Palmerston North law firm Fitzherbert Rowe have faced the sort of legal action law firms fear, a successful conflict of interest claim that saw Justice Jillian Mallon deliver a million-plus verdict in favour of the firm’s former client, racehorse trainer Jeffrey Lynds.
Justice Mallon’s 94 page judgment against the firm was delivered this month, following a a year-long claim but with a case that goes back several decades.
The issue went back to a transaction with a colleague of Lynds over the purchase of two stallions and involving Lynds raising finance based on what he believed was the financial health of his farmer-partner. In fact his partner’s dairying business was heavily in debt. A subsequent company formed by the investors was placed in liquidation in 2015.
“It does not appear that Fitzherbert Rowe had a system by which conflict checks were carried out before instructions were accepted,” the judge said in her decision.
“Had they had such a system and carried out a conflict check before accepting the instructions [about the pegasus transaction], there would have been the opportunity to seek and obtain Mr Lynds’ informed consent.”
Further conflicts occurred also as Fitzherbert Rowe partners had learned more about Mitchell’s financial situation.
Lynds was unlikely to have bought the stallions if he had that information, the judge said.
Mallon said her “guesstimate” at Lynds’ compensation for the deals was somewhere between $1m and $1.5m, but she asked the parties sort it out themselves.
“This has been a long road for Mr Lynds and, no doubt to some extent, for Fitzherbert Rowe. Closure of the matter is desirable.”