(i) The case law
82In Vairy v Wyong Shire Council [2005] HCA 62; 223 CLR 422, McHugh J stated, at [25] 432, that the duty of care in negligence was "generally described as a duty to take reasonable care". His Honour further observed that in some areas of the law of negligence the duty was expressed in more limited and specific terms. Gummow J noted, at [62] 443, that the question:
"Whether in the given circumstances there exists a duty of care in negligence is a question of law ... the existence of some or all of those 'given circumstances' may depend upon issues of fact ..."
83Hayne J, at [118] 459, also noting that in negligence the duty was to take reasonable care, stated:
"Beyond that, however, it is not possible to amplify the content of the duty without reference to particular facts and circumstances. In each case, the content of the duty will turn critically upon the particular facts and circumstances."
84In Roads and Traffic Authority of NSW v Dederer [2007] HCA 42; 234 CLR 330, Gummow J, in referring with approval to the statement of McHugh J in Vairy (albeit that McHugh J was in dissent in the result in Vairy), stated, at [49] 347:
"In simple and complicated cases alike, one thing is fundamental: while duties of care may vary in content or scope, they are all to be discharged by the exercise of reasonable care." (original emphasis)
85Although these principles apply to a case of professional negligence, such a claim will usually require a more specific identification of the duty of care having regard to the facts and circumstances of the particular case. In this case, it was argued that the content of the duty of care included the allegation advanced as the informed instructions case.
86In his opening of Mr Marshall's professional negligence proceedings against Stacks, Mr Andrews indicated to the trial judge that he proposed to rely upon the statement of Deane J in Hawkins v Clayton at 579, that the duty of care of a solicitor:
"... may, in some special categories of case, extend to require the taking of positive steps to avoid ... economic loss being sustained by the person ... to whom the duty is owed."
Whether this proposition is correct is central to the question whether there was an arguable case on the law in respect of the informed instructions case.
87There has been some departure from Deane J's reasons in Hawkins v Clayton: see Astley v Austrust Ltd [1999] HCA 6; 197 CLR 1 where the High Court, following the decision of the House of Lords in Henderson v Merrett Syndicates Ltd [1995] 2 AC 145, held that an action may be brought for professional negligence in both contract and tort and that the obligations thereunder were not necessarily co-extensive. However, that is not the issue in the present case and the High Court made no express reference to Deane J's statement, at 579, to which I have referred.
88In the year following the decision in Hawkins v Clayton, this Court, in Waimond Pty Ltd & Anor v Byrne (1989) 18 NSWLR 642 expressly adopted and applied Deane J's statement. The facts in Waimond were complicated, but in brief, concerned a solicitor's liability to a client who suffered loss as a result of a fraudulent property transaction by another of the solicitor's clients. Kirby P, at 652, expressly applied Deane J's comment, at 579, holding that, in the circumstances, the solicitor was required to take "positive steps" to ensure that the client's interests were protected. The positive step required in that case was no more, but no less, than to obtain instructions from the client. Hope AJA agreed with Kirby P's conclusion, but without reference to Hawkins v Clayton.
89However, doubt was cast upon the correctness of Deane J's statement by this Court in Heydon v NRMA [2000] NSWCA 374; 51 NSWLR 1. In that case, the Court was concerned with the question of the duty of care owed by a legal practitioner, a leading Queen's Counsel, in the giving of advice in his relevant area of skill and expertise.
90McPherson AJA, at [364] 118, Ormiston AJA agreeing, stated that Deane J's statement in Hawkins v Clayton, that a solicitor may have a duty to take positive steps beyond the express terms of the solicitor's retainer, was no longer good law. His Honour considered that this followed from the High Court's rejection in Astley v Austrust Ltd of Deane J's reasoning in Hawkins v Clayton. Likewise, his Honour also said that Waimond should no longer be followed.
