Attard v James Legal Pty Ltd - [2010] NSWCA 311

No judgment structure available for this case.

Reported Decision: 80 ACSR 585

New South Wales

Court of Appeal

CITATION: Attard v James Legal Pty Ltd [2010] NSWCA 311

HEARING DATE(S): 8 June 2010, 9 June 2010

JUDGMENT DATE:
23 November 2010

JUDGMENT OF: Beazley JA at 1; Giles JA at 4; Tobias JA at 33

DECISION: (a) Appeal allowed in part.
(b) Set aside Order 2 made by Simpson J on 4 September 2009.
(c) In lieu thereof, subject to Order (d), order pursuant to UCPR 20.14 that the amount due and owing by the first and second cross-defendants to the cross claimants pursuant to the cross-claim be referred to a referee experienced in the assessment of legal costs and disbursements for assessment as to the fairness and reasonableness of the costs claimed by the cross-claimants in their cross-claim upon condition that the first and second cross-defendants pay to the cross claimants 60% of the amounts referred to in the said Order 2 within 28 days of the date of this order.
(d) Direct that the parties submit within 21 days of the date of these orders, an order for reference in accordance with Order (c) to an agreed referee which order will be made in chambers.
(e) Stay Orders 3 and 4 made by Simpson J on 4 September 2009 until the said reference has been completed and any report of the referee has been adopted or otherwise dealt with by the Court pursuant to UCPR 20.24.
(f) The appellants to pay 75% of the respondents’ costs of the appeal.
(g) The costs of the reference referred to in Order (b) above be reserved to the trial judge when dealing with the referee’s report pursuant to UCPR 20.24.
(h) Grant liberty to the parties to apply for variation of these orders by notice of motion accompanied by written submissions to be filed and served within 7 days of the date of these orders.
[The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

CATCHWORDS: COSTS – assessment – solicitor-client – whether primary judge should have referred quantum of costs claimed to referee pursuant to UCPR 20.14 - EVIDENCE – admissibility – statements as to what a person would have done – whether 5D(3) CLA required Court to ignore statement in affidavit notwithstanding no objection taken to its admission - LAWYERS – negligence – advocates’ immunity – attaches to acts and omissions and extends to conduct of instructing solicitor – whether failure to advise that stay applied unless and until Court granted leave to proceed led to decision affecting conduct of defence to cross-claim – offence to finality principle not necessary - LAWYERS – negligence – breach of duty – whether respondents properly retained by appellants – whether respondents breached duty of care or terms of retainer - LAWYERS – negligence – causation – whether, had appellants been advised that cross-claim was stayed, they would have instructed respondent to oppose grant of leave to proceed pursuant to s 444E(3) Corporations Act – whether primary judge erred in refusing to assess probabilities of hypothetical leave application – whether application for leave would have been denied

LEGISLATION CITED: Civil Liability Act 2002
Corporations Act 2001
Corporations Law
Evidence Act 1995
Fair Trading Act 1987
Legal Profession Act 1987
Legal Profession Act 2004
Trade Practices Act 1974
Uniform Civil Procedure Rules 2005

CATEGORY: Principal judgment

CASES CITED: Allatech v Construction Management Group [2002] NSWSC 293; (2002) 20 ACLC 1493; (2002) 167 FLR 324
Attard v James Legal Pty Ltd [2009] NSWSC 811
Attard v James Legal Pty Ltd [No 2] [2009] NSWSC 901
Attard & Ors v James Legal Pty Ltd & Ors [2004] NSWSC 478
BBC Hardware Ltd v GT Homes Pty Ltd [1997] 2 Qd R 123
Chappel v Hart [1998] HCA 55; (1998) 195 CLR 232
D’Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; (2005) 223 CLR 1
Foxcroft v The Ink Group Pty Ltd (1994) 12 ACLC 1063
Giannarelli v Wraith [1988] HCA 52; (1988) 165 CLR 543
J & B Records v Brashs Pty Ltd (1994) 12 ACLC 534
J F Keir Pty Ltd v Priority Management Systems Pty Ltd (admin apptd) [2007] NSWSC 748
Keefe v Marks (1989) 16 NSWLR 713
Keesing v Adams [2010] NSWSC 336
Meehan v Stockmans Australian Café (Holdings) Pty Ltd (1996) 22 ACSR 123
Neal v Ambulance Service of New South Wales [2008] NSWCA 346; (2008) Aust Torts Reports 81-988
Ogilvie-Grant v East (1983) 7 ACLR 669 at 672; 1 ACLC 742
Philip Walton t/as Pitcher Walton & Co v Efato Pty Ltd [2008] NSWCA 86
Pioneer Water Tanks (Australia 94) Pty Ltd v Delat Pty Ltd (1998) 16 ACLC 36
Rees v Sinclair (1974) 1 NZLR 180
Re Grenadier Constructions No 2 Pty Ltd (1994) 12 ACLC 460
Rosenberg v Percival [2001] HCA 18; (2001) 205 CLR 434
Ryan v Hansen [2000] NSWSC 354; (2000) 49 NSWLR 184
Seltsam Pty Ltd v McGuiness [2000] NSWCA 29; (2000) 49 NSWLR 262
Slater v Global Finance Group Pty Ltd (1999) 150 FLR 264
Symonds v Vass [2009] NSWCA 139; (2009) 257 ALR 689
Vagrand Pty Ltd (in liq) v Fielding (1993) 41 FCR 550; 113 ALR 128; 10 ACSR 373
Wallabah Pty Ltd v Navillo Pty Ltd (1997) 15 ACLC 396
Walton v Efato Pty Ltd [2008] NSWCA 86

PARTIES: Alfred Attard
Michael Henry
Glowmint Pty Limited
Elzac Properties Pty Limited
Construction Management Group Pty Limited
James Legal Pty Limited
Peter Richard James

FILE NUMBER(S): CA 2009/40367

COUNSEL: 1,2,3,4,5 App: C R Newlinds SC / P Newtown
1, 2 Resp: M Southwick

SOLICITORS: 1, 2, 3, 4, 5 App: Lazarus Legal Group
1, 2 Resp: James Legal Pty Ltd

LOWER COURT JURISDICTION: Supreme Court - Common Law Division

LOWER COURT FILE NUMBER(S): SC 2004/20044

LOWER COURT JUDICIAL OFFICER: Simpson J

LOWER COURT DATE OF DECISION: 14 August 2009; 2 September 2009

LOWER COURT MEDIUM NEUTRAL CITATION: Attard v James Legal Pty Ltd [2009] NSWSC 811; Attard v James Legal Pty Ltd [No 2] [2009] NSWSC 901

CA 40367/09
SC 20044/04

BEAZLEY JA
GILES JA
TOBIAS JA
23 February 2010

ALFRED ATTARD & ORS v JAMES LEGAL PTY LTD & ANOR

Judgment

1 BEAZLEY JA: I have had the advantage of reading in draft the judgments of Giles and Tobias JJA. I am in agreement with their respective reasons and the orders proposed by Tobias JA. I add the following short additional remarks of my own.

2 In D’Orta–Ekenaike v Victoria Legal Aid [2005] HCA 12; (2005) 223 CLR 1 the principle of advocates immunity from suit was confirmed: see the Court’s earlier decision in Giannarelli v Wraith [1988] HCA 52; (1988) 165 CLR 543, where it was held that an advocate cannot be sued for negligence in the conduct of the case or in work out of court which is intimately connected with the conduct of a case in court. The immunity rests upon the public policy consideration of finality of litigation. As Mason CJ said in Giannarelli at 555 it is the "adverse consequences for the administration of justice which would flow from re-litigation in collateral proceedings for negligence of issues determined in the principal proceedings" which is determinative. See also D’Orta at [31]. The law is settled that the immunity attaches to acts as well as omissions and extends to the conduct of solicitors, including a solicitor whose role is as an instructing solicitor to a barrister who appears in court. The undoubted negligent conduct in this case was an omission and the respondent was an instructing solicitor.

3 There has been some criticism of the underlying rationale given by the High Court for the existence of the immunity, as discussed by Giles JA. Implicit in that criticism is concern as to the reach of the immunity. Howsoever that may be, it is apparent for the reasons given by each of Giles and Tobias JJA, that the immunity applies in this case.

4 GILES JA: Subject to what follows in relation to advocate’s immunity, I agree with the reasons of Tobias JA.

5 Advocate’s immunity has recently been considered in some detail in this Court in Symonds v Vass [2009] NSWCA 139; (2009) 257 ALR 689, particularly with regard to the finality principle explained in D’Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; (2005) 223 CLR 1 as its rationale. I venture to repeat what I there said -

D’Orta-Ekenaike v Victoria Legal Aid

6 Tobias JA refers to the different statements of the test for a connection between the advocate’s work and the case, and the statements of the test and how it has been applied were also considered in Symonds v Vass. In that case Ipp JA reconciled the two statements of “work done out of court which leads to a decision affecting the conduct of a case in court” and “work intimately connected with the conduct of a case in court”, on the basis that work within the first statement is work intimately connected with the conduct of a case in court. The second statement as framed by his Honour was not entirely as in Giannarelli v Wraith (1988) 165 CLR 543, namely “’work intimately connected with’ work in a court” (at 560), but work in a court is readily equated with conduct of a case in court.

7 In D’Orta-Ekenaike v Victoria Legal Aid the joint majority (Gleeson CJ and Gummow, Hayne and Heydon JJ) considered that the statements did not differ “in any significant way”, but directly endorsed the first statement (at [86]). In Walton v Efato Pty Ltd [2008] NSWCA 86 at [84] Tobias JA adopted that statement, with the concurrence of Beazley JA and myself. It has been adopted by his Honour in the present case.

8 It would be a mistake to concentrate unduly on nuances of meaning according to which collection of words is used although in Symonds v Vass at [24] I explored possible differences. In D’Orta-Ekenaike v Victoria Legal Aid at [87] it was said that the “criterion” adopted in Giannarelli v Wraith “describes the acts or omissions to which immunity attaches by reference to the conduct of the case. And it is the conduct of the case that generates the result which should not be impugned”. According to the rationale, finality of the result drives the test of the effect of the act or omission on the conduct of the case.

9 It is clear that the immunity can extend to a negligent omission: for example, Rees v Sinclair (1974) 1 NZLR 180 (at 187); Giannarelli v Wraith itself; and Keefe v Marks (1989) 16 NSWLR 713. There is express reference in D’Orta-Ekenaike v Victoria Legal Aid at [87] to the acts or omissions to which immunity attaches.

10 That is material to what is involved in a decision affecting the conduct of the case in court. A negligent act of decision-making is not necessary. A negligent omission will ordinarily not be an act of decision-making, but if because of the omission one course is taken in the conduct of the case in court, when a different course would have been taken but for the omission, that can suffice. The decision lies in taking the course.

11 The conduct of a case in court includes failure to take an available defence to a claim. That was in principle the conduct in Rees v Sinclair. It was the conduct in Giannarelli v Wraith, where the omission was failure to plead a statutory prohibition on the admissibility of important evidence. The failure to consider making a claim for interest in Keefe v Marks is the converse of failure to take an available defence.

12 The present case, in relation to the Orlando proceedings, was equivalent to failure to take an available defence. The cross-claim against CMG was filed in mid-June 2000. Mr James was retained in late July 2000. Pursuant to his retainer, he was called upon to advise whether and how CMG should defend, or continue to defend, the cross-claim. Part of the advice should have been that, because of the stay pursuant to s 444E(1) of the Corporations Law consequent on entry into the Deed of Arrangement (and he knew of the Deed in August 2000), FCL could not pursue the cross-claim without the leave of the court. The point was available to be taken, and on the findings to which Tobias JA has come (with which I agree) leave would not have been granted. There was effectively a defence to the cross-claim.

