Claims against Lawyers arising from Property and Leasehold Transactions

A solicitor is required to exercise reasonable skill and care when carrying out their retainer. He/she will be negligent if they have acted in a way in which no reasonably competent solicitor would have done in the same circumstances. This will be judged against the backdrop of the practice commonly adopted in the profession.

The principal source of a solicitor’s duty to their client, and the scope of that duty, is principally determined by the contract of retainer between them. Terms of engagement should set out the tasks to be undertaken by the solicitor. It is important to specify any limits on the retainer.² A solicitor’s duty is otherwise limited to carrying out the tasks which the client has instructed him or her to do, and the solicitor has agreed to undertake. The Court must be wary of imposing duties on solicitors which go beyond the scope of what they have been requested and undertake to do. However, it is implicit in a solicitor’s retainer that the solicitor will provide advice that is reasonably incidental to the work they are carrying out. In determining what advice is reasonably incidental, it is necessary to have regard to all of the circumstances, including the character and experience of the client.³ An inexperienced client will expect to be warned of risks which are (or should be) apparent to the solicitor but not to the client.

The Privy Council said in Clark Boyce v Mouat:⁴

When a client in full command of his faculties and apparently aware of what he is doing seeks the assistance of a solicitor in the carrying out of a particular transaction, that solicitor is under no duty whether before or after accepting instructions to go beyond those instructions by proffering unsought advice on the wisdom of the transaction. To hold otherwise could impose intolerable burdens on solicitors.

The duty that a solicitor owes to a sophisticated commercial property developer will not be the same as the duty owed to a first-time purchaser buying a property off the plans.

In most residential conveyancing transactions, it is normal for the purchaser and vendor to contract using the standard form agreement for sale and purchase approved by TLANZ/REINZ. This agreement gives certainty. Property lawyers know or should know what each clause means and how they operate.

Prudent purchasers will have their lawyer review the agreement before signing to make sure there are appropriate conditions to protect them. Once both parties have signed, the agreement becomes legally binding, and the parties are bound to the terms. They may have no, or limited, rights to cancel.

An agreement for sale and purchase will usually include conditions which must be fulfilled for the purchase to proceed. The parties can include other conditions under the ‘Further Terms of Sale’ to suit their particular situation. An agreement is unconditional when all of the conditions are satisfied or waived.

A common source of claims is failing to identify legal restrictions on property. We have also seen a number of claims against lawyers who miss deadlines (e.g. by failing to diarise dates by which conditions must be satisfied or waived).

It will usually be prudent for a solicitor to meet with their client. The solicitor needs to obtain sufficient background information to understand the client’s experience and circumstances.

A solicitor acting for a purchaser will undertake a title search. Advice will be provided on the title and the agreement for sale and purchase. A lawyer will generally recommend the purchaser obtain a LIM report.

The Property Law Section Property Transactions and E-Dealing Practice Guidelines (Guidelines) reflect recommended practice for lawyers acting in property transactions. Whilst the Guidelines are not binding on a court, they are likely to be highly persuasive.

The Guidelines confirm the fact that a client may have signed an unconditional agreement for sale and purchase does not negate the lawyer’s duty to give advice on the effect and implications of that agreement.

In most claims against lawyers, causation plays a critical role. There are two aspects: factual and legal causation. As Lord Sumption said in Hughes Holland v BPE Solicitors:⁵

It is generally a necessary condition for the recovery of loss that it would not have been suffered but for a breach of duty. But it is not always a sufficient condition. The reason, as Lord Asquith pointed out, is that the law is concerned with assigning responsibility for the consequences of the breach, and a defendant is not necessarily responsible in law for everything that follows from his act, even if it is wrongful. A variety of legal concepts serves to limit the matters for which a wrongdoer is legally responsible. … Effective or substantial causation is a familiar example of a legal filter which serves to eliminate certain losses from the scope of a defendant’s responsibility. It is an aspect of legal causation.

Two important decisions of the New Zealand Supreme Court regarding causation in property transactions are Tauranga Law v Appleton⁶ and Blackwell v Edmonds Judd.⁷

The issue and counterfactual inquiry in both cases was whether the client would have acted differently if they had been given the correct advice.

