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Financial Advice 2

Advocate’s Immunity and Solicitor’s Negligence Claims:

What does the High Court decision mean for lawyers, their clients and negligence claims in Australia?

Advocate’s immunity is a legal principle that protects lawyers from being sued for their ‘in court’ work in some circumstances, even if that work would otherwise be considered to be negligent.

Both barristers and solicitors have an immunity from action in relation to ‘in court’ work. Work performed in the conduct of a case in court (including work done out of court) that leads to a decision affecting the conduct of the case may be protected.

The immunity has been the subject of controversy. Some commentators consider that the immunity gives solicitors and barristers extra protection against claims for negligent work that are not afforded to other professionals in Australia. On the other hand, the immunity assists the courts in delivering certain outcomes in cases. If the immunity was not available, it’s argued that the finality of court judgements could be jeopardised by plaintiffs revisiting the issues raised in determined cases through negligence claims.

The application of the immunity principle in Australia has been clarified by the High Court in the decision: Gregory Ian Attwells & Anor v Jackson Lalic Lawyers Pty Ltd [2016] HCA 16.

What has the High Court decided?

The key points are as follows:

  • The advocate’s immunity principle can continue to be used by solicitors in Australia to defend claims brought against them with respect to their court work. The High Court did not follow the example of the UK and New Zealand which have abolished the immunity.
  • The Court has provided clarification in relation to the extent to which the immunity applies to negligent advice given by a solicitor to a client to settle a claim. The Court has held that the immunity will not cover negligent advice from a lawyer to settle a claim where the advice does not ‘move litigation towards a determination by a court’.
  • What this means is that negligent advice to settle a claim would not be immune where no exercise of judicial power determined the terms of that settlement. This often occurs in litigation; parties may settle on the advice of their solicitors at the door of the court, or during a trial, even sometimes after the trial has concluded where the parties are awaiting a judgement from the court. If the parties are able to agree on a settlement, it is common for them to jointly ask the court for orders to give effect to that settlement by consent. Those orders do not normally relate to an ‘exercise of judicial power.’ The Judge does not determine the dispute (or any aspect of it), but rather, gives effect (through orders) to the settlement independently reached by parties to the litigation.
  • The Court has clarified that where a settlement agreement is embodied in consent orders, that merely enforce the terms of an agreement between the parties, and where the terms of the agreement are settled by the parties, the immunity would not apply as the substantive content of rights and obligations had been decided by the parties without any determination by the court.

Summary of the Facts

The Attwells were involved in a dispute regarding a guarantee. They acted as a guarantor to a bank, for the liabilities of a company. The amount of the company’s debt to the bank was $3.4 million, while the Attwell’s liability under the guarantee was limited to $1.5 million. The company defaulted on its obligations and the bank commenced proceedings against the Attwells, as guarantors, to recover the balance. The Attwells and the company retained the respondent, a law firm, to act for them in those proceedings.

The Attwells received advice from their lawyers to settle their dispute. They were advised to consent to an order for judgment in the amount of $3.4 million and they did so.

The Attwells then brought proceedings in the Supreme Court against their former lawyer alleging that they were negligent in advising them to consent to the order for judgment. The Attwells alleged that their lawyer failed to advise them as to the effect of the consent orders.

The law firm argued that the lawyer who advised the Attwells was exempt from the negligence claim under the advocate's immunity. It argued that advocate's immunity extended to negligent advice which leads to a final judgement and negligent advice which leads to an agreed settlement.

The case went to the Court of Appeal in New South Wales for determination. The Court of Appeal held that the lawyers were immune from the negligence claim because the negligence proceedings would necessarily involve a re-agitation of the issues raised in the guarantee proceedings.

The Attwells appealed to the High Court. The question for the High Court was whether the immunity extended to negligent advice leading to the settlement of a case by agreement between the parties.

Decision

The Court, by majority, held that the lawyers were not immune from suit, because the advice from the lawyer to settle the proceedings was not intimately connected with the conduct of the case in court in that it did not contribute to a judicial determination of issues in the case.

The contents of this blog post are considered accurate as at the date of publication. However the applicable laws may be subject to change, thereby affecting the accuracy of the article. The information contained in this blog post is of a general nature only and is not specific to anyone’s personal circumstances. Please seek legal advice before acting on any of the information contained in this post.

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