject to LCIL receiving independent legaladvice and confirming its agreement given Gibson Sheat's professionalobligations; and(d) whether any pre-conditions to agreement, particularly any requirementfor a formal written document, were subsequently waived.The facts[6] I begin by setting out the relevant facts. This will involve making factualfindings. The hearing proceeded before me over the course of five days and theparties' witnesses were cross-examined on their evidence. Ultimately, however, thereis little in the nature of factual disputes between them of significance.[7] The relevant land lies on the banks of the Tukituki River a little up the rivervalley from Te Mata Peak. A developer by the name of Garth Paterson was developingthe land into lifestyle blocks. In January 2014 the LCIL interests agreed to purchasea number of lots in the development and paid deposits in the amount of $463,000.[8] Mr Paterson's entities had a mortgage with Westpac New Zealand Ltd(Westpac). In January 2015 Westpac issued default notices under the mortgageagreements. That put the LCIL purchases and the deposits at risk. In March 2015Mr Stefan Lepionka of LCIL approached Mr David Wallace, a partner of Gibson Sheatfor assistance. Mr Lepionka had been at school with Mr Wallace. Gibson Sheat wasthen instructed and it advised LCIL to adopt a particular strategy. This involvedpurchasing Westpac's mortgage, taking possession of the development to complete thesubdivision, and adopting the LCIL purchase contracts. This strategy apparentlyprotected the LCIL purchase contracts and accordingly the deposits. LCIL duly tooksuch action in reliance on Gibson Sheat's advice in April 2015.[9] Disputes then emerged with other parties involved in the subdivision,particularly Mr Coltart who had worked with Mr Paterson, another prospectivepurchaser, and Mr Paterson himself.[10] Mr Coltart then made an offer to purchase the property in connection withissues he had raised. LCIL decided that an opinion should be sought from counselabout these other issues before the offer was accepted. In May 2015 a property lawspecialist, Mr John Greenwood, advised that the adoption of LCIL's purchasecontracts may have breached the duties of a mortgagee under s 176 of the PropertyLaw Act 2007. LCIL then decided not to proceed by accepting Mr Coltart's offer.[11] A hearing then took place in the High Court in August in relation to LCIL'sapplication to remove caveats that Mr Coltart had lodged. In addition, injunctionproceedings were brought by the entities associated with Mr Paterson.[12] Further advice was then obtained by LCIL from Mr Justin Smith KC. On12 October 2015 he provided oral advice that, whilst there were arguments todistinguish case law, there was a risk that the Court would find that it was inappropriatefor LCIL to have used the mortgagee's powers to protect LCIL's position.[13] The proceedings then continued. On 17 November 2015 Associate JudgeSmith granted LCIL's application to remove Mr Coltart's caveats.4 The Court heldthat there was no bad faith directed towards Mr Coltart through the adoption of theLCIL purchase contracts.5 Mr Coltart lodged an appeal. Separate proceedings werealso then brought by another entity.6 Mr Smith KC was then asked for further advice,particularly in relation to the new proceedings. On 9 December he provided a draftopinion indicating that LCIL was at significant risk.[14] I accept Mr Lepionka's evidence that Mr Wallace then phoned Mr Lepionkaand advised him that he and one of his partners strongly disagreed with Mr Smith's4 Lepionka & Company Investments Ltd v Coltart [2015] NZHC 2849.5 At [120].6 This sentence was corrected under r 11.10 of the High Court Rules 2016.opinion, and that he had got it wrong.7 By email dated 13 December 2015Mr Lepionka formerly raised his concerns relating to Gibson Sheat's advice, and thestrategy, however.[15] The following day Mr Wallace and his fellow partner Mr Edward Cox met withMr Smith. Gibson Sheat's position was discussed, including its obligations under theLawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (theRules) and particularly rr 5.11 and 5.12 which regulate whether a solicitor can actwhen there is a potential claim against that solicitor by the client. At that stage,however, Gibson Sheat decided not to stop acting or inform LCIL to take independentadvice under the Rules as the purchase offers then on foot could mean that LCILsuffered no loss resulting from any negligent advice. Gibson Sheat advised its insurersof a possible claim on or about 21 December 2015, however.[16] On 21 December 2015 the Court of Appeal set down Mr Coltart's appeal forhearing on 25 February 2016. Discussions then occurred between the parties,including in relation to the fees that Gibson Sheat was still billing LCIL. Work wasrequired to deal with the appeal. By letter dated 10 February 2016 Mr Cox made aproposal to Mr Lepionka, copied to Mr Greg Horton in relation to fees.8 That letteralso raised the conflict of interest. It stated:If Gibson Sheet is to continue to provide legal services to you, there is a furthermatter that needs to be addressed and resolved. Your email of 13 December2015 questions and puts directly in issue whether you have been wronglyadvised by Gibson Sheat. This was canvassed further in our conference withyou and your legal adviser, Greg Horton, on 15 December 2015.We do not accept there is any proper basis to question or criticise our advice.However, having raised this matter we are required by Chapter 5.11 and 5.12of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care)Rules 2008 (attached) to advise you to seek independent advice and that wemay not act further until you have received that independent advice and thematters in dispute between us are resolved. Accordingly, to continue ourengagement it will be necessary for Greg to confirm that you have takenindependent legal advice and that any claim you may consider you have7 Mr Wallace gave evidence that he could not recall most of the key conversations in issue, butcontemporaneous documents support Mr Lepionka's evidence.8 Mr Horton was a solicitor and a trustee of one of the family trusts. In that capacity he providedday to day advice to Mr Lepionka, and Mr Horton's firm was also instructed from time to time onspecific legal work.against our firm is fully and finally settled and resolved. In that event we mayresume taking instructions to continue to act for you in this matter.[17] Mr Horton responded very shortly thereafter saying that LCIL gave itsinformed consent to Gibson Sheat continuing to act. Mr Cox replied advising thatGibson Sheat could still no longer act once a claim was apprehended, and effectivelyreiterating that the claim needed to be resolved before Gibson Sheat could resumeacting. Mr Horton responded advising that LCIL had provided informed consent, andthat there was no current claim against the firm. Mr Cox was unmoved, however. Hereplied saying that a claim had been raised, and: please take urgent instructions as to LCIL's position. If having takenindependent legal advice from you, LCIL confirms that any claim it considersit considers it may have had against our firm is fully and finally settled andresolved then we can resume taking instructions to continue to act for it in thismatter. We would welcome resuming work for Stefan in those circumstances.We look forward to hearing from you.[18] Mr Horton responded:So let's be really clear here Ed, are you saying you are not and will notprogress the appeal unless your client acquiesces to your terms?Be really clear Ed.[19] Mr Cox then reiterated the position on 11 February stating that there was a waythrough the situation if LCIL was independently advised by him (that is, Mr Horton)and was in a position to resolve the potential claim, but if it could not be resolved thenGibson Sheat could no longer act. He reiterated the position on 12 February indicatingthat an urgent response was required as Gibson Sheat would need leave from the Courtof Appeal to withdraw as counsel. LCIL was under considerable pressure as aconsequence.