Stillman v Rusbourne

HEADNOTE [This headnote is not to be read as part of the judgment] In 2006 the applicant and Goldfields Crushing and Screening Pty Ltd ("GCS"), of which the applicant was a director and shareholder, were named as defendants in proceedings brought by Coast to Country Crushing and Screening Pty Ltd ("CCCS") in the Equity Division of the Supreme Court. The applicant and GCS engaged the respondents, who practise in partnership as a firm of solicitors, to advise and represent them in the proceedings. On 11 July 2007 a court appointed mediation took place. Following this mediation, and on the advice of the respondents, the applicant and GCS accepted an offer of settlement proffered by CCCS. The applicant and GCS were unable to fulfil the terms of the resultant Deed of Settlement; in November 2007 GCS was placed into liquidation and the applicant's estate sequestrated in July 2008. In 2013 the applicant commenced proceedings against the respondents, alleging that they had been negligent in their advice and representation in the course of the mediation. On 3 June 2014, pursuant to Uniform Civil Procedure Rules 2005 (NSW) 13.4, an order that the proceedings be dismissed was made on the basis that they disclosed no reasonable cause of action. The Court held that the "conduct complained of was work leading to the conduct of the case in court" and was therefore subject to "advocates' immunity": Stillman v Rusbourne [2014] NSWSC 730. The applicant sought leave to appeal against this decision. Held Gleeson JA and Simpson JA, refusing leave to appeal: (1) That the work done by the respondents fell within orthodox understandings of the advocate's immunity being work that led to a settlement and thus affected the conduct of the case in court: Gleeson JA at [11]; Simpson JA at [19]. D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; 223 CLR 1; Giannarelli v Wraith [1988] HCA 52; 165 CLR 543; Jackson Lalic Lawyers Pty Ltd v Attwells [2014] NSWCA 335 (2) While mediation does not, of itself, involve the exercise of judicial power, it is a step in the process towards the exercise of judicial power, which is exercised when judgment is entered. Basten JA, dissenting: (3) Advocates' immunity is rooted in the fundamental need of the administration of justice for finality of judicial determination of controversies between parties. In the present case, consent orders were entered prior to commencement of a trial, reflecting a settlement reached by the parties out of court; the judicial determination of the controversy on its merits did not take place. There was no justification for extending advocates' immunity to the conduct of the respondents in the course of the mediation which lead to the settlement: [8]; [17]; [30]; [47]. D'Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1; [2005] HCA 12 applied. Chamberlain v Ormsby t/as Ormsby Flower [2005] NSWCA 454; Donellan v Watson (1990) 21 NSWLR 335 followed. Jackson Lalic Lawyers Pty Ltd v Attwells [2014] NSWCA 335 distinguished. Civil Procedure Act 2005 (NSW), s 91 referred to.

Judgment

1. BASTEN JA: In April 2006 the applicant, Trevor James Stillman, and two other parties were defendants in proceedings commenced in the Supreme Court by a company known as Coast to Country Crushing and Screening Pty Ltd ("CCCS"). The respondents were lawyers acting for the applicant and his co-defendants in the 2006 proceedings. On 11 July 2007 the dispute was the subject of a mediation which resulted in a settlement agreement pursuant to which the defendants were required to make payments to the plaintiff, CCCS. If the defendants defaulted, a judgment could be entered by consent against the applicant and the corporate defendant, Goldfields Crushing and Screening Pty Ltd ("Goldfields Crushing").
2. Default occurred in October 2007 and, on 11 November 2007, CCCS entered judgment against Goldfields Crushing and the applicant for an amount in the order of $1.7million.
3. On 10 July 2013 the applicant commenced proceedings in the Common Law Division against the respondents, alleging that they had been negligent in giving advice and assistance in the course of the mediation, in breach of their retainer and in breach of their duty of care.
4. On 10 February 2014 the respondents filed a notice of motion seeking dismissal of the proceedings pursuant to the Uniform Civil Procedure Rules 2005 (NSW) ("the UCPR"), r 13.4 on the basis that "the defence of advocates' immunity" provided a complete answer to the applicant's claim.
5. On 13 June 2014 Davies J upheld the respondents' application and dismissed the proceedings with costs. [1] After a careful review of the legal principles, particularly by reference to the reasoning in the High Court in D'Orta-Ekenaike v Victoria Legal Aid, [2] the judge concluded that the advice given in the course of the mediation involved "work leading to the conduct of the case in court" and thus fell within the scope of the immunity. [3] The applicant has sought leave to appeal from those orders.
6. Because the settlement resulted in there being no trial, and because of the uncertainty which attends the scope of the advocates' immunity, the case is an appropriate one in which to grant leave to appeal. Further, for the reasons explained below, the better view is that the facts as pleaded do not fall within the scope of the immunity as articulated by the High Court in Giannarelli v Wraith, [4] as explained in D'Orta-Ekenaike. Accordingly, the appeal should be allowed.

