Donnellan v Woodland - [2012] NSWCA 433

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation: Donnellan v Woodland [2012] NSWCA 433
Hearing dates: 8 August 2012
Decision date: 18 December 2012
Before: Beazley JA at [1];
Basten JA at [253];
Barrett JA at [276];
Hoeben JA at [284];
Sackville AJA at [285]
Decision:
1. Appeal allowed;
2. Set aside orders made in the Court below;
3. Judgment for the defendant on the statement of claim;
4. The respondent to pay the appellant's costs of the appeal and at first instance. The respondent to have a certificate under the Suitors' Fund Act 1951;
5. The notice of motion filed 4 September 2012 dismissed with costs.
[Note: 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:
TORTS - Negligence - Legal practitioner's duty of care - Legal practitioner retained to advise in respect of the Conveyancing Act 1919, s 88K - Application not granted - Whether legal practitioner's advice negligent - Whether advice protected by advocates' immunity - Principle of finality of litigation.
LEGAL PRACTITIONERS - Advocates' immunity - Application of principle in D'Orta-Ekenaike v Victoria Legal Aid - Scope of advocates' immunity - Whether alleged negligent conduct led to a decision affecting the conduct of the case in court.
Legislation Cited: Civil Liability Act 2002
Civil Procedure Act 2005
Conveyancing Act 1919
Fair Trading Act 1987
Supreme Court Act 1970
Uniform Civil Procedure Rules 2005
Cases Cited: 117 York Street Pty Ltd v Proprietors of Strata Plan No 16123 (1988) 43 NSWLR 504
Adeels Palace Pty Ltd v Moubarak; Adeels Palace Pty Ltd v Bou Najem [2009] HCA 48; 239 CLR 420
Alpine Holdings Pty Ltd v Feinauer [2008] WASCA 85
Attard v James Legal Pty Ltd [2010] NSWCA 31
Biggar v McLeod [1978] 2 NZLR 9
Blulock Pty Ltd v Majic (2001) 10 BPR 19,143
Boland v Yates Property Corporation Pty Ltd [1999] HCA 64; 74 ALJR 209
Bott v Carter [2012] NSWCA 89
Calderbank v Calderbank [1975] 3 All ER 333; [1975] 3 WLR 586
Chamberlain v Ormsby t/as Ormsby Flower [2005] NSWCA 454
Coshott v Barry [2009] NSWCA 34
D'Orta-Ekenaike v Victorian Legal Aid [2005] HCA 12; 223 CLR 1
Dansar Pty Ltd v Pagotto [2008] NSWSC 112
Day v Rogers [2011] NSWCA 124
Durack v De Winton (1998) 9 BPR 16,403
Gett v Tabet [2009] NSWCA 76; 254 ALR 504
Giannarelli v Wraith [1988] HCA 52; 165 CLR 543
Goodwin v Yee Holdings Pty Ltd (1997) 8 BPR 15,795
Grattan v Simpson (1998) 9 BPR 16,649
Hanny v Lewis (1998) 9 BPR 16,205
Hawkins v Clayton [1988] HCA 15; 164 CLR 539
Heenan v Di Sisto [2008] NSWCA 25; 13 BPR 25,213
Heydon v NRMA [2000] NSWCA 374; 51 NSWLR 1
In the Matter of an Application by Kindervater [1996] ANZ ConvR 331
ING Bank (Australia) Ltd v O'Shea [2010] NSWCA 71; 14 BPR 27,317
Katakouzinos v Roufir Pty Ltd (1999) 9 BPR 17,303
Keefe v Marks (1989) 16 NSWLR 713
Kelley v Corston [1998] 3 WLR 246; [1997] 4 All ER 466
Kent Street Pty Ltd v Council of the City of Sydney (2001) 10 BPR 18,757
King v Carr-Gregg [2002] NSWSC 379
Kuru v State of New South Wales [2008] HCA 26; 236 CLR 1
Malec v JC Hutton Pty Ltd [1990] HCA 20; 169 CLR 638
MacRae v Stevens [1997] ANZ ConvR 129; (1996) Aust Tort Reports 81-405
Rees v Sinclair [1974] 1 NZLR 180
RJE v Secretary to the Department of Justice [2008] VSCA 265
Roads and Traffic Authority of NSW v Dederer [2007] HCA 42; 234 CLR 330
Rogers v Whitaker [1992] HCA 58; 175 CLR 479
Sellars v Adelaide Petroleum NL [1994] HCA 4; 179 CLR 332
Somasundaram v Melchior & Co [1988] 1 WLR 1394; [1989] 1 All ER 129
Stephens v Giovenco; Dick v Giovenco [2011] NSWCA 53
Studer v Boettcher [2000] NSWCA 263
Symonds v Vass [2009] NSWCA 139; 257 ALR 689
Tonitto v Bassal (1992) 28 NSWLR 564
Tregoyd Gardens Pty Ltd v Jervis (1997) 8 BPR 15,845
Trust Co Australia v Perpetual Trustees WA (1997) 42 NSWLR 237
Vairy v Wyong Shire Council [2005] HCA 62; 223 CLR 422
Voli v Inglewood Shire Council [1963] HCA 15; 110 CLR 74
Walton t/as Pitcher Walton & Co v Efato Pty Ltd [2008] NSWCA 86
Wilson v Carter [2005] NSWSC 1351
Woodland v Manly Municipal Council [2003] NSWSC 524
Wyong Shire Council v Shirt [1980] HCA 12; 146 CLR 40
Texts Cited: Walmsley, Abadee, Zipser, Professional Liability in Australia, 2nd ed (2007)
Category: Principal judgment
Parties: Patrick Donnellan t/as P J Donnellan & Co (Appellant)
Peter Richard Woodland (Respondent)
Representation: Counsel:
J C Kelly SC; M Avenell (Appellant)
R E Dubler SC; J S Emmett (Respondent)
Solicitors:
Colin Biggers & Paisley (Appellant)
Esplins Solicitors (Respondent)

File Number(s): CA 2007/265232
Publication restriction: No
Decision under appeal

Jurisdiction:

9111

Citation:

Woodland v Donnellan [2011] NSWSC 777

Date of Decision:

2010-07-29 00:00:00

Before:

R S Hulme J

File Number(s):

2007/20438

HEADNOTE

[This headnote is not to be read as part of the judgment]

The appellant acted as the respondent's solicitor in respect making an application for a drainage easement pursuant to the Conveyancing Act 1919, s 88K, over property owned by Manly Municipal Council (the Council). The appellant provided the respondent with advice as to the prospects of success of the s 88K application, potential costs consequences and certain offers made by the Council. The application proceeded to hearing in the Supreme Court and was rejected. The respondent was ordered by Hamilton J to pay the Council's costs, partly on an indemnity basis.

The respondent brought professional negligence proceedings against the appellant and succeeded before the trial judge, who awarded damages representing a significant portion of the respondent's legal costs, the Council's costs and the costs of an application for leave to appeal. The appellant brought an appeal against the trial judge's decision.

On the appeal to this Court, five issues arose for determination:

(i) Whether the trial judge erred in finding that the appellant breached his duty of care?

(ii) Whether the trial judge erred in his finding on causation?

(iii) Whether the trial judge erred in not finding that, in any event, the appellant was immune from suit in accordance with the principle of advocates' immunity outlined in D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; 223 CLR 1?

(iv) Whether the trial judge erred in not assessing damages on the basis of a loss of a chance?

(v) Whether the trial judge erred in respect of the costs orders he made on the claim?

The Court sat a bench of five judges as subsumed in issue (iii) was a challenge by the respondent to the correctness of a line of authority in the Court of Appeal, namely, Chamberlain v Orsmby t/as Ormsby Flower [2005] NSWCA 31, Attard v James Legal Pty Ltd [2010] NSWCA 31 and Day v Rogers [2011] NSWCA 124 in the event that the Court held those cases were not distinguishable from the current matter.

Subsequent to the hearing of the appeal, the respondent filed a notice of motion dated 4 September 2012 seeking the Court's leave to amend its notice of contention.

Held per Beazley JA (Basten, Barrett, Hoeben JJA and Sackville AJA agreeing) allowing the appeal:

In respect of (i):

(1) A legal practitioner owes a duty to a client to take reasonable care to exercise due care, skill and diligence by performing the task to the requisite skill expected of legal practitioners in the profession: [88].

Cited: Voli v Inglewood Shire Council [1963] HCA 15; 110 CLR 74; Hawkins v Clayton [1988] HCA 15; 164 CLR 539; Rogers v Whitaker [1992] HCA 58; 175 CLR 479

(2) In respect of the settlement of claims, the duty of the solicitor is to assist the client to make an informed decision as to whether or not to settle a claim: [96].

Considered: Studer v Boettcher [2000] NSWCA 263

(3) The trial judge erred in finding that the appellant's advice in respect of liability and costs and, specifically in relation to the settlement offers, constituted a breach of the appellant's duty of care as a legal practitioner. The appellant's advice that the respondent had a strong case for the grant of an easement pursuant to the Conveyancing Act 1919, s 88K was not clearly wrong as a matter of law. The trial judge's criticism of the appellant's advice did not give sufficient weight to the existence of differing views in the Equity Division of the Supreme Court as to the proper application of s 88K: [103], [120], [144].

(4) The appellant was not negligent in his advice as to costs in relation to a s 88K application and the failure to warn of the risk of an indemnity costs order was neither negligent nor causative of loss. The appellant's advice that there were good grounds to argue for a different costs order carried the implied qualification that the argument may not be successful: [108]-[109], [143]-[144].

In respect of (ii):

(5) There was insufficient evidence to support the inference that the Council would have settled at that time and it was not sufficient for the trial judge to find that Mr Woodland would have been willing to settle on terms "more disadvantageous" than those contained in his letter of 10 January 2002. The "but for" test of causation in the Civil Liability Act 2002, s 5D(1)(a) was not satisfied as the there was no finding as to the terms upon which the Council and Mr Woodland would have settled: [158]-[159].

In respect of (iii):

(6) In D'Orta-Ekenaike, the High Court confirmed that advocates' immunity extends to a solicitor acting in litigation if the solicitor's negligent conduct falls within the scope of the immunity, namely, that the conduct constitutes work done out of court that leads to a decision affecting the conduct of the case in court: [172].

Applied: D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; 223 CLR 1

Considered: Giannarelli v Wraith [1988] HCA 52; 165 CLR 543

(7) Intermediate appellate courts ought to only depart from their own earlier decisions if they form the view that the earlier decisions are "plainly wrong" and there are "compelling reasons" to not follow that line of authority: [191]-[192].

Followed: Gett v Tabet [2009] NSWCA 76; 254 ALR 504

Cited: RJE v Secretary to the Department of Justice [2008] VSCA 265

(8) This case involves the application of a legal principle laid down by the High Court. There is a clear jurisprudential distinction between the statement of principle and the application of principle. Earlier cases that involve the application of principle provide guidance to decision makers as to how principle is to be applied in a particular case. The identification of factual differences in the cases does not mean that a legal principle does not apply in a given case: [197].

