Limelight Articles
Advocates’ immunity curtailed
Attwells v Jackson Lalic Lawyers Pty Limited [2016] HCA 16
Introduction
On 4 May 2016, the High Court of Australia handed down its much-anticipated decision on the advocates’ immunity from suit in Attwells v Jackson Lalic Lawyers Pty Limited [2016] HCA 16. The High Court allowed the immunity but carved out an exception for settlements.
The immunity no longer extends to negligent advice which contributes to the making of a voluntary agreement between the parties merely because litigation is on foot.
This has significant ramifications for legal practitioners and their insurers. Practitioners must carefully consider the circumstances in which they advise their clients to settle and the terms of any consent orders which are submitted to the court as the result of advice to settle.
Background
Gregory Attwells and Barbara Lord (together Attwells) were the guarantors of secured advances made by the ANZ Bank (bank) to Wilbidgee Beef Pty Ltd (debtor). Liability under the guarantee was limited to $1.75M.
The debtor defaulted. It appears the debtor was insolvent so the bank brought proceedings against Attwells under the guarantee (underlying proceedings).
The proceedings were settled on the first day of hearing. Pursuant to the settlement, the Court made consent orders that provided for judgment against Attwells for the full amount of the debtor’s indebtedness to the bank, being approximately $3.4M, subject to the bank not enforcing judgment if Attwells paid $1.75M by a certain date.
Attwells failed to pay $1.75M by the date and the bank enforced judgment for the higher amount, that is, approximately $3.4M.
Attwells sued their solicitors in the Supreme Court of New South Wales for their advice on settlement and the structure of the settlement.
First instance
The solicitors contended that the defence of advocates’ immunity provided a complete defence to Attwells’ claim. They asserted that, in accordance with the principles outlined by the High Court in Giannarelli v Wraith[1] and D’Orta-Ekenaike v Victoria Legal Aid,[2] 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.
The issue as to whether advocates’ immunity applied was ordered to be determined as a separate question, but Justice Harrison declined to answer it[3]. His Honour’s reasoning was that it was unclear whether he would need to revisit issues previously determined in the underlying proceedings, and therefore offend the principle of finality that underpins the immunity.
The solicitors appealed.
Appeal
The New South Wales Court of Appeal allowed the appeal[4], holding that Justice Harrison had erred in not answering the separate question, that advocates’ immunity applied, and that it acted as a complete defence to Attwells’ claim.
Bathurst CJ, with whom Ward JA and Meagher JA agreed, stated[5]:
… 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 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.
Attwells sought, and were granted, special leave to appeal.
High Court
A Court comprised of Chief Justice French and Justices Kiefel, Bell, Gageler, Keane, Nettle and Gordon rejected the appellants’ invitation to depart from the decisions in D’Orta and Giannarelli. The Court found no reason to disturb those decisions, which reflected “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.”[6] Any abolition of the immunity, in the Court’s view, is a matter for the legislature.
By a ratio of 5:2, the Court (French CJ, Kiefel, Bell, Gageler and Keane JJ comprising the plurality) held that the immunity did not extend to advice given out of court by the practitioner leading to a settlement; and that on a fair reading of D’Orta, the immunity was never intended to extend so far, even if the settlement led to consent orders made by the court.
The court affirmed the principles in Giannarelli and D’Orta and explained[7]:
Once it is appreciated that the basis of the immunity is the protection of the finality and certainty of judicial determinations, it can be more clearly understood 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 judicial decision. The notion of an “intimate connection” between the work the subject of the claim by the disappointed client and the conduct of the case does not encompass any plausible historical connection between the advocate’s work and the client’s loss; rather it is concerned only with work by the advocate that bears upon the judge’s determination of the case.
In reaching its conclusion, the Court rejected an argument advanced by the Law Society, that any confinement of the immunity with respect to settlements would have a chilling effect on the public policy in favour of settlement of litigation. The Court unapologetically explained that the public policy which justifies the immunity is not concerned with the desirability of settlements, but with the finality and certainty of judicial decisions.
The respondent law firm argued that a judgment that reflects a compromise reached by consent is no less effective as a final and certain judgment than one reached after a contested hearing. The Court rejected that argument on the basis that “the consent order in question 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.”
In part dissent, Justices Nettle and Gordon agreed with the majority in determining that the rationale of the immunity did not extend to advice unless it “moves the case in court toward a judicial determination” but disagreed that the immunity should not apply to advice to settle or not to settle a proceeding. His Honour Justice Nettle observed that the curtailment of the immunity would necessarily lead to anomalous results depending on whether a consent order dismissing the action as a result of a settlement did or did not contain contractual settlement terms. If it did, any attack on the advised terms of settlement would necessarily involve a collateral attack on the court’s order and hence the kind of attack that the immunity was meant to avoid.
Similarly, Her Honour Justice Gordon dissented on the basis that the immunity fundamentally revolves around finality – the final quelling of a controversy by the exercise of judicial power. Her Honour found that the final outcome in the court below – the entry of a judgment for approximately $3.4M, was as much the exercise of judicial power as entry of judgment after trial.
Implications
The decision will undoubtedly affect the way in which practitioners advise their clients as to settlement. In the short term there may be a reticence to advise to settle prior to trial.
Since the court expressly did not decide upon the application of the immunity to settlements requiring the exercise of judicial power[8], terms of consent orders are likely to receive closer attention, as practitioners draft them to include more terms which are determinative of the rights and obligations of the parties in an effort to bring the exercise of judicial power into the terms of the orders by consent.
The advocates’ immunity continues, arguably as it was always intended. The guiding principle to the operation of immunity is the interconnectedness of the work of the advocate with the judicial determination of the case.
Date: 4 May 2016
This publication constitutes a summary of the information of the subject matter covered. This information is not intended to be nor should it be relied upon as legal or any other type of professional advice. For further information in relation to this subject matter please contact the author.
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