Legal principles

1. There is no difficulty in articulating the test to be applied in the present case: the problem lies in its application. The immunity has a core and a penumbra. At the core is the conduct of the trial; that is, conduct undertaken in court. The penumbra may be understood to include all that conduct which occurs out of court but which is "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 that cause is to be conducted when it comes to a hearing." That language, derived from the judgment of McCarthy P in the New Zealand Court of Appeal in Rees v Sinclair, [5] was adopted by Mason CJ in Giannarelli. [6] There was no departure from that test in D'Orta-Ekenaike, the joint reasons adopting the terminology of Mason CJ that the immunity extends to work done in court and to "work done out of court which leads to a decision affecting the conduct of the case in court." [7] Brennan J, agreeing with the Chief Justice, referred to "the making of preliminary decisions affecting the way in which the case is to be conducted when it comes to a hearing." [8]
2. The high significance of D'Orta-Ekenaike was to place the justification for the advocates' immunity squarely within a functional understanding of the exercise of judicial power "as an element of the government of society". [9] The conclusion which was drawn from the analysis following that statement was expressed in the following terms: "[43] The 'unique and essential function' of the judicial branch is the quelling of controversies by the ascertainment of the facts and the application of the law. [10] Once a controversy has been quelled, it is not to be re-litigated. Yet re-litigation of the controversy would be an inevitable and essential step in demonstrating that an advocate's negligence in the conduct of litigation had caused damage to the client. … [45] Rather, the central justification for the advocate's immunity is the principle that 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. If an exception to that tenet were to be created by abolishing that immunity, a peculiar type of re-litigation would arise. There would be re-litigation of a controversy (already determined) as a result of what had happened during, or in preparation for, the hearing that had been designed to quell that controversy. Moreover, it would be re-litigation of a skewed and limited kind. No argument was advanced to this Court urging the abolition of judicial or witness immunity. If those immunities remain, it follows that the re-litigation could not and would not examine the contribution of judge or witness to the events complained of, only the contribution of the advocate. An exception to the rule against the reopening of controversies would exist, but one of an inefficient and anomalous kind."
3. The Court then considered three factors which might have led to a different approach following which, the joint judgment concluded that there was: 1. no sufficient reason for reconsidering the decision in Giannarelli that "an advocate is immune from suit whether for negligence or otherwise in the conduct of a case in court"; [11] 2. there was no sufficient reason for departing from the test that the immunity extended to work done out of court which "leads to a decision affecting the conduct of the case in court", [12] and 3. it being artificial to draw the line "at the courtroom door", or to draw any other "geographical line", the criterion for immunity is decided "by reference to the conduct of the case" so that it is "the conduct of the case that generates the result which should not be impugned." [13]
4. D'Orta-Ekenaike itself involved a challenge to the competence of advice given at committal proceedings in respect of an alleged offence, which caused the applicant to enter a plea of guilty, which plea was later withdrawn but was used at the subsequent trial. Thus, the conclusion reached in the joint reasons was that "tendering this advice to the applicant was work which an advocate did out of court but it was work which led to a decision which affected the conduct of the case at the subsequent trial." [14]
5. D'Orta-Ekenaike, like Giannarelli, involved a claim in negligence with respect to criminal proceedings. The difference between civil and criminal cases was dealt with in D'Orta-Ekenaike by reference to the question posed as to whether there should be "[a]n exception for criminal cases". [15] That question was answered in the negative because the division between civil and criminal proceedings is not always clear, [16] and because, although aspects (such as the burden of proof and the manner in which the issues were identified) might differ, the principle of finality applied equally however the proceedings were characterised. [17] Of course, viewed from the perspective of a governmental function, the characterisation of the proceedings might be significant, not for the purpose of formulating an "exception" to a general rule, but in the application of the general rule.
6. The question which arises (not for the first time) in the present case is how the established principle should be applied with respect to a civil proceeding which has been commenced, but has terminated prior to trial, either by way of a summary disposal or a consent judgment. [18]
7. One possible boundary could be found in the commencement of proceedings. However, there is no authority in support of that approach and it would appear to be inconsistent with the proposition that no "geographical" line can be drawn, as explained in the joint reasons of D'Orta-Ekenaike. While it may seem unlikely that anything done prior to the commencement of proceedings would fall within the immunity, the relevant point for present purposes is that not everything done after the commencement of proceedings will necessarily fall within the immunity. Because any proceedings once commenced must end in a judgment, the mere fact that, whether by agreement or otherwise, there is a judgment, but no trial, cannot engage the immunity. Given the present state of authority, it seems that each such case must be addressed on its own circumstances.
8. In Bott v Carter, [19] after noting that the advocate's immunity had been retained in D'Orta-Ekenaike, I suggested: [20] "However, the justification is now soundly rooted in a principled approach to the fundamental need in the administration of justice for finality of judicial determination, subject only to constitutional requirements found in the entrenched supervisory jurisdiction of the High Court and State Supreme Courts and statutory provisions for appellate or other forms of review. Those roots (which also form the basis of at least one aspect of abuse of process) will inform the scope of the rule, in particular in relation to pre-trial activities and omissions. The scope of the immunity is no longer to be determined by differences in language but by the tendency of the claim to result in re-litigation of a controversy which has been quelled."
9. In Jackson Lalic Lawyers Pty Ltd v Attwells [21] Bathurst CJ (with the agreement of Meagher and Ward JJA) referred to that passage as not propounding a new test but clarifying that "in cases where it is uncertain that the advocates' immunity applies, consideration of that issue will be informed by its justification", being the "finality of litigation".
10. In order to apply that approach, it is necessary to understand two factors relevant to the "principle of finality". First, it is described in D'Orta-Ekenaike as "[a] central pervading tenet of the judicial system" and requires that "controversies, once resolved, are not to be reopened except in a few, narrowly defined, circumstances." [22] Thus, it is not itself a product of statute and operates at a relatively high level of abstraction. Secondly, the suggestion that the exceptions are few and narrowly defined must be read in the context of the succeeding discussion, which refers to the "principal qualification" as being the appellate system. That system is not itself narrowly defined: rather, it is all but universal (although sometimes subject to leave requirements and the exclusion of factual findings); to the extent it is not universal, the constitutionally mandated supervisory jurisdiction of the Supreme Court fills any gap. [23] Even judgments which are subject to appeal may also be subject to the Supreme Court's supervisory jurisdiction. Nor does the principle of "finality" operate in an unqualified sense in the criminal jurisdiction, subject only to rights of appeal. Thus, even when all appeal rights have been exhausted, there is provision for review of both convictions and sentences on application to the Supreme Court or by petition to the Governor. [24]
11. The operation of the principle of finality will need to be assessed against the statute law in the relevant jurisdiction. In the present case it is to be addressed by reference to proceedings which have not been determined by any judicial officer "on the merits". Thus, the "principle of finality" is qualified by a countervailing principle, the expression of which is now to be found in s 91 of the Civil Procedure Act 2005 (NSW), which reads: 91 Effect of dismissal of proceedings (1) Dismissal of: (a) any proceedings, either generally or in relation to any cause of action, or (b) the whole or any part of a claim for relief in any proceedings, does not, subject to the terms on which any order for dismissal was made, prevent the plaintiff from bringing fresh proceedings or claiming the same relief in fresh proceedings. (2) Despite subsection (1), if, following a determination on the merits in any proceedings, the court dismisses the proceedings, or any claim for relief in the proceedings, the plaintiff is not entitled to claim any relief in respect of the same cause of action in any subsequent proceedings commenced in that or any other court.
12. The principle set out in this provision is not novel. [25] Further, the UCPR contain powers, with limitations, for the setting aside or variation of judgments and orders. Generally speaking, those powers depend upon whether a judgment has or has not been entered. They commence with a general power to set aside a judgment or order, whether or not entered, if made "irregularly, illegally or against good faith." [26] There are other powers which may be exercised even after entry of the judgment or order, including particular default judgments and judgments given in the absence of a party. [27] The Court may at any time set aside a judgment or order which does not determine any claim for relief or involve the dismissal of part or all of a proceeding.
13. There are also circumstances in which a consent order may be set aside. Some of the principles governing the setting aside of consent judgments and illustrations of where the principles had been applied were referred to in Independent Commission Against Corruption v Kinghorn. [28] It is not necessary to consider those factors further, this not being a case in which it is sought to set aside a consent judgment. Their relevance, for present purposes, is by way of a qualification to the "principle of finality", as it applies to consent judgments. Enough has been said to demonstrate that the principle does not operate in some absolute or unqualified sense.

