INTRODUCTION

In Attwells v Jackson Lalic Lawyers Pty Ltd1 the High Court of Australia has revisited the existence and scope of the immunity of advocates from suit. This immunity, where available, provides a complete defence to lawyers alleged to be guilty of professional negligence.

Prior to Attwells, the immunity was most recently considered by the High Court in D’Orta-Ekenaike v Victoria Legal Aid,2 wherein the Court held that the immunity extended to protect a solicitor involved in the conduct of litigation in a court.

BACKGROUND

The underlying litigation involved a bank pursuing the guarantors of a company loan. The guarantors’ liability was limited to $1.5m, while the company’s liabilities totalled almost $3.4m. As at the date of the trial, the total amount owing under the guarantee was $1,856,122.00 including costs and interest (the guarantors’ maximum exposure). The guarantors instructed solicitors to defend those proceedings, and the matter settled on the first day of trial. The settlement terms included that judgment would be entered against the guarantors and the company for the full debt (almost $3.4m) but that the bank would not enforce the judgment as long as the guarantors paid the sum of $1.75m within a certain time frame. The terms of settlement were reflected in consent orders filed to enter judgment for $3.4m, with the Court noting the non-enforcement agreement.

The guarantors failed to make the payment, and accordingly, the bank was entitled to enforce the full judgment of $3.4m against the guarantors directly.

The guarantors subsequently issued legal proceedings against the solicitors in the Supreme Court of New South Wales, alleging that the solicitors were negligent in advising them to consent to judgment being entered in those terms and failing to advise as to the effect of the consent orders. The solicitors argued that, whether or not they had been negligent, they were immune from suit because of the principles of advocate’s immunity. The parties agreed to have the issue of immunity from suit determined separately from the other issues in the negligence proceedings; however, the primary judge declined to do so, without evidence being led on the question.

The New South Wales Court of Appeal granted leave to appeal and held that the question of immunity could be addressed separately. The Court of Appeal held that the advice fell within the scope of the immunity. Special leave was subsequently granted and the issue was argued before the High Court.

DECISION OF THE HIGH COURT OF AUSTRALIA

The appellant guarantors argued that the principles of advocate’s immunity were unclear, inconsistent and ought to be abolished; however, the High Court unanimously declined to abolish the immunity, partly because it would generate a sense of injustice in cases which have been affected by those principles and partly because no new arguments had been raised that had not been previously considered.

The plurality (French CJ, Kiefel, Bell, Gaegler and Keane JJ) explained that the central reason to retain the immunity was:

“the specific concern that once a controversy has been finally resolved by the exercise of the judicial power of the State, the controversy should not be reopened by a collateral attack which seeks to demonstrate that that judicial determination was wrong.”

Interestingly, the NSW Law Society intervened and argued that the immunity ought to be extended because it might encourage solicitors to advise clients to settle disputes, which is in the public interest. The High Court rejected this argument and subsequently ordered that the Law Society pay costs incurred incidental to its intervention.

The respondent solicitors argued that the principles of advocate’s immunity should be extended to the “quelling of controversies” by agreement, and not confined to judicial determination. They argued that consent judgment was similar to a judicial determination. The plurality, however, rejected this argument and affirmed the previous authority,3 namely that while consent orders may have the same legal effect as an order made after a hearing, it “does not impute any finding to the court” because there is no exercise of judicial power, merely facilitation of the agreed compromise between the parties. The plurality concluded that the advice provided by the respondent solicitors fell outside the scope of the immunity, remarking that “the immunity does not extend to negligent advice which leads to the settlement of a claim in civil proceedings”.

Justices Nettle and Gordon delivered separate dissenting judgments. Justice Nettle opined that where a court makes orders by consent, the matter is judicially determined and accordingly, advocates immunity ought to be extended to negligent advice given in the course of that settlement. Nettle J considered that the underlying public interest arguments which give purpose to advocate’s immunity can be applied analogously to matters determined by consent.

Justice Gordon agreed with Justice Nettle that judicial determination included orders made by the court which were by consent. Gordon J considered in detail the definition of ‘judicial determination’.

The guarantors’ appeal was allowed and the matter was remitted back to the Supreme Court of New South Wales.

IMPLICATIONS

The decision in Attwells is something of a mixed blessing for relevant stakeholders, including lawyers, their professional indemnity insurers and clients. On the one hand, advocate’s immunity remains available but on the other the High Court has clarified that the immunity does not extend to negligent advice leading to a settlement.

Of course the fact the that the immunity continues to exist will no doubt frustrate those who have argued for its abolition, contending that it is anomalous or confers an unfair privilege on lawyers4 that is not granted to other professions.