(9) Whether advocates' immunity applies in a given case involves an examination of the alleged and / or found negligence and the determination of the question whether the negligent conduct led to a decision affecting the conduct of the case in court: [219].

(8) The relevant question the trial judge ought to have asked was whether the negligence he found was "conduct that led to a decision affecting the conduct of the matter in court" in circumstances where costs were wasted by continuing the litigation: [225].

(9) Advocates' immunity applies where a practitioner has been found to have breached the duty of care owed to a client. If a breach is not causally connected to the damage suffered, there is no actionable negligence: [226].

(10) If the appellant's conduct in respect of the offers of settlement had been negligent, that conduct led to a decision by the respondent affecting the conduct of the matter in court. If advice given in respect of settlement resulted in proceedings being pursued in court, this advice would be protected by advocates' immunity as contemplated in D'Orta-Ekenaike. The appellant's omission to give appropriate advice as to the offer resulted in the decision to continue proceedings in court, and was thereby protected by the immunity: [198], [227], [229].

Considered: Biggar v McLeod [1978] 2 NZLR 9; Kelley v Corston [1997] 4 All ER 466; [1998] 3 WLR 246; MacRae v Stevens [1997] ANZ ConvR 129; (1996) Aust Tort Reports ¶81-405; Chamberlain v Ormsby t/as Ormsby Flower [2005] NSWCA 454; Walton t/as Pitcher Walton & Co v Efato Pty Ltd [2008] NSWCA 86; Coshott v Barry [2009] NSWCA 34; Symonds v Vass [2009] NSWCA 139; 257 ALR 689; Attard v James Legal Pty Ltd [2010] NSWCA 31; Day v Rogers [2011] NSWCA 124

Distinguished: Alpine Holdings Pty Ltd v Feinauer [2008] WASCA 85; Dansar Pty Ltd v Pagotto [2008] NSWSC 112

(11) The test of finality is not only directed to whether the final decision in the original case was correct. It extends to the case where a particular consequence has befallen the client and this consequence cannot be sufficiently corrected within the litigation in which the client was engaged. Thus wasted costs claims are protected by the immunity: [232].

Applied: D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; 223 CLR 1

In respect of (iv):

(12) The trial judge erred in his assessment of damages and ought to have calculated damages on the basis of the loss of a chance. The amount of damages to be awarded falls to be assessed having regard to the probabilities or possibilities of what would have occurred: [239].

Considered: Malec v JC Hutton Pty Ltd [1990] HCA 20; 169 CLR 638; Sellars v Adelaide Petroleum NL [1994] HCA 4; 179 CLR 332

Cited: Heenan v Di Sisto [2008] NSWCA 25; 13 BPR 25,213

In respect of (v):

(13) If the appellant had been negligent in his advice in respect of an offer of settlement then the negligent advice would have been a cause of the loss the respondent suffered in paying indemnity costs and the appellant would have been accordingly liable for those costs: [241].

(14) If the appellant's advice had been negligent then his conduct would have been causative of the respondent's decision to apply for leave to appeal: Civil Liability Act 2002, s 5D(1)(a). In that event, the trial judge would not have erred in his determination that the appellant was liable for the costs of the respondent's application: [244].

In respect of the application to amend the notice of contention:

(15) The obligation imposed by the Civil Procedure Act 2005, s 56 for the courts and the parties to facilitate "the just, quick and cheap resolution of the real issues" in dispute between the parties militates against the Court granting leave to the respondent to amend its notice of contention at such a late stage: [249]-[250].

(16) There is a question whether advocates' immunity should be assessed prior to any consideration of negligent conduct. If the conduct falls within the immunity the question of negligence does not arise for determination. The immunity protects the practitioner from suit: [6]

(17) Given the trial judge's findings of negligence against the practitioner, it was appropriate to determine that question of negligence in this case: [8], [10].

Judgment

INDEX
Preliminary consideration
6
The background facts
11
The offers of compromise
29
Judgment of Hamilton J: The s 88K application
(a)
Determination of the s 88K application
50
(b)
Determination of the costs issues
58
Reasons of R S Hulme J: The professional negligence claim
64
Findings of negligence
66
(a)
Negligence in advising Mr Woodland that he had a strong case
71
(b)
Negligence in advising Mr Woodland that there were good grounds to argue that each party would be left to pay his or its own costs
76
(c)
Negligence in failing to advise Mr Woodland to accept the offer of 21 December 2001
79
Grounds 1-6: Did his Honour err in finding that Mr Donnellan breached his duty of care?
(i)
Legal principles
88
(ii)
(a)
No negligence in advising Mr Woodland he had a strong case
98
(b)
No negligence in failing to advise that Mr Woodland would probably be liable for the Council's costs
105
(c)
No negligence in failing to advise Mr Woodland to accept the offer of 21 December 2001
110
(iii)
The contention point: Failure to advise Mr Woodland to accept the offer of 16 May 2002
121
Ground 7: Did his Honour err in finding that Mr Woodland would have been willing to settle?
145
Ground 8: Immunity from suit
160
Case law applying the principle stated in D'Orta-Ekenaike
(i)
The challenged decisions
179
(a)
Chamberlain v Ormsby
180
(b)
Attard v James Legal Pty Ltd
181
(c)
Day v Rogers
185
(d)
Symonds v Vass
187
(ii)
Were the challenged decisions plainly wrong?
190
(iii)
Points of distinction between the challenged cases and this case
193
Other case law
210
Did the trial judge err in finding that the immunity did not apply?
220
Ground 9: Assessment of damages
235
Grounds 10 and 11: The costs issues
240
Application to amend notice of contention
245
Orders
252

BEAZLEY JA: This is an appeal from a verdict and judgment entered against the appellant Mr Donnellan, a solicitor, by R S Hulme J in professional negligence proceedings brought against him by a former client, the respondent, Mr Woodland. The claim was governed by the provisions of the Civil Liability Act 2002, Pt 1A. The appeal is in respect of both liability and damages. The matter was heard by a bench of five judges, as Mr Woodland gave notice that he proposed to challenge the correctness of decisions of this Court relating to the principle of advocates' immunity and its application.

In the professional negligence proceedings, Mr Woodland alleged that Mr Donnellan had been negligent in the manner that he acted for him in respect of an application under the Conveyancing Act 1919, s 88K whereby Mr Woodland sought the grant of a drainage easement over property owned by Manly Municipal Council (the Council). The s 88K application failed and Mr Woodland was ordered to pay the Council's costs, partly on an indemnity basis, the Council having made a Calderbank offer of compromise during the course of the proceedings.

Mr Woodland succeeded before R S Hulme J in his professional negligence claim against Mr Donnellan. His Honour awarded damages in the sum of $414,053.69, representing a significant portion of the costs Mr Woodland was ordered to pay to the Council, a portion of the legal costs he paid to Mr Donnellan in respect of the s 88K application, together with the costs of an application for leave to appeal brought by Mr Woodland against the costs orders made in the s 88K application. When interest in the sum of $262,237.03 was added, the total judgment sum was $676,290.72.

Five principal issues arose on the appeal. First, whether the trial judge erred in concluding Mr Donnellan was negligent in the advice he gave to Mr Woodland in respect of the likelihood that the court would order the grant of an easement and the potential costs consequences associated with an unsuccessful application: grounds 1-6 (the negligence issue). Secondly, whether his Honour erred in his finding on causation, to the effect that Mr Woodland would have been willing to settle the s 88K application as at 21 December 2001: ground 7 (the causation issue). Thirdly, whether his Honour erred in not finding that Mr Donnellan was, in any event, immune from suit in accordance with the principles in D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; 223 CLR 1: ground 8 (the advocates' immunity issue). Fourthly, whether his Honour erred in not assessing damages on the basis of a loss of a chance: ground 9 (the damages issue). Fifthly, whether his Honour erred in respect of (a) the costs orders he made on the claim: ground 10; and (b) Mr Woodland's unsuccessful application for leave to appeal against costs orders made by Hamilton J: ground 11 (the costs issues).

By notice of contention, Mr Woodland argued that Mr Donnellan was negligent in failing to advise him to make a counter offer to an offer made by the Council on 16 May 2002, an allegation that had been rejected by the trial judge.

Preliminary consideration

A preliminary question arises as to whether the advocates' immunity issue should be determined prior to any consideration of the other issues raised on the appeal. If, as I understand it to be the case, the principle underlying advocates' immunity is that of finality of litigation: see D'Orta-Ekenaike, there is an argument that a claim brought against a legal practitioner for negligence in the conduct of litigation should be determined, in the first place at least, by reference to the immunity. If the immunity applies, the question whether there is negligence becomes moot. That is another way of saying that the immunity is an immunity from suit.

Against that approach is the argument that it may not be possible to determine whether the immunity attaches unless the negligent conduct is identified. Whilst the pleadings are the obvious starting point, they may not sufficiently enable that identification to be made. That was the position in Alpine Holdings Pty Ltd v Feinauer [2008] WASCA 85, discussed below. If the correct position is that the immunity should be determined prior to the determination of the question of negligence, an immunity claim ought properly be able to be dealt with on the pleadings by way of a strike out application pursuant to the Uniform Civil Procedure Rules 2005 (UCPR), r 13.4 or r 14.28. This was the view of this Court in Bott v Carter [2012] NSWCA 89, especially at [11]. Bott v Carter itself involved an application to strike out the statement of claim. As the result in Alpine Holdings demonstrated, that may be a contestable result.

When there has been a full hearing of a matter, the practice of the courts appears to have been to determine the negligence claim first and then to determine whether advocates' immunity protects the practitioner from liability for negligence: see, for example, Chamberlain v Ormsby t/as Ormsby Flower [2005] NSWCA 454 and Symonds v Vass [2009] NSWCA 139; 257 ALR 689. In the latter case, on the decision of the majority, the matter was remitted to the Common Law Division because inadequate findings had been made in respect of the negligence claim to enable the Court to determine whether the immunity applied.

For myself, I am not satisfied that there is a single correct approach. Rather, it will depend upon the circumstances of the particular case. If the pleadings on their face alleged negligence in the conduct of litigation falling into one of the three categories of consequence that flow from a practitioner's negligence: see D'Orta-Ekenaike at [70], discussed below at [166], it may be possible that the immunity question can be determined on the basis of the conduct alleged in the pleadings. There is a question, in any event, as to the extent of the reach of the immunity. As Basten JA, at [11], observed in Bott v Carter, "the immunity does not extend to all activities undertaken by legal practitioners, even in relation to disputes which may give rise to litigation". However, not every case will be so clear cut.