Inconsistency and re-litigation

1. There are two further factors discussed in D'Orta-Ekenaike which may provide further support for the advocates' immunity. Thus, in identifying the central justification for the advocates' immunity, the joint reasons noted that, "[i]f an exception to that tenet were to be created by abolishing that immunity, a peculiar type of re-litigation would arise." [29] The language adopted in this passage, set out in full at [8] above, appeared to envisage, as was the case in D'Orta-Ekenaike, a dispute resolved by a trial. There is reference to "the hearing" and the fact that the fresh litigation would be of a more "limited kind." That is, some issues would be reagitated, but not all. The rationale is powerful in relation to matters which have been determined on the merits, but has less ready application to proceedings where there has been no hearing.
2. In some circumstances, a claim of negligence on the part of the legal representatives may impugn the result reached in earlier litigation. [30] Where the result is impugned but not varied, there is a real risk that such litigation would bring the administration of justice into disrepute. [31] As the High Court held, the fact that such conduct may constitute an abuse of process is not inconsistent with acceptance of the advocates' immunity: indeed, the same justification supports both legal principles. However, where there has been no trial and no judicial determination on the merits, it is not easy to see why proceedings agitating the circumstances in which an agreement was reached, as between one party and his or her lawyer, would affect public confidence in the administration of justice, merely because a consent judgment remained on the court record, thus resolving the dispute between the parties to the litigation.
3. Once it is accepted that the commencement of litigation does not immediately enliven the advocates' immunity with respect to the conduct of the legal representatives, it would seem that the mere fact of a judgment, whether by consent or as a result of the summary disposal of proceedings, cannot itself preclude a claim by the unsuccessful party against his or her legal representatives. Although principle cannot be established in this area by reference to anomalies, some forms of anomaly may be revealing. Thus, 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.
4. That anomaly may appear to be more acute where the claim in negligence is brought by the defendant to an earlier proceeding. That is because the defendant is not in control of the initiation of the court process. Thus, if before the proceedings were commenced, the prospective defendant's lawyers negligently advised a settlement, the advocates' immunity could not protect them. If, however, their negligence included delay in giving the appropriate advice, so that proceedings were commenced before they gave the advice but were then settled on the basis of the negligent advice, the advocates' immunity might be engaged so as to protect them from their greater negligence. This unjustifiable anomaly suggests that the advocates' immunity should not extend to that situation.