13 The line is not drawn at the courtroom door: Giannarelli v Wraith at 559. The negligent omission to advise was to do with the conduct of the case in court, and satisfied the test on either of its statements. So far as it was necessary that it lead to a decision affecting the conduct of the case in court, the course of the conduct of the case was affected by a decision resting upon the omission. The defence of the cross-claim was continued.

14 In my opinion, therefore, on the test for advocate’s immunity as laid down by the High Court, the respondents have immunity from the claim in relation to the Orlando proceedings.

15 How does this fit with the finality principle?

16 In D’Orta-Ekenaike v Victoria Legal Aid the plurality said at [45] that -

“ … 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.”

17 At [66]-[69] their Honours identified three kinds of consequences of complaint by a disappointed litigant who seeks to sue an advocate. The first was where it is said that the conduct of the advocate was the cause of the client losing the case, without remedy on appeal. The second was where it is said that the conduct of the advocate was the cause of the client suffering an intermediate consequence, which was not wholly remedied on appeal. The third was where it is said that the conduct of the advocate was the cause of the client incurring unnecessary expense because a costs order was made against the client, or because unnecessary costs were incurred in taking a step in the litigation.

18 The Orlando proceedings were eventually settled, together with a raft of other litigation. A deed dated 3 June 2003 provided that the cross-claim in the Orlando proceedings should be dismissed with no order for costs, and that the other proceedings should be disposed of in similar way. It also provided that CMG would pay a substantial sum of money to FCL, subject to certain conditions. FCL was claimant in other of the settled proceedings, and the payment was not apportioned between proceedings: whether some part was referable to the cross-claim in the Orlando proceedings is not known.

19 The present case is one of consequences of the third kind. It is a wasted costs case, although it could have been a case of consequences of the first kind if CMG had suffered judgment on the cross-claim. But it is a rather particular wasted costs case, since the costs are not those incurred by, for example, over-lengthy cross-examination, but costs which the appellants said should not have been incurred because CMG should not have been defending the cross-claim at all.

20 What is the offence to finality if the respondents’ conduct of the Orlando proceedings is held to have caused the appellants to incur unnecessary costs? There has not been a judicial determination, although it was not submitted that this took the claim in relation to the Orlando proceedings outside advocate’s immunity (I said something of this in Symonds v Vass at [35]). Presumably there has been a court order dismissing the cross-claim with no order as to costs. That is a resolution of the controversy. How would allowing the appellants to litigate their claim in relation to the Orlando proceedings offend the finality of that result?

21 In the litigation of the appellants’ claim, they said that advice that the cross-claim was stayed would have been acted upon, leave would have been refused and the cross-claim would have remained stayed. In substance, that would have been the same as dismissal of the cross-claim. Perhaps CMG would have obtained an order for costs in the District Court, although when FCL brought the cross-claim there was not a stay. Save perhaps as to obtaining an order for costs, it is not easy to see conflict with the finality of the order dismissing the cross-claim with no order as to costs. The result that on the appellants’ case should have occurred, in substance did occur. Any conflict between no order as to costs and a possible order for costs in favour of CMG does not turn on the substantive outcome.

22 However, on my understanding of the law as expounded in D’Orta-Ekenaike v Victoria Legal Aid, offence to the finality principle in the particular case is not necessary.

23 In D’Orta-Ekenaike v Victoria Legal Aid the plurality said of the three kinds of consequences -

“70. What unites these different kinds of consequence is that none of them has been, or could be, wholly remedied within the original litigation. The final order has not been, and cannot be, overturned on appeal. The intermediate consequence cannot be repaired or expunged on appeal. The costs order cannot be set aside; the costs incurred cannot be recovered from an opposite party. And in every one of these cases, the client would say that, but for the advocate's conduct, there would have been a different result.”

24 Their Honours saw as the paradigm case where the advocate’s negligence caused the client to lose the litigation. The final result would be impugned, and that was inconsistent with the need for finality: at [72]-[73]. Their Honours then asked whether there could be a remedy when the challenge was to an intermediate result, and the final result was not challenged. They saw such cases as exceptional. They said that the proposition that for every wrong there should be a remedy “has become too attenuated to be of any relevant application”, and that “[i]f final results cannot be challenged, intermediate results should not be treated differently”: at [80]-[82].

25 Their Honours then said -

“83. There remains for separate consideration the last of the three kinds of consequence identified earlier as consequences of which a client may wish to complain: wasted costs. Again, at first sight it might be thought that seeking to recover wasted costs would not cut across any principle of finality. But it is necessary to recall that the general rule is that costs follow the event. To challenge the costs order, therefore, will often (even, usually) involve a direct or indirect challenge to the outcome on which the disposition of costs depended. For the reasons given earlier, that should not be permitted lest a dispute about wasted costs become the vehicle for a dispute about the outcome of the litigation in which it is said that the costs were wasted.”

26 At this point the vice was challenging the costs order, in the light of [70] including that costs unnecessarily incurred could not (because they were not ordered) be recovered from the opposite party, because that could involve a challenge to the outcome. (The reference only to challenging the costs order was adverted to in Walton v Efato Pty Ltd at [89], without coming to a conclusion on the question in which that arose.) Their Honours said that a dispute about wasted costs, including costs unnecessarily incurred, should not be permitted, because it could involve direct or indirect challenge to the outcome.

27 For the second and third kinds of consequences, the justification for advocates immunity was applied at a general level. Challenge to an intermediate result, one which was not or no longer final, would not be permitted at all, even though there might be a wrong without a remedy; as a matter of principle, challenges to intermediate results and challenges to final results were equated. Seeking to recover wasted costs would not be permitted at all, even though sometimes (the obverse of often or usually) challenging the costs order would not involve a challenge to the outcome. Seeking to recover wasted costs cut across finality because a dispute about wasted costs might become the vehicle for a dispute about the outcome of the litigation.

28 As I understand the reasons then, it is not asked whether in the particular case there would be offence to finality, or such offence to finality that the claim against the advocate should not be permitted. If the test is satisfied, there is immunity for all three kinds of consequences. Whether in the particular case the controversy would be reopened, and in this case whether permitting the appellants’ claim in relation to the Orlando proceedings would bring conflict with the finality of the order dismissing the cross-claim with no order as to costs, does not arise.

29 It could be said that, in raising what would have happened in FCL's cross-claim if CMG had relied on the stay and opposed leave, the claim in relation to the Orlando proceedings reopened a controversy which had been resolved by judicial order (although not judicial determination) in or shortly after June 2003, and that the reopening could bring dispute over the outcome, because (at least in theory) there could be a finding that leave would have been given and the cross-claim would have been litigated to a result adverse to CMG. That would seem to fall within the paradigm case, where a hypothetical different outcome, if there had not been the negligent act or omission, will not be countenanced because the final result would be impugned. The paradigm case is a very wide notion of offence to finality.

30 Viewing the present case as a wasted costs case, on the finality principle as applied in such a case to justify advocate’s immunity there need not be a challenge to finality of a judicial act at all. There is nonetheless immunity.

31 The test endorsed in D’Orta-Ekenaike v Victoria Legal Aid stands. Professor Peter Cane has explained difficulties in the finality principle as a basis for advocate’s immunity, including observing that there is “a lack of fit between the rationale for the immunity … and the formula specifying its scope”: (2005) 13 Torts LJ 93 at 100. The “formula” has been authoritatively stated, with the rationale as expounded in D’Orta-Ekenaike v Victoria Legal Aid. It may be thought that in some respects the law as to advocate’s immunity is not entirely satisfactory. However, I must give effect to it.

32 I agree with the orders proposed by Tobias JA.

33 TOBIAS JA: This appeal involves a dispute between Alfred Attard, the first appellant, and Michael Henry, the second appellant, (together the appellants) on the one hand and Peter Richard James, the second respondent, who is a solicitor, on the other. The appellants, together with the companies in which they were shareholders, sued Mr James and his company, James Legal Pty Limited, (together the respondents), alleging breach of contract and negligence as well as breaches of s 52 of the Trade Practices Act 1974 and s 42 of the Fair Trading Act 1987.

34 Essentially, the claims concerned legal professional services rendered by the respondents to the appellants over a period of about two and a half years beginning in July 2000 and concluding in April 2003.

35 The respondents filed a cross-claim seeking payment of what was said to be outstanding costs and disbursements for legal professional services rendered pursuant to their retainer to provide such services and in accordance with several costs agreements into which the parties had at times entered.

36 The proceedings were heard by Simpson J who, on 14 August 2009 found in favour of the respondents on both the appellants’ claim and the respondents’ cross-claim: Attard v James Legal Pty Ltd [2009] NSWSC 811 (the primary judgment). Pursuant to a supplementary judgment of 2 September 2009, her Honour ordered that the appellants’ Further (Third) Amended Statement of Claim (the Statement of Claim) be dismissed and that judgment be entered in favour of the respondents on their cross-claim in an amount of $903,450 together with interest in the sum of $534,174.69: Attard v James Legal Pty Ltd [No 2] [2009] NSWSC 901 (the supplementary judgment). Final orders were made on 4 September 2009. The appellants appeal to this Court from those orders.

THE BACKGROUND FACTS

37 The third appellant, Glowmint Pty Limited (Glowmint) was a development company whose director and shareholder was Mr Henry. The fourth appellant, Elzac Properties Pty Ltd (Elzac) was the trustee of The Alfred Attard Family Trust.

38 Messrs Attard and Henry were at all material times directors of the fifth appellant, Construction Management Group Pty Ltd (CMG) which, the primary judge inferred, was a building construction company. Glowmint and Elzac were equal shareholders in CMG.

39 Mr James was at all material times a solicitor practising in Sydney. From April 1994 he traded as “James Solicitors”. As and from 1 January 2001 he offered legal services through the first respondent, James Legal Pty Ltd (James Legal), an incorporated law practice. He was a director and shareholder of that company. In 1996 he employed a solicitor, Mary Cunningham, who on 1 January 2001 became a director of James Legal. Mr James and James Legal provided commercial litigation services with the focus on providing such services to the building/construction industry.

40 In 1997 CMG entered into a contract with Franks Centre Lofts Pty Ltd (FCL) (the FCL contract) for the development of residential apartments in Camperdown (the FCL development). In 1999 CMG entered into a contract with Allatech Pty Ltd (Allatech) (the Allatech contract) to construct a retirement village at Prestons. At or about the same time CMG entered into a sub-contract with Orlando Interiors Pty Limited (Orlando) for the supply and installation of plasterboard ceilings for the FCL development.

41 By letter dated 4 May 1999 Messrs Blessington Judd, solicitors then acting for CMG, purported to terminate the FCL contract. By letter dated 5 October 1999 Allatech purported to terminate the Allatech contract. On 7 June 1999 the Orlando contract was novated by CMG to FCL.

42 These events, as her Honour observed at [14] of her reasons, spawned the following litigation:

(a) Proceedings instituted in the Supreme Court some time in 1999 by FCL against Messrs Attard, Henry and CMG (the FCL proceedings) concerning the purported termination of the FCL contract and including claims against Messrs Attard and Henry for misleading and deceptive conduct. The FCL proceedings were entered into the Construction List of the Court. Messrs Attard, Henry and CMG filed and served defences and CMG filed and served a cross-claim.

(i) CMG instructed Orlando to install gyprock with a fire rating of one hour in the public corridors of the FCL development;

(ii) the work carried out by Orlando was defective and in breach of the FCL contract and had to be re-executed at a cost of $65,820;

(iii) CMG was liable to indemnify FCL in that amount.

(c) Proceedings commenced on or about 15 July 2000 by CMG against Allatech & Anor in the Supreme Court (the Allatech proceedings). The nature of these proceedings was not disclosed in the evidence.