91It is appropriate to set out this aspect of his Honour's reasons in full:
"Finally, reference must be made to the limits of the duty to advise. At one time a solicitor's duty was considered to be limited by the terms of the retainer from the client, there being no affirmative legal obligation to give advice going 'beyond the specifically agreed task or function'. Then, in Hawkins v Clayton (1988) 164 CLR 539 at 585, it was held that there was no justification for imposing a contractual duty of care that was co-extensive with the parallel duty independently imposed in the law of negligence. It followed that an obligation might arise requiring a solicitor to take positive steps, beyond the specifically agreed professional task or function, to avoid a real and foreseeable risk of economic loss being sustained by the client, or even by others who were not the clients who had retained the solicitor. The result was that in Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642 at 652, a majority of this Court held that an affirmative duty to advise might exist in relation to matters that were not directly within the ambit of the retainer from the client. The decision on this point in Waimond Pty Ltd v Byrne has since been followed on several occasions. More recently, however, in Henderson v Merrett Syndicates Limited [1995] 2 AC 145 at 193-194, the House of Lords rejected the reasoning of Deane J in Hawkins v Clayton, holding instead that there was 'no sound basis for a rule which automatically restricts a claimant to either a tortious or a contractual remedy', and that it was the contract that defines the relationship of the parties, so that ordinarily 'the parties must be taken to have agreed that the tortious remedy is to be limited or excluded'. In Astley v Austrust Ltd (1999) 197 CLR 1, the High Court decided to follow the reasoning in Henderson v Merrett Syndicates Ltd, in preference to that of Deane J in Hawkins v Clayton. The result, in my respectful opinion, is that what was said by Deane J in Hawkins v Clayton has ceased to be good law in Australia. Because it formed the or a pivotal point in the reasoning in Waimond Pty Ltd v Byrne, it is no longer possible to say that there is a 'penumbral' duty in tort requiring a solicitor to advise on matters going beyond the limits of his or her retainer. On that aspect, the decision in Waimond Pty Ltd v Bryne is inconsistent with the reasoning in Astley v Austrust Ltd, and should, in my opinion, no longer be followed. It had the effect of enlarging or extending the range of matters on which a solicitor, and possibly also a barrister, might be required by the law of tort to advise a client or other persons."
92Malcolm AJA took a different approach. His Honour, at [146] 53, first described the duty and standard of care of a solicitor:
"... solicitors owe a duty of care to those whom they advise or for whom they act. In the present context, their duty is to exercise reasonable care and skill in the provision of professional advice. The standard of care and skill is that which may be reasonably expected of practitioners. In the case of practitioners professing to have a special skill in a particular area of the law, the standard of care required is that of the ordinary skilled person exercising and professing to have that special skill."
93His Honour continued, at [147] 53:
"... the duty is to apply the relevant degree of skill and exercise reasonable care to carrying out the task. There is no implied undertaking that the advice is correct, but only that the requisite degree of professional skill and care has been exercised in the giving of the advice."
94Malcolm AJA next referred to circumstances that may give rise to an additional duty to advise: see Rogers v Whitaker [1992] HCA 58; 175 CLR 479. That case involved the negligence of an ophthalmic surgeon in failing to warn a patient of a material risk of an operation. The plurality (Mason CJ, Brennan, Dawson, Toohey and McHugh JJ) held, at 490, that "[t]he law should recognize that a doctor has a duty to warn a patient of a material risk inherent in the proposed treatment".
95It is apparent that Malcolm AJA understood the duty to which Deane J had referred in Hawkins v Clayton to be of the kind referred to in Rogers v Whitaker. His Honour, at [147] 54, explained his reasoning as follows:
"Of course, where there is reason for doubt or there are risks which a person possessing the relevant degree of skill and competence should perceive, it follows from the above that there may be a duty to warn of the kind recognised by their Honours in Rogers v Whitaker. Thus, in Hawkins v Clayton (1988) 164 CLR 539 at 583-585, it was held by Deane J that, in the case of a solicitor, the circumstances may give rise to a duty to do more than simply perform the task defined by his instructions, if circumstances arose giving rise to a real and forseeable risk of economic loss by the client, or, in particular circumstances, even a person who was not a client but who may be adversely [a]ffected. See also Waimond Pty Ltd & Anor v Byrne (1989) 18 NSWLR 642 in which the judgment of Deane J was followed. In Henderson v Merrett Syndicate Limited [1995] 2 AC 145 the House of Lords declined to follow Hawkins v Clayton insofar as it suggested that in the case of a solicitor liability lay only in contract rather than concurrently in contract and tort. In Astley v [Aus]trust Ltd [1999] HCA 6; (1999) 73 ALJR 403 the High Court decided to follow the decision in Henderson v Merrett Syndicate Limited in preference to the judgment of Deane J so that in the case of solicitors, the liability remains a concurrent liability in contract and in tort."