[20] I again accept Mr Lepionka's evidence that Mr Wallace then phoned him overthe weekend and advised that to get matters back on track LCIL needed to make anoffer to Gibson Sheat. Mr Lepionka discussed this with Mr Horton who then draftedup a proposed offer from LCIL to Gibson Sheat. That offer was then sent byMr Lepionka to Mr Cox and Mr Wallace on the evening of Sunday 14 February. Itproposed arrangements in relation to outstanding and future fees and included thefollowing terms:4. We will withdrawal litigation threat on GS, and accept your full andfinal terms in your letter.5. We want a quick and clean legal resolution so that all parties can bringclosure to this situation we all find ourselves in.[21] That proposal was not accepted by Gibson Sheat, however. Bell Gully wasinstructed on short notice to act for LCIL on the appeal. Mr Mike Colson, then a BellGully partner, acted as counsel.[22] Following the hearing on 25 February Mr Colson reported that the hearing hadgone well and that LCIL was likely to succeed. He put the prospects of success at 70per cent.[23] On the day of the hearing Mr McHardy also submitted a new offer to purchaseone of the lots with an indication he may be prepared to purchase one of the other ofthe lots. In evidence Mr Lepionka referred to this offer as a "real game changer andpotential breakthrough", and that he could tell from a conversation he then had withMr Wallace that Mr Wallace was also very excited about the development as "it washis plan coming to fruition".[24] This further phone call between Mr Wallace and Mr Lepionka happened theday after the Court of Appeal hearing. I accept Mr Lepionka's evidence thatMr Wallace expressed the view in this call that Gibson Sheat's risk had now gone, andthat Gibson Sheat would now make a counter-offer on its fees to enable the positionto be resolved so that Gibson Sheat could resume acting. Mr Wallace denied he wouldhave said this, but it is clear that Mr Lepionka understood that this was whatMr Wallace had said because that is what he reported by email to Mr Horton and hisother trustee. I generally found Mr Lepionka to be a truthful witness. Mr Hortonresponded to the email with a guarded view, indicating that it seemed to him thatGibson Sheat remained pretty worried about their risk and that they would want toachieve a full and final settlement, but that this was "okay on the right fee deal".[25] Gibson Sheat did then make a further proposal by letter dated 26 February inthe following terms:1. As discussed, the Coltart appeal hearing went well and hopefully thejudgment will reflect that and be available shortly.2. If you are in agreement that LCIL has no claim now or to be broughtin future in relation to Gibson Sheat's advice, including in relation toLCIL's acquisition of Westpac's mortgage and the adoption of theLCIL purchase agreements, entry into the related agreement tocomplete the subdivision, the ensuing conduct of litigation andcompletion of LCIL's instructions generally up to disengagement, wecould (and would like to) recommence acting for you.3. On that basis we could continue to work on your behalf in relation tothe conveyancing and the outstanding litigation involving GLW andAFI subject only to our obligations under the LCCC Rules. TheColtart matter would remain with Bell Gully while it runs its course.4. If we are able to each that agreement the only remaining issue is ouroutstanding fees. In that regard, we propose to deduct $100k from ouroutstanding involves. Please note this is not a concession that at anytime our advice has been incorrect or wanting, and simply reflectsyour concerns and our discussions over the level of fees. That wouldbe the complete fee arrangement with you.[26] Messrs Lepionka, Horton and the other trustee then discussed the position andagreed on a response. By email dated 29 February LCIL made a counter-offer in thefollowing terms:Counter offer1. Your $100k offer is not accepted. We would only accept a reductionof $131,651.00+GST.2. Fee proposal/ estimate required on all future commercial actionsexcluding litigation (apart from GLW Liquidation) based on rates set out inyour letter of offer. Regular fee updates and prior approval to exceed estimateby 10% or more.3. All costs outside of that basis of Estimated Fee to be run through Gregand I for sign off. We don't want the clock on without our knowing.4. We will withdrawal litigation threat on GS, and accept your full andfinal terms in your letter.5. Main litigation services conducted by BG. GLW liquidation to beprovided by GS in conjunction with BG overall litigation strategy and servicesthereafter will be based on merits and on a case by case basis.Please advise by close of play today or earlier if GS is in/out so we can proceedaccordingly either way.[27] So the differences between the parties had narrowed to two matters — the sizeof the fee credit, and the extent of Gibson Sheat's role going forward.[28] There were then further email exchanges about the offers, followed by atelephone discussion between Mr Lepionka and Mr Wallace on 29 February. Thistelephone discussion is of central importance because the two men reached agreementon the outstanding issues. There is contemporaneous evidence of this discussion inthe form of a handwritten file note made by Mr Wallace, which notes that the phonecall happened at "4.25 pm(ish)", and a follow up email from Mr Wallace toMr Lepionka at 4.58 pm. The email records:As per our discussion I confirm you and I have agreed Gibson Sheat willreduce our outstanding invoices by $105,000 plus gst on the terms 2-5 outlinedin your email below and in paragraph 2 and 4 of our draft letter of 26/2/15(copy attached). We will prepare a simple deed recording this.On a personal note I am relieved to have sorted this out on terms acceptableto both parties.Please let us have your instructions on what is required work wise so we canprovide the estimates required.[29] Paragraphs 2–5 were a reference to paragraphs of the email referred at [26]above, and the reference to paragraphs 2 and 4 is a reference to those paragraphs inthe letter quoted at paragraph [25] above. So the recorded oral agreement had resolvedthe two outstanding matters, and the full and final settlement requirement referred toin both communications was specifically confirmed.[30] Mr Lepionka replied by email at 8.47 that night thanking Mr Wallace for hisemail, expressing the hope that "this round" that they would have a "better experienceand outcome dealing with [Gibson Sheat]" and giving instructions on what had to bedone immediately, and requiring estimations by Gibson Sheat for that work. Thiseffectively confirmed the agreement described in the email.[31] I accept that Mr Wallace's email had correctly recorded the oral agreementreached between Mr Wallace for Gibson Sheat, and Mr Lepionka for LCIL. It isconsistent with the written file note of Mr Wallace, and the evidence of Mr Lepionka.Mr Wallace's file note records Mr Lepionka making the counter-offer on fees as hisfinal offer and:I accepted the offer on basis that everything else was as per our letter + hisemail today. Stef agreed. I said I'd do a simple agreement recording ouragreement.[32] Mr Lepionka accepted that this file note largely reflected his recollection.Under cross-examination he said that the agreement was subject to a written contract,however. I will deal with that argument below.[33] Mr Wallace responded to Mr Lepionka's reply by email of 2 Marchcommenting on the issues moving forward, including the risks. Mr Lepionka thenmade marked-up comments on Mr Wallace's views in the email. He said in evidencethat he was surprised that Mr Wallace had outlined a greater level of risk relating tothe exercise of mortgagee powers than he had earlier expressed, but his comment onthis risk in the marked-up comments was limited to him saying that it "Defeats theoverall purpose and why we acted on GS plan to adopt S&P agreements".