Factual circumstances

1. So far as the applicant's statement of claim in these proceedings revealed, the principal proceedings were commenced by CCCS on 29 April 2006, following which the applicant retained the respondents to act for him and Goldfields Crushing. The proceedings sought rental payments with respect to equipment owned by CCCS and used by Goldfields Crushing. The proposed defence was that the agreement between the parties was not a lease of equipment, but rather a joint venture agreement in which profits and losses would be shared between the parties. The pleading alleged advice given by the respondents between about July 2006 and July 2007 to the effect that the applicant and his company had a sound basis in fact and law to defend the proceedings. At an interlocutory stage in the proceedings, before any trial had commenced, the parties were referred to a "court-appointed mediator."
2. The mediation took place on 11 July 2007: it resulted in a settlement on terms unfavourable to the defendants (the applicant and Goldfields Crushing). The pleading alleged that the respondents' advice changed in the course of the mediation and the applicant was pressured to accept terms which were "excessively disadvantageous". The settlement terms proposed by CCCS, to which the applicant and Goldfields Crushing ultimately agreed at the conclusion of the mediation, involved the following: [32] (a) that judgment be entered by consent against Goldfields Crushing and the plaintiff for $1 million; (b) that $500,000 be paid by Goldfields Crushing or the plaintiff to CCCS by 31 October 2007; (c) that 12 instalments of $41,666 be payable on the last day of each month for 12 months by Goldfields Crushing or the plaintiff to CCCS, commencing on 30 November 2007; (d) that CCCS should take a lien over two pieces of Goldfields Crushing's machinery, valued at over $1,200,000; (e) that in the event of any default in the performance of these terms, CCCS would immediately be entitled to enter judgment against Goldfields Crushing and the plaintiff in the amount of $1,499,270.98, together with interest and costs.
3. There was no pleading (or evidence) that any judgment in the terms of (a) was entered. Shortly after the agreement was reached, the applicant was seriously injured, with the result that both he and Goldfields Crushing were unable to meet the payments required under the terms of the agreement. Goldfields Crushing was thereafter placed in voluntary administration on 31 October 2007, being the date on which the first instalment was due and payable, and the applicant entered bankruptcy. Sequestration of the applicant's estate apparently took place on 8 July 2008, two days before these proceedings were commenced. (The trustee nevertheless assigned the cause of action to the applicant. [33] )
4. The nature of the court record is not entirely clear from the pleading, nor from the evidence. The primary judge recorded that CCCS entered judgment against Goldfields Crushing and the applicant on 7 November 2007. [34] What in fact happened is less clear. An affidavit of Lucy Williams, filed on 10 February 2014 on behalf of the respondents, annexed a document entitled "Associate's Record of Proceedings" dated 13 July 2007, referring to a hearing before Bergin J at which the judge made orders by consent as set out in pars 1 and 4 of short minutes of order. The judge noted the matters in paragraphs 2 and 3 of the short minutes and listed the matter for directions on 15 February 2008, in accordance with par 1. Paragraph 4 contained an order that the terms of the agreement identified in paragraphs 2 and 3 not be disclosed. Paragraphs 2 and 3 referred to the agreement to make payments and noted that, in default, CCCS would be at liberty to enter judgment in the sum of almost $1.5 million together with interest.
5. Following default on the first payment, it appears that a judgment was given on 7 November 2007 and entered on the same date, in the following terms: The plaintiff will move the court for orders that judgement be entered in favour of the plaintiff against the Defendants for: Claim $1,499,270.98 Interest $195,192.75 Court costs and fees $2,914.00 Professional costs $To be assessed TOTAL $1,697,377.73

1. It has been assumed for the purposes of the present application that judgment was in fact entered in favour of CCCS against the applicant and Goldfields Crushing. (The terms of the order were to be found in a notice of motion for judgment, which, carelessly, were simply carried across verbatim into the order.)