96In Curnuck v Nitschke [2001] NSWCA 176, Davies AJA (Meagher JA agreeing) doubted the correctness of McPherson AJA's statement in Heydon v NRMA that Waimond v Byrne was no longer good law. His Honour said, at [6]-[9]:
"6 ... I do not read the decisions in Henderson v Merrett Syndicates Ltd and Astley v Austrust Ltd as leading to that conclusion. The fact that the causes of action in tort and contract may be concurrent does not mean that their incidents are necessarily the same. Under contract law, duty turns upon the terms, scope and context of the contract. Under torts law, issues of proximity and foreseeability are crucial to liability. Public policy may play a part. And there are many other differences. The respective laws on damages are different. The principles of contributory negligence and contribution differ as between the causes of action. The limitation periods may be different. A plaintiff is entitled to sue in both contract and in tort or in either, and may choose the best result.
7 Waimond Pty Ltd v Byrne seems to me to be well based upon the principle enunciated in Henderson v Merrett Syndicates Ltd and Astley v Austrust Ltd. In that case, the duty of a solicitor to speak with his client with respect to a certain transaction did not arise from his contractual retainer. It arose out of the relationship of proximity which existed between the solicitor and his client. The solicitor knew that a transaction, which he had been instructed to carry out for another client, affected the interests of his client. The majority of the Court considered that the circumstances were such that the solicitor had a duty to check with his client or to advise him to seek independent advice.
8 It is one thing to say, where a solicitor has a contractual relationship with a client and where the matter in issue arises within the scope of the retainer, that there will be no difference between the duty of care imposed by the contract and that imposed by the law of negligence. It is another thing to say that, in respect of a matter which is beyond the scope of the contract, a tortious duty of care may not arise from the relationship between the parties.
9 In Australia, there have been several cases where a duty of care has been imposed upon solicitors notwithstanding that the solicitor's retainer did not impose that duty. (See Hawkins v Clayton; Hill v Van Erp (1997) 188 CLR 159; and Waimond Pty Ltd v Byrne.)"
97In Kowalczuk v Accom Finance [2008] NSWCA 343; 77 NSWLR 205, Campbell JA (Hodgson and McColl JJA agreeing) undertook a review of the cases which had dealt with the question of the content of a solicitor's duty of care, including Waimond v Byrne, Heydon v NRMA and Curnuck v Nitschke, to which I have referred. His Honour concluded, without expressing a final view on the question of principle, that the relationship between the solicitor and client in Kowalczuk did not give rise to an obligation on the solicitor to act beyond the scope of the contractual duty.
98The next relevant decision in point of time is David v David [2009] NSWCA 8. In that case, the Court was concerned with the scope of the duty of care of a solicitor retained to give advice on a refinancing transaction. Allsop P (Hodgson JA and Handley AJA agreeing) stated, at [76]:
"Some reliance was placed on Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642 in argument. In Kowalczuk v Accom Finance Pty Limited [2008] NSWCA 343 at [267]-[294] Campbell JA undertook a detailed analysis of the precedential status of Waimond in particular after Heydon v NRMA Ltd [2000] NSWCA 374; 51 NSWLR 1 and Astley v Austrust Ltd [1999] HCA 6; 197 CLR 1. It is unnecessary to repeat that analysis. It is sufficient to say that the notion that a solicitor may owe a client a 'penumbral' duty that extends beyond scope of the retainer is doubtful. If, however, the solicitor during the execution of his or her retainer learns of facts which put him or her on notice that the client's interests are endangered or at risk unless further steps beyond the limits of the retainer are carried out, depending on the circumstances, the solicitor may be obliged to speak in order to bring to the attention of the client the aspect of concern and to advise of the need for further advice either from the solicitor or from a third party."
