NSW Court of Appeal on whether advocates’ immunity covers negligent advice to settle given at mediation

By 18/12/2015Solicitors
negligent legal advice

Does advocates’ immunity apply when negligence is involved in legal advice given at a mediation which results in the settlement of litigation, prior to trial?

In Stillman v Rusbourne [2015] NSWCA 410 (16 December 2015) the NSW Court of Appeal held 2-1 that the immunity does apply, on current High Court authority.

However Basten’s JA dissent points to potential reasons why the immunity may not survive where there has been no final hearing on the merits.

This issue appears likely to be considered in a pending High Court appeal from a separate decision of the NSW Court of Appeal in a similar matter (Jackson Lalic Lawyers Pty Ltd v Attwells [2014] NSWCA 335 (Jackson Lalic)).

Facts

The applicant sued the respondent solicitors for alleged negligent advice and assistance on the settlement of the litigation, given during the course of a Court-appointed mediation.

The advice led to the case being settled on terms recorded in a deed which provided for payment of $1 million in instalments and, in default, the entry of a consent judgment for a larger sum. Upon default in payment judgment was entered against the applicant.

The applicant claimed that the respondents’ advice changed during the mediation and the applicant was pressured to accept terms which were “excessively disadvantageous”.

The tests to be applied

There was no controversy in the appeal concerning the tests to be applied, that is, whether the alleged conduct out of Court:

  • was “so intimately connected with the conduct of the cause in Court that it can fairly be said to be a preliminary decision affecting the way in which the cause is to be conducted when it comes to a hearing” (Giannarelli v Wraith (1988) 165 CLR 543);
  • [had led to] a decision affecting the conduct of the case in Court” (D’Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1)

Nor was there any controversy about the underlying principle of finality, namely the preservation of public confidence in the administration of justice, by preventing the relitigation of controversies “except in a few narrowly defined circumstances” (D’Orta at [45]).

The controversy in the appeal

The controversy in the appeal was in the application of the above tests, specifically whether the immunity applies to alleged negligent advice which results in settlement of litigation without a final hearing on the merits.  In the (dissenting) view of Basten JA the immunity should not apply in such circumstances, because the principle of finality is not offended.

The judgments

Gleeson and Simpson JAA comprised the majority, and held that the immunity applied. Basten JA dissented, and held that the immunity did not apply.

Gleeson JA

Gleeson JA observed that:

Negligently advising a settlement of proceedings is a recognised category of work involving a preliminary decision affecting the way in which the case is to be conducted when it comes to a hearing … This is because it involves the question of the continuation or termination of the litigation.” (at [55],[60])

His Honour held that there was a sufficient connection between the work out of Court (during the mediation) and the conduct of the case in Court, to attract the immunity (at [60]).

His Honour referred to Jackson Lalic where the NSW Court of Appeal accepted that advice concerning settlement given to, and followed by the client in the course of a final hearing fell within the scope of the immunity.  In that case the hearing did not proceed to its conclusion, as it was terminated by the terms of a consent order.

His Honour observed (at [61]) that it is a matter for the High Court to determine whether the immunity should be restricted only to cases where there has been a final hearing on the merits.

Simpson JA

Simpson JA held that the immunity applied because Court appointed mediation is a recognised step in the process of litigation in the Supreme Court, and that it is a step in the process towards the exercise of judicial power which in fact was exercised by the entering of judgment in accordance with the deed of settlement (at [71]).

Her Honour noted that Jackson Lalic, a case she considered indistinguishable from this case, is pending hearing by the High Court, but that circumstance could not affect her decision on the current authorities.

Basten JA

Basten JA, in dissent, held, inter alia, that:

1.   the immunity does not apply to proceedings where there has been no trial and no judicial determination on the merits. To illustrate the point his Honour employed the following example (at [22]):

where lawyers may be liable for negligently failing to join in proceedings a party against whom the client had a good claim, it is difficult to justify denying liability, on the basis of the principle of finality, where the party was initially joined but later negligently released by way of consent orders discontinuing the proceedings against that party before trial.”

2.   a mediation does not involve the exercise of judicial power, or anything analogous to the exercise of judicial power. There is no assessment by an independent tribunal of the merits of each party’s case, or any ruling on those merits. On the face of it, there is no reason to deny a party who is negligently advised in a mediation, a right to bring proceedings against his or her lawyers. The only sense in which the negligent advice may affect the conduct of litigation, is to bring it to an end without a trial and determination by the Court. This “somewhat artificial sense” does not appear to fall within the terms of the immunity set out in Giannarelli and applied in D’Orta (at [30]-[31]).

In Basten JA’s view a claim in negligence against a solicitor where the negligence results in a pre-trial offer being accepted would fall outside the immunity because the negligence does not affect the conduct of the trial in a practical sense. Whereas, the immunity would apply if the negligent advice results in the offer being refused, and the matter then proceeds to trial and final judgment (at [49]).

Comment

The scope of advocates’ immunity is of major importance to the legal profession, in relation to advising on the settlement of proceedings, both prior to and during trial. This is particularly so as most proceedings settle without a final hearing on the merits.

Postscript

Basten JA’s dissent in this case would have been upheld by the High Court – see my later post: High Court on liability of lawyers for negligent advice concerning the settlement of litigation