[34] Later that evening Mr Wallace sent Mr Lepionka a draft settlement agreementas he said he would. That agreement is mostly consistent with the terms of the oralagreement, although there are some aspects that are arguably not, and which I will dealwith in greater detail below. No steps were taken by LCIL in relation to the draft,however.[35] On 6 April the Court of Appeal indicated that the judgment on the appeal wouldbe issued the following day. The following morning Mr Lepionka sent Mr Wallace anemail about Gibson Sheat's bills which he said seemed "extremely excessive andnot consistent with our agreement?". Mr Cox asked Mr Wallace that day if the writtenagreement had been signed, and Mr Wallace checked with his secretary. Mr Wallace'ssecretary then re-sent the email from Mr Wallace to Mr Lepionka with the draftsettlement agreement.[36] That afternoon the Court of Appeal delivered the decision in the appeal.9Contrary to expectations it upheld Mr Coltart's appeal based on the argument that theLCIL interests were using the mortgagee's powers for a collateral and improperpurpose of protecting LCIL's position. This meant that Mr Coltart's caveats could besustained.9 Coltart v Lepionka & Company Investments Ltd [2016] NZCA 102, [2016] 3 NZLR 36.[37] Gibson Sheat did not follow up execution of the agreement after that point.Gibson Sheat's insurer asked for a copy of the signed settlement agreement. But it isapparent that Gibson Sheat formed the view that pursuing the signing of the agreementmight open up arguments about whether settlement had actually been achieved. Theposition was considered in April and again in June, but there was no further follow upwith LCIL. The terms of the agreement were nevertheless performed, including byGibson Sheat giving LCIL the fee credit that had been agreed upon.[38] The substantive arguments relating to the legitimacy of the strategy LCIL hadadopted on Gibson Sheat's advice were later addressed in the underlying litigation.By judgment dated 14 December 2017 the High Court found that LCIL breached theduty of the mortgagee under s 179 when it adopted the Lepionka purchase contracts.10The Court was unable to conclude whether LCIL failed to obtain the best pricereasonably obtainable at the time of the adoption, however, as this would depend onfurther evidence.11[39] I note that there was evidence that in subsequent discussions with Mr Lepionkain 2017 and 2021 Mr Wallace made certain admissions. The content of thesediscussions was disputed, and I make no findings about them. I have taken thisevidence into account to the extent that it might bear on the question whether a bindingagreement was reached, and its terms, but I do not find it necessary to make findingsabout these later discussions as I do not apprehend them to be directly relevant to theissues before the Court.[40] Finally, it is also appropriate to record that Mr Paterson, in particular, becamea most persistent litigant, to the point that orders were made against him under s 166of the Senior Courts Act 2016.12 He sought to attend the hearing of this preliminaryquestion, but I made confidentiality orders to protect LCIL's privileged materials forthe reasons out lined in my minute dated 30 May 2023 which effectively preventedhim attending the hearing.1310 AFI Management Pty Ltd v Lepionka & Company Investments Ltd [2017] NZHC 3116.11 See summary at [494].12 Paterson v Lepionka & Company Investments Ltd [2020] NZHC 2184.13 Lepionka & Company Investments Limited v Gibson Sheat HC Wellington CIV-2020-485-301, 30May 2023.LCIL's arguments[41] The central question to be determined by the Court is whether there was a fulland final settlement reached between the parties as a consequence of the oraldiscussion between Mr Lepionka and Mr Wallace on 29 February, and then confirmedin the email exchange between them immediately afterwards. LCIL advance threeseparate arguments to say there was no such agreement, although those argumentsoverlap. In particular LCIL say:(a) That there was no intention to be bound following the oral agreementas the parties' discussions demonstrated that there were key matters thatwould need to be finalised in formal contractual documentation —including the requirement that LCIL have independent legal advice onthe settlement.(b) There is also an inference, not displaced in the present case, thatimportant contracts of this kind will be reduced to writing before theybecome legally binding.(c) In any event, irrespective of the parties' intentions, there is an impliedcondition arising as a matter of law that LCIL seek and obtainindependent legal advice before such agreement could be binding.[42] I will consider each of those arguments in turn, but it will also be important toaddress the arguments collectively given that they involve a substantial degree ofoverlap.Were the requirements for a contract met?[43] LCIL first argue that no binding agreement was reached on 29 February 2016as the essential terms had not been sufficiently agreed and there was no intention to bebound. LCIL submitted that central terms were still being debated, particularly thequestion of LCIL's receipt of independent legal advice.[44] The test for the establishment of a contract was set out by the Court of Appealin Electricity Corporation of New Zealand Ltd v Fletcher Challenge Energy Ltd in thefollowing terms:14The prerequisites to formation of a contract are therefore:(a) An intention to be immediately bound (at the point when the bargainis said to have been agreed); and(b) An agreement, express or found by implication, or the means ofachieving an agreement (e.g. an arbitration clause), on every termwhich(i) was legally essential to the formation of such a bargain; or(ii) was regarded by the parties themselves as essential to theirparticular bargain.A term is to be regarded by the parties as essential if one party maintains theposition that there must be agreement upon it and manifests accordingly to theother party.[45] I accept that the parties had an intention to be bound, and that all essential termsof the contract were reached in the oral agreement between Mr Wallace andMr Lepionka. I do not accept that the additions in subsequent draft written agreementsuggested a binding agreement had not already been reached. There are two terms inthe written draft that departed from the oral agreement. Both can be seen as examplesof Gibson Sheat seeking to crib additional terms in the written record of the settlementrather than the addition of essential terms, however. In particular:(a) The written agreement included Mr Lepionka personally as a party inaddition to LCIL. Although that was not an aspect of the oral agreementI do not see that much significance attaches to this proposed addition,and it does not mean that the essential terms had not been agreed orally.If Mr Lepionka personally was the client as well as LCIL then it wouldhave been intended that he be bound by the settlement. It would defeatthe whole purpose of the agreement if he were to say he personallyretained the right to sue. The better view is, however, that he was notthe client, and had no personal claim. So including him as a party was14 Electricity Corporation of New Zealand Ltd v Fletcher Challenge Energy Ltd [2002] 2 NZLR433 at [53].not controversial, and did not evidence a lack of agreement to theessential terms of the earlier oral agreement.(b) More importantly Gibson Sheat added, at their insurer's instigation, aclause in the proposed written agreement that "LCIL and Stefanacknowledge that they have been told to take, and have taken,independent legal advice about any claims they consider they may havehad against GS". I do not consider that this was a term of the oralagreement, or that it could have been an operative term of the writtencontract. It was not an obligation on either party — it seeks to recordwhat had already happened. It would have been better if it had beenrecorded in the draft recitals to describe the background to theagreement that had been reached. There is an argument about theimpact that the obligations under the Rules which I address below. ButI do not consider that any essential term was not reached as aconsequence of these words in the draft agreement.