Claims Resolution Service Ltd v Pfisterer  NZHC 1088
Following the Canterbury earthquakes, a number of homeowners found themselves in a dispute with their insurance companies. Some sought help from “claim advocates” who advertised their services on a “no win no pay” basis.
Lucia Pfisterer was one of them. She had a house in Opawa, Canterbury, which she bought in 2019 for $350,000. A year and a half later, the house suffered damage in the earthquakes. EQC paid $117,000. In addition, her insurer, Southern Response, offered $320,000 for repairs.
Ms Pfisterer sought help from Claims Resolution Services Ltd (CRSL) on a no win no pay basis. The agreement was that CRSL would advance the legal costs necessary to argue her case with the insurer and she would not have to repay the money unless she won the case. In addition, CRSL charged a commission calculated at 8% of the ultimate settlement sum.
CRSL engaged a quantity surveyor who evaluated that the repair cost would be $816,000 and the rebuild cost would be $946,000. Southern Response did not agree with these estimates. A lawyer engaged by CRSL for Ms Pfisterer issued proceedings on her behalf. Two days before the trial, Southern Response made an offer of settlement of $500,000 as a cash settlement. If Ms Pfisterer was going to rebuild the foundations, then Southern Response would pay an additional $300,000 for the foundations.
Ms Pfisterer accepted the cash offer, but 25 minutes later changed her mind. By that stage, her lawyer had communicated the acceptance to Southern Response. Ms Pfisterer was unhappy with her lawyer, feeling that she was being bullied into signing a settlement agreement.
Soon after, Ms Pfisterer dismissed her lawyer. She then engaged new lawyers. Three months later, the new lawyers negotiated a settlement almost on the same terms as the first lawyer.
CRSL considered that the settlement was a win and invoiced Ms Pfisterer $93,000. This included the lawyers’ fees and expert costs. When Ms Pfisterer refused, CRSL issued proceedings.
Ms Pfisterer counter-claimed alleging misleading and deceptive conduct, unconscionable bargain, breach of contract and breach of fiduciary duty.
What the Court found
However, the Court found that viewed overall the agreement was not unfair, that she gained material advantages from her contract with CRSL in the form of deferred legal fees and only having to pay those fees if she won the case. The Court also found that the stress and anxiety caused by the earthquakes did not amount to a contractual disadvantage. In the end, the Court found that Ms Pfisterer had to pay CRSL’s invoice.
The outcome for Ms Pfisterer
Unfortunately for Ms Pfisterer, this turned into a costly experience. From her insurance settlement of approximately $617,000 ($500,000 from Southern Response and $117,000 from EQC), she had to pay:
- $93,000 to CRSL
- $60,000 to her second lawyers
- $155,000 to CRSL in interest and legal fees (awarded by the Court after losing the case)
- A significant sum to her own lawyers to take the case to trial.
There are two lessons to learn from here. The first is to be careful what you sign. Courts are likely to enforce a contractual arrangement. The second lesson is to count the cost of a dispute. Winning is never guaranteed.