High Court further defines advocate’s immunity from suit
May 9, 2016
The decision is Attwells & Anor v Jackson Lalic Lawyers Pty Ltd  HCA 16 (4 May 2016).
Mr Attwells and another person guaranteed a company’s payment of a loan from a bank. The company defaulted on its obligations and the bank commenced proceedings against the guarantors in the Supreme Court of NSW. The guarantors and the company retained Jackson Lalic Lawyers Pty Ltd to act for them in those proceedings. The guarantors’ liability under the guarantee document was for an amount significantly less than the amount of the company’s debt to the bank. The proceedings were settled on the first day of the hearing on terms that judgment would be entered against the guarantors and the company for almost the full amount owed by the company, but that the bank would not seek to enforce that judgment if the guarantors paid the bank a lesser sum reflecting their obligations under the guarantee. The terms of the settlement were reflected in a consent order for judgment in the amount owed by the company, and the court’s noting of the conditional non-enforcement agreement between the parties.
The guarantors failed to meet their obligations under the settlement. The appellants then commenced proceedings in the Supreme Court alleging that the respondent was negligent in advising them to consent to the judgment being entered in the terms of the consent orders, and in failing to advise them as to the effect of the consent orders.
The respondent defended the proceedings on the basis that it was immune from suit by virtue of the defence of advocate’s immunity. That issue was ordered to be determined separately from the principal negligence proceedings. The primary judge declined to answer the separate question. The respondent appealed. The NSW Court of Appeal granted leave to appeal and held that the respondent was immune from suit by virtue of the advocate’s immunity. The appellants appealed to the High Court.
A majority of the High Court (French CJ, Kiefel, Bell, Gageler and Keane JJ) held that the respondent was not immune from suit. The advice to settle the guarantee proceedings was not intimately connected with the conduct of those proceedings in that it did not contribute to a judicial determination of the issues in those proceedings, notwithstanding that the terms of the settlement were embodied in consent orders made by the court.
The court examined the test for the application of advocate’s immunity as determined in its decisions in D’Orta-Ekenaike v Victorian Legal Aid [i] and Giannarelli v Wraith [ii] . Those decisions held that the immunity extends to conduct or work done out of court which leads to a decision affecting the conduct of a case in court, or is intimately connected with work in court.
The appellant contended that the High Court ought reconsider these decisions. The court declined to do so, holding that overturning D’Orta and Giannarelli would ‘generate a legitimate sense of injustice in those who have not pursued claims or who have compromised or lost cases by reference to the state of the law as settled by these authorities during the years when they stood as authoritative statements of the law. An alteration of the law of this kind is best left to the legislature’. [iii]
The majority found that D’Orta supported the position contended for by the appellants, that is, ‘It is the participation of the advocate as an officer of the court in the quelling of controversies by the exercise of judicial power which attracts the immunity. Because that is so, the immunity does not extend to acts or advice of the advocate which did not move litigation towards a determination via a court’. [iv] [emphasis added]
The majority acknowledged that advice to cease litigating which leads to a settlement is connected in a general sense to litigation which is in turn compromised by a settlement agreement. However, the intimate connection required to attract the immunity, which the court described as a ‘functional connection between the advocate’s work and the judge’s decision’, does not exist in such circumstances. [v].
The majority reiterated the public policy reasons underpinning the existence of the immunity, in particular that disputes, once finally resolved by the exercise of judicial power of the state, should not be reopened by collateral attack [vi].
The majority considered the respondent’s argument that a judgment that reflects a compromise reached by consent is no less effective to quell a dispute than if it followed a contested hearing. The court found that the public policy which sustains the immunity is not offended by recognising the fact that the terms of the settlement agreement were not, in any way, the result of the exercise of judicial power. [vii]
The majority concluded that the consent order and associated notation by the court reflected an agreement of the parties for the payment of money in circumstances where no exercise of judicial power determined the terms of the agreement or gave it effect as resolving the dispute. The consent order may have facilitated the enforcement of the compromise, but it was the agreement of the parties that settled its terms. [viii]
Nettle and Gordon JJ had a different view.
Nettle J found that when a matter is settled wholly out of court, the settlement does not move the litigation towards a determination by the court. Accordingly, advice to enter into such a settlement does not attract the immunity. However, where a matter is settled out of court on terms providing for the court to make an order by consent that determines the rights and liabilities of the parties, the settlement plainly does move the litigation toward a determination by the court. [ix] His Honour held that in circumstances such as this matter, even where the parties are agreed on the orders which should be made for the determination of their rights and liabilities, it remains for the court to be satisfied that it is appropriate so to order. [x]
His Honour concluded that the determination of the appellants’ claim would necessitate a reopening of the controversy between the appellants and the bank. Accordingly, the immunity applied and the appeal ought be dismissed.
Gordon J found that immunity was attracted in this matter because there was a final quelling of the controversy between the appellants and the bank by the making of the consent order. [xi]
Her Honour held that the outcome for the appellants by the entry of the consent order was in effect no different from the core complaint made in D’Orta, and that the entry of verdict and judgment by admission or consent is as much the exercise of judicial power as entry of judgment after trial. [xii]
Her Honour examined the terms of the consent order and noted the distinction in different paragraphs between the orders to be made by the court and to the agreement between the parties which was to be noted. ‘Most importantly’, her Honour stated, ‘order 1 provided that there was a verdict and judgment’ against the appellants for a specified amount.
Her Honour examined the restrictions in the NSW Uniform Civil Procedure Rules governing ‘judgments and orders’ concerning reopening of orders that have been formally given or made and entered.
Her Honour found that those restrictions reflected the general principle of finality of litigation which underpins the immunity as explained in D’Orta. [xiii]
Her Honour concluded that orders 1 to 9 of the consent order (which recorded the verdict and judgment), as distinct from the agreement between the parties noted in paragraphs 10 to 17, recorded the final quelling of a controversy by the exercise of judicial power.
This decision represents an important clarification in the application of advocate’s immunity.
Legal practitioners cannot now rely on the immunity as a defence to a claim arising out of negligent advice concerning settlement of court proceedings which is recorded in consent orders.
Authored by Ian Denham, Partner and Susan Reid, Senior Associate, Sydney.
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