Application of principles

1. The nature of a mediation for the purposes of reaching an agreement as to an existing dispute does not invoke the exercise of judicial power, nor anything analogous to judicial power. There is no assessment by an independent tribunal of the merits of each party's case, nor any ruling on those merits. Taken in isolation, there would be no reason to deny a party who was negligently advised in the course of a mediation a right to bring proceedings against his or her lawyers.
2. The only reason to depart from this analysis is that the mediation has, in one sense, had an effect on the conduct of outstanding litigation, namely that it has put an end to the litigation without a trial and determination by a judge (or a judge and jury). It is only in a somewhat artificial sense that it could be said that the negligent advice has affected the "conduct" of a hearing, that is by obviating the need for a hearing. Such reasoning would not appear to fall within the terms of the principle espoused in Giannarelli and applied in D'Orta-Ekenaike.
3. Next, it is necessary to consider whether this conclusion is inconsistent with authority addressing the same circumstances.
4. In fact, this approach is consistent with the outcome of an earlier matter in this Court involving a consent judgment. In Chamberlain v Ormsby t/as Ormsby Flower, [35] the respondent solicitor commenced proceedings for the appellant (his client) in the Compensation Court seeking lump sum compensation for a workplace injury. Pursuant to advice given shortly prior to the commencement of the trial, the appellant accepted an offer and, as it appeared, an award was made by consent on that day in the Compensation Court. [36] The Court held that the trial judge had been in error in failing to consider whether the solicitor was negligent in commencing the proceedings and allowing them to proceed to a final award without properly investigating and advising in relation to the appellant's possible common law rights which would, at that time, be lost if he recovered lump sum compensation. All members of the Court assumed that such an action was available against the solicitor and remitted the matter for a retrial.
5. The solicitor had cross-claimed against a barrister retained to appear at the hearing in the Compensation Court. The trial judge had found the barrister not to have been negligent, a conclusion which was upheld on appeal. Having made that finding, Tobias JA then stated that "[i]n any event" the barrister was immune from being sued for negligence by the solicitor, applying D'Orta-Ekenaike. [37]
6. On one view, there is an inconsistency between the approach the Court took with respect to the negligence of the solicitor and its approach with respect to the barrister. That can be explained as flowing from the conclusion that the solicitor's negligence occurred well prior to the day of the hearing, whereas the impugned advice given by the barrister occurred on the day of the hearing. Further, it is clear that the primary basis for rejecting the claim against the barrister was the express finding that he was not negligent. Accordingly, so far as it is relevant to the facts of the present case, Chamberlain supports the conclusion that the solicitor did not enjoy immunity for the advice given well before any trial was to commence, where no hearing on the merits eventuated.
7. Since the judgment of the primary judge, this Court has delivered judgment in Jackson Lalic. That case had elements of similarity with the present facts and elements which differentiated it. Advice was given which resulted in a settlement. As explained by Bathurst CJ: [38] "The alleged breach occurred in advising on settlement of the guarantee proceedings during the luncheon adjournment on the first day of the hearing and more importantly on the evening of that day. The Agreed Facts also state that the consent order the first respondent and Ms Lord were advised to sign [was] signed on that evening and submitted to the Court on the following day."
8. The Chief Justice concluded that "[t]he advice thus led to the case being settled" and that, "[p]ut another way it was intimately connected with the conduct of the guarantee proceedings." [39]
9. The approach adopted by this Court in Jackson Lalic was consistent with the reasoning of the New Zealand Court of Appeal in Biggar v McLeod. [40] Applying Rees v Sinclair, Richardson J stated that "the advice given by a barrister as to the settlement of a cause during the course of the trial and the settling of the terms of a compromise must attract immunity." [41] Although Richardson J further stated that the connection with the conduct of the litigation was "not simply that there is a temporal connection between that work and the actual trial itself", he was speaking in the context of a trial which had commenced, as in Jackson Lalic.
10. Accepting that a settlement reached on the basis of advice given in the course of a final hearing falls within the scope of the advocates' immunity, it does not follow that every settlement achieved out-of-court, and particularly before the matter has reached a hearing, will fall within the advocates' immunity. So much was expressly recognised in the concurring judgment of McHugh J in D'Orta-Ekenaike: [42] "There is, of course, a greater public interest in maintaining confidence in the administration of criminal rather than civil justice. So, it is possible to sue a practitioner for the negligent settlement of proceedings or for the negligent loss or abandonment of a cause of action. Such claims lead to the litigation of a primary claim even if that claim can no longer be pursued. These results flow even though there is a public interest in the finality achieved through the statutes of limitations and the promotion of out-of-court dispute settlement. But where a trial has taken place, as the judgment of Gleeson CJ, Gummow, Hayne and Heydon JJ demonstrates, public confidence in the administration of justice is likely to be impaired by the re-litigation in a negligence action of issues already judicially determined."
11. McHugh J also noted the decision of this Court in Donellan v Watson [43] as a case in which "the negligent compromise of appeal proceedings leading to the loss of benefits gained at first instance [has] been held not to fall within the immunity." [44]
12. Donellan v Watson was decided after Giannarelli; it concerned a consent judgment entered at the hearing. The issues, as identified by Handley JA, were as follows: [45] "A solicitor certainly has no actual authority to compromise litigation contrary to his instructions and if he does so he will be liable to the client for any damage sustained by the latter as a result of the unauthorised compromise …. It is therefore clear that prior to … Giannarelli v Wraith the appellants would have been liable to their clients for the damage they suffered. The question therefore is whether those decisions have impliedly overruled this long line of established authority."
13. The Court was unanimous in concluding that the solicitor's appeal should be dismissed. Handley JA concluded that the liability of the solicitor as the agent of the client acting without authority was not overruled by Giannarelli (and earlier English authorities). However, the reasoning of Mahoney JA, accepted by Waddell AJA, followed a different line. Mahoney JA noted that the error was an error "made in court." [46] Accepting that the proceeding was brought in negligence, he nevertheless concluded: [47] "On this basis, the question to be determined is whether the immunity given to advocates for what is done in court is subject to an exception which extends to the present case. The present case exhibits, in this regard, particular or special features. There was no contested hearing. What was done was to seek an order from the court by consent. The order made by the judge stands. It is not contended that, if the assumptions made by the learned judge be correct, the order made was wrong. The present proceeding does not attack it collaterally. On the contrary, the present proceeding assumes that the order was correctly made and is effective, upon the basis of what the learned judge was told. The plaintiff's [sic] claim is that the consequences of the order caused damage to them and that they are entitled to compensation for that damage. The present proceeding does not fall within the rationale of the reasons for which the immunity is given. In Giannarelli v Wraith, Mason CJ referred to the peculiar nature of the advocate's responsibility when he appears for a client in litigation and to the adverse consequences of the re-litigation of issues determined in a court proceeding …."
14. After referring to authority, Mahoney JA continued: [48] "If the present case falls outside the reasons for granting the immunity, I do not think that the dictates of logic, if they be such, require that the immunity be preserved where functionally it is not required."
15. Donellan was called in aid by the respondent client in Jackson Lalic. It was distinguished on the basis that Mahoney JA had held that "ordinarily, compromise, even if the consensus be reached out of court, is within the advocates' immunity." [49] The passage relied upon for that proposition is not to be found in the reasoning set out above. It is in the penultimate paragraph of the judgment of Mahoney JA, which was to the following effect: [50] "I am conscious also that questions may arise as to the action of an advocate in the settlement of a case outside the court. In Swinfen v Lord Chelmsford, [51] the court considered the liability of an advocate who compromises a proceeding contrary to his client's instructions. Ordinarily, such a compromise, even if the consensus be reached out of the court, is within the immunity. If the advocate, in court, secures an order based on the compromise, he will, I think, not be liable not withstanding that the making of the agreement and so the obtaining of the order was contrary to his instructions. I do not see the present case as inconsistent with this. It is concerned, not with the making of the compromise and the carrying out of it, but with negligence in the failure to carry an authorised compromise into effect."
16. The point of distinction identified by Mahoney JA was a fine one. The reference by McHugh J in D'Orta-Ekenaike suggests that he treated the judgment as correct, without perceiving a need to distinguish Swinfen v Lord Chelmsford, which was decided at a time when a different rationale applied; the reasoning underlying Swinfen v Lord Chelmsford was not consonant with that accepted in D'Orta-Ekenaike. The justification accepted in Swinfen v Lord Chelmsford, in a judgment delivered by Pollock CB, for finding a barrister not liable to his client for settling a case, supposedly against her instructions, was twofold. First, there was no contractual relationship; secondly a retainer carried the authority for conducting the trial in accordance with counsel's view of the best interests of the client, so long as that judgment was formed honestly and in good faith. Nor is Swinfen v Lord Chelmsford inconsistent with a finding of liability in the present case; as to the complaint that counsel consented "to a juror being withdrawn, and so prevented the cause from being tried" the Court held that "conduct and control of the cause are necessarily left to counsel." [52] Further, perhaps because the withdrawal of the juror resulted in no judgment on the merits, the Court also held that "[i]f the act of compromise was a nullity, the rights of the plaintiff remain the same and are uninjured." [53]
17. The primary judge was not invited to address Donellan v Watson; as has been noted, the decision in Jackson Lalic in this Court post-dated his reasons.
18. The factual difference between this case and Jackson Lalic may reflect the distinction drawn in s 91 of the Civil Procedure Act between the dismissal of proceedings "following a determination on the merits" and dismissal in other circumstances. At least, it involved a settlement in the course of a final hearing. It is sufficient to say, applying the rationale for the immunity identified in D'Orta-Ekenaike and recognising the importance of locating the immunity within the function of exercising judicial power, that the justification for extending the immunity to the present case is absent and is not required by Jackson Lalic.
19. Finally, it is necessary to consider the decision of this Court in Donnellan v Woodland. [54] This, too, was a case which proceeded to trial and, indeed, to final judgment. It did not involve a settlement, but an unsuccessful final determination. The attempt to escape the immunity rested on the complaint that the solicitor's negligence occurred in advising that proceedings should be taken and in rejecting an offer made prior to trial. The case thus involved a standard application of the principle that, where litigation goes to trial, steps taken out of court prior to the trial, which affect the conduct of the trial, will fall within the scope of the advocates' immunity.
20. It might be objected that there is an anomaly in allowing a claim in negligence against a solicitor in circumstances where the negligence results in a pre-trial offer being accepted and refusing to allow such a claim where the negligent advice results in the offer being refused. The point of distinction is that the former does not affect the conduct of the trial in a practical sense, because there is no trial, whereas in the latter case the matter proceeds to trial and final judgment. If that distinction be valid, there is no authority binding this Court to uphold the decision of the primary judge. Indeed, Chamberlain, the correctness of which was not challenged in this Court, was inconsistent with that approach and would require that it be set aside.