[46] So it is apparent that the essential terms of the agreement were reached by theparties on 29 February. I also accept that the parties clearly exhibited an intention tobe bound by what had been agreed orally, and confirmed by the email exchange,particularly as they duly performed the agreement. I address this question more fullybelow in the context of LCIL's two further arguments.[47] LCIL's arguments more squarely focus on two further related matters —thatthe agreement was subject to the execution of a formal written contract, and also thatit was subject to the Rules being complied with (including a need for LCIL to havetaken independent legal advice). I will deal with each of those questions in turn.Was the agreement subject to contract?[48] LCIL argue that the oral agreement reached on 29 February was conditional onthe execution of a written agreement, and that the parties were not immediately boundby the oral agreement. It argues that a written agreement was a condition precedentto the formation of the contract.[49] When dismissing Gibson Sheat's summary judgment application Paulsen AJheld that there was scope for the inference that the parties would not be bound until awritten agreement was signed.15 LCIL relies on authorities that have held that there isan inference that parties will not be bound by an apparent agreement until entry of awritten contract in certain circumstances. In Carruthers v Whitaker the Court ofAppeal held that there was no binding contract for the sale of a farm notwithstandingand oral agreement that had apparently been reached.16 Richmond J said:17It is established by the evidence to which I have earlier referred that at the timewhen the parties instructed their respective solicitors they all had in mind onlyone form of contract which would govern the sale and purchase of the farm,namely, a formal agreement in writing to be prepared and approved by thesolicitors. When parties in negotiation for the sale and purchase of propertyact in this way then the ordinary inference from their conduct is that they havein mind and intend to contract by a document which each will be required tosign. It is unreasonable to suppose that either party would contemplate thatanything short of the signing of the document by both parties would bringfinality to their negotiations. Furthermore both parties would expect theirsolicitors to handle the transaction in a way which would give them properprotection from the legal point of view.[50] In Concorde Enterprises Ltd v Anthony Motors (Hutt) Ltd the Court of Appealdealt with a potential business contract and reached a similar conclusion that nobinding agreement was reached before a written contract was signed.18 Cooke J forthe Court set out the above passage from the judgment of Richmond J and said:19This case is in the different field of commercial contracts, where there is notby law the same need for signed writing as evidence, but in our opinion thenatural inference is the same in the absence of factors to the contrary.Unless that inference is displaced the result is that, even although all the termsto be included in the document have been agreed, there is no contract and eachparty has a locus poenitentiae until at least execution on both sides. It may bethat exchange or delivery of executed documents is also necessary, but thatneed not now be decided. Cases can arise where, without execution of adocument on one side or both, the parties act on it, so that an implied contractarises. Brogden v Metropolitan Railway Co (1877) 2 App Cas 666 is a leadingillustration. But that is not this case.15 Lepionka & Company Investments Ltd v Gibson Sheat, above n 2, at [77]–[78].16 Carruthers v Whitaker [1975] 2 NZLR 667.17 At 671.18 Concorde Enterprises Ltd v Anthony Motors (Hutt) Ltd [1981] 2 NZLR 385 (CA).19 At 389.[51] Similarly LCIL relies on Verissimo v Walker where a prospective buyer andseller of a kiwifruit orchard had agreed on essential terms for the sale and purchase ofthat orchard, but they had not yet signed an agreement.20 The vendor then received abetter offer from another buyer which the vendor accepted. The Court of Appealupheld the High Court's conclusion that while the essential terms had been agreedthere was no contract as the parties had contemplated a formal written agreement. TheCourt held that the inference referred to in the authorities did not only arise in complexcases.21[52] It is equally clear, however, that the parties can have an intention to be boundsimply through exchanges, including the exchange of correspondence, and even whenthere is draft contractual documentation which is not signed. That was the case inSavvy Vineyards 3552 Ltd v Kakara Estate Ltd where the Supreme Court found thatthe failure to sign the agreements passed between the parties was not controlling, andthat the whole course of conduct led to the inference that the terms of the agreementhad been accepted.22 So whether there is an agreement to be bound prior to the entryof a formal written document depends on the particular circumstances of the case.[53] LCIL say that the inference that a written contract was required arises in thepresent case, and that it has not been displaced. Such a written document wasspecifically referred to in the oral discussion. A written contract was then dulyprepared and sent by Gibson Sheat, but never then executed. Moreover Gibson Sheat'sprofessional and ethical obligations affected its ability to reach any agreement, as therewas a requirement for LCIL to seek and obtain independent legal advice — somethingthat LCIL never did — a matter which had been raised by Gibson Sheat, and thenspecifically included in the draft agreement it prepared. In addition both Mr Lepionkaand Mr Horton gave evidence that their understanding was that the agreement wassubject to such a written contract.20 Verissimo v Walker [2006] 1 NZLR 760.21 At [34].22 Savvy Vineyards 3552 Ltd v Kakara Estate Ltd [2014] NZSC 121, [2015] 1 NZLR 281 at [62] and[111].Assessment[54] I do not accept LCIL's arguments, and conclude that the parties intended to bebound by the oral agreement from when it was reached, and which was then confirmedby email. This agreement was not subject to the execution of a written document.That is so for a series of related reasons which displace any inference that a formalwritten agreement was intended before the agreement became binding.[55] First, the nature of the contractual arrangements between the parties wasdifferent from the cases where the inference was held to apply. This was not anagreement for the purchase of land, or the entry of a business contract. Gibson Sheathad been acting as LCIL's solicitors on the issues that had arisen out of the subdivisionin accordance with Gibson Sheat's standard terms of engagement. It had had towithdraw because there was a significant issue about the advice that it had given, andwhich LCIL had relied upon. LCIL wanted Gibson Sheat to continue to act on thesematters, but Gibson Sheat said that it could not do so unless the prospective claim inrelation to its potentially erroneous advice was resolved. The parties then discussedwhat Gibson Sheat would need to offer LCIL in return for LCIL forgoing any suchclaim so that Gibson Sheat could resume acting. Agreement was reached on this, andthen Gibson Sheat resumed acting. That is a different context from the arms-lengthcontractual negotiations arising in the above cases where detailed contractual termswould be expected to be formulated by the parties' lawyers. This different contextalso gives rise to the overlay of Gibson Sheat's professional obligations under theRules, and the requirement for independent advice which I address below. But theparties here were resuming a pre-existing contractual arrangement, and resolving adispute that was necessary for that purpose. It was not a matter of entering a newcontract of business or commercial significance where a formal written contract wouldbe expected.