High Court to reconsider application of advocate’s immunity to negligently advised settlements: special leave granted in Attwells & Anor v Jackson Lalic Lawyers Pty Limited

Legal Directions

On 7 August 2015 the High Court granted special leave to the plaintiffs in the Attwells proceeding.

The High Court’s reconsideration of the application of advocate’s immunity has the potential to affect both insurers of lawyers or barristers and legal practitioners generally.

Facts in Attwells

The plaintiffs provided guarantees to a bank in respect of the liabilities of a company to which the bank had advanced monies. The plaintiffs’ maximum liability to the bank as guarantors was $1.75 million.

The company defaulted and the bank commenced proceedings against the plaintiffs to recover the sum secured by the guarantees. The company was not sued – presumably as it was insolvent. By that time the full amount of the debt, including accrued interest, was a little under $3.4 million.

The proceedings came on for trial before Justice Rein in the Supreme Court of NSW, but were settled on the first day. Pursuant to the settlement, Rein J made orders by consent, which provided for a judgment against the plaintiffs for the full amount of the company’s indebtedness to the bank (that is, $3.4 million), subject to an agreement that the bank would not enforce judgment if the plaintiffs paid a lesser sum by a nominated date.

The plaintiffs failed to make the payment within the time, and the bank enforced judgment for the higher amount, that is, judgment for approximately $3.4 million.

Of course, were it not for the entry of the consent orders, the plaintiffs could only ever have been liable for a maximum $1.75 million, plus interest and costs.

First instance decision

The plaintiffs sued their former solicitors alleging that they negligently structured the settlement. They did not sue the barrister as he was not involved in documenting the settlement.

The solicitors pleaded that the defence of advocate’s immunity provided a complete defence to the plaintiffs’ claim. They contended that work done by them was done either in court, or alternatively out of court but in circumstances that then led to a decision affecting the conduct of the proceedings, or was intimately connected with work in court.

Following application by the solicitors, Justice Schmidt of the Supreme Court of New South Wales ordered that the issue of whether the defence of advocate’s immunity provided a complete defence to the plaintiffs’ claim be determined as a separate question. [1]

The separate question was referred to Justice Harrison to determine, based on facts agreed between the parties.

Justice Harrison declined to make any order on the separate question on the basis that it was not clear whether the case would require the Court to revisit issues previously determined, and thus offend the principle of finality. His Honour stated:

 … it is not possible to form a concluded view about whether or not an examination of the plaintiffs’ liability to the bank over and above their certified liability as guarantors of the company’s obligations will or may “identify issues which do not involve re-agitation” of the judgment entered by consent by Rein J. I have been provided with an expansive statement of agreed facts for my purposes, but the allegations of negligence against the defendants cannot be usefully assessed or determined without considerably more material. Without being exhaustive I can well imagine that such extra material would necessarily include evidence from the plaintiffs with respect to their discussions with and instructions to the defendants, as well as the advice that they received, leading up to and concluding with the settlement. [2]

The solicitors appealed Justice Harrison’s decision.

Court of Appeal decision

The New South Wales Court of Appeal held that Justice Harrison had erred. The appeal Justices considered the separate question could be answered and that the defence of advocate’s immunity applied and acted as a complete defence to the plaintiffs’ claim. [3]

Bathurst CJ, with whom Meagher JA and Ward JA agreed, stated:

In the present case, in my opinion, the work fell within categories of work done out of court affecting the conduct of the case in court. The alleged breach occurred in advising on settlement of the guarantee proceedings during the luncheon adjournment on the first day of the hearing and more importantly on the evening of that day. The Agreed Facts also state that the consent order the first respondent and Ms Lord [the second respondent] were advised to sign were signed on that evening and submitted to the Court on the following day.

The advice thus led to the case being settled. Put another way it was intimately connected with the conduct of the guarantee proceedings. [4] 

Special leave application

On 7 August 2015, the High Court of Australia granted the plaintiffs special leave to appeal the decision of the New South Wales Court of Appeal. [5]

The plaintiffs’ lawyer submitted that the defence of advocate’s immunity ‘concerns a matter which is plainly of great public significance’ and that the time had come for the High Court to reconsider its decision in D’Orta-Ekenaike v Victorian Legal Aid (D’Orta) [6], particularly in the context of negligently advised settlements. He submitted that the application of advocate’s immunity in that context is or ought to be distinguished from the application of advocate’s immunity to proceedings determined upon the merits either by a jury verdict or by a judge.