Conclusion

1. For these reasons, in my view the primary judge was in error in concluding that the proceeding should be dismissed because the applicant's cause of action fell within the scope of the advocates' immunity. Accordingly, the Court should make the following orders: 1. Grant the applicant leave to appeal from the judgment of Davies J in the Common Law Division given on 13 June 2014. 2. Allow the appeal and set aside the orders made on 13 June 2014, and in place thereof order that - 1. the defendants' motion of 10 February 2014 (seeking to have the plaintiff's proceedings dismissed) be dismissed; 2. order that the defendants pay the plaintiff's costs of the motion. 1. Order that the respondents pay the applicant's costs in this Court.
2. GLEESON JA: I have had the advantage of reading in draft the judgments of Basten and Simpson JJA. I agree with the orders proposed by Simpson JA and with her Honour's reasons. I would add the following comments.
3. It can be accepted that there are similarities and also one difference between the present facts and the circumstances in Jackson Lalic Lawyers Pty Ltd v Attwells [2014] NSWCA 335 (Jackson Lalic) at [37] (Bathurst CJ; Meagher and Ward JJA agreeing), where this Court accepted that advice concerning settlement given in the course of a final hearing falls within the scope of the advocates' immunity. The difference is that in Jackson Lalic there was a temporal connection between the work involved in advising on a settlement and the actual trial itself. The advice was given during the luncheon adjournment on the first day of the hearing and on the evening of that day.
4. Nonetheless and importantly, in Jackson Lalic the final hearing did not proceed to its ultimate conclusion. The proceedings were terminated by the terms of a consent order which provided for a verdict and judgment for a specified amount and an agreement to not to enforce that judgment if a lesser sum was paid by a specified date.
5. While the temporal connection in Jackson Lalic between that work and the actual trial itself served to highlight the intimate connection between the two, the statements of Mason CJ and Brennan J in Giannarelli v Wraith [1988] HCA 52; 165 CLR 543 at 560 (Mason CJ) and 579 (Brennan J) make clear that the advocates' immunity does not depend upon demonstrating such a temporal connection.
6. 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: D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; 233 CLR 1 at [154] (McHugh J), citing Biggar v McLeod [1978] 2 NZLR 9. This is because it involves the question of the continuation or termination of the litigation: Biggar v McLeod at 14 (Richardson J).
7. That Biggar v McLeod, like Jackson Lalic, differs from the present case because it also involved negligently advising a settlement during the conduct of the hearing is not, of itself, a sufficient distinction. In both of those cases, like the present, the fresh proceedings against the legal practitioner involved a re-agitation of the issues raised in the earlier litigation. Thus it was fundamental to the claim that the consent judgment entered following the settlement was wrong and the incorrect result due to the negligence of the legal practitioner. As Bathurst CJ said in Jackson Lalic (at [41]) "[t]his necessarily involves consideration of the issues raised in the earlier litigation to determine whether in fact the applicant's advice was negligent".
8. I do not regard Donellan v Watson (1990) 21 NSWLR 335 as requiring a different result and I respectfully disagree with the contrary view expressed by Basten JA.
9. Donellan v Watson was an unusual case. A settlement of appeal proceedings had deprived the clients of benefits obtained at first instance. The settlement was contrary to the clients' instructions. It was not contended that the order made was wrong. Mahoney JA (with whom Waddell AJA agreed) held (at 337) that there was no collateral attack on the order and that the rationale of the reasons for the advocates' immunity did not apply. His Honour accepted (at 338) that ordinarily, a compromise, even if consensus is reached out of court, is within the advocates' immunity. However the case before him involved negligence in failing to carry an authorised compromise into effect.
10. As Bathurst CJ observed in Jackson Lalic (at [46]), the settlement in that case, unlike Donellan v Watson, was within the authority of the applicant. Accordingly, the fresh proceedings against the legal practitioner involved a re-agitation of the issues raised in the earlier litigation, unlike the position in Donellan v Watson. It was in that sense that the proceedings in Jackson Lalic offended against the principle of finality of litigation: Jackson Lalic at [41]. They involved a collateral attack on the judgment which had been entered by consent. That falls squarely within the rationale of the advocates' immunity as presently stated by the High Court.
11. In the present case, the work by the respondent lawyers fell within the recognised categories of work done out of court affecting the conduct of the case in court. The alleged breach occurred in advising on a settlement of proceedings at mediation. The settlement terms were recorded in a deed which provided for payment of a sum ($1 million) by instalments and, in the event of default, the entry of a consent judgment for a larger sum. This is what ultimately occurred. The advice led to the case being settled. That was a sufficient connection between the work out of court and the conduct of the case in court to attract the advocates' immunity
12. If the rule concerning advocates' immunity for out of court work affecting the conduct of the case in court is to be restricted only to cases where there has been a final hearing on the merits, then that is a matter which should be left to the High Court to determine. I recognise that an argument can be made for such a change, but it seems to me that this would require reformulation of the present rule as to advocates' immunity.
13. SIMPSON JA: The applicant, Trevor James Stillman, seeks leave to appeal against a decision of Davies J in the Common Law Division of the Supreme Court: Stillman v Rusbourne [2014] NSWSC 730. Pursuant to Uniform Civil Procedure Rules 2005 (NSW) 13.4 Davies J dismissed the proceedings commenced by the applicant against the respondents on the basis that no reasonable cause of action was disclosed. The issue that arises concerns the reach of the principle of "advocates' immunity" from suit with respect to claims in negligence by solicitors in the conduct of litigation.
