French CJ, Kiefel, Bell, Gageler, Keane, Nettle and Gordon JJ
The appellant guaranteed the payment of liabilities of a company amounting to approximately $3.4M. The guarantor’s liability was capped at $1.5M. The company defaulted on the payment of its liabilities and the bank brought proceedings against the guarantors in the Supreme Court of New South Wales. The company and the guarantors retained the respondent firm to act for them. Through discussions between the parties, if the appellants consented to judgment being entered for the bank of $3.4M, the bank would not enforce payment of this amount provided that the guarantor’s paid $1.75M to the bank by a specified date (the “settlement”). The respondent firm advised the appellants to consent to the settlement.
Under the settlement, if the appellants failed to pay the $1.75M by the specified date, they would be liable in a further $1.5M. The appellants failed to meet their obligation under the settlement. An attempt to have the settlement set aside was dismissed. The appellants then brought proceedings in the New South Wales Supreme Court against the respondent firm alleging that the firm was negligent in advising them to consent to the settlement and in failing to advise them as to the effect of the settlement. The respondent firm contended that the advocate’s immunity applied. In the Supreme Court, Harrison J held that in the absence of further evidence, a determination on the immunity question could not be reached. On appeal, the court held that the respondent firm’s advice regarding the settlement was within the advocate’s immunity.
Pursuant to a grant of special leave, the appellants appealed to the High Court arguing that the advocate’s immunity does not extend to negligent advice leading to a settlement of a case through an agreement between the parties. The court entered judgment for the appellants and rejected the claim by the respondent firm that it was immune from suit because of the advocate’s immunity.
The High Court considered the authority of D’Orta-Ekenaike v Victoria Legal Aid and subsequently Giannarelli v Wraith both which considered advocate’s immunity. From these cases it was held that immunity will only apply to work done in court or ‘work done out of court which leads to a decision affecting the conduct of the case in court’ or ‘work intimately connected with’ work in a court. In entering for the appellants, the majority stated that:
 In short, in order to attract the immunity, advice given out of court must affect the conduct of the case in court and the resolution of the case by that court. The immunity does not extend to preclude the possibility of a successful claim against a lawyer in respect of negligent advice which contributes to the making of a voluntary agreement between the parties merely because litigation is on foot at the time the agreement is made.
 It is apparent … from D’Orta that it is the participation of the advocate as an officer of the court in the quelling of controversies by the exercise of judicial power which attracts the immunity. Because that is so, the immunity does not extend to acts or advice of the advocate which do not move litigation towards a determination by a court. In particular, the immunity does not extend to advice that leads to a settlement agreed between the parties.
Therefore, crucial to the court’s ruling was that the advice given by the respondent firm did not move the litigation toward a judicial determination, rather, the advice led to the case being settled out of court inter parties.
David Cormack – Brisbane Barrister & Mediator.