In the present case, the trial judge held that the immunity did not apply. Accordingly, even had his Honour determined the immunity issue first, given his conclusion, the negligence claim would still have required resolution. In those circumstances, it seems to me to be appropriate that this Court first determine the negligence issue, so that there is a final resolution of that issue between the parties. I am also of the opinion that it is not necessarily certain that the immunity question in this case could have been resolved on the pleadings. The first particular of negligence alleged related to a letter the Council wrote on 16 December 2001. That letter extended to matters that went beyond the matter in issue on the s 88K application. It may not have been necessarily apparent without a full understanding of the facts whether the negligence so alleged fell within the immunity.

The background facts

Mr Woodland and his former wife were the registered proprietors of property at Seaforth (the Woodland land). As Mrs Woodland is not a party to the appeal and played no active role in the proceedings in the court below, reference hereinafter will only be made to Mr Woodland as the relevant party to the proceedings. Mr Woodland was also the principal of a company which owned other property to the north of the Woodland land (the Woodland company land). The Council, which was also the Consent Authority for Mr Woodland's development application, owned property to the east and to the south of the Woodland land. A child care centre was planned for development on the Council's land to the south.

On 9 March 1998, the Council granted Mr Woodland conditional development approval to subdivide the Woodland land. The condition related to drainage whereby Mr Woodland was required to provide a system of on-site stormwater detention within the Woodland land. In an attempt to circumvent that condition, but still provide for adequate drainage from the land, Mr Woodland approached the Council for the grant of an easement for drainage over the Council's land to the south of the Woodland land. In about April 1999, Mr Woodland consulted Mr Donnellan in relation to the development application and, in particular, as to the possibility of obtaining an easement for drainage.

Mr Donnellan's initial advice was provided in a letter dated 6 April 1999 and included a reference to the making of an application for the grant of an easement under the Conveyancing Act, s 88K. Mr Donnellan's letter stated, in respect of s 88K:

"Under Section 88K it is necessary to demonstrate that the alternatives to the use of the proposed easement are impracticable by comparison with that use. We will need therefore to establish to the court that pumping drainage to the road is going to be expensive and awkward to a degree which outweighs any detriment that there might be to the Council in having this easement granted over its property."

Section 88K provides:

"88K Power of Court to create easements

(1) The Court may make an order imposing an easement over land if the easement is reasonably necessary for the effective use or development of other land that will have the benefit of the easement.

...

(4) The Court is to provide in the order for payment by the applicant to specified persons of such compensation as the Court considers appropriate, unless the Court determines that compensation is not payable because of the special circumstances of the case.

(5) The costs of the proceedings are payable by the applicant, subject to any order of the Court to the contrary."

On 14 April 1999, Mr Donnellan again wrote to Mr Woodland, stating:

"... we think that it is quite likely that the Court would grant the easement for drainage ... in the sense that [the easement] provides a solution to drainage which is practical and beneficial ...

Under Section 88K there is a requirement that the applicant for an easement pay the costs of the application and compensation ..."

Mr Donnellan noted that in Mr Woodland's case there was an available alternative to a drainage easement, namely, an on-site pump out system, but that was "plainly not an alternative of the same utility".

On Mr Donnellan's advice, Mr Woodland retained Mr Staniland, an engineer, to address the question of drainage. Mr Staniland was advised by Mr Donnellan that an application under s 88K for a drainage easement was contemplated. At about this time, Mr Donnellan also told Mr Woodland that he had a strong case.

On 23 April 1999, Mr Donnellan wrote to Mr Woodland and attached a copy of the decision of Young J (as his Honour then was) in Hanny v Lewis (1998) 9 BPR 16,205. In his letter, Mr Donnellan stated:

"We are hopeful, though perhaps a little naively, that the Council when it is faced with the prospect of the cost of Supreme Court proceedings and a likelihood that those proceedings will be successful in the circumstances, it will throw in the towel and agree to the grant without the need to go to Court."

Between April and October 1999, Mr Donnellan was of the opinion that Mr Woodland's interests would be best served by Mr Woodland and the Council coming to an agreement as to the grant of an easement. However, on 12 October 1999, Mr Donnellan wrote to the Council indicating that a s 88K application was being considered and that his client would feel justified in making an application for costs in respect of any such proceedings. In this regard, Mr Donnellan agreed in cross-examination that, at this time, he was of the opinion that Mr Woodland should be awarded his costs if it became necessary to make the s 88K application.

On 3 December 1999, the Council replied to Mr Donnellan's letter of 12 October 1999, stating that it would not give any further consideration to the requested grant of an easement. Mr Donnellan accepted in cross-examination that he was "indignant sometimes ... [s]ometimes very indignant" at the Council's attitude.

On 20 December 1999, acting on Mr Donnellan's advice, Mr Woodland commenced proceedings against the Council in the Supreme Court claiming relief pursuant to the Conveyancing Act, s 88K. According to Mr Woodland, Mr Donnellan advised him that he had "good prospects of having [his] own legal costs recovered should the matter proceed to Court".

On 5 January 2000, Mr Donnellan and Mr Woodland had a conversation as to the likely order the Court would make in respect of costs. Their respective versions of the conversation differed significantly. Mr Donnellan said he reiterated to Mr Woodland that an applicant for an order under s 88K was ordinarily required to pay the costs of the other party, irrespective of the outcome. Mr Woodland said that Mr Donnellan told him that:

"In this case it is likely that the Court would at least order that each party pay its own costs due to the outrageous behaviour of the Council."

(The trial judge, at [148], effectively accepted Mr Woodland's version of this conversation: see below at [76].)

By April 2001, each of the Council and Mr Woodland had obtained a valuation for compensation purposes should an easement be granted. The Council's valuation was $7,000 and Mr Woodland's valuation was $3,000.

On 20 April 2001, Mr Donnellan wrote to the Council's solicitors in the following terms:

"... we respectfully submit to you that this case is a classic instance where, on the present state of the authorities the Court would grant an easement under the Section. It is true that there is an alternative means of drainage but it could not seriously be suggested that a system of pumps and rising mains is a preferable alternative to what is proposed."

In September 2001, a hearing date for the s 88K application was allocated. On 21 December 2001, the Council's solicitors wrote to Mr Donnellan suggesting a compromise of the proceedings. This letter is a central focus of the arguments in the case and, together with other offers and counter offers, is considered in detail below.

The s 88K application was heard by Hamilton J in the Equity Division of the Supreme Court. Although originally set down for three days, the matter proceeded on three different occasions over a total of nine days, commencing on 13 February 2002. The extended hearing time was due, at least partly, to the fact that the Council filed substantial expert evidence part way through the proceedings.

Hamilton J dismissed the s 88K application on 12 May 2003, on the basis that it had not been established that an easement for drainage over the Council's land was reasonably necessary for the development of the Woodland land. Central to Hamilton J's reasoning was the existence of a viable alternative, namely, an on-site pump out system, which was the drainage system specified by the Council in the Development Consent.

On 20 June 2003, Hamilton J ordered that Mr Woodland pay the Council's costs of the proceedings. In this regard, his Honour refused to exercise the discretion conferred by s 88K to make an order other than that the applicant pay the costs of the other party to the proceedings. His Honour further ordered that costs be payable on an indemnity basis from 17 May 2002 on the basis that it was unreasonable for Mr Woodland to have refused a Calderbank offer made by the Council on 16 May 2002: Calderbank v Calderbank [1975] 3 All ER 333; [1975] 3 WLR 586. However, his Honour rejected an application by the Council that costs should be paid on an indemnity basis from 22 December 2001, because he did not regard Mr Woodland's conduct unreasonable in respect of the offer made in the Council's letter of 21 December 2001.

An application by Mr Woodland for leave to appeal against the costs orders was refused by the Court of Appeal. Mr Woodland was ordered to pay the Council's costs of the summons for leave to appeal.

The offers of compromise

As the central allegations of negligence focussed around the offers of settlement and the advice Mr Donnellan gave in respect of those offers, it is necessary to consider the specific terms of the offers made and the advice given.

The Council made two offers of compromise in the course of the proceedings. The first was made by letter from the Council's solicitors dated 21 December 2001, in the following terms:

"1. That Council authorise the General Manager to negotiate creation of and compensation for an easement for drainage purposes over Council land in favour of [the Woodland land] and a contribution from the owners of [the Woodland land] towards the construction of a Council drain, within Council land, to connect to drainage pits in Ross Street, Seaforth for the drainage of [the Woodland land]. This contribution to be equal to the cost that would have been incurred by them in the construction of a separate drainage line to Ross Street.

2. Further, that the owners of [the Woodland land] be required to pay all Council's legal, valuation and other statutory expenses incurred, associated with the settlement of this matter.

3. That Council negotiate with the owner [of the Woodland land] the creation of an easement for drainage purposes over the rear of their land in favour of properties to the North.

Having regard to the impending Supreme Court action set down for 13 February 2002, there is a need for some urgency in the matter and Council proposes meeting with your clients to discuss this offer. We would appreciate you communicating this offer to your clients today and organising a meeting either on 24 December or 31 December or, alternatively, in the week commencing January 2, 2002."

The proposal in para 1 of the offer was for the grant of an easement over the Council's land which was at the rear of the Woodland land. This was the easement that Mr Woodland was seeking in his s 88K application. The compensation sought in para 1 and the costs referred to in para 2 were not specified in the letter, however, there were later discussions as to the likely amounts involved: see [38] below. The proposal in para 3 was for an easement for drainage across the Woodland land in favour of private properties to the north of the Woodland land. This proposal was unrelated to the easement Mr Woodland was seeking in his s 88K application.

On 10 January 2002, Mr Donnellan wrote to the Council's solicitors making the following counter offer (being the counter offer he had suggested to Mr Woodland in his letter of 8 January 2002):

"1. [Mr Woodland] will grant to [the Council] an easement for drainage 1 metre wide along the south eastern boundaries of their properties, being [the Woodland land and the company land].

2. [Mr Woodland] will make a contribution of $9,020.00 to the Council towards the construction of a Council drain within the easement and through Council land being Lots 13 and 14 in DP ****** to connect to drainage pits in Ross Street ... to enable drainage of [the Woodland land and the company land] and other properties not owned by [Mr Woodland] to the north. This is the amount which it would have cost [Mr Woodland] to construct a drain [himself] to Ross Street to drain [the Woodland land and the company land].

3. [Mr Woodland] will not require compensation for the grant of the easement across [his] properties.

[The Council] is to agree to the following:

1. To construct the Council drain at least to the extent that it drains [the Woodland land and the Woodland company land], within 12 months of the date of receiving [Mr Woodland's] contribution (bank guarantee to secure [Mr Woodland's] contribution).

2. [The Council] will pay its own costs of the proceedings: it is an outrage that they got this far in the first place in light of [the Council's] engineer's recommendation of 11 February, 1999, that the easement sought by [Mr Woodland] be granted.

