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Case Law Update – Solicitor’s Negligence – OIO Consent – Damages – Ex Turpi Causa

10 November 2021

The High Court has rejected a solicitor’s defence of ex turpia causa (no action will arise out of a dishonourable cause) and ruled in favour of the plaintiff in BCH Investments Limited v Nguy [2021] NZHC 2932.

 BCH Investments Limited (BCH), an overseas person for the purposes of the Overseas Investment Act 2005 (OIA), instructed Mr Nguy, a solicitor, to act for it in relation to the purchase of a development site in Albany, Auckland. Land Information New Zealand subsequently prosecuted BCH for failing to obtain consent for the purchase under the OIA. BCH was fined $300,000 plus costs and directed to sell the property.

 BCH brought a claim against Mr Nguy alleging breach of contract and negligence for failing to advise BCH of the need to obtain consent under the OIA prior to purchasing sensitive land in New Zealand, and for failing to advise of the potential consequences of breaching the OIA. In its claim, BCH sought damages from Mr Nguy to cover the fine, and its costs in seeking retrospective consent and defending the prosecution.

 The defence of ex turpia causa (no action will arise out of a dishonourable cause) was rejected on the grounds that although BCH was in breach of the OIA, it did not knowingly breach the OIA. Rather, the loss claimed by BCH was caused by Mr Nguy’s failure to advise on the very thing he was instructed to do. BCH was awarded damages in the amount of the fine plus the legal costs it incurred.

This case highlights the importance of pre-purchase due diligence and compliance with the OIA.

For further information about this case please contact Brett Vautier or Paul Kim.