43 On or about 15 June 2000 CMG resolved pursuant to s 436A of the Corporations Act 2001 (the Corporations Act) to appoint Mr Peter Hillig (Mr Hillig) as administrator of the company upon the ground that it was then insolvent. Accordingly, the administration of CMG commenced upon the appointment of Mr Hillig as administrator: s 435C(1).

44 However, pursuant to the combined operation of ss 435C(1)(b) and 435C(2)(a), Mr Hillig’s administration came to an end on 28 July 2000 upon a Deed of Company Arrangement being entered into (the Deed) to which Mr Hillig, Mr Attard, Mr Henry, Glowmint and Elzac were parties. As the provisions of the Deed are relevant to the issues on the appeal, it is convenient at this point of the narrative to refer to its relevant terms.

45 Under Clause 2 of the Deed Mr Hillig was appointed Administrator. Upon the execution of the Deed, Mr Hillig ceased to be the administrator of the “Company” (CMG) and was thereby appointed, and agreed to act, as Administrator under the Deed. By Clause 4.1 the Administrator had the powers set out in Schedule 1 which, relevantly, included the power to bring, prosecute and defend in the name of CMG or the Administrator, any actions, suits or proceedings; to appoint a solicitor, accountant or other professionally qualified person to assist and to bring or defend an application for the winding up of CMG.

46 Clause 4.2 provided as follows:

“Subject to the provisions of this Deed, the Administrator shall not be involved in the carrying on of the Company and, in particular, the Litigation Claims and collection and realisation of the Company’s Receivables.”

47 Clause 5 was in the following terms:

“The Company shall not carry on business and, subject to provisions of this Deed (in particular the Administrator’s rights pursuant to Clause 7), during the continuance of this Deed the Directors [who were defined to mean Messrs Attard and Henry] shall:

(i) be responsible for the management, conduct and pursuit of the Litigation Claims; and

(ii) …

48 The expression ‘Litigation Claims’ was defined in Clause 1 to mean:

“…the following proceedings involving the Company (or any proceedings incorporating the subject of these proceedings):

(a) all litigation in the Supreme Court of New South Wales between the Company and Allatech Pty Limited (ACN 074 810 674) including Equity Division – Construction List, Matter No 99/55021;

(b) all litigation between the Company and Supreme Linings Pty Limited (ACN 002 932 381) including District Court of New South Wales proceedings no. 00204/2000, and Supreme Court of New South Wales, Equity Division proceedings no. 1826/2000; and

(c) in the Supreme Court of New South Wales, Equity Division, Construction List-matter no. 55017/99 between the Company & Ors, and Franks Centre Lofts Pty Limited (ACN 077 392 922) & Ors.”

49 The litigation referred to in (a) above included the Allatech proceedings whereas that in (b) above included the Supreme Linings proceedings. The litigation referred to in (c) above was the FCL proceedings.

50 Clause 7 of the Deed relevantly provided as follows:

“7.1 During the continuance of this Deed, and in addition the Directors obligations pursuant to Clause 8, the Directors, on behalf of the Company, must use their best endeavours to collect the Company’s Receivables and pursue the Litigation Claims, and maximise any recovery from the Litigations Claims for the benefit of the Company.

7.2 …

7.3 …

7.4 The Company and the Directors shall assume control of carriage of the Litigation Claims, and may with prior written consent of the Administrator, settle or discontinue any of the Litigation Claims at any time on such terms and for such amount as recommended by their legal advisors.”

51 Clause 8 provided for the Directors to fund the Company’s pursuit of the litigation to the extent that it could not be funded from the realisation of the Company’s Receivables and so that the Company could prosecute and defend all aspects of the Litigation Claims.

52 Clause 14.1 provided that subdivisions A, B, C and E of Division 6 of Part 5.6 of the Corporations Law (now the Corporations Act) and certain of its Regulations, applied to claims made under the Deed. Part 5.6 of the Law/Act related to “Winding up generally” whereas Division 6 related to “Proof and ranking of claims”.

53 Clause 15.1 relevantly provided as follows:

“Subject to Clauses 12 and 13 [not presently relevant], during the continuance of this Deed, no Deed Creditor will:

a) Take or concur in the taking of any step to wind up the Company;

b) Except for the purpose and to the extent provided in this Deed, institute or prosecute any legal proceedings in relation to a debt;

c) Take any further step whatsoever in any proceedings pending against or in relation to the Company in respect of a debt.”

54 The moratorium provided in Clause 15.1 was subject to the provisions of s 444E of the Corporations Act which applied to a person bound by a deed of company arrangement until the deed terminated. It relevantly provided as follows:

“(3) The person [bound by the deed] cannot:

(a) begin or proceed with a proceeding against the company …; or

(b) …

except:

(c) with the leave of the Court; and

(d) in accordance with such terms (if any) as the Court imposes.”

55 The expression “Deed Creditor” was defined in Clause 1 of the Deed to mean any person who was, or claimed to be, owed a debt by the Company on 15 June 2000 other than the Directors and the Directors’ Interests. The latter expression was defined to mean Glowmint and Elzac in their own right and as trustees of the Alfred Attard Family Trust. “Debt” was widely defined, and enlivened a claim or right of action whether liquidated or unliquidated.

56 Finally, Clause 18 provided that the Deed could be pleaded by the Company against any Deed Creditor in bar of any debt, whether that creditor’s debt was or was not admitted or established under the Deed.

57 I return to the narrative. Junior Counsel, Mr Mel Bloom, held a brief or briefs in relation to some or all of the litigation referred to in the definition of “Litigation Claims” in the Deed. In June 2000 Whittens Solicitors were legally representing CMG as well as Messrs Attard and Henry. However, on or about 19 July 2000, Mr Bloom spoke to Mr James with a view to the latter taking over representation of the Henry and Attard interests in the various pieces of litigation. There was a meeting between Messrs James, Attard and Henry at the offices of James Solicitors on 21 July 2000.

58 The primary judge accepted that Mr James effectively took over the representation of the Attard and Henry interests by 1 August 2000 but that he had had no involvement in the preparation of the Deed. However, on 1 August 2000 he was provided with a copy of the Deed. Taking over the representation of the Attard and Henry interests was, as her Honour noted at [19], a not inconsiderable task. Thus in relation to the FCL proceedings, Mr James was provided with and read 57 volumes of “construction records”.

59 Initially Mr James opened a file in respect of the FCL proceedings and thereafter opened further files with respect to the Supreme Linings proceedings, the Allatech proceedings and the Orlando proceedings. He also opened what was referred to as “a Master File”. There were a number of meetings between Messrs James, Attard, Henry and Bloom and Ms Cunningham, or any combination thereof, during August 2000. On 23 August Mr James handed to Messrs Attard and Henry an Agreement for the Provision of Legal Services. This related to the FCL, Allatech, Orlando and Supreme Lining proceedings and to the Master File. Thereafter, in August 2000 and in January 2002 he gave either or both of Messrs Attard and Henry further such agreements: it was on the basis of those agreements that the respondents’ cross-claim in the present proceedings was founded.

60 Between September and December 2000 Mr James briefed Mr Marcus Jacobs QC to appear, inter alia, on behalf of CMG in the FCL, the Orlando and the Allatech proceedings.

61 According to her Honour (at [48]), from about May 2001 onwards the evidence established extensive, almost constant, communication between Messrs James, Attard, Henry, Jacobs and Ms Cunningham. Much of it concerned the various pleadings in the proceedings; on other occasions it involved the tactical approach to be taken in the proceedings. A significant part of the matters discussed related to the funding of the litigation, Messrs Attard and Henry having made it clear to Mr James that available funds were limited.

62 The Orlando proceedings were listed for hearing in the District Court for four days commencing 26 November 2001. Mr Jacobs was briefed to appear instructed by Ms Cunningham. The proceedings did not conclude in the four days allocated and were adjourned to 21 January 2002. Her Honour noted (at [51]) that according to Mr Attard’s evidence, he drew attention to the fact that CMG was subject to the Deed and that, by reason of s 440D of the Corporations Act, proceedings could not be commenced or continued against CMG without the leave of the Supreme Court or without the written consent of Mr Hillig, the Administrator under the Deed. In fact, s 444E(3) applied, as CMG was then subject to the Deed. Section 440D(1) had applied from the commencement of CMG’s administration until the entry into the Deed, and referred to the administrator’s written consent or the leave of the Court. Section 444E(3) referred only to the leave by the Court. This prompted Mr Jacobs to notify the District Court judge who then adjourned the hearing, apparently indefinitely. .

63 FCL as a person bound by the Deed as a Deed Creditor, then sought the leave of the Supreme Court to proceed with its cross-claim against CMG. On 31 October 2002 the Court by consent made orders that, inter alia,

(a) Mr Attard and Mr Henry be given leave nunc pro tunc to intervene in the Orlando proceedings pursuant to s 237 of the Corporations Act ; and

Corporations Act

64 In this respect it may be noted that, as a matter of construction the definition of “Litigation Claims” in Clause 1 of the Deed (a matter to which I return at [172] below), although applying to all litigation between CMG and Allatech on the one hand and all litigation between CMG and Supreme Linings on the other and thereby including respectively the Allatech proceedings and the Supreme Lining proceedings, did not include the Orlando proceedings - although it did include the FCL proceedings. In any event, the effect of the Court’s order of 31 October 2002 which was not made with Mr Hillig’s consent as Administrator of CMG under the Deed, was that Messrs Attard and Henry became responsible for the funding of the Orlando proceedings given the insolvency of CMG.

65 In the meantime, on 11 January 2002 Allatech commenced proceedings in the Supreme Court against CMG and Mr Hillig (the Hillig proceedings) in which it sought orders to terminate the Deed, remove Mr Hillig as Administrator of CMG and appoint a liquidator to CMG. Messrs Attard and Henry retained Mr James of James Legal to act in resisting those orders. Mr Jacobs was briefed on behalf of CMG. Mr Hillig was separately represented and also resisted the making of the orders sought. However, as her Honour noted at [54] of her reasons, the evidence did not disclose the progress or outcome of those proceedings.

66 Nevertheless, those proceedings were brought pursuant to s 445D(1) of the Corporations Act, which empowers the Court to make an order terminating a deed of company arrangement if it is satisfied of various matters. Such an order may be made on the application of, amongst others, “any other interested person”.

67 CMG and Mr Hillig instituted proceedings challenging Allatech’s standing to bring the Hillig proceedings pursuant to s 445(D)(1) upon the basis that it was not, within the meaning of s 445D(2)(c), relevantly, an “interested person”. That application was rejected by Austin J in Allatech v Construction Management Group [2002] NSWSC 293; (2002) 20 ACLC 1493; (2002) 167 FLR 324. Relevantly for present purposes, his Honour (at [8]) recited Allatech’s allegations that Messrs Attard and Henry as directors of CMG, caused that company to incur certain project expenses whilst diverting the profit of the project to another company. It alleged that those directors’ various activities constituted breaches of their fiduciary duties as directors of CMG.

68 At [9] his Honour noted that Allatech alleged

“that the circumstances constituting the breaches of fiduciary duties by CMG’s directors [referred to at [8] ] ought to have been disclosed to creditors in Mr Hillig’s Report [being his report of 4 July 2000], but they were not disclosed. It also says that the Report should have disclosed the cause of action [of CMG] against Blessington Judd against whom proceedings were not commenced until May 2001. It makes various other complaints about inadequate disclosure in the Report.”

69 I mention these matters as they involved allegations not only against Mr Hillig but also against Messrs Attard and Henry as directors of CMG. It was in this context that Mr Hillig was separately represented from CMG who, on the instructions of Messrs Attard and Henry, was represented by Mr James.

70 As I have indicated, the appellants’ Statement of Claim made a number of allegations against the respondents arising out of the provision by them of professional legal services with respect to the various proceedings in which CMG had become involved. Those proceedings included the FCL proceedings, the Orlando proceedings and the Supreme Linings proceedings. The primary judge dismissed all causes of action. However, only two of the allegations rejected by her Honour are the subject of this appeal.