3. The cost of the survey and conveyancing work for the creation of the easement over [Mr Woodland's] land be borne by [the Council]. [Mr Woodland] will agree to documents being prepared by [the Council] for the purposes ..."

In suggesting that he make the counter offer, Mr Donnellan stated in his letter to Mr Woodland:

"Even though the conduct of the Council in everybody's view who has had anything to do with the matter on your side is outrageous, Section 88K, under which we are proceeding, provides that ordinarily the costs of the defendant in the proceedings should be borne by the applicant if the easement is granted. That is not a hard and fast rule and we would certainly be making representations to the Court that at the very least each party should pay their own costs in the circumstances, but given that such an order is probably the best we could do (as opposed to an order that the Council pay your costs) there is nothing much to be put at risk by proposing to the Council that we agree to such an arrangement."

The Council responded by letter dated 17 January 2002. The Council stated that proposal 3 of their letter of 21 December 2001 was a separate consideration from the easement subject of the s 88K application. The Council's proposal in respect of the s 88K application was contained in paras 1-2 of the letter of 21 December 2001. The Council advised that settlement of the s 88K proceedings did not necessarily involve the provision of other drainage easements through the Woodland land and the Woodland company land. By this, the Council was indicating that para 3 of its letter of 21 December 2001 and Mr Woodland's proposal of 10 January 2002 would not necessarily be negotiated as part of any settlement of the proceedings.

The letter stressed that any settlement of the s 88K application must include payment of the Council's legal, valuation and other statutory expenses incurred in relation to the proceedings or associated with the settlement of the matter. The letter pointed out that those requirements were consonant with the terms of s 88K.

Mr Donnellan replied to the Council's letter on 17 January 2002 expressing his view that the Council's attitude was "outrageous", that Mr Woodland would be seeking costs on the s 88K application and would argue strongly that the discretion as to costs in s 88K be exercised in his favour. However, the letter proposed a way forward by way of settlement which was essentially a restatement of the offer contained in the letter of 10 January 2002.

This offer was rejected by the Council in its solicitor's letter dated 18 January 2002. Nonetheless, the Council offered to meet with Mr Woodland if he was interested. Mr Woodland agreed, on Mr Donnellan's recommendation, and met with the Council's officers on 23 January 2002.

Also on 18 January 2002, the Council's solicitor, Mr Rose, telephoned Mr Donnellan on two occasions seeking such a meeting. Mr Donnellan's file note of the second conversation recorded that the Council wished only to discuss proposals 1 and 2 of its letter of 21 December 2001, that is, it only wished to discuss the matters directly related to the s 88K application. Mr Donnellan informed Mr Rose he would get instructions in relation to Mr Woodland paying the Council's costs. In this regard, Mr Rose indicated a "ball park figure" for costs of $20,000 to $25,000. Mr Donnellan also informed Mr Rose that the position was open in respect of the payment of the compensation.

Mr Donnellan wrote to Mr Woodland on 21 January 2002. The letter was lengthy but given the trial judge's finding of negligence relating to the Council's letter of 21 December 2001, it is necessary to refer to it in detail:

"[Mr Rose from the Council] informed me that the Council is no longer interested in pursuing part 3 of the Council's resolution, namely the acquisition of an easement across the rear of your property. That means that the opportunities that we had to do a trade-off have been reduced a little. We are left with parts 1 and 2 of the resolution. Part 2, as you will recall, requires you to acknowledge that you will accept as a basis for negotiation that you have to pay compensation and the Council's costs to date in relation to the proceedings for the acquisition of the easement. I indicated that I had no instructions from you that we would accept that as a basis for settlement.

The purpose of my writing at this stage is to alert you to what the present situation is and to canvass some possibilities. As you know, my attitude to the Council's conduct of these proceedings is as set out in the last letter which I sent to you, namely, that it has been outrageous.

All that aside, the issue here is what is in your best economic interests to do, and I think that it would be prudent for you to consider settling on the following basis:

1. The Council does the following:

(a) grants the easement;

(b) confirms that it will agree, subject to the appropriate application being made, to a connection from the easement across Lot 14 to the Council's sewer ...

2. You agree to the following:

(a) to pay compensation for the easement in an amount to be discussed with the General Manager and agreed upon in the light of the valuation evidence;

(b) that you will pay the Council's costs of the proceedings in an agreed amount to date (that amount can also be the subject of negotiations), somewhere in the order of $20,000.00 according to the Council's solicitors.

I think this might be the best course to adopt now that the prospect of trading off the grant of the easement over the back of your property has been removed from these negotiations for the following reasons:

(1) Under Section 88K the starting point, as I have pointed out to you previously and has been mentioned in other correspondence, is that the applicant for the grant of an easement has to pay:

(i) compensation for the easement;

(ii) the costs of the respondent in the proceedings.

In relation to the costs of the proceedings, as you know, I have a strong view that we could argue that at the very least each party should pay its own costs - if the Council should not in fact have to pay yours - on the basis that notwithstanding the statutory provision, the discretion as to costs always rests with the Court. In the case of grants of easement under Section 88K, it is undeniably the fact that the statute prescribes that it is the applicant who pays the respondent's costs, and that is going to be a difficult prescription to overturn in the absence of seriously outrageous conduct on the part of a respondent. There is no guidance so far in the decided cases as to what such conduct would be, and in fact, this matter would probably be the first time that such an argument had been put to the Court, and therefore I cannot give you any prediction with complete confidence about the outcome might be: that will depend, amongst other things, on the Judge and his perception of the nature of the Council's conduct in the matter. It may very well be the case that my feelings on the matter would be borne out in his decision, but I don't think that it is sensible to put you to the risk of an adverse finding if that risk can be avoided. The risk I am talking about here is not only having to pay your own costs of a three day hearing in the Supreme Court but the other side's costs as well, which could be bumping things up very seriously indeed.

It would probably get to the stage where if you had to pay that sort of money plus the drainage construction costs, the benefit from the grant of the easement would evaporate. If you settle on the basis that I have outlined above, then you can roughly calculate what the whole thing is going to cost you by adding the following:

1. Our costs and disbursements to date $24,674.00

2. The Council's costs to date, say $20,000.00

3. Compensation to the Council, say $5,000.00

4. Construction costs, say $15,500.00

...

I know that there is a lot of money involved in settling on this basis and, as you know, I was hopeful that we might be able to offset some of that expense by the grant by you of an easement over the back of your property, but at least for the moment that seems to have gone by the board. However, it is still a scenario which is preferable to the one where the costs of the hearing in the Supreme Court were added." (emphases added)

The Council's solicitors wrote to Mr Donnellan on 21 January 2002 requesting that the meeting be conducted in the absence of solicitors and that:

"At the meeting [the Council] anticipates that discussion will cover:

(a) settlement of the proceedings on the basis of an easement being provided in Lot ** (possibly incorporating a line of pipes within Lot **, along the boundary of that lot with Lot **), in the form sought in the Amended Summons filed in the court proceedings, save and except that the easement will be for underground pipes only;

(b) the payment of an amount of compensation; and

(c) the payment of an amount for [the Council's] costs."

Mr Donnellan recommended to Mr Woodland that he accede to the Council's request for a meeting. In an email of the same date to Mr Woodland, Mr Donnellan advised him as follows:

"I think that perhaps it wouldn't be a bad idea if you were to have this conference for the reasons we discussed.

The matter which it seems to me would be entirely within your province to discuss and come to an agreement on without any risk are the following:

1. the grant of the easement in the location depicted on the amended plans prepared by the surveyor. It should be pointed out to the GM that the enlargement of the easement is designed to protect some features of the landscape that the Council would probably think it desirable to protect. Those features are actually shown on the accompanying drawings.

2. the amount that you will agree to pay for the Council's costs of the proceedings.

Points to remember.

You know how much you have paid me up to date - $25,000. You have the running of the case and therefore your costs would be expected to exceed the costs of the Council

If an award of costs were made in favour of the Council, it would be an award of party/party costs which means that the Council would recover costs as assessed which is normally about 65% of the total bill. Something between that and 80% would not be unreasonable.

3. the amount that you will pay for compensation for the easement.

Points to remember

The easement is to go underground. That has always been the case. Their valuer says that the compensation if it is underground should be $7,000 and ours says that it should be $3,000. Somewhere in between would be a reasonable compromise if it means avoiding the costs of continuing the litigation.

The shape of the easement has been changed to get around the rock shelves on [the Council's land]. It is bigger and affects more of the council property. I do not think that it could have the result however of increasing the compensation ...

...

The conference should be without prejudice, but I think it would be appropriate to agree to things in principle so that there is some purpose to it all and I think the GM will want that ...

One of the big advantages of this conference without lawyers is that it will be much less expensive and may very well accomplish more. It would not be a bad idea to take notes of key points if that is practical."

Following the conference, Mr Woodland reported back to Mr Donnellan as to his discussions with the Council, stating that:

"º Council does not want the easement but are prepared to grant one and extension to Ross Street based on us paying compensation, all council costs to date and further costs to wind down the case plus granting easement across our three blocks at the rear for benefit of properties to the north

º Council costs to date approx $29K plus expected extra $11.3k to wind down

º Compensation $8k

º Revised easement totally unacceptable as encroaches on planned day care building works.

...

º Council are expecting costs of $89k to redesign and build our proposed drainage easement"

Mr Woodland concluded his letter with the comment, "In summary, pure unadulterated browbeating with obvious intent to intimidate".

On the same day, Mr Donnellan briefed counsel to appear on the s 88K application.

Mr Donnellan made a further offer to the Council on behalf of Mr Woodland on 25 January 2002 as follows:

"Our client will:

1. Pay compensation for the easement in the amount of $3,000.00 or an amount for compensation that our respective valuers, in consultation, agree is fair compensation for the easement.

2. Pay an amount towards [the Council's] costs and disbursements of $15,000.00. We wish to make it plain that it is [Mr Woodland's] view that because of [the Council's] unreasonable refusal of our client's application that the statutory requirement that [Mr Woodland] should pay [the Council's] costs should be displaced. However in an endeavour to save further costs of a hearing [Mr Woodland] makes this offer.

3. Pay all of the costs of and incidental to the preparation and registration of the transfer and grant of the easement."

The letter referred the Council to recent case law relating to s 88K. Mr Donnellan also suggested that the parties' respective valuers confer to see whether they could "come to some agreement as to an appropriate amount of compensation".

The Council's second offer of compromise was made by letter dated 16 May 2002, in which the Council offered to grant the easement sought by Mr Woodland in the s 88K application, upon payment by him of compensation in the sum of $4,000 (an amount that by that time had been agreed by the valuers) together with payment of the Council's costs of the proceedings. No amount was specified in respect of the Council's costs. The offer contained a further term permitting the connection of the drainage pipe laid in the easement to the Council's drainage system in Ross Street. That aspect of the offer was made on condition that the drainage pipes be no less than 375 mm diameter, a grated inlet pit connecting to the Council's existing pit be constructed and that there be no cutting into exposed rock, all drilling was to be underneath.