14. The relevant facts may be stated briefly. The respondents practice in partnership as a firm of solicitors. In 2006 the applicant and Goldfields Crushing and Screening Pty Ltd ("GCS"), of which the applicant was a director and shareholder, were named as defendants in proceedings in the Commercial List of the Equity Division of the Supreme Court brought by Coast to Country Crushing and Screening Pty Ltd ("CCCS"). The applicant and GCS retained the respondents to advise and represent them in the proceedings. Between July 2006 and August 2007, the respondents provided detailed advice to the applicant and GCS, and drafted documents relevant to the litigation. On 11 July 2007, a court appointed mediation took place in relation to the proceedings. Two solicitors from the respondents' partnership represented the applicant and GCS.
15. Following the mediation, and acting on the advice of the respondents, the applicant and GCS accepted an offer of settlement proffered by CCCS. The parties entered into a Deed of Settlement, the first term of which was: "That Judgment be entered by consent against GCS and the [applicant] for $1,000,000.00." There were also terms for that sum to be paid by way of periodic instalments. A final term provided for the entry of judgment in the sum of $1,499,270.98 in the event of default. By reason of events it is unnecessary to detail, the applicant and GCS were unable to honour the payment terms. As a consequence, GCS was placed into liquidation and the applicant was declared bankrupt.
16. By Statement of Claim filed on 10 July 2013 the applicant commenced proceedings against the respondents, pleading that they negligently advised and represented GCS and himself, resulting in loss and damage to them. Other causes of action also appear to have been pleaded. The common element throughout the pleading of the applicant's case was the alleged defective and negligent representation provided to the applicant (and GCS) by the respondents.
17. The respondents filed a Defence. Included in the Defence was a plea that they were entitled to immunity from suit by reason of the principle known as "advocates' immunity". They then sought, by Notice of Motion, an order that the proceedings be dismissed pursuant to UCPR 13.4, which relevantly provides that proceedings may be dismissed where they disclose no reasonable cause of action.
18. That Notice of Motion came before Davies J on 3 June 2014. On 13 June his Honour made orders as sought by the respondents. He held: "71 In my opinion, taking the allegations at their highest, the conduct complained of was work leading to the conduct of the case in court. Advice leading to a settlement falls within the [advocate's] immunity. Applying the test in General Steel Industries v Commissioner for Railways (NSW) [[1964] HCA 69;] (1964) 112 CLR 125, the [respondents] have demonstrated that the [applicant] does not have a reasonable cause of action against the [respondents]."
19. In reaching that conclusion the primary judge considered and applied various well-known authorities of the High Court and this Court in relation to advocates' immunity. It is necessary to mention only Giannarelli v Wraith [1988] HCA 52; 165 CLR 543 and D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; 223 CLR 1. Those authorities, and others, were considered by this Court in Jackson Lalic Lawyers Pty Ltd v Attwells [2014] NSWCA 335, the circumstances of which bore significant similarities to those of the present case. The plaintiffs in Jackson Lalic had been parties to litigation the hearing of which had commenced in the Supreme Court. They were represented by the defendants, and, following their advice, entered into a settlement of the proceedings. This occurred during the time fixed for hearing of the proceedings. The settlement turned out to be highly disadvantageous to the plaintiffs. They therefore sought to sue the defendants, Jackson Lalic Lawyers. Bathurst CJ, with whom Meagher and Ward JJA agreed, stated the relevant principle of advocate's immunity, derived from Giannarelli and D'Orta-Ekenaike as: "… extending to work done in court or work done out of court which leads to a decision affecting the conduct of the case in court." (at [36])
20. His Honour held that the "work" - that is, the work of representing the plaintiffs and advising on the settlement: "… fell within categories of work done out of court affecting the conduct of the case in court." (at [37]) and: "The advice thus led to the case being settled. Put another way it was intimately connected with the conduct of the guarantee proceedings." (at [38])
21. He went on to say: "41 Second, the current proceedings do involve a re-agitation of the issues raised in the earlier litigation. It is fundamental to the claim that the judgment entered was wrong and the incorrect result was due to the negligence of the [solicitors]. This necessarily involves consideration of the issues raised in the earlier litigation to determine whether in fact the [solicitor's] advice was negligent. In that sense it offends against the principle of finality of litigation."
22. In my opinion, the circumstances in Jackson Lalic are indistinguishable from the present. I am unpersuaded that s 91 of the Civil Procedure Act 2005 (NSW) has any bearing on the issues to be determined. I am unpersuaded that the fact that Jackson Lalic involved a settlement in the course of final hearing is a relevant distinguishing factor. Court appointed mediation is a recognised step in the process of litigation in the Supreme Court. It is not to the point that the mediation itself did not involve the exercise of judicial power. It was a step in the process towards the exercise of judicial power, which in fact was exercised when (presumably) judgment was entered in accordance with the first term of the Deed of Settlement.
23. The decision in Jackson Lalic is not, of course, strictly binding on this Court. However, the basis upon which this Court will part from earlier decisions is well-known: Gett v Tabet [2009] NSWCA 76; 254 ALR 504. In any event, the decision in Jackson Lalic was an orthodox application of longstanding, well-known and recognised principle.
24. One troubling feature is that the High Court has granted special leave to the respondent in Jackson Lalic to appeal: Attwells & Anor v Jackson Lalic Lawyers Pty Ltd [2015] HCATrans 176 (7 August 2015). That, however, is not a relevant circumstance upon which to base a departure from the authority of Jackson Lalic and previously decided cases. It is understood that a date was fixed for the hearing of the appeal in Jackson Lalic, but, unfortunately, had to be vacated. For the present, Giannarelli, D'Orta-Ekenaike and, most recently, Jackson Lalic, state the law to be applied by this Court.
25. In my opinion the position is clear, on the authorities that I have mentioned, and those additional authorities considered in Jackson Lalic. No reasonably arguable ground of appeal emerged. I would therefore refuse leave to appeal with costs.

