By Stephen Aroney, Partner, and Georgia Henderson-Smith, Lawyer

The Supreme Court of NSW has dismissed proceedings commenced by a Plaintiff claiming professional negligence on the part of his former solicitor and senior counsel (the First and Second Defendants) on the basis that neither of them breached their duty of care and that nothing the Defendants did, or failed to do, caused the alleged loss. Ironically, the Plaintiff’s claim stemmed from the Defendants’ advice that there were reasonable prospects of success against the solicitors previously acting for the Plaintiff (Jackson Lalic Lawyers) for professional negligence in connection to Consent Orders entered into with the ANZ Bank in June 2010.

The original proceedings against Jackson Lalic Lawyers arose as a result of the solicitors negligently advising the Plaintiff’s late brother and de facto, at the hearing, to sign Consent Orders stipulating judgment to ANZ in the amount of $3.3 million when the maximum sum owed was only $1.8 million. The Consent Orders provided that the judgment would be satisfied if $1.75 million was paid by a specified date, which they were unable to meet. The effect of the Consent Orders was that the Plaintiff was liable for $1.5 million more than he would have otherwise been if properly advised of his options.

By reason of the alleged professional negligence of Jackson Lalic Lawyers, the Defendants in this case advised the Plaintiff that he had sound prospects to commence proceedings against Jackson Lalic Lawyers. However, Jackson Lalic Lawyers denied the Plaintiff’s claim and relied on the doctrine of advocates immunity, which protects solicitors and barristers from being sued by their clients for negligence in respect of their work conducted at the hearing and also work intimately connected to how the case is run in court. The issue of advocates immunity was determined separately in an appeal to the High Court in Attwells v Jackson Lalic Lawyers Pty Ltd [2016] HCA 16. The High Court overturned the Court of Appeal decision and set legal precedent by finding that advocates immunity did not apply to solicitors advising on settlement even on the day of a hearing because settlement advice was not considered to be work intimately connected to how the case is run in court.

Despite the High Court’s overturn of the Court of Appeal decision, and the resultant failure of the doctrine of advocates immunity as a defence for Jackson Lalic Lawyers, the Plaintiff (surprisingly) settled its case against Jackson Lalic Lawyers on a walk away basis due to advice from his new solicitors that the grounds of professional negligence were not properly made out as against Jackson Lalic Lawyers (namely, the Plaintiff’s liability for $3.3 million to the ANZ Bank, rather than $1.75 million, did not amount to a loss in circumstances where the Plaintiff’s late brother and de facto had to declare bankruptcy, and therefore could not pay either amount, regardless of the amount owed).

The present case arose because the Plaintiff alleged that the Defendants negligently advised him to pursue the claim against Jackson Lalic Lawyers, causing him to incur unnecessary legal fees.

Her Honour Justice Lonergan, in the Supreme Court proceedings, meticulously set out the relevant grounds needed to establish professional negligence and ultimately found that the Defendants had not breached their duties of care to the Plaintiff as legal practitioners. Her Honour found that there were sound prospects of success against Jackson Lalic Lawyers given the unchallenged evidence that they failed to properly advise the Plaintiff’s brother and de facto when entering into the Consent Orders with the ANZ Bank in June 2010 and that they suffered damages at that time pursuant to the principles in Potts v Miller [1940] HCA 43. Additionally, her Honour found that there was no causative link between the conduct of the Defendants and the losses suffered by the Plaintiff in the present case, which were predominantly made up of his legal costs incurred in the High Court appeal on advocates immunity and the Plaintiff’s solicitors negotiating the walk away settlement with Jackson Lalic Lawyers, all of which were decisions made by the Plaintiff and his current solicitors (therefore breaking the chain of causation since the Defendants could not be blamed for these costs being incurred).

An important takeaway from this case is her Honour’s comment that the precautions taken by legal practitioners should comprise “deploying due care, skill and diligence of a standard reasonably expected of a solicitor and barrister, advising on prospects of success and maintaining the proceedings until completion and/or termination of their retainers”. While her Honour found that the Defendants met this standard of care, the same could not be said for Jackson Lalic Lawyers who negligently advised him to execute the Consent Orders (however, her Honour was also critical of the Plaintiff’s current solicitors for inexplicably advising the Plaintiff to abandon the claim against Jackson Lalic Lawyers after winning the High Court appeal on advocates immunity and, to make matters worse, for wrongly bringing these proceedings against the Defendants).

The fascinating history of this case, and its close analysis of the advice of the various solicitors and barristers involved, provides a valuable blueprint of what must be established by a Plaintiff to obtain a finding of professional negligence against their legal practitioner. Conversely, a different reader may find that this case provides a valuable blueprint of how a Defendant may combat an opportunistic or litigious Plaintiff – or how not to sue their legal practitioner!