Attwells v Jackson Lalic: A shock to lawyers' immune systems

While there were no heroes, villains or shootings in Canberra last Wednesday morning, there was a partial revocation of the immunity from suit previously afforded to solicitors. This was far from a wholesale removal of the immunity, but is a departure from the recent trend towards expanding, rather than contracting, the reach of advocate's immunity.

Advocate's Immunity in the High Court of Australia

Frequent film-goers, and fans of the Lethal Weapon series of movies, may recall a scene from Lethal Weapon 2, set on a ship owned by the villain of the piece. The villain, a member of a foreign embassy, openly commits a heinous crime in full view of the hero, a police officer, played by Mel Gibson. He holds up his passport, saying to the hero "Diplomatic Immunity!" Unfazed by this perplexing legal and diplomatic situation, our hero shoots the villain between the eyes, adding for the audience's benefit:  "It's just been revoked".

In recent times, advocate's immunity has been a potent defence for lawyers against lawsuits arising from work "intimately connected" with courtroom litigation. In some cases it has been held to extend further than the court itself, to the conduct of a lawyer outside the courtroom if that conduct led "to a decision affecting the conduct of the case in court"[1]. The immunity principle was a substantial hurdle to prospective plaintiffs seeking redress for their lawyer's negligent court-related conduct.

Rationale

The central justification for the immunity is the principle of finality of judicial decisions, which is:  

"[T]hat controversies, once resolved, are not to be reopened except in a few narrowly defined circumstances. This is a fundamental and pervading tenet of the judicial system, reflecting the role played by the judicial process in the government of society." [2]

Otherwise, to allow a negligent lawyer's disappointed client to sue for work the lawyer has done, which has affected the way the Judge decided their case, leaves the judgment open to "collateral attack" and another episode of judicial consideration.

In Australia, the principle received official recognition by the High Court in Giannarelli v Wraith[3] in 1988.  Since that time it has been applied by the Courts to determine many negligence claims against solicitors.  Recent examples of these unsuccessful claims include alleging negligence in respect of:

• advice relating to the existence of a settlement offer and the quantum of a claim[4];
• advice leading to the settlement of a claim[5];
• advice on the prospects of success before proceedings are commenced[6];
• failing to include a remedy and party in proceedings[7]; and
• failing to follow a client's direct instructions during criminal proceedings.[8]

Most notable of the recent NSW cases was Donnellan v Woodland.[9] This concerned the alleged negligent advice surrounding an offer of compromise. The claimant brought an action of negligence against his lawyer, who allegedly incorrectly advised him about a settlement offer.  The advice was that his in-court prospects of success were strong and was silent on the possibility of paying the Council's costs if he lost. The Court of Appeal applied the test in D'Orta, which was whether the alleged negligence was conduct that led to a decision affecting the conduct of the matter in court. The lawyer's advice about the offer led to the claimant's decision about whether to continue the proceedings. Accordingly, Beazley JA found that the solicitor was entitled to the benefit of advocate's immunity.

Attwells v Jackson Lalic

Attwells & Anor v. Jackson Lalic Lawyers Pty Limited (Attwells) was commenced in the NSW Supreme Court and appealed from the NSW Court of Appeal to the High Court. The decision of the High Court majority delivered on 4 May 2016 marks a curtailment rather than an abolition of the advocate's immunity principle. 

Those following the case closely would have expected that change may be afoot, based on the appointment of a seven judge bench to hear the appeal and the rapid progress it made through the special leave application stage, the hearing of which took all of 26 minutes. These factors suggested that there was a strong possibility of a serious reconsideration of the reach of the advocate's immunity principle.

The case itself revolved around the alleged negligent settlement of guarantee proceedings. The plaintiffs were guarantors for a company Wilbidgee Beef Pty Ltd (Wilbidgee Beef) for a loan of AUD 1.5 million.

Wilbidgee Beef defaulted on its AUD 3.4 million debt it owed to the Bank. The Bank sued Wilbidgee Beef and its guarantors in Court to enforce payment. At the time proceedings were commenced, the Bank estimated that the guarantors owed it a total of AUD 1,856,122.