71 In relation to the cause of action founded on breach of contract, only the following allegations particularised in paragraph 74 of the Statement of Claim are now sought to be pressed

■ The [respondents] acted in the FCL Proceedings, the Allatech Proceedings and the Supreme Linings Proceedings and incurred and claimed costs in relation to acting in those proceedings during the period when CMG was under administration and there was a stay of claims by and against CMG pursuant to section 444E of the Corporations Act .

■ The [respondents] failed to advise Mr Attard and Mr Henry that the claims by and against CMG in the FCL Proceedings, the Allatech Proceedings and the Supreme Linings Proceedings were stayed.

■ The [respondents] acted in the Orlando Proceedings, including appearing at the hearing for 5 days in the District Court of New South Wales and incurred and claimed costs in relation to acting in the Orlando Proceedings during the period when CMG was under administration and there was a stay of claims by and against CMG pursuant to section 444E of the Corporations Act .

■ The [respondents] failed to advise Mr Attard and Mr Henry before 18 January 2002 that the claims by and against CMG in the Orlando Proceedings were stayed.

72 The other allegation, which is a live issue in the appeal, relates to the Hillig proceedings. It is alleged at [77] of the Statement of Claim that in breach of their duty of care, the respondents purported to act for CMG in the Hillig proceedings without the consent of the Administrator of CMG, [namely, Mr Hillig]. In their cross-claim the respondents pleaded their retainer by Messrs Attard, Henry and CMG. They further pleaded costs agreements dated 17 August 2000, 3 April 2001, 25 January 2002 and a deed dated 5 February 2003.

73 The costs agreement of 25 January 2002 related to the retainer of James Legal by Messrs Attard and Henry to act for CMG in the Hillig proceedings. In paragraph 13 of their defence to the cross-claim, the appellants admitted that Messrs Attard, Henry and CMG entered into that costs agreement and that James Legal and/or Mr James had agreed to carry out certain work as set out in that agreement to act generally and specifically in relation to the Hillig proceedings.

74 Paragraph 14 of the cross-claim was in the following terms:

“In accordance with the January 2002 costs agreement [James Legal] carried out work and was entitled to render professional fees and incur disbursements.”

entitled to render professional fees and incur disbursements in relation to the Hillig proceedings

75 The combined effect of paragraphs 13 and 14 of the defence to the cross-claim would, at least on one view of it, seem to constitute an admission that Mr James and James Legal were retained by Messrs Attard, Henry and CMG to act on CMG’s behalf in the Hillig proceedings; that they carried out professional work with respect to those proceedings; and that they were entitled to render professional fees and incur disbursements in relation thereto.

76 This admission is of relevance to the appellants’ contention on the appeal that the respondents were not entitled to recover from Messrs Attard or Henry any outstanding costs or disbursements incurred by them in relation to the conduct of the Hillig proceedings.

77 However, of some relevance to the issue with respect to the Hillig proceedings is paragraph 25 of the defence to cross-claim in which it was alleged that the respondents, in answer to the whole of the cross-claim, agreed with the appellants or, alternatively, represented to them

“(a) that the [respondents] would arrange for the assessment of all bills rendered by them to the [appellants], including accounts paid and unpaid and accounts whether rendered or not at the time of such agreement or alternatively representation.

(b) that after assessment, the liability of the [appellants] on all such bills would be limited to the amount of the bill or the amount of the assessment, whichever was the lower.”

78 It is fair to say that the appellants failed to establish the agreement or representation alleged and there is no appeal from her Honour’s decision with respect thereto. Nevertheless, there was an issue on the appeal as to whether the primary judge should have referred the relevant bills to an appropriately qualified referee for assessment as to whether the costs and disbursements, the subject of those bills, were reasonable.

THE PRIMARY JUDGE’S FINDINGS

79 It is only necessary to refer to so much of her Honour’s judgment as relates to the issues that were advanced on the appeal. After setting out the relevant factual material, and prior to dealing with each of the appellants’ claims which, ultimately, were confined to the claims for breach of contract and/or negligence, the primary judge first dealt with the general question of the immunity from suit of advocates in respect of the conduct of litigation as discussed by the High Court in Giannarelli v Wraith [1988] HCA 52; (1988) 165 CLR 543 and D’Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; (2005) 223 CLR 1.

80 Relevantly to the issues in the present case, the following propositions can be extracted from her Honour’s discussion (at [66]-[75]) of those two authorities:

(a) Although the immunity was originally considered as applying only to those legal practitioners who practised as barristers, it now extends to legal practitioners practising as solicitors who undertake the relevant kind of work. Accordingly, Mr James and James Legal have the benefit of the immunity to the extent that it would protect a barrister undertaking the work that they performed.

(b) The immunity extends to any cause of action based upon the conduct of litigation.

(c) The question is the reach, or boundary, of the immunity where, in a case such as the present, none of the relevant work actually took place in court, although it was connected with one or other of the various pieces of litigation in which Mr James and James Legal had been retained.

(d) Although each claim of the appellants was connected to that litigation, the critical question was the extent of the solicitor’s immunity for work done out of court.

■ extending to work done out of court which leads to a decision affecting the conduct of the case in court;

■ extending only to work 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;

■ work which is intimately connected with the conduct of litigation.

■ failing to raise a matter pertinent to the opposition of a maintenance application;

■ failing to plead or claim interest on an action for damages;

■ issuing a notice to admit and making admissions;

■ failing to plead a statutory prohibition on the admissibility of crucial evidence;

■ negligently advising a settlement;

■ failing to advise clients facing criminal charges that they might have a good defence;

■ negligently advising a client to plead guilty at committal.

81 The primary judge then proceeded to deal with each of the claims the subject of final submissions by the appellants. In doing so she first determined with respect to each claim whether it attracted the relevant immunity of a solicitor for work done out of court and then considered, even if the immunity applied, whether there were other grounds for rejecting the claim.

The Orlando proceedings

82 Her Honour identified (at [79]) the issue arising out of the Orlando proceedings in the following terms:

“Purporting to act for CMG in the Orlando proceedings while there was a stay of the claim against CMG and without the consent of the Deed Administrator.”

83 At [80] and [81] of her reasons, the primary judge made the following findings:

■ it was reasonable to infer that Mr James did not explicitly turn his mind to the provisions of s 440D of the Corporations Act ;

■ the fact that he did not make a decision in these circumstances was irrelevant as the whole point of the appellants’ claim was that he overlooked those provisions;

■ nevertheless what he did in representing CMG in the Orlando proceedings, was “ intimately connected with ” that litigation and certainly was preliminary to the decisions about how that litigation was to be conducted.

84 Accordingly, her Honour (at [82]) rejected the Orlando proceedings claim on the basis of Mr James’ failure to appreciate that s 440D of the Corporations Act effected a stay of FCL’s cross-claim against CMG that was “intimately connected with” his agreement to represent CMG in defending that cross-claim in the District Court. It could therefore be said that Mr James’ negligent failure to appreciate that there was a stay and the impact that would have upon the Orlando proceedings including FCL’s cross-claim against CMG, was because of his decision and that of his clients to be involved in the conduct of the litigation constituted by that cross-claim, including the decision to defend that claim.

85 The primary judge then considered that there were other reasons to reject the appellants’ claim. At [84] she found that had Mr James taken the point earlier, meaning thereby at the time the cross-claim was filed and served and the stay was in operation, it would still have been open to FCL to seek leave to proceed pursuant to s 440D of the Corporations Act (correctly, s 444E) after 28 July 2000 being the date of the Deed. As it would have been successful, as it ultimately was, CMG sustained no damage, being the costs of the four days of the hearing of the Orlando proceedings in the District Court, before the Court granted leave for FCL to proceed. CMG would have been in exactly the same position that it would have been had the application for leave to proceed been made when Mr James assumed carriage of the matter after the cross-claim was filed on 14 June 2000.

86 The primary judge then said at [85]:

“This raises a hypothetical question. What, as a matter of the practice of this Court, would have been the likely result of such an application? This is precisely the sort of issue on which expert evidence could have cast considerable light. No evidence was put before the Court to demonstrate that, on the probabilities, FCL would have failed had it made such an application. No evidence was adduced (nor argument advanced) to identify the principles according to which such applications are determined. In answer to a question from me as to the evidence from which I could determine the likely result of such an application, I was told that I could myself assess that probability.”

87 Her Honour rejected the proposition that she could herself assess the probability of whether or not FCL would have been successful in obtaining the leave of the court in June 2000 to proceed pursuant to s 440D for two reasons: one factual and one of principle. The former, as she said at [86], was that she did not routinely sit to determine applications in the Corporations List and therefore did not have the requisite knowledge of the practice of the Court or the expertise to apply to such a determination. The latter, as she said at [87], would be that to take the course proposed would in effect constitute her as an expert witness – namely, to assess the probable fate of a hypothetical application by FCL.

88 Her Honour concluded at [88] that:

“[b]ecause there is no evidence on which I could conclude that FCL would probably have failed in any application to proceed against CMG, there is no evidence of any damage flowing from Mr Jacobs’ representation of CMG in the Orlando proceedings. For this reason also, this claim must be rejected.”

89 The appellants challenge both her Honour’s findings and reasons on grounds to which I shall refer below.

The Hillig proceedings

90 At [109] the primary judge indicated that she found it difficult to identify the precise basis on which this claim was made. She then referred to the relevant paragraphs of the Statement of Claim that apart from reciting the orders sought in the Hillig proceedings, did no more than allege that the respondent did not obtain the consent of Mr Hillig as Administrator under the Deed, to act for CMG in those proceedings. At [111] she referred to the following final written submissions of the appellants on this issue:

“137. Mr James accepted that Mr Hillig was represented by solicitors in the Hillig Proceedings and his position was to uphold the [Deed]. The defendants did not add any value or advance the interests of Messrs Attard and Henry in the Hillig proceedings.

Accordingly, the plaintiffs claim a declaration that the plaintiffs are not liable to the defendants in respect of work performed in the Hillig proceedings

91 At [113] her Honour found that whatever Mr James did in respect of the Hillig proceedings, it was done in such a manner as to be “intimately connected with” the litigation. He was thus entitled to advocates’ immunity.

92 Moreover, at [114], her Honour held that in any event no evidence had been adduced by the appellants on which to found a conclusion that Mr James had acted negligently in the professional services that he had provided to CMG with respect to the Hillig proceedings. In their submissions on the appeal, the appellants essentially accepted this finding but claimed that they were not obligated to pay the respondents’ costs and expenses with respect to the representation of CMG in the Hillig proceedings upon the ground that James Legal had acted without instructions.

The cross-claim

93 A number of contentions were advanced before the primary judge with respect to the cross-claim which her Honour rejected and which are not the subject of challenge on the appeal. She therefore concluded that the respondents were entitled to succeed on their cross-claim. However, an issue arose as to the quantum of the costs and disbursements that should be the subject of an order pursuant to the cross-claim that those costs and disbursements be paid by the appellants.

94 The primary judge referred to this issue in the following terms:

“160. However, I am not satisfied that I have been referred to all available material in relation to the cross-claim. I am satisfied that the cross-claimants (Mr James and James Legal) are entitled to recover in accordance with the various costs agreements. What I have not heard is adequate argument on the availability to the plaintiffs, at this stage, of assessment of costs.

161. Accordingly, while there ought to be a verdict for the cross-claimants on the cross-claim, I will refrain from making such an order, or entering judgment, until the parties have had an opportunity of putting further material or argument before me.”

