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Karlie Margaret Smith v Claims Resolution Services & Grant Shand Barristers & Solicitors

Another major decision expected shortly

Claims Resolution Services Ltd v Lucia Renate Pfisterer

Although the Supreme Court has now cleared the way for the Karlie Smith led class action to proceed against CRS and Grant Shand Solicitors, another case has already gone to trial in the Christchurch High Court, that will likely have a direct bearing on the class action itself. That other case is Claims Resolution Services Ltd v Lucia Renate Pfisterer and it is highly relevant because Lucia’s facts are very similar as are the causes of action in each case.

Therefore, because Lucia’s trial has been held and the Court has heard all the evidence as to the alleged misrepresentations, misleading and deceptive conduct, and how there is an apparent breach of fiduciary duties owed to Lucia, the High Court judgment should have a direct bearing on the class action and how it may be conducted later.

Background of the Pfisterer case

Lucia Pfisterer entered a contract with CRS whereby CRS agreed to provide services in relation to Lucia’s earthquake claim, and CRS instructed Grant Shand Solicitors to file legal proceedings against Southern Response. Lucia later became disenchanted because she was advised that taking all issues into account, and the ‘expert’ evidence they had assembled on her behalf, her entitlement was $917,026.87.

However, shortly before the scheduled trial date, CRS and Shand said that the insurer was now willing to settle but for the sum of $500,000 and some other benefits and she was advised her to take that settlement. As they could not explain why she might not now be entitled to the full amount indicated by the expert advice they had secured for her, she felt she was being misled and pressured into a settlement below her genuine entitlement. She terminated her relationship with them. Lucia then instructed GCA Lawyers and later entered a settlement with Southern Response.

In August 2016 CRS filed proceedings in the District Court seeking recovery from Lucia Pfisterer, of the sum of $103,713.46 being professional fees and disbursements allegedly owed to CRS under the contract it had with her. CRS also sought interest and costs. CRS alleged that its contract entitled it to that sum regardless of whether she had settled with their assistance or with the help of a law firm.

Ms Pfisterer defended the claim and in February 2018 filed an amended Statement of Defence. In addition to denial of the direct assertions made by CRS in its claim, Ms Pfisterer stated the following affirmative defences:

- No right to recover costs/disbursements not actually incurred

- Misrepresentation of the plaintiff’s role as a litigation funder

- Misrepresentation of how big the plaintiff’s commission would or could be

- Misleading and deceptive conduct

- Breach of fiduciary duty

- Unconscionability

CRS denied Ms Pfisterer’s affirmative allegations.

Ms Pfisterer successfully sought leave for the proceedings to be referred to the High Court and the trial proceeded before Justice Hinton, over four days from 5 October 2020. The key parties all gave evidence including Brian Staples (as Director of CRS), Grant Shand (as the lawyer who filed proceedings) and Ms Pfisterer. The decision was reserved but is expected to be issued early in 2021.

Relationship to the class action - Karlie Margaret Smith v Claims Resolution Services & Grant Shand Barristers & Solicitors

Lucia Pfisterer’s case is factually and legally very similar to the issues and allegations being made in the representative action being led by Karlie Smith, against CRS/Shand. The class action proceedings allege that both CRS and Grant Shand breached fiduciary duties owed to Karlie Smith while providing her with services. Also they made various misrepresentations by failing to disclose the existence of an unlawful joint venture between them, various conflicts of interest that existed, or how those parties would benefit from the arrangements. Also, the action alleges that in those circumstances the contracts between Karlie Smith and CRS/Shand were unconscionable and void.

After the High Court granted Karlie Smith leave to proceed as representative of a class of former clients of CRS and Shand, the defendants attempted to thwart the class action by appealing to the Court of Appeal and arguing that all cases were different and there was insufficient commonality of issues to permit a class action to proceed. The Court of Appeal firmly rejected those arguments and dismissed CRS & Shand’s appeals. (For more on that action see our other News item entitled Class Action against Grant Shand & CRS will proceed).

However, in issuing its judgment (which is available on this website) the Court of Appeal noted the fact of the Lucia Pfisterer proceeding, and that other parties were facing debt collection proceedings initiated by CRS:

[18] Ms Smith, and a number of other CRS clients, are currently defending separate debt collection proceedings in the District Court commenced by CRS for the recovery of monies, particularly legal fees and commission, said to be owed pursuant to the CRS contracts. A number of those persons provided affidavits in support of Ms Smith’s application for representative status, confirming their intention to opt in as member of the class. Others, who contracted with CRS in the circumstances pleaded by Ms Smith, have paid such amounts already. It is anticipated that such persons would also opt into the representative proceeding authorised by the High Court. The parties advised us that there are some 178 potential members of that class in total.

[19] The High Court recently heard CRS’ debt collection claim against one such CRS claimant, Ms Pfisterer, and her counter-claim against CRS and Shand Solicitors based on an alleged breach of fiduciary duty and the consequences thereof, much as pleaded by Ms Smith in the representative proceeding1. Judgment was reserved recently. Other claims in the District Court have been stayed pending the determination of Ms Smith’s claim. 2

[20] As acknowledged by Ms Smith, her proceeding will in effect act as a representative defence to debt collection proceeding as well as the basis for a representative claim for the return of monies already paid by CRS clients pursuant to the claimed unconscionable CRS contracts.

In these circumstances it’s clear that the judgment in the Pfisterer proceedings may have significant bearing on the Smith class action.

Persons currently facing CRS debt collection proceedings, or who may want to join the Smith Class Action, should make contact with GCA Lawyers as below.

Inquiries to: Grant Cameron, 0274 323 066, or

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