Endnotes

1. Stillman v Rusbourne [2014] NSWSC 730.
2. (2005) 223 CLR 1; [2005] HCA 12.
3. Stillman at [71].
4. (1988) 165 CLR 543.
5. [1974] 1 NZLR 180 at 187.
6. Giannarelli at 560; see also at 571 (Wilson J) and 594 and 596 (Dawson J).
7. D'Orta-Ekenaike at [86] (Gleeson CJ, Gummow, Hayne and Heydon JJ); see also [151] (McHugh J); Kendirjian v Lepore [2015] NSWCA 132 at [51] (Leeming JA); see also S Walmsley, A Abadee, B Zipser, G Sirtes, Professional Liability in Australia (3rd ed, Thomson Reuters, 2016) at [31190].
8. Giannarelli at 579.
9. D'Orta-Ekenaike at [32]; Application of Malcolm Huntley Potier [2012] NSWCA 222 at [14] (Allsop ACJ and Basten JA).
10. Fencott v Muller (1983) 152 CLR 570 at 608 per Mason, Murphy, Brennan and Deane JJ.
11. D'Orta-Ekenaike at [85].
12. D'Orta-Ekenaike at [86].
13. D'Orta-Ekenaike at [87].
14. D'Orta-Ekenaike at [88].
15. D'Orta-Ekenaike at [76]-[80].
16. D'Orta-Ekenaike at [76] and [77].
17. D'Orta-Ekenaike at [78]-[79].
18. See, eg, Alpine Holdings Pty Ltd v Feinauer [2008] WASCA 85; Walmsley et al, Professional Liability in Australia at [4.470]-[4.490].
19. [2012] NSWCA 89.
20. Bott at [23]; see also Sims v Chong (2015) 230 FCR 346; [2015] FCAFC 80 at [60] (Mansfield, Siopis and Rares JJ).
21. [2014] NSWCA 335 at [40].
22. D'Orta-Ekenaike at [34].
23. Kirk v Industrial Court of New South Wales (2010) 239 CLR 531; [2010] HCA 1.
24. Crimes (Appeal and Review) Act 2001 (NSW), Pt 7.
25. See, eg, In the matter of an Appeal by Luck [2003] HCA 70; 78 ALJR 177 at 178-179 (McHugh ACJ, Gummow and Heydon JJ); Newmont Pty Ltd v Laverton Nickel NL (No 2) [1981] 1 NSWLR 221 (Needham J); Sims v Chong at [95].
26. UCPR, r 36.15(1).
27. UCPR, r 36.16(2).
28. [2015] NSWCA 342.
29. D'Orta-Ekenaike at [45]; see also Sims v Chong at [57]; Symonds v Vass [2009] NSWCA 139; 257 ALR 689 at [26] (Giles JA).
30. D'Orta-Ekenaike at [74].
31. D'Orta-Ekenaike at [75].
32. Stillman at [11].
33. Stillman at [19].
34. Stillman at [15].
35. [2005] NSWCA 454.
36. Chamberlain at [135].
37. Chamberlain at [118]-[120]; Giles JA agreeing at [5] as to the whole of the reasons of Tobias JA with respect to the claim against the barrister.
38. Jackson Lalic at [37].
39. Jackson Lalic at [38].
40. [1978] 2 NZLR 9.
41. Biggar at [14].
42. D'Orta-Ekenaike at [166].
43. (1990) 21 NSWLR 335.
44. D'Orta-Ekenaike at [156].
45. Donellan at 342.
46. Donellan at 336.
47. Donellan at 337B-C.
48. Donellan at 337F-G.
49. Jackson Lalic at [44] and [46].
50. Donellan at 338B.
51. (1860) 5 H&N 890; 157 ER 1436.
52. 157 ER 1436 at 1449.
53. 157 ER 1436 at 1449-1450.
54. [2012] NSWCA 433.

Amendments 17 December 2015 - amend "judgment order" to "judgment or order" - [18] 02 February 2016 - insert "with costs" - coversheet DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 02 February 2016