[56] LCIL also needed to reach a resolution promptly. The delay which would havebeen occasioned by negotiating documentation was inconsistent with the parties'intention to reach an immediate deal. The key issue for LCIL was to have GibsonSheat resume acting as soon as possible. Gibson Sheat also wanted to do so in orderto assist their client out of a difficult situation. But the claim had to be resolved. Inthe email of 14 February 2016, prior to the Court of Appeal hearing, Mr Lepionkaadvised Messrs Cox and Wallace that LCIL wanted "a quick and clean legal resolutionso that all parties can bring closure to this situation we all find ourselves in" — acomment made immediately after saying that the agreement would involve thewithdraw of the litigation threat and the acceptance of full and final terms. Theurgency at that stage was in connection with the need for counsel to appear at the Courtof Appeal hearing. The oral agreement reached was after the Court of Appeal hearing,but there was a similar pressing time issue. On the day of the hearing Mr McHardyhad made a new offer which Mr Lepionka described as a game changer. LCIL neededto move promptly to deal with this offer to try and resolve what had become a verymessy situation for it. In those circumstances, objectively construed, what wasnecessary was for the key terms for a resolution of the claim to be reached. It was notnecessary for a formal written contract to be drawn up and signed before thatresolution.[57] That is also how the parties treated the suggested documentation of their oralagreement. In the discussion between Mr Lepionka and Mr Wallace on 29 Februaryit was Mr Wallace who suggested that their agreement be documented at the end ofthe discussion. When doing so he did not suggest that this was a pre-condition to thatagreement. Rather it is something he said that he would do following them agreeingon the outstanding issues for a resolution. That is consistent with the agreement beingdocumented for the sake of good order. Mr Wallace emailed Mr Lepionka thefollowing day recording what the terms of their agreement were. I consider that hedid so in order to be sure there was no uncertainty about those terms. Mr Lepionkaeffectively confirmed these terms by his reply thanking him, and explaining what henow wanted done. The reference in Mr Wallace's email to preparing "a simple deedrecording this" is consistent with that deed being a matter of formal record of theagreement, not a pre-condition to it.[58] The parties then immediately implemented the agreement. Gibson Sheatresumed acting and the fee credit was given. That is consistent with the parties havingreached a binding agreement, and inconsistent with a written contract being required.Gibson Sheat had made it abundantly clear that it would only resume acting if therewas a full and final settlement. The fact that it did so, and that the agreement wasperformed, is consistent with a binding agreement having been reachednotwithstanding that no written contract was signed. There was no suggestion fromLCIL that the agreement was not in place. Indeed LCIL expressly raised an issue asto whether Gibson Sheat's bills were being issued in a manner consistent with theagreement they had reached.[59] There is also no reference in the exchanges between the parties leading up tothe agreement, or after the oral agreement, to a requirement for there to be an executedwritten document. The written exchanges between the parties were extensive,explaining what each required to reach an agreement. The fact that neither party saidthat a written agreement would be required is significant, and reflects the realities ofthe position. Moreover when the draft agreement was sent there was no suggestionthat there was a requirement to sign it before the agreement would be effective, andthe parties did not treat it in that way. When the issue of a signed copy came up therewas some uncertainty at Gibson Sheat as to whether the agreement had been signed ornot, or what had happened to it. This reflects that it was a document that was toformally record what had already been agreed rather than what had to be executed forthere to be any agreement at all.[60] For these reasons I do not accept that it was necessary for the parties to sign awritten contract before they intended to be bound by their agreement. They clearlyexhibited an intention to be bound as a consequence of the exchanges leading up totheir oral agreement then reached on 29 February, and which was confirmed in theemail exchanges following that agreement.Contract subject to condition concerning independent advice[61] LCIL's second, and related argument is that there was no binding agreement,as any agreement was subject to an implied condition that the requirements of theRules had been met, and in particular that LCIL had sought and received independentlegal advice on the entry of the agreement. LCIL argues it never obtained such advice,and the agreement was not effective as a consequence.The argument[62] The precise nature of LCIL's allegation was unclear. LCIL had earliercontended that there was an implied term that LCIL obtain independent legal adviceon the standard grounds for implying terms, but that was not its contention before me.Neither did LCIL pursue a claim of breach of fiduciary duty against Gibson Sheat, orrespond to Gibson Sheat's defence by an allegation that the entry of the agreementinvolved a breach of fiduciary duty. Rather it argued that the agreement it had reachedwas subject to a condition imposed as a matter of law. The implied or imposed termwas not pleaded in its defence to Gibson Sheat's counterclaim. Neither was such aterm clearly formulated during submissions. LCIL's closing submissions stated,however:5.1 LCIL's position is that, regardless of what the parties intended, theLCC Rules implied a by operation of law term into any settlement agreement,that prevented the agreement from taking effect until LCIL had takenindependent advice and elected to proceed.[63] The relevant obligation in the Rules is set out in the following terms:Claims against lawyer5.11 When a lawyer becomes aware that a client has or may have a claimagainst him or her, the lawyer must immediately—(a) advise the client to seek independent advice; and(b) inform the client that he or she may no longer act unless theclient, after receiving independent advice, gives informedconsent.5.12 A lawyer may resume acting for a former client where the matter indispute has been resolved.[64] LCIL argued that the professional obligations under the Rules were implied, orimposed as a term of the contract. It referred to the decision of the British ColumbianCourt of Appeal which held that such professional obligations were implied into thecontract of retainer between lawyer and client by the operation of law rather than thenormal tests for implied terms of contract.23 LCIL then relied on a line of authoritiesconcerning solicitors professional and ethical responsibilities including the decision23 Macquirie, Hunter v Foote et al (1982) 43 DLR (3d) 354.of the High Court of Australia in Maguire v Makaronis,24 and the decision of theSupreme Court of New South Wales in Naro Investments Pty Ltd v Benjamin &Khoury Pty Ltd.25 The principles in these decisions are reflected in the New Zealandauthorities, including the decision of the Court of Appeal in Sims v Craig Bell &Bond.26[65] I accept that the professional, ethical, and/or fiduciary obligations of lawyersmight be considered to be implied into contracts entered between lawyer and client insome circumstances. I also accept that the authorities demonstrate that a lawyer'sduties are not necessarily met simply by the lawyer advising the client to obtainindependent legal advice in the kind of circumstances arising in this case — that iswhere the client has a potential claim against the lawyer, and the lawyer and client areseeking to settle that claim so the lawyer can still act, or resume acting. In somecircumstances the lawyer will have a duty to ensure that the client has actuallyobtained independent legal advice before entering a settlement agreement with theclient or former client.