Email to me as pdf:

In brief - Immunity does not extend to negligent advice leading to settlement of court proceedings

The High Court has unanimously determined in the matter of Attwells v Jackson Lalic Lawyers that advocate's immunity from suit remains a feature of the Australian common law. However, the Court held by a 5-2 majority that the immunity from suit does not extend to negligent advice which leads to the settlement of court proceedings.

Application of immunity by Australian courts widened in recent years

Advocate's immunity from suit was first expressly recognised in Australia in Giannarelli v Wraith [1988] HCA 52, applying the House of Lords decision in Rondel v Worsley (1969) 1 AC 191. The decision was later affirmed by the High Court in D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12.

Since Giannarelli and D'Orta, Australian courts have continued to widen the application of the immunity and interpretation of what type of work is "intimately connected with work in court". The interpretation covered a wide range of work (see D'Orta at [156]), including advice as to the settlement of Court proceedings (see, for example, Donnellan v Woodland [2012] NSWCA 433).

Despite a series of attacks in the intervening years and the High Court's refusal in 2015 to grant special leave in both Young v Hones [2015] HCASL 73 and Nikolidis v Satouris [2015] HCASL 117, the immunity remained intact and has not, until now, attracted any further interest from the High Court.

Bank calls upon guarantees after company defaults

The facts of the underlying proceedings in Attwells v Jackson Lalic Lawyers Pty Limited [2016] HCA 16 are uncontroversial.

The guarantors, Mr Attwells and Ms Lord, provided guarantees to a bank in respect of the liabilities of a company to which the bank had advanced monies secured by mortgages.

The company defaulted and the bank called upon the guarantees, commencing proceedings in the NSW Supreme Court ("the Guarantee Proceedings").

The bank was owed a total of $3.4 million. The guarantors' liability under the guarantees was limited to $1.75 million.

The solicitors sued in this case, Jackson Lalic Lawyers, were engaged to defend Mr Attwells and Ms Lord in the Guarantee Proceedings.

Settlement negotiated and guarantors fail to pay by nominated date

On the first day of the hearing, a settlement was negotiated between the guarantors and the bank. The Guarantee Proceedings were brought to an end, with consent orders entered for judgment against the guarantors for the full $3.4 million, subject to an agreement that the bank would not enforce the judgment against the appellants if they paid $1.75 million by a nominated date.

The guarantors subsequently failed to pay $1.75 million by the nominated date.

Did the advice to settle fall within the scope of advocate's immunity?

Mr Attwells issued professional negligence proceedings in the NSW Supreme Court against Jackson Lalic Lawyers, alleging that they were negligent in advising Mr Attwells and Ms Lord to consent to judgment being entered against them for an amount greater than their total exposure under the guarantee.

The respondent solicitors applied for the pre-trial determination of the separate question of whether the whole of the suit against them was barred by reason of advocate's immunity.

At first instance, the NSW Supreme Court found that there were insufficient facts to determine the separate question before hearing and declined to answer the separate question.

Granting leave to appeal, the Court of Appeal found that the separate question was capable of being answered and determined that advice to settle did fall within the scope of the advocate's immunity, as it led to the Guarantee Proceedings being settled and was therefore intimately connected with the Guarantee Proceedings. (See Jackson Lalic Lawyers Pty Ltd v Attwells [2014] NSWCA 335.)

The High Court was asked to consider two questions - whether the Court ought to reconsider its decisions in Giannarelli and D'Orta and abolish the immunity; and whether the immunity extends to negligent advice which leads to the settlement of a case.

Should the advocate's immunity be abolished?

The High Court unanimously declined to reconsider its decisions in Giannarelli and D'Orta and abolish the immunity, finding that there was a clear basis in principle for the existence of the immunity.

Re-affirming D'Orta, the Court explained: "…the central justification for the advocate's immunity is the principle that controversies, once resolved, are not to be reopened except in a few narrowly defined circumstances." (See D'Orta at [45] and Attwells v Jackson Lalic Lawyers at [34].)