The date of 16 May 2002 was the Thursday prior to the adjourned hearing date of Monday 20 May 2002. The offer was open until Friday 17 May 2002 at 5 pm and was stated to be a Calderbank offer. Mr Donnellan gave evidence that he could not recall having explained the significance of a Calderbank offer to Mr Woodland.

Mr Woodland did not accept the offer and the hearing proceeded on 20, 23 and 24 May 2002, when it was again adjourned to October 2002 for further hearing.

On 19 June 2002, Mr Woodland made a counter offer in which he offered to pay compensation in the sum of $4,000 for the grant of an easement, to accept the terms of the easement as proposed in the Council's letter of 16 May 2002 and to pay 20 per cent of the Council's reasonable legal costs up to a maximum of $15,000. There was no evidence that the Council replied to that offer and his Honour inferred that the Council did not accept it.

On 3 October 2002, the Council made a further offer essentially in the same terms as its offer of 16 May 2002, except that on this occasion, the Council specifically stated that the issue of installation of pipes on Ross Street should be left unresolved. The Council's costs at that time were estimated by its solicitors to be $205,000. The Council's solicitors also advised that the Council would incur another $75,000 in the further conduct of the case to its conclusion.

Judgment of Hamilton J: The s 88K application

(a) Determination of the s 88K application

In his judgment, Hamilton J identified two principal issues in the s 88K proceedings: first, whether Mr Woodland had established that the grant of the easement was "reasonably necessary" for the effective use or development of the Woodland land; and secondly, whether it had been established that the use of the land which had the benefit of the easement was not inconsistent with the public interest. It is only the first of these issues which was relevant to the professional negligence proceedings. Although the parties had, during the course of the proceedings, agreed that the amount of compensation payable, should the trial judge order the grant of an easement, was $4,000, his Honour noted there remained an outstanding issue as to the quantum of any additional compensation payable in respect of work necessitated in the development of the child care centre.

Hamilton J, at [6]-[12], reviewed the following authorities as to the meaning of "reasonably necessary" for the purposes of s 88K: Tregoyd Gardens Pty Ltd v Jervis (1997) 8 BPR 15,845 at 15,847 per Hamilton J; In the Matter of an Application by Kindervater [1996] ANZ ConvR 331 per Derrington J; Goodwin v Yee Holdings Pty Ltd (1997) 8 BPR 15,795 at 15,799 per Windeyer J; 117 York Street Pty Ltd v Proprietors of Strata Plan No 16123 (1988) 43 NSWLR 504 at 508-509 per Hodgson CJ in Eq; Durack v De Winton (1998) 9 BPR 16,403, at 16,448-16449 per Einstein J; Hanny v Lewis at 56,875 per Young J; Grattan v Simpson (1998) 9 BPR 16,649 at 16,651 per Young J; Katakouzinos v Roufir Pty Ltd (1999) 9 BPR 17,303 at [38] per Hodgson CJ in Eq; Kent Street Pty Ltd v Council of the City of Sydney (2001) 10 BPR 18,757 at [12] per Barrett J (as his Honour then was); Blulock Pty Ltd v Majic (2001) 10 BPR 19,143 at 19,148 per Windeyer J.

His Honour, at [19], derived a series of principles from the cited cases. Relevantly for present purposes, his Honour observed that the question whether the easement was reasonably necessary involved the making of a value judgement and not the exercise of a discretion. His Honour also observed that under the section, the reasonable necessity for the easement was the necessity for the use or development of the land and not for use by the current or any other owner: see Hanny v Lewis at 56,875.

Importantly, his Honour considered that "reasonably necessary" meant "something more than mere desirability or preferability over the alternative means available": see Tregoyd Gardens v Jarvis at 15,847. In this regard, his Honour preferred his own decision in that case and the cases that had approved it: see Durack v De Winton; Hanny v Lewis; Grattan v Simpson to the decision of Hodgson CJ in Eq in 117 York Street v Proprietors of Strata Plan 16123. In that case, Hodgson CJ in Eq stated that for an easement to be reasonably necessary for the use or development of land, that "use or development with the easement must be (at least) substantially preferable to the use or development without the easement".

Hamilton J accepted that the question whether use of the Woodland land with the easement was substantially preferable, was relevant to the question whether an easement was reasonably necessary. However, it was not a necessary precondition to such a finding. His Honour stated that adherence to the words of the section was essential.

In his factual findings, Hamilton J, at [31], assessed the cost differential in the construction of a gravity drain which would require the grant of the easement and the installation of an on-site pump out system to be between $10,000 and $20,000. His Honour, at [32], considered the benefits and the possible shortfalls in having an on-site pump out system as compared to gravity drainage through an easement over the Council's land. He concluded that the possible shortcomings of an on-site pump out system were remote and, accordingly, concluded that Mr Woodland had not established "preferability and certainly not substantial preferability of the development with the easement over the development without the easement".

His Honour's reasons continued:

"34 In deciding whether under s 88K(1) of the CA the plaintiffs, on whom the onus rests, have established that the grant of an easement is reasonably necessary for the development of the property, the Court is faced with the following situation. The plaintiffs say that it is reasonably necessary that they have the easement to permit the gravity discharge of water to Ross Street. The defendant says that the grant of the easement is not reasonably necessary for the development of the plaintiffs' land because an alternative exists which is viable and not, in the order of things, inordinately expensive, namely, the installation of a pump out system to Panorama Parade ... In considering the impact on the plaintiffs of the additional expense, I bear in mind that the subdivision is clearly to the plaintiffs' advantage by providing them with a separately saleable suburban block of land, which is obviously of considerable value. I do not think it weighs heavily against the plaintiffs' proposal that the land over which the easement is asked is owned by a public authority, namely, the defendant. It is said that this is an improper compromise of public land. However, in reality, although a function of public utility will be conducted on the land, in my view it is more appropriate in this instance simply to regard the defendant as another landowner whose rights will be interfered with. That interference, however, is not contemptible.

35 Remembering the confiscatory nature of the statute; the fact that there is a degree of real difficulty which would be caused by the easement and the pipe traversing the defendant's land; the existence of some problem arising from ponding of water in Ross Street; the possibility that that would be added to at least in greater than one in 20 year rain events; and, most importantly, the existence of a viable alternative by the pump out of water to Panorama Parade, it is my view that the plaintiffs have not in the requisite way established that it is reasonably necessary that they should have the easement sought."

His Honour, at [36], stated that if he was wrong in his conclusion that the easement was not reasonably necessary, he would have exercised his discretion against the grant of an easement for the reasons he gave in [35].

(b) Determination of the costs issues

Mr Woodland and the Council each made an application for an order for costs.

Mr Woodland sought an order that he not be ordered to pay the Council's costs of the application pursuant to the discretion conferred by s 88K(5). His Honour rejected that application.

The Council sought an order for indemnity costs on the basis of the offer made in its letter of 21 December 2001 or, alternatively, the offer made in its letter of 16 May 2002.

Hamilton J concluded in a separate judgment: Woodland v Manly Municipal Council [2003] NSWSC 524 at [10], that Mr Woodland's conduct was not in any way unreasonable by reference to the offer contained in the letter of 21 December 2001. However, his Honour held that the letter of 16 May 2002 was made in accordance with Calderbank principles and was a complete offer capable of acceptance. His Honour noted:

"That letter referred to s 88K(5) and required the payment of costs to date. In return it offered the grant of an easement so sought by [Mr Woodland] in satisfaction of [the] application for one."

In his Honour's opinion, at [12], the offer of 16 May 2002 would have provided, from Mr Woodland's viewpoint:

"... a far better result than [he] achieved in the proceedings. In essence it offered [him] everything [he] wanted except as to costs. [He] proceeded in refusing it on the basis that [he] should not be obliged to pay the costs, or certainly the whole of the costs of the proceedings ... it is my view that it was not reasonable for [him] in the circumstances to refuse that offer and to prolong the litigation."

His Honour accordingly ordered Mr Woodland to pay the Council's costs on an indemnity basis from 17 May 2002.

Reasons of R S Hulme J: The professional negligence claim

On 3 December 2007, Mr Woodland filed a statement of claim claiming damages from Mr Donnellan for breach of the duty of care Mr Donnellan owed to Mr Woodland in acting for him in respect of the s 88K application. In essence, Mr Woodland alleged that Mr Donnellan was negligent in the following respects (being the allegations of negligence advanced by counsel and accepted by R S Hulme J as accurately stating Mr Woodland's case):

"(i) That in his letter of 8 January 2002 Mr Donnellan overestimated the prospects of success generally and in particular the prospects of the Plaintiff obtaining a favourable costs order;

(ii) That Mr Donnellan should have advised the Plaintiff to accept the offer contained in the letter of 21 December 2001 from Messrs Abbott Tout;

(iii) Alternatively to (ii), at the least Mr Donnellan should have advised the Plaintiff there was a real prospect of losing the Section 88K application and the prospects of persuading the Court to depart from an order that the Plaintiff pay all of the Defendant's costs [were] low;

(v) Failing to otherwise take steps in response to the letter of 21 December 2001 that would have led to settlement;

(vi) Failing to advise that the offer in the Council letter of 16 May 2002 should be accepted;

(vii) Alternatively, failing to respond promptly with a counteroffer that omitted the 375mm pipe requirement but otherwise complied with the Council offer; and

(viii) Failing to advise as to the significance of the 16 May offer being a 'Calderbank' offer."

Having considered the evidence to which I have referred, R S Hulme J reviewed a number of authorities that had dealt with the meaning of "reasonably necessary" and with costs questions under s 88K(5). In this regard, his Honour analysed all but four of the authorities to which Hamilton J had referred in the s 88K application. R S Hulme J also considered additional authorities to which Hamilton J had not referred. In doing so, R S Hulme J did not comment upon the different meaning given to the phrase "reasonably necessary" in the case law, exemplified, in particular, in the judgment of Hodgson CJ in Eq in 117 York St v Proprietors of Strata Plan No 16123 on the one hand and in the judgment of Hamilton J in Tregoyd Gardens Pty Ltd v Jervis on the other. I will return to the relevance of this later in these reasons.

Findings of negligence

R S Hulme J summarised his findings of negligence, at [172]:

"To summarise, Mr Donnellan was negligent in advising the Plaintiff to the effect that his case for the granting of the easement was strong and in failing to advise that there was a real or substantial risk that the easement would not be granted. Mr Donnellan was negligent also in not advising the Plaintiff that there was a probability that, even if the easement was granted, Mr Woodland would be ordered to pay the Council's costs. This negligence was repeated on a number of occasions when contrary views were expressed. Mr Donnellan was negligent in not advising the Plaintiff that there was a risk that any costs ordered might be on an indemnity basis."