[66] Such an obligation is not expressly outlined by r 5.11. But in somecircumstances the professional obligations may require the solicitor to go further thanthe strict terms of that rule and may extend to ensuring that independent advice has infact been received, particularly before entering an agreement with the client. AsHeath J said in Burgess v Monk, the "need for informed consent on the part of theclient underpins rr 5.11 and 5.12".27[67] The more conventional contention would have been for LCIL to argue that theagreement reached between the parties was unenforceable as it was entered in breachof Gibson Sheat's fiduciary obligations. But I accept that it may be possible the sameargument to be advanced by a contention that there was an implied pre-condition ofthe agreement. I do not consider that it would be appropriate to dismiss LCIL'sargument on the technical ground that their argument is pleaded as one of an impliedterm of contract rather than breach of fiduciary duty as Gibson Sheat argued, however.24 Maguire v Makaronis [1997] HCA 23, (1997) 188 CLR 499.25 Naro Investments Pty Ltd v Benjamin & Khoury Pty Ltd [2021] NSWSC 262.26 Sims v Craig Bell & Bond [1991] 3 NZLR 535 at 543–544.27 Burgess v Monk [2017] NZHC 2618, (2017) PRNZ 712 at [51].The substantive argument is still squarely raised for determination. But equally I donot consider that LCIL can improve the strength of the substantive argument byadvancing it by way of implied or imposed term rather than as a breach of fiduciaryduty. For LCIL's argument to prevail it is still necessary for it to establish that GibsonSheat's obligations meant that there was a requirement for LCIL to have actuallyreceived independent legal advice before the agreement reached can be regarded asenforceable.[68] The argument was based on rr 5.11 and 5.12 of the Rules, but it seems to methat any imposed or implied term would need to be based on Gibson Sheat'sobligations more broadly, whether based on the terms of the Rules or its ethical,professional and fiduciary duties.Were such duties still owed?[69] A preliminary issue arises out of the fact that Gibson Sheat had withdrawn asLCIL's solicitors at the time that the agreement was entered, and a question ariseswhether it continued to have any fiduciary or professional duties in thosecircumstances.[70] In one of the authorities relied upon by LCIL, Naro Investments, the New SouthWales Supreme Court granted a solicitor summary judgment on a settlementagreement with the client notwithstanding the client's argument that the agreementwas entered in breach of fiduciary duty.28 There had been a dispute between thesolicitor and its former client relating to the size of the fees. This was resolved by theagreement. So that case also involved the entry of a settlement agreement betweenthe solicitors and the client which the solicitor then sought to enforce. In respondingto the client's argument that the settlement agreement was entered in breach offiduciary duty Slattery J held that the solicitor ceased having any fiduciary duties tothe client when the agreement was reached as it had withdrawn as the client's lawyers.He said:2928 Naro Investments Pty Ltd v Benjamin & Khoury Pty Ltd, above n 24.29 At [28] (citations omitted). It is a well-accepted legal principle that a solicitor only owes a fiduciaryduty to a client during the currency of the retainer and not after its termination.[71] I accept that the fact that at the time the parties formed their oral agreementGibson Sheat had withdrawn from acting, and that Bell Gully then acted for LCIL ishighly relevant. But notwithstanding Gibson Sheat's withdrawal as LCIL's solicitorsit seems to me that it had continuing fiduciary duties to LCIL. There is a period oftime where obligations remain. This was reflected in the fact that Gibson Sheatcontinued to be involved in the handover to Bell Gully. Mr Cox provided help toMr Colson in connection with the hearing in the Court of Appeal. Messrs Cox andWallace were then provided with a copy of Mr Colson's advice on the likelihood ofsuccess after the hearing. That involved the receipt of what would otherwise beconfidential legal advice were it not for Gibson Sheat's continued involvement.Mr Wallace also became aware of Mr McHardy's offer because of his continuedassociation with LCIL's affairs.[72] For these reasons Gibson Sheat continued to owe residual duties to LCIL. Sothe withdrawal is not a complete answer to the allegation. When Mr Wallace contactedMr Lepionka the day after the Court of Appeal hearing such duties continued to exist.Put another way, the obligations in rr 5.11 and 5.12 of the Rules are likely to involvesituations where the rules overlap, and the obligations, including fiduciary obligations,continue to operate.[73] But I accept that Gibson Sheat's withdraw is nevertheless highly relevant,particularly because LCIL now had other lawyers acting for it. This is a factor I returnto below.Did Gibson Sheat meet its obligations?[74] It is important to understand the precise content of a lawyer's duties. The trueduty is the duty to act in the client's best interests. Entering an agreement with a clientunder which the lawyer obtains a personal benefit is not consistent with that duty. Butsuch an agreement can still legitimately be entered if the client is fully informed of allthe facts and implications, and that the client's agreement is freely given. Advising aclient to take independent advice is a measure to ensure the relevant duty is met, ratherthan being a formulation of what the duty is. In Witten-Hannah v Davis the Court ofAppeal upheld a claim for breach of fiduciary duty against a lawyer when the lawyerhad entered a contractual arrangement with the client.30 Richardson J said:31 In discharging fiduciary responsibilities a solicitor cannot have a personalinterest in a transaction unless the client is fully informed of all the facts andof all the implications for the client and then freely consents. In somecircumstances and because of the insidious potential for conflict of interest,the discharge of that responsibility can only be established by ensuring thatthe client is independently advised. Ensuring independent advice is not aseparate fiduciary duty but rather a means of discharging the responsibility ofensuring that the client is fully informed and freely consents to her solicitor'sparticipation in the transaction[75] That is why the obligation requires, in some circumstances, that the lawyer besure that the client has actually taken independent advice. As explained by Slattery Jin Naro Investments:32Strictly a fiduciary does not have a duty to obtain the fully informed consentof the person to whom the fiduciary duty is owed but rather the existence ofinformed consent goes to negate what otherwise would be a breach offiduciary duty Fiduciaries ordinarily establish informed consent by proof ofthe giving of independent advice to the person to whom the fiduciary duty isowed.What is required for fully informed consent is a question of fact in all thecircumstances of each case and there is no precise formula which willdetermine in all cases if fully informed consent has been given[76] Here Gibson Sheat, who continued to have residual fiduciary duties to LCIL,was entering a contract with LCIL under which Gibson Sheat obtained a personaladvantage. It could only do so when it had fiduciary duties if it ensured that LCIL wasfully informed. The ultimate question is whether, in the circumstances of this case,Gibson Sheat did what was required to meet its responsibilities in this respect.[77] For the reasons outlined below I conclude that it did.