September 2016


Lawyer immunity remains: HCA

By John Reynolds and Kate Tilley, KT Journalism

The High Court has refused to overturn a long-held immunity for lawyers who provide negligent advice to clients during court proceedings.

The High Court (HCA) agreed two previous HCA decisions that enshrined lawyer immunity should stand “for the protection of the public interest”.
But a majority of judges found the immunity did not extend to a law firm’s negligent advice on settlement terms.

The court was asked to review its previous decisions, D’Orta-Ekenaike v Victoria Legal Aid [2005] and Giannarelli v Wraith [1988], during its review of a 2014 NSW Appeal Court decision to quash negligence proceedings against Jackson Lalic Lawyers Pty Ltd (JLL).

Gregory Ian Attwells and Barbara Jane Lord had sued JLL for negligently advising them to settle a dispute with ANZ Bank. JLL later admitted the advice was negligent.

Mr Attwells and Ms Lord had signed a 2010 settlement that required them to pay the bank $1.7 million within five months or be liable for a $3.4 million debt.

Mr Attwells and Ms Lord were guarantors for Wilbidgee Beef Pty Ltd’s liabilities to the bank. Wilbidgee owed $3.4 million, but the guarantors' liability was limited to $1.5 million. On the opening day of the Supreme Court trial, the bank certified that the total amount owing under the guarantee, including interest and enforcement costs, was $1,856,122.

Later that day, counsel for the guarantors told the court settlement terms were for judgement to be entered against Mr Attwells, Ms Lord and Wilbidgee for the full amount of Wilbidgee's debt and the bank would not seek to enforce the order for payment of that amount if the guarantors paid $1.75 million within five months. The terms were reflected in a consent order made by the court and the court noted the conditional non-enforcement agreement between the parties, which was not itself embodied or reflected in a court order.

A JLL lawyer told Mr Atwells and Ms Lord if they failed to pay it made no difference that the full judgement was for $3.4 million. However, when they failed to pay, the bank did seek to enforce the order.

In the initial proceedings, Attwells v Jackson Lalic Lawyers Pty Ltd [2013] NSWSC 925, the parties agreed the question of whether JLL was immune be determined separately from other issues in the negligence proceedings. But the primary judge did not answer it.

The Appeal Court concluded the negligence proceedings would necessarily involve re-agitatingg issues determined in the guarantee proceedings; and reconsidering those issues to determine whether JLL had been negligent would “offend the principle of finality”.

When Mr Attwells was granted leave to appeal to the HCA, the Law Society of New South Wales sought leave to intervene, which was granted on condition it pay costs of the parties occasioned by the intervention.

As well as trying to get the NSW Appeal Court judgement overturned, before the HCA, Mr Attwells’ counsel argued the earlier judgements left the scope of the immunity unclear, and “there is such a degree of inconsistency between the immunity and its rationale that this court should follow other common law systems and abolish the immunity”.

The majority judgement of Chief Justice Robert French and Justices Susan Kiefel, Virginia Bell, Stephen Gageler and Patrick Keane said: “To overturn Giannarelli and D'Orta would generate a legitimate sense of injustice in those who have not pursued claims or have compromised or lost cases by reference to the state of the law as settled by these authorities during the years when they have stood as authoritative statements of the law. An alteration of the law of this kind is best left to the legislature.”

They said questions about rationale for the immunity and its scope were fully argued in Giannarelli and D'Orta and no argument of principle or public policy was advanced to change that.

“The decision in D'Orta stated a rule that is consistent with, and limited by, a rationale which reflects the strong value attached to the certainty and finality of the resolution of disputes by the judicial organ of the State.”

JLL argued it would be anomalous to say the immunity did not extend to advice that led to a disadvantageous compromise but did extend to negligent advice not to compromise which led to a judicial decision less beneficial to the client than a rejected offer of compromise.
“It was argued that to differentiate between these cases may discourage lawyers from giving frank advice in favour of settlement because settlement itself would put them outside the zone of immunity. The Law Society supported this argument, emphasising that public policy favours settlement of litigation.”

But the majority said JLL’s assumption negligent advice not to settle was "intimately connected" with the ensuing judicial decision was “not sound” and it was no surprise there was no authority cited to support the assumption. “It is difficult to envisage how advice not to settle a case could ever have any bearing on how the case would thereafter be conducted in court, much less how such advice could shape judicial determination of the case.”
The HCA rejected the Law Society’s argument, saying immunity was not attracted “simply because its existence might encourage lawyers to advise their clients to settle their claims”.

“While it is true there is a public interest in the resolution of disputes, the public policy that justifies the immunity is not concerned with the desirability or otherwise of settlements, but with the finality and certainty of judicial decisions.”

However, in Attwells’ case “there was no occasion for the operation of the immunity in relation to advice which led to the settlement of the guarantee proceedings on terms disadvantageous to the guarantors.

“The consent order and associated notation of 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 enforcement of the compromise, but it was the agreement of the parties that settled its terms.”

Chief Justice French and Justices Kiefel, Bell, Gageler and Keane refused to reconsider the earlier decisions, but they allowed Mr Attwells’ appeal, finding the separate question of whether his claim was defeated entirely because of immunity from suit was answered: "no".

“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. No doubt an advice to cease litigating which leads to a settlement is connected in a general sense to the litigation which is compromised by the agreement. But the intimate connection required to attract the immunity is a functional connection between the advocate's work and the judge's decision,” they said.

“The public policy, protective of finality, which justifies the immunity at the same time limits its scope so its protection can only be invoked where the advocate's work has contributed to judicial determination of the litigation. In short, in order to attract the immunity, advice given out of court must affect the conduct of the case in court and the resolution of the case by that court. The immunity does not extend to preclude the possibility of a successful claim against a lawyer [for] negligent advice which contributes to the making of a voluntary agreement between the parties merely because litigation is on foot at the time the agreement is made. That conclusion is not altered by the circumstance that, in the present case, the parties' agreement was embodied in consent orders.

“Advice to cease or continue litigating does not itself affect the judicial determination of a case,” they said.

“Such an extension undermines the notion of equality before the law by enlarging the circumstances in which lawyers may be unaccountable to their clients.”

In dissenting judgements, Justices Michelle Gordon and Geoffrey Nettle said they would have upheld the NSW Appeal Court ruling.
Justice Gordon agreed with NSW Supreme Court Chief Justice Tom Bathurst, with whom Justices Meagher and Ward agreed, that JLL was immune from suit because “the advice led to the case being settled. Put another way, it was intimately connected with the conduct of the guarantee proceedings”.
Justice Nettle said it was irrelevant the advice to settle was made outside the court and given to the judge later. “Even where the parties agree with the [settlement], it remains for the court to be satisfied it is appropriate,” he said. “If one party later contends [the advice] was negligent, [their argument will] involve questioning the court's order.”

He said in Mr Attwells and Ms Lord’s case, the advice directly led to settlement. “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.”

(Gregory Ian Attwells v Jackson Lalic Lawyers Pty Ltd [2016], HCA 16, 04/05/16)

Click here to read HWLEbsworth’s commentary on the case.

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