His Honour had earlier noted, at [19], that Mr Donnellan agreed in evidence that when he was initially retained, he told Mr Woodland that he had a strong case. His Honour also recorded that Mr Donnellan had also agreed under cross-examination that he was of the opinion that if Mr Woodland was obliged to bring a s 88K application, Mr Woodland should be awarded his costs, notwithstanding the terms of s 88K(5): judgment at [22].

His Honour further found, at [173], that Mr Donnellan was negligent in failing to advise Mr Woodland of the advantages of accepting the offer of 21 December 2001 and of the disadvantages in rejecting it. His Honour also held that Mr Donnellan breached his duty of care at that time in not correcting his earlier wrong and negligent advice.

In making those findings, his Honour made no adverse credit findings against either Mr Donnellan or Mr Woodland, either as to their honesty or reliability. Rather, his Honour attributed the inconsistencies in their respective accounts of conversations to defects in their recollections: see at [142].

In order to determine whether his Honour erred in finding that Mr Donnellan breached his duty of care, it is necessary to consider separately each of his Honour's negligence findings.

(a) Negligence in advising Mr Woodland that he had a strong case

The trial judge made the following findings in respect of the advice Mr Donnellan gave to Mr Woodland as to the likelihood that the s 88K application would succeed.

First, his Honour found, at [143], that a feature of the advice Mr Donnellan gave to Mr Woodland from about April 1999, when Mr Donnellan was first consulted, until the commencement of the hearing on 13 February 2002, was "the absence of any significant attention to the statutory test in s 88K, 'reasonably necessary'". His Honour accepted that the advice Mr Donnellan gave in his letter of 6 April 1999, that the on-site pump was "'impractical by comparison with' the use of the proposed easement", was close in meaning to the statutory test. However, his Honour considered that the balance of the advice given in that letter, relating to the expense and awkwardness of a pump out system outweighing any detriment to the Council in granting the easement, bore no relationship to the statutory test. His Honour said:

"Such a test is appreciably different, less stringent and introduces a standard, 'detriment that there might be to the Council in having the easement granted' that bears no relationship to 'reasonable necessity'. And while it may well be that the issue of detriment to the Council would be relevant to other aspects of s 88K, the reference to that detriment in the 6 April letter was calculated to mislead."

His Honour considered, at [144], that the language Mr Donnellan used in other letters to Mr Woodland tended "to confirm that [Mr Donnellan] did not appreciate the stringency inherent in the statutory test". By way of example, his Honour referred to the statement in the letter of 14 April 1999 that the on-site pump out system was "not ... of the same utility ... so that it goes beyond being merely desirable to being something which is necessary". His Honour also noted that in the letter of 20 April 2001, Mr Donnellan used the expression "preferable alternative".

In his Honour's opinion, at [145], the statement that "Mr Woodland had a strong case", as Mr Donnellan had advised Mr Woodland in April 1999, "was not only unjustified but very much so", having regard to the authorities. Although his Honour accepted, at [145], that a gravity drain may have been preferable and even "much preferable" to an on-site pump out system, that did not answer the question whether the easement was reasonably necessary. His Honour considered that the cases in which the court had ordered the grant of an easement pursuant to s 88K were all much stronger than Mr Woodland's application. His Honour's view was that Mr Woodland had an arguable case, in the sense that he "would not have characterised him as having no chance of success". However, in his Honour's opinion:

"Mr Donnellan's assessment, from which he did not resile, at least prior to the February 2002 hearing was inconsistent with the authorities, unduly optimistic and, in my view, to a degree that was unreasonable."

His Honour also held, at [146], that Mr Donnellan's statements in his letters of 14 April and 23 April 1999 respectively, that "we think it is quite likely that the Court would grant the easement" and that there was "a likelihood that [the] proceedings will be successful", were unreasonable.

(b) Negligence in advising Mr Woodland that there were good grounds to argue that each party would be left to pay his or its own costs

His Honour held, at [148], that the substance of the advice Mr Donnellan gave to Mr Woodland in respect of costs was that there were good grounds to argue that each party would be left to pay his or its own costs. His Honour, at [149], accepted there were grounds for arguing that the Council should be deprived of portion of its costs on the s 88K application, given that there did not appear to be any possibility of a significant or practical impact on the Council's land if it did grant an easement. In expressing that opinion, his Honour recognised that Hamilton J had taken a contrary view as to the impact of an easement upon the Council's land.

His Honour considered that Mr Donnellan's opinion seemed to have been influenced by his own view that the Council's conduct was "outrageous" and that the Council's stated concern about the child care centre was "nonsense". However, in his Honour's view, there was no basis "for the extremity of Mr Donnellan's characterisation".

His Honour concluded, at [151], that when regard was had to the case law, "the only reasonable conclusion open was that there was a probability that the Council would not be ordered to pay its own costs" and that Mr Woodland had not been so advised. In this regard, his Honour observed that in most of the earlier cases, costs had not been awarded on an indemnity basis to the other party, although Hamilton J had made an indemnity costs order in favour of a defendant, even in the absence of any unreasonable conduct on the part of the applicant for the easement. His Honour also noted that it was possible that Simos J had taken a similar approach in one of his decisions. His Honour held, therefore:

"In these circumstances, Mr Donnellan should have advised the Plaintiff of the possibility and risks that such an approach would be taken against him. It was unreasonable of him not to do so. A fortiori is this so once it became apparent that the proceedings were to be heard by Hamilton J."

(c) Negligence in failing to advise Mr Woodland to accept the offer of 21 December 2001

It was against the background of the advice given as to Mr Woodland's prospects of success and the likely costs order that would be made, that his Honour considered the offer made by the Council in its letter of 21 December 2001. It will be recalled that the letter contained an offer to negotiate in respect of three proposals relating to: the grant of an easement as claimed in the s 88K application; the payment of all costs and expenses; and the grant by Mr Woodland of an easement for drainage in favour of properties to the north of the Woodland land. His Honour's reasoning, at [152], was as follows:

"In that the first and third proposals referred to future negotiations, they may have come to nothing but in the circumstances then prevailing there was no possible reason to reject those suggestions. Apart from the topic of compensation mentioned in the first proposal Mr Woodland could not conceivably have hoped to do better in respect of the matters there dealt with than was suggested in that proposal. And on the topic of compensation, the letter of 20 April 2001 makes it apparent that the difference between the parties was but $4,000, an amount that was not large in absolute terms and tends to pale into insignificance when compared with other amounts involved."

His Honour considered, at [153], that the third proposal in the letter of 21 December 2001 was not substantially different from the offer Mr Woodland made in his letter of 10 January 2002 that he would grant an easement along the south-eastern boundaries of his property to drain properties to the north.

His Honour also considered the offer in the second proposal, that Mr Woodland pay all of the Council's legal, valuation and statutory expenses, would not have been more expensive than an indemnity costs order. His Honour recognised that the requirement that Mr Woodland pay all of the Council's costs did not involve any element of compromise. However, his Honour considered there was no compelling reason why the Council should have compromised.

His Honour's comments as to costs were subject to a qualification that the Council had not claimed "reasonable costs". However, he considered, at [155], that a term as to reasonableness would have been implied "as a matter of contract law".

His Honour concluded, at [156], that subject to the reservation as to costs being reasonable:

"... the Council's offer in the letter of 21 December, at least in its terms, provided Mr Woodland with a real prospect of obtaining the easement he desired on terms no more exacting than he was not unlikely to have had to meet under a Court decision, a decision that was by no means certain to be in his favour."

His Honour next had regard to Mr Donnellan's advice to Mr Woodland on 8 January 2002 to make a counter offer. His Honour considered that Mr Donnellan at that time "was under an obligation to advise" Mr Woodland of the advantages of accepting the Council's offer and the risks of rejecting it. His Honour was also of the opinion that Mr Donnellan was under an obligation at that time to cure the earlier erroneous advice that he had given in relation to the prospects of success of the s 88K application.

Although his Honour accepted, at [157], that the advice Mr Donnellan gave in the letter of 21 January 2002 was "more measured", he considered that Mr Donnellan was still deficient in not advising Mr Woodland of the risk, which was at least substantial, that he would not be successful in court proceedings and that if he failed he would almost certainly have to pay his own costs and those of the Council. His Honour, at [158], did not otherwise consider what was said in the letter of 21 January 2002 on the topic of costs as a breach of Mr Donnellan's duty of care. In this regard, his Honour considered that Mr Donnellan's advice, that it would be difficult to overturn the prescription in s 88K that the applicant pay the other party's costs of the proceedings unless the court ordered otherwise was, "in the absence of seriously outrageous conduct on the part of [the Council] ... a fair warning of the risks inherent in what s 88K said on the topic of costs".

His Honour, at [159], recognised that there was a question whether there was in fact any prospect of settlement following the letter of 21 December 2001, but dealt with that question in his consideration of the issues of causation and damages.

His Honour was also of the opinion, at [160], that the subsequent letters of advice to Mr Woodland reflected a view of the litigation that was "unreasonably optimistic", both as to the prospects of the court acceding to the application and to the court making an order other than that Mr Woodland, as applicant for the grant of the easement, pay the costs of the proceedings, including those of the Council, regardless of the outcome.

Did his Honour err in finding that Mr Donnellan breached his duty of care?

(i) Legal principles

A legal practitioner owes a duty to a client to take reasonable care and to exercise "due care, skill and diligence", bringing to the task required to be performed "the competence and skill that is usual among [practitioners] practising their profession": Voli v Inglewood Shire Council [1963] HCA 15; 110 CLR 74 at 84 per Windeyer J; Hawkins v Clayton [1988] HCA 15; 164 CLR 539 at 580 per Deane J; Rogers v Whitaker [1992] HCA 58; 175 CLR 479 at 483 per Mason CJ, Brennan, Dawson, Toohey and McHugh JJ. The duty may be owed pursuant to an express or implied contractual retainer, or under the common law, or both.

Mr Donnellan was retained to provide advice to Mr Woodland in respect of the obtaining of an easement. Mr Woodland pleaded that the duty arose out of an express retainer that was partly oral and partly written. The duty was pleaded to arise from either an express or implied term of the retainer (paras 11 and 12 of the statement of claim) as follows:

"...[Mr Donnellan] owed a duty to [Mr Woodland], to exercise reasonable care and skill in respect of advising [Mr Donnellan] as to the conduct of the Proceedings and all matters relating to the application to Council to obtain an easement."

The scope of the duty pleaded by Mr Woodland thus replicated the common law duty of care owed by a professional to a client stated in Voli v Inglewood Shire Council.