The majority expressed that where a final order has been made resolving litigation, a claim which asserts that "but for the advocate's conduct" there would have been a different result is objectionable as a matter of public policy. That is because the consequences of the decision about which the claimant wishes to complain are consequences flowing from a lawful result lawfully reached (at [35]).

The public policy upon which the immunity is grounded was at the heart of the Court's decision to re-affirm the immunity.

The majority acknowledged that the operation of the immunity may have the incidental result of an advocate escaping liability for their negligence but explained that "this incidental operation is a consequence of, and not the reason for, the immunity" (at [52]).

Does the immunity extend to advice in respect of settlements?

By a split majority 5-2, the Court found that the immunity does not extend to negligent advice regarding settlement.

In analysing the public policy considerations upon which the immunity is founded, the majority held that the scope of the immunity is "confined to conduct of the advocate which contributes to a judicial determination" (at [37]). The distinction between a judicial determination on the facts and the resolution of proceedings by consent orders was material to the majority's judgment that the immunity does not apply to negligent advice as to settlement.

The majority observed that the "intimate connection" between the advocate's work and the conduct of the case in Court must be such that the work affects the way the case is to be conducted so as to affect its outcome by the judicial decision (at [46]).

One key question that remains unanswered by the majority is the application of the immunity to negligent advice which leads to settlement in circumstances where the Court must first approve that settlement. In circumstances where a settlement requires Court approval, one would expect it would satisfy the requirement for the exercise of judicial power that is required for the resolution of the dispute.

Minority view that immunity should extend to negligent advice regarding settlement

The minority, Nettle J and Gordon J, reasoned that negligent advice to settle, or not to settle, ought to remain immune as the rights of the parties merge in the final judgment and that merger has long been treated as res judicata in Australia.

The minority held it was artificial to draw a line between orders made by consent and those made at the conclusion of a contested hearing, in circumstances where powers to set aside or vary a judgment are the same irrespective of the manner in which the judgment was made. Advice which led to the judgment being entered was said to be advice which led to the ultimate quelling of the dispute.

Does advocate's immunity apply to negligent advice to commence proceedings?

The Court clearly expressed that the immunity will not apply to negligent advice to commence proceedings which are doomed to fail (at [50]). It was explained that the historical connection between the advocate's work and the litigious event in such circumstances was insufficient to establish an "intimate connection" to the following judicial decision. Gordon J observed that "advice of that kind starts a controversy", it is not the type of work associated with the final quelling of controversy (at [128]).

In cases where the initial proceeding was doomed to fail, this position seems irrefutable. The position is somewhat less clear, however, where a party asserts that had the failed proceeding been commenced or pleaded in a different way, it would have succeeded. Conceptually, such a scenario may call upon the parties to re-traverse the controversy that was the subject of the initial decision.

Lawyers should ensure that all reasons for or against settlement are clearly articulated and understood

Practitioners would be wise to acknowledge that the immunity is not intended for their benefit. The High Court has clearly enunciated that the "immunity is grounded in the necessity of ensuring that the certainty and finality of judicial decisions, values at the heart of the rule of law, are not undermined by subsequent collateral attack" (at [52]).

The protection barristers and solicitors enjoy as a result of the immunity is incidental to, and a consequence of the immunity, not a basis for it.

When considering the immunity, Australian courts will not be looking to shield solicitors. Rather they will be considering how the legitimate public interest in the finality of litigation may be impeached by allowing the fresh proceeding.

The High Court's decision presents yet another compelling reason why it is essential for practitioners to provide comprehensive advice in relation to settlements, including the rationale for such advice. This may prove challenging for settlements that take place on the "Court steps", but is nevertheless prudent professional practice to ensure that all of the reasons for or against settlement are clearly articulated and understood.

This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2024.

Related Articles