High Court on whether a lawyer can be held liable for negligent advice not to settle legal proceedings

by Greg Carter, Fixed-Fee Litigation Lawyer in Perth

In May 2016 the High Court held that advocates’ immunity does not apply to a lawyer who gives negligent advice which leads to settlement of litigation by agreement between the parties.  (See my earlier case note: High Court on liability of lawyers for negligent advice concerning the settlement of litigation.)

This case note concerns a recent High Court decision regarding whether advocates’ immunity applies where negligent advice is given not to settle litigation.

Facts

In 1999 Mr Kendirjian was injured in a car accident.  In 2004 he commenced proceedings against the driver, Ms Ayoub, who admitted liability.  In 2006 a trial occurred in the NSW District Court to assess damages.

On the first day of trial, Ms Ayoub’s legal representatives made an offer to Mr Kendirjian to settle the proceeding for $600,000 plus costs.  The offer was not accepted and the trial proceeded.  Following the trial Mr Kendirjian obtained judgment for $308,432.75 plus costs.

At trial Mr Kendirjian’s credibility was the key issue.  The trial judge concluded, based on video recordings of Mr Kendirjian in the years after the accident, that he had exaggerated or misstated the extent of his medical condition.  Those adverse findings led to the damages awarded being less than offered by Ms Ayoub.

Mr Kendirjian alleged that in 2009 he found out from Ms Ayoub’s solicitor the amount of her settlement offer.

In 2012 Mr Kendirjian commenced proceedings in negligence against his solicitor and barrister, alleging that they did not advise him of the amount of the settlement offer, only the fact that it had been made.  He further alleged that the settlement offer was rejected without his express instructions, based on the advice of the barrister that the offer was “too low”.

The barrister’s defence was that either he or the solicitor, or both of them, informed Mr Kendirjian of the settlement offer, who instructed them to reject the offer and counter-offer $1.2 million.  The barrister also alleged that Mr Kendirjian’s counter-offer was contrary to his advice to make a counter-offer of $800,000 including costs.

Mr Kendirjian sought damages of $312,567 plus interest and costs, which he calculated by subtracting the amount he received in the District Court trial from the settlement offer of $600,000 plus costs.

The solicitor and barrister obtained summary judgment in the District Court against Mr Kendirjian, on the basis of the common law principle of advocates’ immunity (ie an advocate cannot be held liable in negligence for a decision made out of Court that affects the conduct of the case in Court).  The NSW Court of Appeal upheld that decision.

However both decisions were made prior to the High Court decision in Attwells v Jackson Lalic Lawyers Pty Ltd, which restricted the scope of advocates’ immunity (see my earlier case note).

Mr Kendirjian appealed to the High Court.

Following the decision in Attwells, the solicitor in this case consented to orders allowing the appeal against him (in other words he agreed that the principle of advocates’ immunity did not apply to him).

However the barrister resisted the appeal on the basis that the decision in Attwells should not apply because he might seek to use the adverse District Court findings about Mr Kendirjian’s credibility to explain why the judgment was much lower than the settlement offer of $600,000 plus costs.

The result in the High Court

The High Court unanimously held that advocates (solicitors and barristers) may be held liable for negligent advice not to settle a proceeding, in addition to negligent advice to settle a proceeding.

This is because the giving of advice either to cease or to continue litigating does not itself affect the judicial determination of a case.

The reasonableness of the advice not to settle the proceeding will be assessed at the time it is given.

A majority of the justices held that the assessment of reasonableness would not involve any consideration of whether the decision of the District Court, affirmed by the Court of Appeal, was right or wrong in relation to Mr Kendirjian’s credibility or otherwise.

However, in the minority on this point, Justice Nettle (with whom Justice Gordon agreed), cautioned that Mr Kendirjian’s negligence action did give rise to the possibility of a challenge to the findings of the District Court:

“… in the scheme of things, it is not improbable that one or other side might attempt to demonstrate the way things were, or should have appeared, when the advice was given by reference to the way things were during and at the conclusion of the trial.  For example, an advocate faced with such a negligence claim might contend that the trial judge’s assessment of the plaintiff’s credit and reliability was so unlikely or unwarranted that it could not reasonably have been anticipated at the time of advice, or that the trial judge’s assessment of damages was so remarkably parsimonious by reference to current practice that it could not reasonably have been foreseen.  Equally, a plaintiff might contend that the trial judge’s assessment of the issues in the case was so predictable that the advocate’s failure to anticipate it was negligent.  Such examples can be multiplied.”

The High Court has sent this case back to the District Court for a trial of Mr Kendirjian’s negligence action.

The case is Kendirjian v Lepore [2017] HCA 13 (29 March 2017).

Comment

This case highlights the importance of ensuring that careful consideration is given to any offer of settlement, and that if it is to be rejected, there is a reasonable basis for it.  That basis should be recorded in writing and communicated to the client.

 

Greg Carter is a freelance litigation lawyer based in Perth, specialising in fixed-fee commercial dispute resolution.

Greg offers a FREE consultation and a ‘no obligation’ quotation.

For more information please call Greg on 0422 406 929 or email gc@gregcarter.com.au.

Or see his website www.gregcarter.com.au.



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