The lawyers for the guarantors informed the Court that the proceedings had been settled in favour of the Bank. The alleged negligence related to this settlement and the consent orders entered into on behalf of the guarantors. In essence the guarantors' lawyers reached a deal with the Bank that AUD 1.75m would be paid within approximately five months of the settlement, in default of which the Bank would be free to enforce the agreed judgment in its favour against Wilbidgee Beef and the guarantors for the full amount owing – roughly AUD 3.4m.

The AUD 1.75m was not paid within the agreed timeframe and the Bank commenced enforcement proceedings against the guarantors. The guarantors then sued their lawyers, alleging that the advice they gave in relation to the settlement agreement was negligent.

The guarantors were unsuccessful in the NSW Supreme Court and the NSW Court of Appeal due to the application of advocate's immunity. Their argument in the High Court was essentially that the main authorities supporting advocate's immunity – specifically Giannarelli and D'Orta – should be reconsidered or, in the alternative, that the immunity should be narrowed in scope to not cover advice pertaining to the settlement of disputes.

The five judge majority of the High Court rejected the Appellant's argument that Giannarelli and D'Orta should be reconsidered. The primary reason for the retention of the immunity in those two cases was held to be the importance of the principle of finality. It "reflects the strong value attached to the certainty and finality of the resolution of disputes by the judicial organ or the State"'[10] as well as the "role of the advocate engaged, as an officer of the court, in the exercise by the court of judicial power to quell a controversy"'[11].

The Court's focus on retaining the immunity led to the eventual conclusion that the "scope of the immunity for which D'Orta and Giannarelli stand is confined to conduct of the advocate which contributes to a judicial determination".[12]

In other words, because the immunity exists to protect the finality of judicial decisions, it can only attach to "conduct of the advocate which contributes to a judicial determination".[13]

Any privilege enjoyed by lawyers in respect of the immunity was held by the High Court to be an 'incidental operation' and a 'consequence of, and not the reason for, the immunity.'[14]

As the settlement and consent orders in Atwells did not move the case towards judicial determination, but instead reflected a voluntary agreement between the parties, it was held to be outside the scope of the immunity. The "intimate connection" that was said to be required to attract the immunity in D'Orta, was elaborated by the Majority in Atwells to involve a "functional connection between the advocate's work and the judge's decision"[15] and this was not present in the advice given by the lawyers.

What this means for advocates and their work in settling litigation is not exactly clear. The question of whether this exemption to immunity will be confined to cases where there is absolutely no judicial input on settlement was specifically left open by the majority but was considered in some detail in the two minority judgments.

It is also unknown whether the specific facts of this case, where the agreement reached was said to create a "new charter of rights"[16] (as the liabilities agreed to were not those that were being decided in the case that was settled), further narrows the application of this exception to the immunity.

Only time will tell how much the immunity has been eroded; however, at this stage it seems Australia is not looking likely to follow the lead of other common law countries like New Zealand, England, Canada, South Africa and the United States, who have completely done away with the immunity.

It remains to be seen whether advocate's immunity will, like the Lethal Weapon series, become a continuing saga, or whether Attwells has brought the advocate's immunity "franchise" (to borrow a movie-goers phrase) to a close. Time will tell. 

[1] Giannarelli v Wraith (1988) 165 CLR 543 at 560 per Mason CJ.
[2] D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12 at [45]
[3] (1988) 165 CLR 543
[4] Kendirjian v Lepore [2014] NSWDC 66
[5] Stillman v Rushbourne [2014] NSWSC 730; Young v Hones [2013] NSWSC 1429
[6] Bird v Ford [2014] NSWCA 242
[7] White v Forster [2014] NSWSC 1767
[8] Gillies v Brewer [2014] NSWSC 1198
[9] [2012] NSWCA 433
[10] Attwells & Anor v. Jackson Lalic Lawyers Pty Limited [2016] HCA 16 at [30]
[11] Ibid [33]
[12] Ibid [37]
[13] Ibid
[14] Ibid [52]
[15] Ibid [5]
[16] Ibid [55].