95 It would appear from these observations that due to the lack of argument on the issue, her Honour was uncertain as to how to assess the costs that she had held the respondents were entitled to recover pursuant to their cross-claim. This issue was the subject of a further hearing before her Honour on 25 August 2009 and in respect of which she delivered the supplementary judgment. In that judgment her Honour noted that in their cross-claim the respondents had sought orders for payment by the appellants of fees said to be owed. She noted that in the principal judgment she had rejected the appellants’ defences and had indicated that the respondents were entitled to orders in their favour on the cross-claim. However, she was not satisfied that she was then in a position to quantify the amounts owing. She said (at [3]):

“There was a question in my mind as to whether, the fees claimed being legal professional fees, the [appellants] were entitled to invoke the assessment regime provided by the legislation regulating the legal profession.”

Legal Profession Act

96 At [4] her Honour noted that in light of the principal judgment it could hardly be contended that the respondents were not entitled to payment. However, the question was how that payment was to be quantified. At [6] she found that the respondents had proved that they had issued invoices totalling $1,323,033.76 for professional fees and disbursements of which $543,345.82 had been paid by the appellants, leaving an outstanding balance of $779,687.94.

97 In January 2004 the respondents had made application pursuant to Division 6 of Part 11 of the LPA for an assessment of their costs in respect of the Allatech proceedings as well as in respect of their Master File costs and certain proceedings involving Blessington Judd. The first four appellants commenced proceedings on 19 February 2004 in the Equity Division of the Supreme Court seeking a declaration relating to a deed concerning the question of costs that had been executed in January 2003 and allegedly repudiated by the respondents. The original Statement of Claim in the present proceedings was filed on 2 March 2004. As a consequence of the allegations contained in that pleading in which damages were sought (including an allegation that the respondents were estopped from claiming costs and disbursements that exceeded the agreed payments referred to in the deed executed in January 2003) on 2 April 2004 an application was made by the appellants for an order staying the assessment of the respondents’ applications on the basis that it would be futile and impractical for that assessment to proceed prior to the termination of the present proceedings.

98 The matter came before Bell J on 7 May 2004 and she delivered judgment on 11 June 2004: Attard & Ors v James Legal Pty Ltd & Ors [2004] NSWSC 478. At [19] her Honour observed that should the assessment process be allowed to run its course, the appellants would be put to considerable expense in the preparation and lodgement of their notice of objections which would raise the question of whether the legal work undertaken was necessary in light of what was alleged in the present proceedings to have been the respondents’ negligence. Ultimately her Honour granted the stay. The primary judge referred to the stay application at [8] of the supplementary judgment and noted at [9] that the appellants had made no application for assessment. She then referred to the defence to the respondents’ cross-claim, including paragraph 25 thereof, which I have recorded at [77] above. However, as I indicated at [78] above, her Honour found that no evidence was called to support the allegations in that paragraph.

99 At [13] her Honour noted that it was of some interest that the defence to the cross-claim contained no express pleading raising any issue as to the fairness or reasonableness of the costs claimed in the various invoices issued to the appellants. This was true but as will appear, Mr James was cross-examined without apparent objection on some of the items in his bills in respect of which he conceded that there had been an overcharge. I shall return to this issue when dealing with the appellants’ submissions.

100 At [14] the primary judge observed that notwithstanding that there was no express pleading raising the issue as to the fairness or reasonableness of the costs claimed, she was concerned that the appellants have the opportunity, if available to them, to have the fairness and reasonableness of the costs assessed. Although she requested the parties to reach agreement on this issue, they were unable to do so.

101 At [15] her Honour found that the LPA did not empower her to make an order for assessment under its provisions. This was clearly so and no challenge is made to that finding. However, as an alternative, the appellants submitted that pursuant to rule 20.14 of the Uniform Civil Procedure Rules 2005 (UCPR), which permits reference to a referee for the determination of any question arising in the proceedings, she should appoint a referee who had costs assessing experience to determine an appropriate quantum of the costs claimed. Although this scenario had some initial attraction to her Honour, on reflection she considered (at [17]) that that course was not available to her or, if it was, that it was not appropriate. This was because the LPA provided specifically for the assessment of costs and imposed restrictions upon the manner in which the assessment was to be undertaken and the circumstances thereof.

102 In other words, as I understand her Honour’s reasoning, the LPA in effect provided an exclusive code for the assessment of the costs of a legal practitioner with respect to the provision of professional legal services. It is this aspect of the supplementary judgment that the appellants challenge.

103 Her Honour’s conclusion with respect to this issue was encapsulated in the following paragraphs of her reasons:

“18. [The respondents] have been denied money to which they are entitled for several years. The plaintiffs stood in the way of assessment of some invoices by applying for, and obtaining, a stay of those assessments.

19. They have never formally queried the fairness or reasonableness of the charges.

20. I have concluded that it is now too late to raise these issues.”

THE ISSUES ON THE APPEAL

The submissions of the parties with respect to the Orlando proceedings issue

104 The appellants’ submissions with respect to this issue may be summarised as follows:

(a) The primary judge’s invocation of advocates’ immunity at [81] to [82] of the principal judgment with respect to Mr James’ alleged negligence in relation to the stay issue was misconceived;

(b) In particular, her Honour applied the wrong test, namely, that the alleged negligence was intimately connected with “ the litigation ”, the correct test being that that negligence must be intimately connected with “ the conduct of the defence to the cross-claim in the Orlando proceedings in court ”. In the present case the relevant negligence was the failure to advise of the existence of the stay, which did not relevantly relate to that conduct;

(c) Although her Honour correctly identified the real issue to be whether if leave had been sought (promptly), it would have been granted, she erred in refusing to assess the probabilities of that hypothetical application under s 440D(1) (or 444E(3)) of the Corporations Act . In particular, she erred in failing to hear submissions on this topic or to receive instruction on the relevant case law as it existed in 2000. Moreover, she erred in finding that she could not determine the issue herself on the bases that first, she did not have the relevant expertise and, second, she had received no expert evidence on the subject. Reliance was placed upon a passage in the judgment of Brereton J in Keesing v Adams [2010] NSWSC 336 at [35] where his Honour observed that on questions of professional legal practice, a court does not need to have evidence but can resort to its own knowledge of professional practices and standards, this being particularly so in legal professional negligence cases. It was submitted that the position was a fortiori with respect to a matter relating to the practice of the Court itself;

● the claim by FCL against CMG was only for $65,820;

● CMG was in administration and had no funds of its own to defend the cross-claim;

● as a matter of law, the debt alleged was, if proved, a provable debt in the administration of CMG and that as a matter of practicality there was no reason why the claim could not have been dealt with as a proof of debt in the administration of CMG at least in the first instance or until it was otherwise rejected by the Administrator;

● the claim against CMG was a building claim the litigation of which notoriously takes considerable time and money to resolve;

105 The respondents submitted that:

(a) Her Honour was correct to apply advocates’ immunity;

(b) Given that Einstein J had on 31 October 2002 granted leave to proceed to FCL with respect to the cross-claim, there was no reason to believe that had a similar application been made by FCL in 2000, it would not have been successful;

(c) Her Honour was correct to find that there was either no evidence, or at least a lack of evidence, as to the necessary factual material which would enable her, on the probabilities, to find that FCL would have failed had it made an application for leave to proceed pursuant to s 440D (or s 444E). However, I interpose that the respondents were unable to point to the nature of the factual material other than that relied upon by the appellants, that they asserted would have been relevant to the determination of the hypothetical application.

Determination of the Orlando proceedings issue

106 The issue of advocates’ immunity was the subject of some consideration by this Court in Philip Walton t/as Pitcher Walton & Co v Efato Pty Ltd [2008] NSWCA 86. With the agreement of Beazley and Giles JJA, at [79]-[84] I discussed the relevant principles. As noted at [79], the respondent in that case submitted that immunity only applied in circumstances where the solicitor was performing work that led directly to (or was intimately connected with) a decision affecting the conduct of the case in court. At [83] I referred to the decision of the High Court in D’Orta-Ekenaike citing [86] and [87] of the joint judgment of Gleeson CJ, Gummow, Hayne, and Heydon JJ in which their Honours stated the tests of “work done out of court which leads to a decision affecting the conduct of the case in court” on the one hand and “work intimately connected with work in court” on the other.

107 At [84] I said this:

Giannarelli

108 The facts of that case were quite different to those of the present. However, the question which I posed in that case may, I think, also be posed in the present case with appropriate amendments, namely: did Mr James’ failure to advise that a stay applied to FCL’s cross-claim in the Orlando proceedings against CMG unless and until the Court granted leave to FCL to proceed (which may or may not have been granted) lead to a decision by the appellants affecting the conduct of their defence to the cross-claim in the District Court.

109 In my opinion, the answer to the question so posed should be in the affirmative. Mr James’ negligence may be described as his failure to advise Messrs Attard and Henry in their capacity as directors of CMG and as the only possible funders of the litigation that:

● FCL’s cross-claim against CMG was stayed;

● FCL could not proceed on that cross-claim unless leave was granted to it pursuant to s 440D(1) or, after 28 July 2000, s 444E(3) of the Corporations Act ;

● as the Deed did not authorise Messrs Attard and Henry to give instructions on behalf of CMG with respect to the Orlando proceedings, it would be a matter for Mr Hillig, the Administrator of CMG under the Deed, whether he wished to consent to any application by FCL for a grant of leave;

● it was a matter for Messrs Attard and Henry whether they would indemnify Mr Hillig for the costs of defending the cross-claim on behalf of CMG until any order for costs was made in CMG’s favour on the cross-claim and if they would fund CMG’s own costs of the cross-claim;

● the costs of defending the cross-claim would in all probability exceed the amount of FCL’s claim;

● they should oppose any application bny FCL for leave to proceed and not offer to indemnify Mr Hillig so that he would oppose the grant of leave which, on the authorities, was unlikely to be granted as a consequence thereof;

110 I would interpose that the reason why Mr James should have advised Messrs Attard and Henry that the Deed did not authorise them to give instructions on behalf of CMG in respect of the Orlando proceedings was because those proceedings did not fall within the definition of “Litigation Claims” in Clause 1 of the Deed. As a consequence the conduct of such proceedings was a matter for Mr Hillig as Administrator. Messrs Attard and Henry, as directors of CMG, were only empowered by the Deed to manage, conduct and pursue the Litigation Claims as defined.

111 It is necessary to then identify a decision caused by Mr James’ negligence that affected the conduct of CMG’s case in the District Court. In my opinion that decision was to instruct Mr James on behalf of CMG to brief counsel for the purpose of defending the cross-claim and to pursue that defence in the manner which occurred. From this it follows, in my view, that Mr James’ negligence did lead to a decision which did affect the manner in which Messrs Attard and Henry conducted CMG’s case in the District Court, namely, that the claim was actively defended where had Mr James not been negligent, it would not have been defended unless and until FCL obtained leave to proceed.

112 Accordingly for the foregoing reasons, in my opinion her Honour was correct to find that the Orlando proceedings claim was subject to advocates’ immunity with the consequence that it was rightly rejected.

113 In case I am wrong with respect to the foregoing, I shall deal with the alternative basis upon which the primary judge rejected this claim.

114 It will be remembered that in the FCL proceedings commenced on 6 May 1999, a declaration was sought that Messrs Attard and Henry were guilty of misleading and deceptive conduct and therefore in breach of s 52 of the Trade Practices Act and s 42 of the Fair Trading Act. In paragraph 28 of the Statement of Claim, which Mr James in his defence relevantly did not admit, it was alleged that Messrs Attard and Henry instructed Mr James in July 2000 that:

● CMG had no funds of its own;

● CMG had spent approximately $260,000 on legal fees during the period from about December 2000 to June 2001 [the latter date could not be correct as the instructions to which paragraph 28 relates were alleged to have been given in July 2000];

● Messrs Attard and Henry would be funding the claims made against them in the FCL, Orlando, Allatech and Supreme Linings proceedings;

● the entire joint and several resources of Messrs Attard and Henry available to defend the claims against them amounted to no more than $600,000;

● the priority of Messrs Attard and Henry was to limit any personal liability that might arise out of the FCL proceedings or any other proceedings which they wished to resolve in the quickest and least expensive way possible;

● Mr James was to advise on the best way to defend the claims made against Messrs Attard and Henry personally; and

115 Mr James could not recall whether at the conference referred to, which he agreed was on 21 July 2000 at his office, Messrs Attard and Henry had indicated they had spent approximately $260,000 on legal costs in relation to the litigation. He accepted that they mentioned that they had spent a substantial amount of money on witnesses and lawyers’ expenses. However, he denied that he was advised that the total resources available to them to fund the litigation were approximately $600,000.

