The challenge to the findings of no reliance and lack of immunity
71 The primary judge held (at [52]) that the appellant had failed to obtain adequate evidence to rebut the presumption of solvency and that his failure to do so on or before 5 September 2003 constituted a failure to exercise reasonable care. It was not contested that such a breach of duty was directly causative of the second costs order. It was nevertheless submitted that in fact there was no breach by the appellant of his duty of care with respect to the obtaining of evidence of a "white knight" such as Mr Burke as both he and Mr Williams had relied upon counsel to advise as to the evidence which should have been garnered for the purpose of rebutting the presumption of insolvency. Although no such advice was forthcoming, it was submitted that the appellant was entitled to assume that no further evidence was required with respect to that issue unless and until advised to the contrary by counsel.
72 Accordingly, the fact that Mr Hogg did not specifically advise that no further evidence was required did not result in there being no reliance by the appellant upon the non-communication by counsel that any further evidence was required. In other words, the appellant was entitled assume by counsel's non-response to the appellant's requests for advice that no such evidence was necessary.
73 The appellant the referred to her Honour's finding that the failure by him to obtain Mr Burke's evidence in a timely fashion was intimately connected with the conduct of the winding up application in court. However, she had held that the immunity did not apply because of the appellant's reliance upon counsel to advise in relation to the obtaining of further evidence of solvency. What her Honour had done, so it was submitted, was to confuse the existence of a duty to exercise reasonable care in the preparation of the respondent's defence to the winding up application with his breach of that duty. If the appellant was entitled to rely upon counsel with respect to that preparation, as her Honour had found, then there could be no breach. If there was no breach then no question of immunity could arise.
74 On the other hand, if there was no relevant reliance, there must have been breach. If there was breach, namely, the failure of the appellant to properly prepare the respondent's case for hearing by obtaining Mr Burke's evidence in a timely fashion, then as that failure was intimately connected with the subsequent conduct of the case in court, the immunity applied.
75 In summary therefore, it was submitted that either there was no breach of duty because the appellant was entitled to rely upon counsel and did so or, if it were found he did not so rely, any breach was one in respect of which the immunity applied. Either way, the appellant was not liable for the losses allegedly sustained by the respondent as a consequence of the making of the second costs order and the inability of the respondent to meet it.
76 The respondent's principal contention at trial was that the need to resist the winding up application (which was based on the presumption of insolvency arising from the Demand not being set aside) and to prove actual solvency, was a direct and foreseeable consequence of the appellant's admitted failure to file a s 459G application in time. Notwithstanding that its case was conducted in that manner, the primary judge took a different course which required her to deal with the issues of reliance on counsel and immunity relied on by the appellant in answer to the respondent's claim. It was submitted that these issues did not arise because each item of loss included in the damages as assessed was a direct and foreseeable consequence of the appellant's failure to lodge a s 459G application in time.
77 Nevertheless, the respondent submitted that her Honour was correct to find that there was no relevant reliance by the appellant on counsel so that her finding that there was a breach by the appellant of his duty of care in the preparation of its case on the winding up application should stand. This was particularly so given her finding that on 27 August 2003 Ms Ward had expressly raised with the appellant and Mr Williams whether there was a need to ascertain whether there were any third parties who would be prepared to offer financial help to the company. The appellant's response that there was no such necessity was itself a failure to appreciate what was required to affirmatively establish solvency without recourse to the advice of counsel.
78 Whilst the appellant sought to rely upon counsel, no actual reliance occurred. No doubt if such advice had been obtained it would have been relied upon. But as no advice was received it was impossible for the appellant to establish that he in fact relied upon non-existent advice. In any event, it was submitted that the failure of the appellant to bring to counsel's notice the fact that Ms Ward had raised the question of obtaining an offer of financial help from a third party was itself a failure which constituted a breach of the appellant's duty of care. This failure was of significance given that the appellant had been aware since 19 August that the winding up application had been stood over to the 29 August, ostensibly for hearing, so that any further evidence relating to solvency would need to be ascertained with some urgency.
79 As to the issue of advocate's immunity, the respondent submitted that the immunity only applied in circumstances where the solicitor was performing work which led directly to (or was intimately connected with) a decision affecting the conduct of the case in court. In the present case the appellant sought to rely on counsel and to limit his own responsibility to the administrative functions associated with obtaining and implementing such advice as might be received from counsel. However, the appellant's failure was in actually obtaining counsel's advice and/or retaining alternative counsel to advise in sufficient time.
80 In other words, where counsel's advice had been sought but was not forthcoming on a matter which the appellant accepted was of critical importance, namely, ensuring that there was adequate admissible evidence of solvency, his failure to at least communicate with counsel (other than by way of the letters already referred to) and to obtain a definitive answer to the question as to whether further evidence was required, constituted a failure to exercise reasonable care in circumstances which could not be said to be intimately connected with the conduct of the case in court. Alternatively, to paraphrase the test described in Giannarelli by Mason CJ (at 560), the appellant's failure was not one which attracted immunity, because the conduct was not "work done out of court which leads to a decision affecting the conduct of the case in court.".
81 In particular, it was submitted that the statement of Rothman J in Wilson v Carter, referred to by the primary judge in [71], was too wide. In that case, Rothman J held (at [55]):
"The drafting of affidavits, the determination of the contents of those affidavits and the advices relating thereto, indeed all the tactical decisions associated with the preparation for and presentation of the extension application were in the circumstances of this case, 'intimately connected' with conduct of the case in court and affected the hearing. It is difficult to imagine out-of-court work more connected with the conduct of the case in court than the determination of the witnesses to be called and the evidence to be adduced from them. To the extent that these allegations concern out-of-court work, they are fundamentally directed to such matters or to preliminary steps leading only to such matters."
82 The difficulty with this statement is that on its face it would appear to apply to a situation where, months before the hearing of the case in court an affidavit is drafted, sworn and filed which is defective in form but which defect is not ascertained before the affidavit is read when the offending paragraphs are rejected. No doubt it might be said that there was a continuing breach of duty constituted by the failure to appreciate in time the defective form of the affidavit. And yet it seems unrealistic to assert that the negligent preparation of that affidavit was intimately connected with the ultimate conduct of the case in court.
83 In D'Orta-Ekenaike, Gleeson CJ, Gummow, Hayne and Heydon JJ determined (at 16 [31]) that there was no sufficient reason for reconsidering the High Court's decision in Giannarelli. They then considered whether the boundary of the operation of the immunity should be redrawn. Their Honours concluded (at 31):
"86. Again, we consider that no sufficient reason is proffered for doing so. In particular, there is no reason to depart from the test described in Giannarelli as work done in court or 'work done out of court which leads to a decision affecting the conduct of the case in court' or, as the latter class of case was described in the Explanatory Memorandum for the Bill that became the Practice Act, 'work intimately connected with' work in a court. (We do not consider the two statements of the test differ in any significant way.)