[78] First it is apparent that Gibson Sheat stated repeatedly that it could not resumeacting for LCIL unless the claim against it was resolved, and that LCIL needed to takeindependent legal advice before doing so. The latter requirement was emphasised30 Witten-Hannah v Davis [1995] 2 NZLR 141.31 At [149].32 Naro Investments Ltd v Benjamin & Khoury Pty Ltd, above n 24, at [30]–[31] (citations omitted).more than once. Gibson Sheat cannot be criticised for failing to meet this requirementof r 5.11. It is true that Gibson Sheat did not further reiterate the need for independentlegal advice when negotiations resumed after the Court of Appeal hearing. But bythen Gibson Sheat had withdrawn as counsel and it had facilitated Bell Gully beinginstructed to act for LCIL in its place.[79] The second point is that LCIL can be treated as a reasonably sophisticatedcommercial operator. Mr Lepionka had been a successful businessman, andMr Horton was an experienced commercial solicitor. The type of transactions thatLCIL had entered demonstrated a degree of commercial experience. LCIL cannot betreated as a vulnerable client. It is true that it was under significant commercialpressure because of the difficult circumstances that had emerged. These were thencompounded by Gibson Sheat's advice that it had to withdraw as its solicitors. A keypressure point in that respect was the need of LCIL to find counsel to appear for itbefore the Court of Appeal. But the immediate pressure of that requirement had beenaddressed — Gibson Sheat had assisted LCIL to instruct Bell Gully, one ofNew Zealand's leading law firms, and Mr Colson, a well-respected commerciallitigator, and now a King's Counsel, was acting.[80] LCIL was also being closely advised by Mr Horton who was a practicingsolicitor. His position was particularly focused on during cross-examination, and inargument. Gibson Sheat's communications to LCIL before it withdrew included theadvice that Mr Horton could provide the independent legal advice contemplated byr 5.11. LCIL argued that the definition of "independent advice" in the Rules mean thatMr Horton's advice could not be regarded as being sufficient to meet this requirement.LCIL raised two matters. First, Mr Horton was really a client rather than the client'ssolicitor as he was involved in these matters as a trustee of one of the Lepionka entities,not as a solicitor. Secondly, an issue potentially arose as to his joint liability withGibson Sheat for the legal advice that had led to the position that LCIL was in.[81] I do not see either point to be of significance. Whilst I accept that Mr Hortonwas one of the client's representatives he was acting in his role as a trustee because hewas an experienced commercial solicitor. His role as a trustee did not prevent himproviding independent legal advice to LCIL. And whilst there was some suggestionat the time by Gibson Sheat that his firm might be jointly liable with it, that suggestionwas never taken very far, and there was ultimately no basis for it. It was clear thatMr Horton had initially advised LCIL to take advice from other solicitors about thesituation, which is precisely why Gibson Sheat were initially instructed. He had norole in raising, or recommending the strategy that Gibson Sheat put forward. I do notsee a basis for contending that either he, or his firm were also potentially liable.[82] I do not accept that these matters mean that Gibson Sheat could not considerMr Horton's advice as meeting the requirements of r 5.11, or its obligations morebroadly, to ensure that LCIL was fully informed before entering the agreement.Mr Horton was an experienced commercial solicitor, and there was no reason to thinkthat he had a conflict. When Gibson Sheat said that LCIL should seek independentlegal advice from him there was no response from him to say that he was not in aposition to give such advice. I accept his evidence that he did not consider that he hadthe personal experience that would allow him to give legal advice about the full extentof the claims against Gibson Sheat, including the amounts that could be recoveredunder such claims. But that does not mean that he was not able to give the kind ofadvice contemplated by r 5.11. If he did not consider that he had sufficient personalexperience on those matters he could have advised LCIL of that, and LCIL could thenhave received advice from another lawyer. Advice had been obtained by LCIL fromMr Smith KC and Mr Greenwood, and Bell Gully was now instructed by it.Mr Colson was acting as counsel and was fully informed of the case. Advice couldhave been obtained from him, in particular, if LCIL had wished to receive it.[83] This was not a situation where Gibson Sheat was required to ensure that LCILhad actually obtained advice from someone other than Mr Horton, or that LCIL wasfollowing that advice. Gibson Sheat could properly proceed on the basis thatMr Horton was able to provide advice to LCIL and that other lawyers were availableshould LCIL wish to take more extensive advice. In Naro Investments Slatter J heldthat there is an inference of fully informed consent meeting a solicitor's duty whenthere is the presence of independent solicitors advising the client.33 It seems to methat Gibson Sheat could also draw that inference in the present case. Mr Horton was33 Naro Investments Pty Ltd v Benjamin & Khoury Pty Ltd, above n 24, at [32].advising LCIL, Bell Gully was acting on the proceedings, and other lawyersindependent of Gibson Sheat had given advice to LCIL about the circumstances thatled to the issue about Gibson Sheat's advice. It is not a situation where Gibson Sheatunderstood, or should have anticipated that LCIL was not properly informed.[84] Neither do I accept that LCIL was not fully informed. LCIL knew that GibsonSheat may have failed to give it adequate advice. Mr Greenwood and Mr Smith KChad both given advice that suggested that Gibson Sheat may have been wrong tosuggest that LCIL embark upon the strategy that it did. LCIL also knew theimplications of Gibson Sheat's potentially erroneous advice. It was facing litigationin relation to what had transpired, and was aware of the implications of that litigation.LCIL was aware of the difficult position it was in, and why Gibson Sheat's advicecontributed to that situation. It knew it was abandoning any claim it had againstGibson Sheat associated with any losses arising from that situation by entering thesettlement agreement, and that the only offer that Gibson Sheat was prepared to makeas compensation was limited to a fee credit (albeit a reasonably substantial one) and abasis for future billing. That provided the necessary information for informed consent.[85] I accept Mr Lepionka's evidence that he did not understand that LCIL couldsue Gibson Sheat for more than the fees that it had billed. Equally I acceptMr Horton's evidence that he did not have sufficient expertise to know what kind ofdamages could be recovered in a claim against Gibson Sheat in this situation. Thehonesty of their evidence in this respect was challenged in cross-examination, and insubmissions, but I nevertheless accept it. It would not have been obvious what lossesGibson Sheat could potentially be liable for. The strategy that Gibson Sheat hadadvised LCIL to adopt arose because LCIL had already paid deposits for acquiringproperty in the subdivision. Those deposits were accordingly at risk. It is notimmediately apparent how the flaw in the proposed strategy created further financiallosses that could be recoverable by way of a claim against Gibson Sheat. LCIL wasalready in a difficult position and there was always business risk associated with LCILacquiring the mortgage, and effectively taking over the development in any event. Oneof the reasons why Gibson Sheat did not earlier raise its conflict with LCIL was thatthere did not appear to be a loss arising from any negligent advice. I also note that,after reaching conclusions in a lengthy judgment, Fitzgerald J held that she was notable to conclude that there were any damages to be awarded for LCIL's breach becauseit depended on what prices could be obtained for the property compared with the pricethat had effectively been paid by the adoption of the Lepionka purchase contracts.34There was only a loss if the Lepionka purchases were under fair value, and if theywere that was to Lepionka's advantage. So the question of loss was a complexquestion.