99In Dominic v Riz [2009] NSWCA 216, Allsop P again turned his attention to the scope of a solicitor's duty of care and the role of the solicitor's retainer in identifying that scope, but did so in terms that were only necessary for the determination of the matter in issue on the appeal. Insofar as is presently relevant, his Honour referred to his earlier statement in David v David at [76]. His Honour then noted, at [91]:
"Neither party submitted that this expression of the matter either involved error or was inappropriate for application here. The passage in David at [76] was not meant, however, to be an operative legal principle. It was intended to do no more than posit the possibility that the performance of the retainer, and what is learnt during it, may affect how the retainer is properly discharged."
100There is a further authority which is relevant to a solicitor's duty where a client gives specific instructions as to what is to be done in a matter. In Studer v Boettcher [2000] NSWCA 263, the appellant, on the advice of his solicitor during the course of a mediation, settled his claim. The appellant later sued his solicitors in negligence. The allegations of negligence included that the appellant was induced to enter into the settlement due to the respondent's improper pressure. He also contended that the respondent's advice was negligent. Handley JA held that the respondent had properly prepared the case for mediation and that his legal advice to the appellant given in the course of the mediation was sound.
101Fitzgerald JA agreed and further observed, at [75], that a client was entitled to make the final decision in determining whether to settle a matter. His Honour noted that a lawyer:
"... should assist a client to make an informed and free choice between compromise and litigation, and, for that purpose, to assess what is in [the client's] best interests."
102Fitzgerald JA observed that the lawyer was "entitled to seek to persuade, but not to coerce, the client to accept and act on that opinion in the clients interests".
103Sheller JA agreed with Handley JA's assessment that the respondent's legal advice was correct. He also agreed with Fitzgerald JA's observations at [75]. As Sheller JA explained, at [58]:
"I agree with Fitzgerald JA that it is never the function of the legal adviser to coerce the client into settlement; see Harvey v Phillips (1956) 95 CLR 235 at 242. The degree to which the legal adviser may seek to persuade the client to compromise the claim and the way in which that may be done can, I believe, only be resolved having regard to the circumstances of the case in question. A great deal will turn upon the capacity of the client. Moreover, the client's refusal to accept sound advice from the legal adviser may compromise their relationship. The legal adviser may feel that the client has lost faith in the legal adviser's competence and may be concerned by ethical restraints in pursuing what the legal adviser regards as a hopeless cause. I mention these matters only to explain the importance of the circumstances of the case."
104Keddies contended that the law dealing with the scope of a solicitor's duty of care was in an evolving state and that David v David and Dominic v Riz supported the existence of a duty of care based upon the informed instructions case. For my part, I consider that there is force in the views expressed by Davies AJA in Curnuck v Nitschke, to which I have referred above, subject only to noting that his Honour's references to "proximity" no longer represent the approach to the question whether a duty of care is owed in a particular case: see Tame v New South Wales [2002] HCA 35; 211 CLR 317 at [106]-[107] 355-356; Vairy v Wyong Shire Council; Mulligan v Coffs Harbour City Council [2005] HCA 63; 223 CLR 486; and RTA (NSW) v Dederer. I would also endorse the observations of Allsop P in David v David and Dominic v Riz.
105In any event, it is not necessary to determine the correctness of these decisions, given the question under consideration. All that is required by s 345 is that there be a reasonably arguable view of the law. In my opinion, on this line of authority, it was reasonably arguable that the content of a duty of care in a particular case may include an obligation to provide additional advice or to take some additional or positive step. Accordingly, to the extent that the trial judge in this case said that the informed instructions case was reasonably arguable, I would agree insofar as his Honour's comment related to the general question whether the content of a solicitor's duty of care in a particular case may include an obligation to provide additional advice or to take some positive step. However, that is not the question in issue. Sections 345 and 348 are directed to particular proceedings. The question is whether Stacks owed a duty of that type to Mr Marshall in the conduct of the nervous shock claim against Allianz.
106In support of their argument that this aspect of Mr Marshall's professional negligence proceedings had reasonable prospects of success, Keddies relied upon the following matters: first, that each of the solicitors involved in the matter had made an independent assessment that the proceedings had reasonable prospects of success (the solicitors' evidence); secondly, that Dr Durrell, in his report, had advised that Mr Marshall had a 24 per cent whole person impairment; thirdly, that Mr Cameron's expert report supported the case that there were reasonable prospects of success; and finally that they had relied on counsel's advice.