In Tauranga Law v Appleton, the Court was satisfied the law firm’s negligent advice was not the cause of the loss because the client would have proceeded with the property investment regardless of competent advice. However, it will be a rare case where such a finding will be made, requiring persuasive and compelling evidence.

This is confirmed in Blackwell v Edmonds Judd. The Supreme Court cautioned against two readily finding that “serious failings on the part of the law firm” did not lead to loss. It emphasised that to find there is no loss, a court must be of the view that even if competent advice had been given, it would more likely than not have been ignored. Where a transaction is seriously disadvantageous to the client, the absence of clear written advice makes it easier to find negligence and causation proven. The more imprudent the client’s course of action, the harder it will be to explain the absence of written advice.

Claimants will inevitably assert they would have acted differently. However, causation has to be assessed objectively and without the distortion of hindsight.⁸

The SAAMCO principle is a legal concept for distinguishing between recoverable and irrecoverable loss which arises in a situation where (a) but for the negligence of a professional adviser his or her client would not have entered into the transaction but (b) part or all of the loss which the client suffered by doing so arose from risks which were not part of the professional’s duty to protect his or her client against.

If the defendant was not under a duty to protect the plaintiff against a particular kind of loss, then he or she cannot be said to have caused that loss by his or her breach of duty. This is known as the scope of duty principle.

The Supreme Court’s 2025 decision in Routhan v PGG Wrightson confirmed that the ‘scope of duty’ principle forms part of the law of negligence in New Zealand.⁹ Professionals are liable only for harm that falls within the scope of the risks that they assumed responsibility for when giving advice or information. This requires the Court to assess using a forward-looking inquiry, asking at the time the duty arose, the nature of the risks the defendant accepted and whether that allocation of risk was fair in the circumstances.

In a typical residential property purchase, a lawyer will often act for joint purchasers (e.g. husband and wife) and also be acting for the bank lending funds secured by a mortgage.

Lawyers need to be wary of the potential for conflicts, particularly in situations involving co-ownership. If a solicitor fails to recognise a conflict and prefers the interests of one client over another then liability for breach of fiduciary duty will arise.

Property and leasehold transactions are a fertile source of claims against lawyers. Prudent lawyers can take steps to minimise the risks of claims, including:

1. Defining the scope of the retainer clearly setting out what is covered by the contract for legal services and what is not.
2. Acting in accordance with the lawyer’s overarching duty to act in the best interests of their client.
3. Giving advice commensurate with the experience and sophistication of the client.
4. Making file notes.
5. Diarising important dates.
6. Following the Guidelines.
7. Avoiding conflicts of interest.

1. These transactions are also a large source of NZLS complaints.
2. A common one is that the solicitor does not provide any tax advice.
3. Minkin v Landsberg [2015] EWCA Civ 1152 at [34] & [38] citing Carradine Properties Limited v DJ Freeman & Co [1995] PNLR 12.
4. Clark Boyce v Mouat [1994] 1 AC 428.
5. Hughes Holland v BPE Solicitors [2017] UKSC 21 at [20].
6. Tauranga Law v Appleton [2015] NZSC 3.
7. Derek Nicholas Blackwell and Charles Basil Blackwell as executors and trustees of the estate of Ross Winston Blackwell v Edmonds Judd [2016] NZSC 40.
8. A recent United Kingdom High Court decision of Gordeno v Irwin Mitchell LLP [2026] EWHC 136 (Ch) underlines the critical importance of causation and the need for Court to be wary of hindsight reasoning. The claimant’s retrospective account that he would have withdrawn from the sale was measured against his appetite for risk with the Judge finding he would have proceeded regardless.
9. Routhan v PGG Wrightson [2025] NZSC 68. However, as far back as in 1999, in Bank of New Zealand v New Zealand Guardian Trust Co Ltd [1999] 1 NZLR 664 (CA), Gault J noted that the cases showed a trend in favour of analysis by reference to the scope of duty, and inquired as to the kinds of risks against which there was a duty to protect the plaintiff.

This publication is intended as a general overview and discussion of the content dealt with. It should not be used in any specific situation, in which case you should seek specific legal advice.