[86] But the fact that Mr Lepionka and Mr Horton did not understand in any detail,and did not further investigate, the losses that they could potentially be claimed againstGibson Sheat is not determinative. If they had wanted further advice on that questionit could have been provided by Mr Colson, somebody else at Bell Gully, or if necessaryMr Smith KC or Mr Greenwood. Mr Horton could have advised Mr Lepionka thatthey should really get such further advice before entering an agreement with GibsonSheat. I do not accept he was not adequately positioned to provide at least that advice.More importantly, I do not accept that Gibson Sheat could not reasonably proceed onthe basis that LCIL was positioned to obtain effective independent advice on theseissues from Mr Horton and any other adviser that Mr Horton suggested should beasked.[87] It is also important not to evaluate the agreement that was reached with thebenefit of hindsight. At the time that the agreement was reached LCIL had succeededin the High Court and Mr Colson had advised that the likelihood of success ofupholding the judgment on appeal was as high as 70 per cent. If the Court of Appealhad indeed upheld the High Court then the settlement contained in the agreementmight well have been regarded as a good one for LCIL. That is not how eventsultimately played out. The Court of Appeal found against LCIL, as the High Courtultimately did in the substantive proceedings. But all settlements involve anassessment of risk. The fact that events did not transpire as hoped does not mean thatit was not a good settlement, or that LCIL did not enter the agreement with open eyes.LCIL made a business decision about what was in its best interests, and in particularit considered that the proposed agreement with Gibson Sheat was the best wayforward. It cannot legitimately get out of that agreement because it turns out not to be34 AFI Management Pty Ltd v Lepionka & Company Investments Ltd, above n 10, at [351] and [362]–[367] and [494](f)–(h).as good a settlement as it hoped, or by complaining that Gibson Sheat did notsufficiently insist on it getting independent legal advice before it was entered. I acceptthat Gibson Sheat did what was necessary in the circumstances.[88] This does not mean that Gibson Sheat cannot be criticised. Gibson Sheat wasslow in providing advice to LCIL on the existence of a conflict of interest and theimplications of that conflict. I accept that Mr Wallace's conduct leading up to thesettlement agreement can also be questioned. When Mr Greenwood and thenMr Smith KC gave their advice, especially when Mr Smith gave the draft writtenadvice, Mr Wallace responded by telling Mr Lepionka that Mr Smith was wrong. Hewas also opposed to Gibson Sheat withdrawing as solicitors. I have acceptedMr Lepionka's evidence that Mr Wallace said words to the effect that the risksassociated with his original advice had now gone when they spoke on 26 February —that is what Mr Lepionka recorded in his contemporaneous email to Mr Horton. WhatMr Wallace said was a loosely formulated exaggeration, no doubt arising fromMr Colson putting the prospects of a successful judgment at 70 per cent. But theexaggerated comment was obviously not literally true.35 Mr Horton's reaction,commenting that Gibson Sheat "remain pretty worried about their risk", showed that.The risks were obviously not gone. The very entry of an agreement settling thepotential claim also reflected this. Whatever may be said about Mr Wallace's overallapproach it does not mean that Gibson Sheat breached its obligations surrounding theentry of the agreement.[89] These conclusions arise whether the claim is considered as a claim for breachof fiduciary duty (with the agreement being unenforceable as a consequence), or aclaim that the agreement was subject to an implied condition that Gibson Sheat metits obligations. I also do not accept that there was an implied condition that LCILreceive independent legal advice on the conventional tests for implied terms. The keyconclusion is that Gibson Sheat met its duties under the Rules, or arising as a matterof law, and that the agreement remains enforceable.35 No claim for misrepresentation was, or could be advanced in these circumstances.The arguments collectively[90] As indicated above, the arguments advanced by LCIL involve a substantialdegree of overlap, and raise many common factors. In those circumstances I have alsostepped back and considered the arguments collectively to be sure that there was a fulland final settlement on 29 February 2016 given what the parties intended, theimportance of independent legal advice, and Gibson Sheat's obligations.[91] I am satisfied there was a full and final settlement. The parties had discussedwhat was necessary for that settlement in detailed terms. These had graduallynarrowed to the key outstanding issues which were finally agreed in the oraldiscussion. Those terms were then confirmed in the email exchange. Whilst a writtendocument was then prepared, as Mr Wallace said he would, neither party treated thatdocument as of key contractual significance. They immediately implemented theiragreement after they had reached the essential terms which enabled Gibson Sheat toresume acting. I also do not accept that Gibson Sheat failed to meet its obligationsunder the Rules or otherwise leading up to the agreement. Gibson Sheat made it veryclear that LCIL needed to receive independent legal advice before a settlement couldbe reached. LCIL was being advised by Mr Horton, and other advisers were availableif necessary. LCIL entered the agreement with the full appreciation of its significance,and without Gibson Sheat misusing its fiduciary position.Waiver[92] Given the above conclusions I do not need to address Gibson Sheat's argumentthat, if there was a condition that the agreement needed to be documented and signedby the parties, it was waived as a consequence of the parties later conduct, and inparticular the performance of the contract by LCIL and Gibson Sheat. It seems to me,however, that the relevant circumstances here are more relevantly considered byaddressing whether the parties had reached a binding agreement notwithstanding thatthe draft agreement was not signed, rather than a contention that there was arequirement for signing that was subsequently waived. That was the approach adoptedby the Supreme Court in Savvy Vineyards 3552 Ltd v Kakara Estate Ltd, and it is theconclusion that I have reached here.36 I otherwise do not address the waiverarguments.Conclusion[93] For the above reasons I conclude that the parties did enter a binding agreementfully and finally settling LCIL's claims against Gibson Sheat. LCIL's claims againstGibson Sheat in these proceedings are accordingly dismissed.[94] Gibson Sheat are likely entitled to costs which I will assess if they are notagreed. Any application for costs should be made by way of memorandum of no morethan 10 pages length plus a schedule to be filed within 15 working days. Anymemorandum in response is to be filed within a further period of 10 days, and also tobe no longer than 10 pages with a schedule. I will then address costs on the papers.[95] Finally I continue the interim suppression orders, and initially release thisjudgment only to the parties. Any application that passages should be redacted in thepublicly released judgment should be made by memorandum filed and served within15 days, and responded to within a further 10 days which I will also then address onthe papers.37Cooke JSolicitors:Bell Gully, Wellington for the PlaintiffHesketh Henry, Auckland for the Defendant36 Savvy Vineyards 3552 Ltd v Kakara Estate Ltd, above n 22.37 Subsequent to the release of the judgment to the parties I followed Erceg v Erceg [PublicationRestrictions] [2016] NZSC 135, [2017] 1 NZLR 310 and determined that no redactions werejustified for the reasons set out in a minute dated 18 September 2023.