The court was clearly interested in the plaintiffs’ contention and required the defendant to address it.

The court referred the defendant to McHugh J’s comment in paragraph [166] of D’Orta that:

So, it is possible to sue a practitioner for the negligent settlement of proceedings or for the negligent loss or abandonment of a cause of action.

The defendant’s counsel submitted that that comment is somewhat contradictory, having regard to McHugh J’s comment in paragraph [154] of D’Orta to the effect that the courts have previously held that negligently advising a settlement was work that was intimately connected with the conduct of a case in court and therefore within the ambit of advocate’s immunity.

Justice Gageler responded that McHugh J’s comment in paragraph [154] of D’Orta was supported by the decision of the Supreme Court of New Zealand in Biggar v McLeod [7], which has now been overruled by Chamberlains v Lay [8]. In Chamberlains, the Supreme Court of New Zealand found that advocate’s immunity did not apply in the context of a negligently advised settlement.

The defendant’s counsel submitted that:

    • the High Court was not bound by the decision of the Supreme Court of New Zealand in Chamberlains
    • the facts of Attwells concern a settlement which occurred mid-trial which resulted in a judgment and in those circumstances the immunity was attracted
    • in effect, the plaintiffs were seeking to re-open the High Court’s decision in Giannarelli v Wraith [9] which was affirmed by the High Court in D’Orta
    • D’Orta was a recent decision of the High Court. The High Court rightly has a ‘very real concern’ in re-opening recent decisions.
    • the High Court had recently disposed of two special leave applications concerning the application of the defence of advocates’ immunity in the context of settlements, one being Young v Hones & Ors [10], and the other being Nikolidis & Anor v Satouris & Ors. [11] In response to that submission, Justice Bell stated that special leave had been refused in those matters because they were not ‘suitable vehicles’ for reconsidering D’Orta.

Although impressive, the defendant’s submissions were not able to dissuade the Court from granting special leave.

Discussion

There is little doubt that the solicitors in Attwells were negligent in advising the plaintiffs to consent to the settlement in the terms recorded in the consent orders. The result for the plaintiffs was egregious in that it caused the plaintiffs to become indebted for a sum well in excess of their obligations under a worst case scenario had the case run.

As such, the decision in Attwells is an appropriate vehicle for reconsideration of the boundaries of advocate’s immunity.

There are a number of potential outcomes. The High Court could be persuaded to abandon the immunity entirely as did the Supreme Court of New Zealand did in Chamberlains. That appears unlikely, although the immunity has long since been abolished in many other jurisdictions.

The High Court could also review the ‘intimately connected’ test, particularly with regards to the application of the immunity to settlement of proceedings. It is true that the question of finality, which underpins the basis for the immunity (although not the method of applying it – see Kendirjian v Lepore [12]) has lesser relevance in relation to settlements which, by their nature, do not involve a court determining the rights of parties. However, there are also strong policy arguments in favour of encouraging and facilitating parties towards settlement: an abolition of the immunity may be seen as contrary to those policy arguments.

Alternatively, as it did in D’Orta and Giannerelli v Wraith before it, the High Court may simply confirm the existence of the immunity, and provide guidance as to its application.

Whichever the outcome of the High Court’s decision in Attwells, the effects will be relevant to insurers of barristers and lawyers, and indeed for legal practitioners in every jurisdiction in Australia.

The hearing of the appeal is likely to be in November.

Authored by Ian Denham, Partner and Susan Reid, Senior Associate, Sydney.

[1] Attwells v Jackson Lalic Lawyers Pty Ltd [2013] NSWSC 925.
[2] Attwells v Jackson Lalic Lawyers Pty Ltd [2013] NSWSC 1510.
[3] Jackson Lalic Lawyers Pty Limited v Attwells [2014] NSWCA 335.
[4] At [37] and [38].
[5] [2015] HCATrans 176.
[6] [2015] HCATrans 176.
[7] [1978] 2 NZLR 9.
[8] [2006] NZSC 70.
[9] [1988] HCA 52; (1988) 165 CLR 543.
[10] [2015] HCASL 73 (6 May 2015).
[11] [2015] HCASL 117 (4 August 2015).
[12] [2015] NSWCA 132.

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