A Weaker Immune System: Advocate’s Immunity from Suit does not Protect Negligent Advice on Settlement

On 29 March 2017, the High Court in Kendirjian v Lepore [2017] HCA 13 upheld a narrower scope of the common law doctrine of an advocate’s immunity from suit, holding that the immunity does not extend to advice given not to settle a case.

The High Court refused to re-open or distinguish its most recent decision on advocate’s immunity, Atwells v Jackson Lalic Lawyers Pty Ltd [2016] HCA 16.

The High Court had clarified in Atwells in May 2016 that although the common law doctrine of immunity from suit should remain in order to protect the finality and certainty of judicial determinations, it does not extend to negligent advice that leads to a settlement between the parties.

The rationale is that since the immunity attaches to the “participation of the advocate as an officer of the court in the quelling of controversies by the exercise of judicial power”, the immunity did not extend to advice that leads to a settlement between the parties, a non-existent exercise of judicial power (Atwells at [38]).

That will be the case even where the settlement is recorded in consent orders by the court, because although a consent order has the same legal effect as an order made after the hearing, the substantive rights and obligations are determined by the parties without any determination by the court (Attwells at [55]).

In Kendirjian v Lepore the appellant had received a settlement offer in the sum of $600,000 plus costs in personal injury proceedings, which he did not accept. He ultimately obtained judgment for $308,432.75 plus costs.

Central to his allegation was that his lawyer had not advised him of the amount of the settlement offer, but merely of the fact that the offer had been made, and that the offer had been rejected absent any express instructions from him, and simply because the offer was “too low”.

The District Court of NSW had held that the respondent’s conduct was covered by advocate’s immunity, a conclusion which was also upheld by the NSW Court of Appeal.

The High Court in Kendirjian v Lepore first rejected the appellant’s primary submission that Atwells should be distinguished on the basis that a departure from the reasoning in the personal injury proceedings in the District Court could arise because the respondents might seek to use the adverse findings made about the appellant’s credibility to explain the discrepancy between the settlement offer and the judgment. Edelman J found (Nettle J disagreeing) that the assessment of the reasonableness of the advice given will not involve any consideration of whether the decision of the District Court was right or wrong in relation to credibility.

The court then refused the respondent’s alternate submission to re-open Atwells on the basis that the immunity should extend to work done affecting the case is conducted when it comes to hearing, finding that the alternate submission was premised on an illusory distinction.

The High Court held at [18] that:

“In Atwells, a majority of this Court held that the advocate’s immunity from suit did not extend to negligent advice which leads to a compromise of litigation by agreement between the parties. As the majority judgment explained, by the same reasoning it is difficult to envisage how that immunity could ever extend to advice not to settle a case…”

On 3 March 2017, the Victorian Court of Appeal also allowed an appeal in Spralja v Bullard (t/as Bullards) [2017] VSCA 32 where a lawyer allegedly failed to properly explain terms of settlement, and the primary judge had found that the negligence suit had no prospects of success because the lawyers were entitled to the protection of advocate’s immunity.

Lawyers should take particular care when advising clients on terms of settlement and advising clients not to settle proceedings. Clear instructions should be obtained and recorded, and the rationale for any settlement should be clearly explained (in writing), including the implications of settling or not settling the proceedings.

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