Australia - High Court Shock To Immune System For Lawyers' Advice On Settlement.
Legal News & Analysis – Asia Pacific - Australia – Dispute Resolution
15 May, 2016
Attwells v Jackson Lalic Lawyers Pty Limited  HCA 16
What you need to know
- Advocate's immunity protects solicitors and barristers from liability in negligence in relation to certain work done in the conduct of legal proceedings.
- The High Court today reaffirmed that advocate's immunity remains available in Australia.
- The immunity does not, however, extend to advice given by a lawyer that leads to a settlement of court proceedings.
- Advice to cease or continue litigation will not attract advocate's immunity unless that advice is acted on by the parties in a way that causes the court to judicially determine the case. Mere agreement of, and entry into, consent orders does not attract the immunity.
Overview of advocate's immunity
Advocate's immunity protects solicitors and barristers from liability in negligence in relation to certain work undertaken in the conduct of a court proceeding. The High Court has previously held that advocate's immunity:
- is not strictly limited to "advocacy work", but extends work done by legal practitioners involved in the conduct of litigation both in and outside court - D'Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1 (D'Orta); and
- extends to work done out of court which leads to a decision affecting the conduct of the case in court, among other things because "it would be artificial in the extreme to draw the line at the courtroom door" - Giannarelli v Wraith (1988) 165 CLR 543 (Giannarelli).
Advocate's immunity does not, however, extend to all work undertaken as part of the litigation process. It covers work that is "intimately connected with the conduct of a case in court”. According to D'Orta, the principal rationale for the immunity is the finality of litigation principle: public confidence in the administration of justice would suffer if litigation could be re-opened, and judicially-determined issues reconsidered, through collateral proceedings in negligence.
Litigation does of course often resolve without a final determination by the court. Solicitors and barristers are routinely called upon to advise clients on the merits of a particular settlement offer or the means by which to resolve a litigated dispute. The nature of that work is, on one view, part and parcel of the advocacy process. But is such advice protected by advocate's immunity?
Advocate's immunity has come under increasing attack in common law jurisdictions around the world. For example, it has been abolished in the United Kingdom, New Zealand, and Canada.
Today the High Court reaffirmed that advocate's immunity remains available in Australia. It further held, however, that advocate's immunity does not extend to negligent advice given by a solicitor which leads to the settlement of a case by agreement of the parties.
The underlying proceedings were commenced in the Supreme Court of New South Wales for the enforcement of a guarantee of a debt owed by a company to a bank (guarantee proceedings).
The company's indebtedness was almost $3.4 million, but the guarantors' liability was for considerably less. At the outset of the trial, the bank certified the total amount owing under the guarantee, including interest and enforcement costs, to be about $1.85 million.
During the first day of trial, counsel for the guarantors informed the Court that the matter had settled on terms that judgment would be entered against the company and the guarantors for the full amount of the debt (namely, $3.4 million) and the bank would not seek to enforce the order for payment if the guarantors paid the sum of $1.75 million by 19 November 2010 (about five months after the date of the settlement). The respondent firm of solicitors had advised the guarantors to sign the consent order "because, if they defaulted in payment of the sum of $1,750,000 by 19 November 2010, it would not make any difference if the judgment in favour of the bank was for $3,399,347.67 or any other sum".
This advice was wrong: it was an express term of the agreement between the parties that if the guarantors failed to pay then the bank could enforce the orders.
A consent order was made for judgment in the sum of $3.4 million, with the Court noting the conditional non- enforcement agreement. The guarantors failed to meet their initial payment obligation, and later failed in an attempt to set aside the settlement as an unenforceable penalty.
The guarantors commenced new proceedings against the respondent firm of solicitors in the Supreme Court of New South Wales alleging that the respondent was negligent in advising them to consent to a judgment in the terms of the consent orders, and in failing to advise on the effect of the consent orders (negligence proceedings).
The primary judge and Court of Appeal
The primary judge declined to answer the question of whether advocate's immunity applied. The New South Wales Court of Appeal held that the primary judge erred in doing so and answered the question itself.
The Court of Appeal held that the respondent's work was within the scope of the immunity because it fell within the categories of work done out of court which affected the conduct of the case in court. This was for two reasons: first, the advice was to settle the guarantee proceedings; and, secondly, the advice led to the settlement of the case. The Court also held that the negligence proceedings would involve a re-agitation of issues determined in the guarantee proceedings, and that a reconsideration of those issues would offend the finality of litigation principle.
The High Court
The High Court granted special leave to appeal. The appellants contended that:
- first, advocate's immunity should be abolished in Australia, and the High Court should overrule its decisions in D'Orta and Giannarelli; and
- secondly, advocate's immunity does not extend to negligent advice which leads to the settlement of a case by agreement between the parties.
The High Court unanimously rejected the first argument. The majority (French CJ, Kiefel, Bell, Gageler and Keane JJ) noted: "The common law of Australia, as expounded in D'Orta and Giannarelli, reflects the priority accorded by this Court to the values of certainty and finality in the administration of justice as it affects the public life of the community". The Court said that the elimination of advocate's immunity was a matter best left to Parliament.
The High Court did, however, accept the second argument and allowed the appeal. The majority (Nettle and Gordon JJ dissenting) held that the "authoritative test for the application of the immunity stated in D'Orta and Giannarelli is not satisfied where the work of the advocate leads to an agreement between parties to litigation to settle their dispute".
Rather, the rationale for the immunity means it is confined to conduct of a solicitor or barrister which contributes to a judicial determination of the dispute between the parties.
More specifically, the majority held that:
- In order to attract advocate's immunity, legal advice given out of court must affect the conduct of the case in court and the resolution of the case by the court.
- There must be a "functional connection" between the legal work in question and the judge's decision.
- The immunity does not extend to advice that contributes to the making of a voluntary agreement between the parties merely because litigation is on foot at the time that agreement is reached.
- In this particular case, the fact that the parties' agreement was embodied in consent orders did not mean the immunity was engaged: the consent orders reflected an agreement in circumstances where no exercise of the judicial power had either determined the terms of the agreement, or given it effect as resolving the dispute between the parties.
The majority was not persuaded that the respondent's advice satisfied the test in D'Orta and Giannarelli. The majority considered there was only a connection in a general sense between the advice to cease litigating (which led to settlement) and a decision by the judge in the proceedings, and not a sufficient connection to engage advocate's immunity. The majority also dismissed concerns expressed by the respondent and the Law Society of New South Wales that the lack of immunity may discourage lawyers from recommending settlement.
For further information, please contact:
Andrew Harpur, Partner, Ashurst