116 The primary judge appears to have accepted this position in the principal judgment when she said:

Trade Practices Act

119. Both Mr Attard and Mr Henry wished to contain costs. Mr James also agreed that this was a priority.”

117 In his affidavit evidence (at Blue 1/21-22) Mr Attard deposed as follows:

“33. On or about 18 January 2002 and shortly before the adjourned hearing date of the Orlando Proceedings, Mr Henry and I attended a meeting with Mr Marcus Jacobs QC and Ms Mary Cunningham and/or Mr James. I do not recall whether both Ms Cunningham and Mr James were present at that meeting. I recall that at least one of them was present. During this meeting the following exchange took place:

Mr Jacobs: ‘It has only just come to light because Allatech has commenced a case against Hillig and CMG to have the administration overturned, that the Orlando Case is stayed unless the Supreme Court gives leave to move forward. I have to instruct her Honour, as I am duty bound to do, that the Orlando Case is stayed because CMG is in a deed of company arrangement. It won’t be a problem as we will consent with FCL to get leave of the Supreme Court to have the case finalised.’

Mr Henry: ‘I have been fucking saying for the whole year that we are in a deed of company arrangement. But you have all been ignoring us.’

Mr Jacobs: ‘Michael, this is the first time I have seen the deed. It was only because of this case that I looked at it.’

34. At no time prior to this meeting had I been advised or informed that the claims by FCL against CMG in the Orlando Proceedings had been stayed. If I had received such advice and I had been asked: ‘what do you want to do about the Orlando Proceedings’ I would have said: ‘Let them remain stayed’.

35. …

36. On or about 31 January 2002 an Originating Process was filed on behalf of the Defendants in the Supreme Court of New South Wales, proceedings no. 1320 of 2002 for leave to proceed against CMG.

37. In or around July or August 2002 I spoke to Mr James in relation to the Application for Leave to Proceed against CMG. The following exchange took place:

Mr James: ‘At this stage Justice Austin is not going to give leave for the Orlando Proceedings to be heard. To circumvent this, you and Michael can take the place of CMG on the application for leave so that the case can be heard.

I said: ‘Why?’

Mr James: ‘Because it’'s obvious that you have already won this case. You need to get leave to proceed with the Orlando Proceedings so you can get your legal costs paid by [FCL].”

118 An issue arose as to the admissibility of paragraph 34 of Mr Attard’s affidavit in view of the provisions of s 5D(3) of the Civil Liability Act 2002 which relevantly provides as follows:

“If it is relevant to the determination of factual causation to determine what the person who suffered harm would have done if the negligent person had not been negligent:

(a) …

(b) any statement made by the person after suffering the harm about what he or she would have done is inadmissible except to the extent (if any) that the statement is against his or her interest.”

119 The issue that arose on the appeal was whether this Court was required to ignore paragraph 34 notwithstanding that no objection had been taken to its admission into evidence.

150 Mr Hillig’s report also referred to the Supreme Linings proceedings in which that company claimed $180,000 against CMG, whereas CMG had lodged a claim in the District Court against Supreme Linings for $750,000. According to the directors’ report, the unsecured creditors of CMG totalled $694,582 of which $443,568 were claims by companies associated with the directors. The report then stated that CMG’s total shortfall as estimated by the directors was $539,954.90.

151 It appears from the foregoing that CMG’s only available asset to fund the Orlando proceedings was cash of $39,611. Against that amount it had unsecured creditors, not including companies associated with the directors of CMG, of $251,014. Its only other possible asset was what might be recovered from the Allatech proceedings, the FCL proceedings and/or the Supreme Linings proceedings. The whole point of the Deed was that those proceedings would not be the responsibility of the Administrator but of the directors personally. Even then, the evidence was (as acknowledged by Mr James) that Messrs Attard and Henry as directors of CMG, were concerned to only defend the personal allegations made against them of misleading and deceptive conduct and were otherwise prepared to allow CMG to be liquidated.

152 Furthermore, the inference was available from the evidence that Mr Hillig as Administrator under the Deed, would have opposed any application for leave to proceed brought by FCL in August 2000. He opposed the 2002 application when it was made and it was only as a consequence of Messrs Attard and Henry being prepared to fund that litigation and to indemnify the Administrator that leave was ultimately granted by consent.

153 So much was established by Mr Attard’s evidence in paragraph 37 of his affidavit that I have extracted at [117] above. It is significant that as at July/August 2002 Mr James had formed the opinion that Austin J was not going to grant leave for the Orlando proceedings to be heard notwithstanding that it had already proceeded for four days and was part-heard in the District Court. It was to circumvent his Honour’s apparent disinclination to grant leave that Messrs Attard and Henry were advised by Mr James to intervene pursuant to s 237 of the Corporations Act and to support FCL’s application for leave. Unless the cross-claim was prosecuted to judgment, there was no chance of Messrs Attard and Henry recovering the legal costs they had already expended on that litigation.

154 The position in August 2000 was quite different, as no such costs had then been incurred. Furthermore, as the appellants submitted, where the amount in issue was relatively insignificant in what was, in effect, a building case, the defence of the cross-claim was likely to incur substantial costs as it in fact did. This was particularly so given that even though CMG was only joined as a cross-defendant to FCL’s cross-claim, it would still need to be represented at the hearing of the claim by Orlando against FCL notwithstanding that it was not a party thereto.

155 For the foregoing reasons, in my opinion, the primary judge should have determined whether, as a matter of probability, an application made by FCL for a grant of leave pursuant to s 444E(3) in August 2000 would have been refused. In my opinion, such an application would have been denied with the consequence that the stay of FCL’s cross-claim against CMG would have remained and the costs incurred by the appellants with respect to that litigation would have been avoided.

156 Notwithstanding the foregoing, the appellants’ claim with respect to the Orlando proceedings fails upon the basis that Mr James was protected by advocates’ immunity as found by the primary judge. Consequently, their challenge to her Honour’s rejection of that claim cannot be sustained.

The submissions of the parties with respect to the Hillig proceedings

157 In their written submissions-in-chief before the primary judge and as her Honour recorded at [111] of the principal judgment (see [90] above), the appellants made three points. The first was that as Mr Hillig, who was represented by his own solicitors, was required to uphold the Deed, it was in effect unnecessary for the respondents to accept instructions from Messrs Attard and Henry to advance either their or CMG’s interests in the Hillig proceedings. Accordingly, the legal costs incurred by Messrs Attard and Henry in those proceedings did not add any value to or otherwise advance their interests in them.

158 The second was that by representing CMG at the expense of Messrs Attard and Henry, James Legal was acting contrary to the original instructions of Messrs Attard and Henry which was to only defend the personal claims made against them for misleading and deceptive conduct in the FCL proceedings.

159 The third was that Messrs Attard and Henry were not authorised under the Deed to give instructions to James Legal to act on behalf of CMG in the Hillig proceedings: this was a challenge to James Legal’s retainer.

160 The primary judge rejected these submissions upon two grounds. The first was that whatever James Legal did in the Hillig proceedings it was in such a way as to be “intimately connected with” the litigation and thus attracted advocates’ immunity. The second was that no evidence was adduced upon which to found a conclusion that James Legal had acted negligently. There was no finding by her Honour that James Legal had acted without instructions on CMG’s behalf or that Messrs Attard and Henry did not otherwise have the authority to retain James Legal on CMG’s behalf for the purpose of those proceedings.

161 The respondents in their written submissions on the appeal contended as follows. First, given the nature of the Hillig proceedings as described by Austin J in Allatech v Construction Management Group to which I have referred at [68] above, it was apparent that Allatech sought to terminate the Deed upon the ground that Messrs Attard and Henry, as directors of CMG, had breached their fiduciary duties as directors and had failed to inform Mr Hillig or the creditors of those breaches. In other words, there were claims made against Messrs Attard and Henry personally which made it entirely appropriate that they separately represent CMG in their capacity as its directors in the Hillig proceedings.

162 Second, the respondents submitted that the appellants’ apparent challenge to her Honour’s decision was based upon the erroneous contention that the respondents were not retained by the parties to those proceedings, i.e. either CMG or Mr Hillig as Administrator under the Deed. I would understand this submission of the respondents to contend that Messrs Attard and Henry as directors of CMG were authorised to retain and instruct James Legal to act for CMG in the Hillig proceedings as a consequence of the provisions of the Deed.

163 Third, the respondents submitted that the appellants’ contentions were not supported by the evidence as Mr Henry had admitted to receiving a fee agreement which stated the instructions to Mr James to “get us out of this as soon as possible”. It was submitted that this was not an instruction not to act.

164 Fourth, it was submitted that under the Deed, Messrs Attard and Henry had the conduct of “all litigation in the Supreme Court of New South Wales between the Company [CMG] and Allatech Pty Ltd …”. As a matter of construction this expression was wide enough to have included the Hillig proceedings.

165 The appellants relevantly submitted that:

(a) by purporting to act for CMG in the Hillig proceedings without the consent of the Administrator or CMG, the respondents were in breach of their primary instructions to the effect that CMG had no funds of its own, that the priority of Messrs Attard and Henry was to limit any personal liability that arose out of the FCL or any other proceedings and that those persons were not concerned with the continued existence or operation of CMG;

(b) the primary judge erred at [109] of the principal judgment where she referred only to paragraphs 55 to 57 of the Statement of Claim and made no reference to paragraphs 76 to 78 which were also concerned with the Hillig proceedings;

(c) her Honour also erred in failing to refer to the oral submissions made on behalf of the appellants at Black 447-448 but which, I interpose, were generally repetitive of the appellants’ written submissions reproduced by her Honour at [111] of the principal judgment (see [90] above);

(d) notwithstanding the failure of her Honour to deal with the oral submissions that were made to her, the respondents breached their duty of care in failing to advise Messrs Henry and Attard that appearing on behalf of CMG in the Hillig proceedings and seeking to uphold the Deed would not add any value or advance their interests in those proceedings [this was a repeat of [137] of the appellants’ written submissions at trial];

(e) the respondents failed to advise Messrs Attard and Henry that they had no interest in the Hillig proceedings especially given their clear instructions that their primary concern was to defend the personal claims made against them and that they were not interested in CMG and were content for it to be placed in liquidation. That being the advice that they ought to have been given, there could be no doubt that Messrs Attard and Henry would have accepted it and consequently avoided liability for the costs claimed by the respondents in respect of the legal costs expended by them in relation to those proceedings;

(f) alternatively, James Legal was aware that Messrs Attard and Henry had no authority to retain them on behalf of CMG in the Hillig proceedings and were therefore negligent in accepting a retainer on behalf of CMG given that those instructions could only be obtained from Mr Hillig as Administrator. However, the respondents did not seek Mr Hillig’s consent and Messrs Attard and Henry denied that they instructed James Legal to act for them or CMG in the Hillig proceedings;

(g) furthermore, Mr Hillig was represented by his own solicitors in those proceedings and had communicated to James Legal that he, Mr Hillig, wished to uphold the Deed. It is because CMG and Mr Hillig (as Administrator) were the only defendants in the Hillig proceedings that the participation by him therein, and his separate representation, resulted in there being no value in Messrs Attard and Henry also being involved in those proceedings. This was, in any event, contrary to their express instructions;

166 The respondents’ oral submissions on the appeal, to the extent to which they were not repetitive of their written submissions, may be summarised as follows:

(a) In paragraph 14 of the cross-claim the respondents alleged that in accordance with the January 2002 costs agreement, James Legal had carried out work and was entitled to render professional fees and incur disbursements pursuant thereto;

(b) In paragraph 14 of their defence in answer to paragraph 14 of the cross-claim, the appellants admitted that one or other of the respondents had carried out work and was entitled to render professional fees and incur disbursements in relation to the Hillig proceedings; this was a clear admission of liability to pay;

(c) Under the Deed, the definition of “ Litigation Claims ” extended to the Hillig proceedings in respect of which the directors of CMG were, pursuant to Clause 5 of the Deed, empowered to conduct and pursue those claims;

(d) In any event, Mr Hillig and his solicitor were fully aware that the respondents, or either of them, were acting for CMG in the Hillig proceedings and took no objection thereto or to the giving of instructions on behalf of CMG by Messrs Attard and Henry;

(e) The Hillig proceedings involved allegations of breaches of fiduciary duties by Messrs Attard and Henry which affected their personal reputations and were therefore within their primary instructions to the respondents to the effect that they wished to limit any personal liability that might arise out of the FCL or any other proceedings.