In the modern law of negligence in Australia, there has been an emphasis upon the identification of the content of the duty of care, with the content finding definition in the facts and circumstances of the given case: see Vairy v Wyong Shire Council [2005] HCA 62; 223 CLR 422 at [62] per Gummow J; at [118] per Hayne J; Roads and Traffic Authority of NSW v Dederer [2007] HCA 42; 234 CLR 330. From a pleading perspective, the content or the scope of the duty in this case was pleaded at a high level of generality. It may be that in a case like the present, no more can be articulated and it is sufficient to repeat the observation of McHugh J in Vairy v Wyong Shire Council, at [25]:

"... the duty in negligence is generally described as a duty to take reasonable care. In some areas of the law of negligence, however, the duty is expressed in more limited and specific terms. Until the decision of this Court in Zaluzna, for example, the duty owed to entrants upon privately owned land varied according to the category of the entrants. They were classified as invitees, licensees and trespassers. Similarly, the duty in respect of negligent statements is more specific and limited than a simple duty to take reasonable care in all the circumstances of the case. In negligence cases involving physical injury, however, the duty is always expressed in terms of reasonable care. As Prosser and Keeton have pointed out, 'the duty is always the same - to conform to the legal standard of reasonable conduct in the light of the apparent risk.'" (citations omitted)

The Civil Liability Act, s 5B specifies the "General principles" that govern breach of the duty of care owed in the particular case. It is accepted that s 5B, in its essential respects, replicated the common law test in Wyong Shire Council v Shirt [1980] HCA 12; 146 CLR 40 at 47 per Mason J, although fidelity to the terms of the statute must be observed: Stephens v Giovenco; Dick v Giovenco [2011] NSWCA 53 at [28] per Allsop P. The question whether there has been a breach of duty has to be assessed prospectively: see Vairy v Wyong Shire Council; Adeels Palace Pty Ltd v Moubarak; Adeels Palace Pty Ltd v Bou Najem [2009] HCA 48; 239 CLR 420.

The risk of harm in this case was the risk that Mr Woodland would not succeed on the s 88K application and, even if he did succeed, he would most likely be responsible for the Council's costs of the application: s 88K(5). Both risks were foreseeable, not insignificant and in the circumstances, a reasonable solicitor in Mr Donnellan's position would have advised Mr Woodland to settle the proceedings, if an offer capable of acceptance had been made: see s 5B(1).

The central allegation of negligence in the present case was the quality of the advice given, both as to liability and costs, and the failure to give specific advice in relation to settlement offers made by the Council. It has been said that although a solicitor does not warrant the correctness of the advice given, and that the question for determination in a negligence claim against a legal practitioner is whether the practitioner exercised reasonable skill and care in giving the advice: see Heydon v NRMA [2000] NSWCA 374; 51 NSWLR 1 at [147] per Malcolm AJA; it would be difficult to avoid liability for advice that was clearly wrong: see Tonitto v Bassal (1992) 28 NSWLR 564 at 576 per Sheller JA; Walmsley, Abadee, Zipser, Professional Liability in Australia, 2nd ed (2007), 3.805. However, if the law is unclear or difficult, the question for the court is whether the practitioner exercised reasonable care in the giving of the advice.

In Trust Co Australia v Perpetual Trustees WA (1997) 42 NSWLR 237 at 247 McClelland CJ in Eq summarised the position in the following terms:

Application to amend notice of contention

The appeal in this matter was heard by the Court on 8 August 2012. The Court's decision was reserved. The respondent, Mr Woodland, had filed a notice of contention which was argued on the appeal. On 4 September 2012, Mr Woodland filed a notice of motion in which he sought leave to file an amended notice of contention and to file the submissions on the issues raised in the amended notice of contention.

In the proposed amended notice of contention, Mr Woodland sought to argue that the trial judge ought to have found:

"... that the conduct found ... to be negligent also constituted misleading conduct by the Appellant in trade or commerce; and

... that the conduct constituted a breach of section 42 of the Fair Trading Act 1987 (NSW); and

... that the advocate's immunity does not apply to claims under the Fair Trading Act 1987 (NSW)."

An affidavit in support of the notice of motion was sworn by Hamish Esplin on 4 September 2012. Mr Esplin deposed that the claim under the Fair Trading Act 1987 was included in the statement of claim and had been referred to briefly by counsel for the respective parties in argument before the trial judge. Mr Esplin conceded that Mr Woodland's reference to this aspect of the claim was "admittedly in very brief terms".

Mr Esplin stated that having found Mr Donnellan liable in negligence and that the immunity did not apply, the trial judge did not deal with the claim under the Fair Trading Act, or with the separate question of whether the immunity applied in respect of a claim brought against a legal practitioner pursuant to the statutory claim. He deposed that through oversight, the point was not included in the notice of contention. He said that the oversight was only identified after oral argument.

The obligation on the courts and parties to observe the statutory requirements of the Civil Procedure Act 2005, s 56 militates against leave being granted. It is apparent from Mr Esplin's affidavit that scant attention was given to the claim under the Fair Trading Act before the trial judge. That would not have been a reason to preclude an argument on the question, had the matter been raised in Mr Woodland's original notice of contention. However, the lateness in raising the issue and the unlikelihood that the issue was considered to be of much importance at trial are sufficient reasons to refuse the application.

The Court is required by the operation of the Civil Procedure Act, s 56, to give effect to the overriding purpose of the Act in facilitating the just, quick and cheap resolution of the real issues between the parties. Parties and their legal representatives have corresponding duties. The application to amend was made almost one month after the conclusion of argument on the appeal. If the amendment was allowed, the Court would need to consider factual issues not addressed in the judgment nor, it would appear, in argument below. It would need to consider the relationship between the immunity and the statutory cause of action, a matter also not addressed below. It might be necessary to give the respondent a further trial to agitate matters not dealt with adequately at the first trial, before a new judge. At the very least, both parties would have to file further submissions in this Court and, almost certainly, given the questions sought to be raised, the Court would require that there be further oral argument. The administrative difficulties in reassembling the Court, which was constituted by a bench of five judges, would be considerable. In these circumstances leave to amend the notice of contention ought to be refused.

Accordingly, I would propose that the notice of motion be dismissed with costs.

Orders

The orders I propose, therefore, are:

1. Appeal allowed;

2. Set aside orders made in the Court below;

3. Judgment for the defendant on the statement of claim;

4. The respondent to pay the appellant's costs of the appeal and at first instance. The respondent to have a certificate under the Suitors' Fund Act 1951;

5. The notice of motion filed 4 September 2012 dismissed with costs.

BASTEN JA: The appellant, Mr Patrick Donnellan, is a solicitor. The respondent, Mr Peter Woodland, was a client who sought the appellant's advice and assistance in relation to attempts to obtain an easement over land owned by Manly Council for drainage of stormwater from a property owned by the respondent and his then wife. Applications to the Council in 1999 for the grant of an easement were unsuccessful. In March or April 1999 the respondent sought advice from the appellant.

A further application to Council, made on the advice of the appellant in the second half of 1999, was also unsuccessful. On 28 January 2000 (according to the statement of claim) the respondent and his wife filed a summons in the Supreme Court seeking relief under s 88K of the Conveyancing Act 1919 (NSW). The hearing in the Equity Division extended over a significant period. On 12 May 2003 Hamilton J dismissed the application. The respondent was ordered to pay the Council's costs, to be assessed on the ordinary basis up to 16 May 2002 and thereafter on an indemnity basis.

In late 2003 the respondent sought leave to appeal (unsuccessfully) against the costs order. In 2007, in circumstances not revealed in the course of these proceedings, the respondent was granted an easement. On 5 December 2007, he commenced proceedings in negligence against the appellant.

The trial judge found that the appellant was negligent in the advice given to the respondent with respect to an offer of settlement made by the Council on 21 December 2001. He found that, if properly advised, the respondent would have settled at that time and, in consequence, the expense incurred by the respondent in the litigation thereafter was caused by the negligence of the appellant: Woodland v Donnellan [2011] NSWSC 777 at [173], [175] and [178].

In this Court the appellant challenged the findings of negligence and also the rejection by the trial judge of a defence of immunity from suit. I agree with Beazley JA that the appeal should be allowed and the judgment below set aside.

As explained by Beazley JA at [4] above, there were five separate challenges within the grounds of appeal, dealing with negligence, causation, immunity from suit, damages and costs. The first seven grounds related to findings with respect to negligence and causation. Ground 8 related to the defence of a legal practitioner's immunity from suit. There is a significant question as to whether the trial judge erred in the order in which he dealt with these issues and, if so, how this Court should approach the matter.

It was held in D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; 223 CLR 1, that the immunity from proceedings brought by a former client against a legal practitioner alleging negligence (or a related cause of action) in relation to the conduct of litigation depends on the principle of finality. That principle is offended by a reconsideration of the circumstances in which a final judgment has been obtained, otherwise than by way of appeal from, or judicial review of, the earlier proceedings. (There may be other exceptions, such as a challenge to a judgment procured by fraud.) In circumstances where the immunity applies, to address the merit of the claim before considering the defence would be to subvert the very principle upon which the defence is premised.

Against that conclusion, it may be contended that the application of the immunity cannot be addressed until the precise scope of the dispute and the manner of its resolution has been determined. However, the availability of the defence cannot rest upon how the parties run the proceedings. If the defence is available, that must be ascertained from the pleadings and the potential scope of the proceedings so revealed. It is not to be assessed and determined only after the hearing of the merits, with its potential to diminish confidence in the proper administration of justice.

On this basis, the approach adopted by the trial judge was erroneous. However, because he determined that the immunity did not apply, there would have been no different result had the defence been addressed at the commencement of the proceedings. The question which then arises is how this Court should approach the matter. On one view, and assuming the immunity applies, the damage has already been done and the principle of finality undermined. If that has resulted in an erroneous finding of negligence on the part of the solicitor, it would seem unfortunate if it were necessary to leave that adverse finding on the record because the solicitor is entitled to succeed on his immunity defence. On the other hand, whether the finding was correct or erroneous will not be known until the assessment has been undertaken. Accordingly, and again assuming the immunity applies, the appeal court, in undertaking that further assessment on the merits, would be repeating and reinforcing the error of the trial judge.

The dilemma thus revealed is not an abstract question of principle in the present case. As noted by Beazley JA at [125], the primary judge actually reached a conclusion that Hamilton J had been wrong in a particular respect in assessing costs: [2011] NSWSC 777 at [165]. That finding directly subverted the principle of finality and cast doubt upon an order made by Hamilton J and, as it appears, one which had been the subject of an unsuccessful application for leave to appeal to this Court in the original proceedings. Where the defendant seeks to rely upon the immunity, the principle of finality will often be most efficiently upheld by an application for summary judgment once the pleadings are closed: see, as an example, Bott v Carter [2012] NSWCA 89.

The application of principle requires that this Court address the availability of the immunity first. On the basis, which should be accepted, that the immunity applies, it will be contrary to principle to re-evaluate the findings of negligence. Nor should such an assessment be undertaken against the possibility of error, as explained in Kuru v State of New South Wales [2008] HCA 26; 236 CLR 1 at [12]. However, as others take a different view, I am content to note my agreement with the analysis of Beazley JA, which exonerates the solicitor of negligence.