Determination of the Hillig proceedings issue

167 In my opinion, any negligence on the part of the respondents that went to the issue of whether or not they had been properly retained to act for CMG in the Hillig proceedings could not attract advocates’ immunity. On the other hand, to the extent to which it was alleged that the respondents or either of them was negligent in failing to abide by any instructions by Messrs Attard and Henry that they were not to represent CMG in the Hillig proceedings, any such failure might attract that immunity essentially for the same reasons as or applied to the Orlando proceedings stay issue.

168 However, it is unnecessary to finally decide the immunity issue for I am of the opinion that the evidence clearly established that Messrs Attard and Henry did instruct the respondents to act on behalf of CMG in the Hillig proceedings. I am of this opinion notwithstanding Mr Henry’s denial (at Black 235M) that he and Mr Attard did so instruct James Legal. This evidence was contrary to that at Black 233X-234C where Mr Henry conceded that he and Mr Attard were actively instructing Mr James in those proceedings. That concession is consistent with the admission in the appellants’ defence to the cross-claim, to which I have referred at [166(b)] above.

169 Mr Attard made similar concessions at Black 183I-R. In this respect his evidence was inconsistent with that at Black 181E-G where he denied instructing Mr James to act on behalf of CMG in the Hillig proceedings. However, the plain fact is that there was no instruction from Messrs Attard and Henry to Mr James or James Legal that they were either not to act or to cease acting for CMG in the Hillig proceedings. Further, they in fact gave instructions in those proceedings for the preparation of affidavits to be filed on their behalf. Accordingly, in my view it should be inferred that they were content for the respondents to act in those proceedings.

170 In the foregoing context it should be noted that in his affidavit sworn 18 April 2008 under the heading “The Hillig Proceedings”, Mr Attard dealt with those proceedings in three paragraphs (paragraphs 43-45). In none of them did he suggest that he and Mr Henry had not instructed Mr James to act for CMG in those proceedings. His only substantive complaint was that he believed that the respondents had not obtained the Administrator’s consent for them to act for CMG in those proceedings.

171 However it is plain, as I have already observed, that Mr Hillig and his solicitor were aware that CMG was separately represented by the respondents and that instructions with respect to that representation were being given by Messrs Attard and Henry. Accordingly, the inference is available, and should be drawn, that Mr Hillig consented to CMG being separately represented by the respondents and to instructions relevant to that representation being given by CMG’s directors.

172 In any event, pursuant to Clause 5 of the Deed, Messrs Attard and Henry as directors of CMG were responsible for the management, conduct and pursuit of the “Litigation Claims”. As I have already noted at [48] above, that expression was relevantly defined to mean:

“… the following proceedings involving the Company (or any proceedings incorporating the subject of these proceedings):

(a) all litigation in the Supreme Court of New South Wales between the Company and Allatech Pty Ltd … including [the Allatech proceedings].”

173 In my view the expression “Litigation Claims” as so defined included not only the Allatech proceedings but also all litigation in the Supreme Court between CMG and Allatech which would include the Hillig proceedings in which Allatech was the plaintiff and CMG was one of two defendants. Accordingly, Messrs Attard and Henry, as directors of CMG, were empowered under the Deed to act on behalf of CMG in those proceedings, which did not require the Administrator’s consent.

174 As I have already noted, the appellants submitted that the costs incurred on behalf of CMG in conducting the Hillig proceedings did not add any value to or advance the interests of Messrs Attard and Henry. I would reject that submission given that the founding allegation on which the Hillig proceedings depended was that in the circumstances set out at [8] of Austin J’s judgment in Allatech v Construction Management Group, Messrs Attard and Henry as directors of CMG, breached their fiduciary duties. These were allegations against Messrs Attard and Henry personally and, if established, would clearly affect their reputations. At [118] of the principal judgment, which I have recorded at [116] above, her Honour found that Mr Attard had maintained that his instructions were to focus on the Trade Practices Act claim made against himself and Mr Henry in the FCL proceedings, and that he was prepared to sacrifice CMG provided he could preserve his reputation by rebuffing the claim of misleading and deceptive conduct made personally against himself and Mr Henry.

175 In these circumstances, it is not surprising that Messrs Attard and Henry were keen to rebut what would otherwise be a slur upon their reputations constituted by Allatech’s allegation that they had breached their fiduciary duties as directors of CMG.

176 For the foregoing reasons I would reject the appellants’ submission that the respondents were not properly retained by Messrs Attard and Henry to act on behalf of CMG in the Hillig proceedings or that they had breached their duty of care or the terms of their retainer in representing CMG in those proceedings on the instructions of that company’s directors.

177 I would therefore confirm the primary judge’s finding at [114] of the principal judgment that no relevant evidence was adduced on which to found the conclusion that Mr James or James Legal had acted negligently in those proceedings. Accordingly the challenge to this part of the primary judge’s decision fails.

The determination of the cross-claim issue

178 The appellants’ challenge to her Honour’s determination of the respondents’ cross-claim is now confined to her refusal to refer the quantum of the costs claimed to a referee pursuant to UCPR 20.14. Her Honour considered that such a course was either not available or, if it was, it was inappropriate essentially for the following reasons:

(a) The LPA provides specifically for the assessment of costs and imposes restrictions upon the manner in which such an assessment is to be undertaken and the circumstances thereof. As a consequence I infer that her Honour considered it to be at least inappropriate to circumvent that process.

(b) For several years the respondents had been denied money to which they were entitled and in fact the appellants had stood in the way of the assessment of some invoices by applying for and obtaining a stay of those assessments from Bell J: see [98] above.

(c) The appellants had never “ formally ” queried the fairness or reasonableness of the charges. I understand this to be a reference to the fact that no such query was raised in the appellants’ defence to the cross-claim.

179 Although there may be some doubt as to whether her Honour made a finding that Division 6 of Part 11 of the LPA provided a complete and exclusive code as to how legal costs were to be assessed, in my opinion if she had, she would be in error. This was clear from s 208I of that Act which provided that Division 6:

“does not limit any power of a court or a tribunal to determine in any particular case the amount of costs payable … “

180 As was pointed out by Kirby J in Ryan v Hansen [2000] NSWSC 354; (2000) 49 NSWLR 184 at [32], in performing their functions under the LPA, a costs assessor was not part of the Supreme Court and, therefore, was not an officer of the Court. In any event, there was nothing in Division 6 that in my view ousted the jurisdiction of the Supreme Court pursuant to UCPR 20.14 to refer to an appropriately qualified referee the determination of the legal costs and disbursements to which a solicitor is entitled.

181 Although the cross-claim was an action, in effect, for liquidated damages, that fact did not in my view prevent the Court from exercising its discretion under UCPR 20.14 to refer the determination of the quantum of a client’s liability to a solicitor for professional costs to an appropriately qualified referee. Nevertheless, the fact that there was a regime available under the LPA may bear upon the exercise of the Court’s discretion to engage that rule.

182 In response to the other grounds upon which her Honour relied in refusing the reference application, the following points need to be made:

(a) It is not entirely correct that the appellants did not put in issue the fairness or reasonableness of the amounts claimed in the various bills, accounts or invoices which the respondents rendered to the appellants. Paragraph 22 of the cross-claim alleged that after 5 February 2003, James Legal issued accounts for work in progress in the sum of $746,792.86 including GST. Paragraph 22 of the appellants’ defence admitted that such accounts were issued in that amount but did not admit the entitlement of James Legal to issue such account or accounts in the amounts claimed.

(b) No doubt one of the reasons for this non-admission defence was that the appellants alleged in the main proceedings that they were not liable to the respondents for any further costs due to the latter’s breaches of contract and negligence. Nevertheless, the pleading is wide enough to include an allegation that James Legal was not entitled to the amounts claimed upon the basis that they were excessive.

Black 290S-294M

application [sic] for overcharging in this matter

allowing a judgment on accounts

Black 294U

"That’s where it goes, the accuracy of the charging rendered by the defendants in this matter.”

at Black 294V-295M

“SOUTHWICK: If that is the case, it has not been pleaded. It would be unfair to make a case on that now.

NEWTON: Yes it is, and that is why I am cross-examining on it. My friend provided an affidavit on Tuesday morning asserting defendants are seeking a judgment, and it arises out of that affidavit. That’s the first time I became aware that the defence was seeking a partial judgment.

HER HONOUR: I won’t stop the cross-examination, but any matter of detail that can be left to a costs assessor should be left to a costs assessor. I don’t know what the process is, I don’t know whether there is an opportunity to cross-examine or not, but there is certainly the opportunity to argue about what is properly chargeable.

NEWTON: I agree with that, and that’s where this part of the cross-examination is going, because ultimately I will be submitting in relation to the foreshadowed application by the defendants that they are entitled to have a judgment based on the non objection to bills of costs, and my answer to that, if your Honour finds they are entitled to those costs, is that that should be sent off for assessment.

HER HONOUR: Then why do we need to go into this detail?

NEWTON: We don’t if that’s the position. That only became apparent from that exchange.

Black 459

Ryan v Hansen

“First, I should state the obvious lest it be overlooked. A cost assessor’s task is to determine a bill of costs. Items on the bill may be allowed or disallowed. There is no power to determine the validity or otherwise of a cross-claim, or to award damages.”

“HER HONOUR: What does this go to?

NEWTON: Because in my submission your Honour those seven claims that I have referred to, if your Honour accepts the plaintiff’s submissions on those, because there will be, after this case, presumably an assessment of the unpaid costs to the defendant’s claim in the cross-claim order and declarations should be made as to what costs a costs assessor should disallow --

HER HONOUR: I told you repeatedly I am not going to be the costs assessor.

NEWTON: I am not suggesting that but in my submission a declaration should be made --

[HER] HONOUR: You are not asking me to assist the costs assessor?

NEWTON: No, I am not your Honour. …”

(g) On the following page of the transcript counsel for the appellants referred to the orders sought by them in their final written submissions and which included orders that on any assessment of the costs claimed by the respondents, the costs assessor disallow any costs claimed in respect of work performed in the Orlando and Hillig proceedings: Black 395H-I; T-U . He submitted orally that that would not involve her Honour assessing costs but that a costs assessor should assess them.

“[w]hat I have not heard is adequate argument on the availability to [the appellants], at this stage, of assessment of costs.”

Accordingly that issue was stood over and became the subject of the supplementary judgment.

(i) A reading of the transcript of the argument on 25 August 2009 which preceded the supplementary judgment, reveals that her Honour expressed the view that the matter of costs ought to go to assessment although it should be a condition of ordering that assessment that the appellants should make some payment to the respondents including any outstanding disbursements. She invited the parties to try and reach some agreement on the issue but they failed to do so.

“may very well be something in the referee point. It’s an ideal matter to be sent to a referee.”

had some initial attraction

(k) Counsel for the respondents acknowledged that his clients had two options to recover their costs. The first was to proceed to an assessment under the provisions of Division 6 of Part 11 of the LPA. The second, which was adopted in the present case, was to seek to recover the costs by way of their cross-claim in response to the appellants’ Statement of Claim.

(l) I would observe that had the respondents adopted the first option, then the issue of whether the costs were fair and reasonable would have inevitably arisen in the course of the assessment under the statutory regime. Having adopted the second option, one asks, perhaps rhetorically, why the appellants should be denied the right to challenge the fairness and reasonableness of the costs in respect of which the cross-claim was brought.

(m) In the foregoing circumstances, I find it difficult to understand her Honour’s finding at [20] of the supplementary judgment that it was “ now too late to raise these issues ”. In the substantive proceedings she herself had stopped cross-examination on the reasonableness of the respondents’ charges upon the basis that she would not determine the quantum of costs – that it would need to be assessed by some other qualified person. Furthermore, her Honour has inappropriately placed weight upon the fact that the appellants applied for and obtained a stay from Bell J in relation to the assessment of some of their bills which the respondents had sought shortly after they ceased to act for the appellants in April 2003.

183 In my opinion it follows that her Honour’s exercise of her discretion having miscarried, it falls to this Court to re-exercise it. In my view this Court should favour an order that the question of the fairness and reasonableness of the costs the subject of the cross-claim be referred to assessment by an appropriately qualified assessor. The consideration of the referee’s report should be by a judge of the Common Law Division of the Court.

184 However, the respondents submit that this should occur only on condition that the appellants pay 85% of the outstanding costs and disbursements as found by her Honour together with interest as well as the costs of the reference.

185 In my view, such a condition should be imposed with respect to 60% of the costs the subject of her Honour’s orders. I would make no order as to the costs of the referral: that should be determined after the referee’s report is returned to the primary judge for her adoption or otherwise pursuant to UCPR 20.24. In the event that the assessment of costs ultimately embodied in judgment on the cross-claim is less than the 60%, the Court has power to order the return of the excess.

186 It will be necessary for the parties to agree on a referee (if they cannot, the Court can nominate the referee), and for a more detailed order for reference to be made. Orders 3 and 4 made by Simpson J, dealing with costs the subject of the cross-claim being less than 60% of the whole, should be stayed consequent upon payment of the 60%, until the whole of the costs have been assessed.

CONCLUSION

187 In my opinion the appellants’ challenges to the findings of the primary judge with respect to the Orlando and Hillig proceedings have failed although they have succeeded on the only issue raised by them with respect to her Honour’s orders on the cross-claim. The issue upon which the appellants have succeeded forms a relatively small part of the appeal and their success on the cross-claim is limited. Accordingly, as the respondent’s success on the appeal outweighs that of the appellants by a significant margin, in my view the appellants should pay 75% of the respondents’ costs of the appeal. Otherwise her Honour’s order that the appellants pay the respondents’ costs of the cross-claim should not be disturbed.

POSTSCRIPT

188 Since writing this judgment I have had the benefit of reading in draft the reasons of Giles JA dealing with the vexed issue of advocates’ immunity and, in particular, its application to the Orlando proceedings. His Honour at [15] to [31] of his reasons has queried the application of the principle to a case such as the present whilst acknowledging, as do I, the binding effect of the High Court’s decision in D’Orta-Ekenaike. Yet, as Giles JA demonstrates, there are problems in some cases with the finality principle, being the central justification for the continued existence of the immunity. At present it is a one size fits all approach.

189 Another unsatisfactory feature of the principle concerns cases involving out of court conduct which precedes, often by a lengthy period, the conduct of the case in court, a matter to which I referred in Philip Walton at [82].

190 For present purposes, it is sufficient for me to reconfirm what I said in Philip Walton and to express my agreement with the unsatisfactory state of the law as to advocates’ immunity referred to by Giles JA and with his Honour’s reasons for coming to that conclusion.

191 The orders I would propose in this matter are as follows:

(a) Appeal allowed in part.

(b) Set aside Order 2 made by Simpson J on 4 September 2009.

(c) In lieu thereof, subject to Order (d), order pursuant to UCPR 20.14 that the amount due and owing by the first and second cross-defendants to the cross-claimants pursuant to the cross-claim be referred to a referee experienced in the assessment of legal costs and disbursements for assessment as to the fairness and reasonableness of the costs claimed by the cross-claimants in their cross-claim upon condition that the first and second cross-defendants pay to the cross-claimants 60% of the amounts referred to in the said Order 2 within 28 days of the date of this order.

(d) Direct that the parties submit within 21 days of the date of these orders, an order for reference in accordance with Order (c) to an agreed referee which order will be made in chambers.

(e) Stay Orders 3 and 4 made by Simpson J on 4 September 2009 until the said reference has been completed and any report of the referee has been adopted or otherwise dealt with by the Court pursuant to UCPR 20.24.

(f) The appellants to pay 75% of the respondents’ costs of the appeal.

(g) The costs of the reference referred to in Order (b) above be reserved to the trial judge when dealing with the referee’s report pursuant to UCPR 20.24.

[The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

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Citations

Attard v James Legal Pty Ltd [2010] NSWCA 311

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CITATION:	Attard v James Legal Pty Ltd [2010] NSWCA 311
HEARING DATE(S):	8 June 2010, 9 June 2010
JUDGMENT DATE:	23 November 2010
JUDGMENT OF:	Beazley JA at 1; Giles JA at 4; Tobias JA at 33
DECISION:	(a) Appeal allowed in part. (b) Set aside Order 2 made by Simpson J on 4 September 2009. (c) In lieu thereof, subject to Order (d), order pursuant to UCPR 20.14 that the amount due and owing by the first and second cross-defendants to the cross claimants pursuant to the cross-claim be referred to a referee experienced in the assessment of legal costs and disbursements for assessment as to the fairness and reasonableness of the costs claimed by the cross-claimants in their cross-claim upon condition that the first and second cross-defendants pay to the cross claimants 60% of the amounts referred to in the said Order 2 within 28 days of the date of this order. (d) Direct that the parties submit within 21 days of the date of these orders, an order for reference in accordance with Order (c) to an agreed referee which order will be made in chambers. (e) Stay Orders 3 and 4 made by Simpson J on 4 September 2009 until the said reference has been completed and any report of the referee has been adopted or otherwise dealt with by the Court pursuant to UCPR 20.24. (f) The appellants to pay 75% of the respondents’ costs of the appeal. (g) The costs of the reference referred to in Order (b) above be reserved to the trial judge when dealing with the referee’s report pursuant to UCPR 20.24. (h) Grant liberty to the parties to apply for variation of these orders by notice of motion accompanied by written submissions to be filed and served within 7 days of the date of these orders. [The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
CATCHWORDS:	COSTS – assessment – solicitor-client – whether primary judge should have referred quantum of costs claimed to referee pursuant to UCPR 20.14 - EVIDENCE – admissibility – statements as to what a person would have done – whether 5D(3) CLA required Court to ignore statement in affidavit notwithstanding no objection taken to its admission - LAWYERS – negligence – advocates’ immunity – attaches to acts and omissions and extends to conduct of instructing solicitor – whether failure to advise that stay applied unless and until Court granted leave to proceed led to decision affecting conduct of defence to cross-claim – offence to finality principle not necessary - LAWYERS – negligence – breach of duty – whether respondents properly retained by appellants – whether respondents breached duty of care or terms of retainer - LAWYERS – negligence – causation – whether, had appellants been advised that cross-claim was stayed, they would have instructed respondent to oppose grant of leave to proceed pursuant to s 444E(3) Corporations Act – whether primary judge erred in refusing to assess probabilities of hypothetical leave application – whether application for leave would have been denied
LEGISLATION CITED:	Civil Liability Act 2002 Corporations Act 2001 Corporations Law Evidence Act 1995 Fair Trading Act 1987 Legal Profession Act 1987 Legal Profession Act 2004 Trade Practices Act 1974 Uniform Civil Procedure Rules 2005
CATEGORY:	Principal judgment
CASES CITED:	Allatech v Construction Management Group [2002] NSWSC 293; (2002) 20 ACLC 1493; (2002) 167 FLR 324 Attard v James Legal Pty Ltd [2009] NSWSC 811 Attard v James Legal Pty Ltd [No 2] [2009] NSWSC 901 Attard & Ors v James Legal Pty Ltd & Ors [2004] NSWSC 478 BBC Hardware Ltd v GT Homes Pty Ltd [1997] 2 Qd R 123 Chappel v Hart [1998] HCA 55; (1998) 195 CLR 232 D’Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; (2005) 223 CLR 1 Foxcroft v The Ink Group Pty Ltd (1994) 12 ACLC 1063 Giannarelli v Wraith [1988] HCA 52; (1988) 165 CLR 543 J & B Records v Brashs Pty Ltd (1994) 12 ACLC 534 J F Keir Pty Ltd v Priority Management Systems Pty Ltd (admin apptd) [2007] NSWSC 748 Keefe v Marks (1989) 16 NSWLR 713 Keesing v Adams [2010] NSWSC 336 Meehan v Stockmans Australian Café (Holdings) Pty Ltd (1996) 22 ACSR 123 Neal v Ambulance Service of New South Wales [2008] NSWCA 346; (2008) Aust Torts Reports 81-988 Ogilvie-Grant v East (1983) 7 ACLR 669 at 672; 1 ACLC 742 Philip Walton t/as Pitcher Walton & Co v Efato Pty Ltd [2008] NSWCA 86 Pioneer Water Tanks (Australia 94) Pty Ltd v Delat Pty Ltd (1998) 16 ACLC 36 Rees v Sinclair (1974) 1 NZLR 180 Re Grenadier Constructions No 2 Pty Ltd (1994) 12 ACLC 460 Rosenberg v Percival [2001] HCA 18; (2001) 205 CLR 434 Ryan v Hansen [2000] NSWSC 354; (2000) 49 NSWLR 184 Seltsam Pty Ltd v McGuiness [2000] NSWCA 29; (2000) 49 NSWLR 262 Slater v Global Finance Group Pty Ltd (1999) 150 FLR 264 Symonds v Vass [2009] NSWCA 139; (2009) 257 ALR 689 Vagrand Pty Ltd (in liq) v Fielding (1993) 41 FCR 550; 113 ALR 128; 10 ACSR 373 Wallabah Pty Ltd v Navillo Pty Ltd (1997) 15 ACLC 396 Walton v Efato Pty Ltd [2008] NSWCA 86
PARTIES:	Alfred Attard Michael Henry Glowmint Pty Limited Elzac Properties Pty Limited Construction Management Group Pty Limited James Legal Pty Limited Peter Richard James
FILE NUMBER(S):	CA 2009/40367
COUNSEL:	1,2,3,4,5 App: C R Newlinds SC / P Newtown 1, 2 Resp: M Southwick
SOLICITORS:	1, 2, 3, 4, 5 App: Lazarus Legal Group 1, 2 Resp: James Legal Pty Ltd
LOWER COURT JURISDICTION:	Supreme Court - Common Law Division
LOWER COURT FILE NUMBER(S):	SC 2004/20044
LOWER COURT JUDICIAL OFFICER:	Simpson J
LOWER COURT DATE OF DECISION:	14 August 2009; 2 September 2009
LOWER COURT MEDIUM NEUTRAL CITATION:	Attard v James Legal Pty Ltd [2009] NSWSC 811; Attard v James Legal Pty Ltd [No 2] [2009] NSWSC 901