Practitioner's immunity

The approach to be adopted in determining the scope of the immunity has been discussed in a number of cases in this Court since D'Orta-Ekenaike.

In particular, there has been discussion as to whether the impugned conduct is "intimately connected with" the ultimate conduct of a case in court: see, eg, Philip Walton v Efato Pty Ltd [2008] NSWCA 86 at [82] (Tobias JA); Wilson v Carter [2005] NSWSC 1351 at [55] (Rothman J), discussed in Day v Rogers [2011] NSWCA 124 at [121]-[128] (Giles JA). In Symonds v Vass [2009] NSWCA 139; 257 ALR 689 at [26] Giles JA stated:

"The rationale enunciated in D'Orta-Ekenaike v Victoria Legal Aid could bring a wide application of the immunity. Whether the work is negligently performed through act or through omission, and whether or not it leads to an overt decision, there cannot be re-litigation in which it is asserted that, but for the negligence, a different result would have been reached. According to the rationale, it does not matter that the client does not seek to overturn the prior result, but uses it as the basis for complaint. The re-litigation is regarded as challenging a lawful result and so as offending the finality principle, distinguished from challenge by appeal because it would be re-litigation 'of a skewed and limited kind' (D'Orta-Ekenaike v Victoria Legal Aid at [45])."

In Day v Rogers, Giles JA noted that the rationale of the immunity extends to a case involving a dispute about wasted costs, which may become the vehicle for a dispute about the outcome of the earlier proceedings: at [132]. See also Attard v James Legal Pty Ltd [2010] NSWCA 311; 80 ACSR 585 at [5]-[10] (Giles JA).

In order to determine the application of the practitioner's immunity from suit in the circumstances of a particular case, it is necessary to identify the cause of action pleaded. (That course is also necessary in order to understand the application of the Civil Liability Act2002 (NSW) and in particular s 5B, an aspect of the case which need not be pursued.) The statement of claim pleaded that the retainer to advise and act on behalf of the respondent (and, at that stage, his wife) arose in April 1999: par 8. The claim alleged that proceedings had been commenced on 28 January 2000 and that the appellant owed a duty to exercise reasonable care and skill in respect of advising the respondent (and his wife) as to the conduct of the proceedings and all matters relating to the application to the Council to obtain an easement: pars 10 and 11. The pleading of material facts commenced with a letter from the solicitors for the Council dated 21 December 2001 and described as "the initial offer to settle". In substance, the complaint was that when the appellant advised the respondent in January 2002, he failed to give reasonably adequate advice as to the scope of s 88K of the Conveyancing Act, the likelihood of success in pursuing proceedings, the risks as to an adverse costs order, the likely costs of the litigation and the desirability of settlement: par 50. Similarly inadequate advice was said to have been provided thereafter, including in the course of the hearing.

It appears that the course of conduct was treated as a single cause of action, with the breach of duty commencing in January 2002: for an example of negligence involving a continuing course of conduct, from the drafting of a statement of claim through to the hearing, see Keefe v Marks (1989) 16 NSWLR 713 at 719 (Gleeson CJ). The respondent contended that he was not challenging the judgment or orders of Hamilton J, but indeed relied upon them as providing the source of his loss which he sought to recover from the appellant. However, both in practice and in principle that contention cannot be accepted.

In practice, and by way of example, Hamilton J, in a judgment delivered on 20 June 2003 with respect to costs, dealt with the Council's application for indemnity costs based on its offer of 21 December 2001. Hamilton J held at [10]:

"Insofar as the plaintiffs did not accept that offer (and, indeed, some negotiation did follow the letter) I do not regard the plaintiffs' conduct as in any way unreasonable by reference to that letter."

If the response of the respondent was not unreasonable, and was based upon the legal advice given by the appellant, to succeed in his claim against the appellant, the respondent needed to demonstrate error in the finding of Hamilton J.

Secondly, Hamilton J did award indemnity costs on the basis of a second offer of settlement contained in the letter of 16 May 2002. In the present proceedings, the appellant persuaded the trial judge that, contrary to the finding of Hamilton J, the letter did not constitute a Calderbank offer and that it was not unreasonable for the respondent not to accept it. In short, as a matter of fact, the proceedings were run in a way which resulted in successful challenges to two findings made by Hamilton J in the original proceedings.

However, in accordance with the principles set out above, the question is not what happened at the trial below, but what might properly have been anticipated, based on the pleadings.

The denial of negligence inevitably brought with it the likelihood of a further trial requiring an analysis of the principles to be applied in an action for relief under s 88K, the nature of the evidence available in the earlier proceedings, a retrospective analysis of the likelihood of success or failure in those proceedings before they were resolved and as to the likely costs orders. It was open to the appellant to argue that, whatever the precise content of the advice given to the respondent (a factual matter to be found at trial) the assessment underlying the advice was reasonable on the law as it stood at the time the advice was given. Such an exercise would, at the very least, have required findings in the negligence proceedings as to the likelihood as to the orders which had in fact been made in the original proceedings. Without setting the orders aside, a finding that they were improbable would inevitably cast doubt upon their correctness. Accordingly, as Giles JA stated in Symonds v Vass, and repeated in Attard, it does not matter that the plaintiff in the negligence proceedings against his former solicitor did not seek to overturn the prior result but used it as a basis for complaint. The principle of finality is infringed in the way indicated. Accordingly, the immunity extended to the circumstances of the present case.

That conclusion does not depend upon what actually happened in the course of the proceedings before the trial judge: rather, it amounts to a finding as to the probabilities based on the pleadings. There should have been no trial. However, the fact that the prediction which should have been made at the outset came to pass at the trial provides a further basis for upholding the appeal on the ground that the immunity operated.

For these reasons alone, the orders proposed by Beazley JA with respect to the appeal should be made. I also agree that the motion to amend the notice of contention should be dismissed with costs, for the reasons explained by Beazley JA.

BARRETT JA: If the defence of legal practitioner's immunity from suit is available to meet a client's allegation of negligence against a lawyer who acted for the client in litigation, there is much to be said, as a matter of principle, for the proposition that the client's negligence action should be disposed of solely on that ground.

If that course is not followed, there will arguably not be due regard for the principle of finality of litigation to which the High Court attached particular significance in D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; 223 CLR 1. This is because trial of the negligence action on its merits (that is, by reference to the facts and circumstances beyond those going to the availability of the immunity) presents the possibility of findings and conclusions at odds with those in the case in which the lawyer acted for the client.

In the present case, the primary judge did not proceed in that way. He dealt first with the merits of the negligence claim against the lawyer and, in so doing, called into question - indeed, expressed disapproval of - at least one aspect of the decision of the judge who determined the litigation in which the lawyer had acted for the client. Only then did he turn attention to the question of the immunity defence.

If the primary judge had taken the view that he should deal with the merits only if he found that the immunity defence was not established, a decision that it was established would have left the merits unaddressed. And if, on appeal, that decision had been found to be in error, the fact that there had been no findings on the merits would have left the parties' controversy unquelled and no means by which the appeal court could produce a conclusion for them. Remitter to the primary judge would have been the only available course.

In the events that happened, of course, the primary judge found that the immunity was not attracted. His addressing of the merits (in fact undertaken before a consideration of the immunity question) was therefore necessary.

I agree that the primary judge fell into error when he decided that the immunity was not available. I agree with what is said by Beazley JA on that matter.

Strictly speaking, therefore, this Court might confine itself to a statement of that conclusion and the reasons for it, in the way that Basten JA considers appropriate. But particularly in view of the way in which the primary judge approached the matter and structured his reasons (as well as the possibility of further appeal), the preferable course, in my view, is that taken by Beazley JA. The principle of finality, as it applies to the proceedings determined by Hamilton J, has already been compromised by what is said in the judgment of the primary judge. This Court cannot change that and does not need to try to preserve something which is already lost.

I agree that the orders Beazley JA proposes should be made for the reasons her Honour gives.

HOEBEN JA: I agree with Beazley JA and the additional observations of Barrett JA

SACKVILLE AJA: I agree with Beazley JA and the additional observations of Barrett JA.

**********

Decision last updated: 18 December 2012

Medium Neutral Citation:	Donnellan v Woodland [2012] NSWCA 433
Hearing dates:	8 August 2012
Decision date:	18 December 2012
Before:	Beazley JA at [1]; Basten JA at [253]; Barrett JA at [276]; Hoeben JA at [284]; Sackville AJA at [285]
Decision:	1. Appeal allowed; 2. Set aside orders made in the Court below; 3. Judgment for the defendant on the statement of claim; 4. The respondent to pay the appellant's costs of the appeal and at first instance. The respondent to have a certificate under the Suitors' Fund Act 1951; 5. The notice of motion filed 4 September 2012 dismissed with costs. [Note: 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:	TORTS - Negligence - Legal practitioner's duty of care - Legal practitioner retained to advise in respect of the Conveyancing Act 1919, s 88K - Application not granted - Whether legal practitioner's advice negligent - Whether advice protected by advocates' immunity - Principle of finality of litigation. LEGAL PRACTITIONERS - Advocates' immunity - Application of principle in D'Orta-Ekenaike v Victoria Legal Aid - Scope of advocates' immunity - Whether alleged negligent conduct led to a decision affecting the conduct of the case in court.
Legislation Cited:	Civil Liability Act 2002 Civil Procedure Act 2005 Conveyancing Act 1919 Fair Trading Act 1987 Supreme Court Act 1970 Uniform Civil Procedure Rules 2005
Cases Cited:	117 York Street Pty Ltd v Proprietors of Strata Plan No 16123 (1988) 43 NSWLR 504 Adeels Palace Pty Ltd v Moubarak; Adeels Palace Pty Ltd v Bou Najem [2009] HCA 48; 239 CLR 420 Alpine Holdings Pty Ltd v Feinauer [2008] WASCA 85 Attard v James Legal Pty Ltd [2010] NSWCA 31 Biggar v McLeod [1978] 2 NZLR 9 Blulock Pty Ltd v Majic (2001) 10 BPR 19,143 Boland v Yates Property Corporation Pty Ltd [1999] HCA 64; 74 ALJR 209 Bott v Carter [2012] NSWCA 89 Calderbank v Calderbank [1975] 3 All ER 333; [1975] 3 WLR 586 Chamberlain v Ormsby t/as Ormsby Flower [2005] NSWCA 454 Coshott v Barry [2009] NSWCA 34 D'Orta-Ekenaike v Victorian Legal Aid [2005] HCA 12; 223 CLR 1 Dansar Pty Ltd v Pagotto [2008] NSWSC 112 Day v Rogers [2011] NSWCA 124 Durack v De Winton (1998) 9 BPR 16,403 Gett v Tabet [2009] NSWCA 76; 254 ALR 504 Giannarelli v Wraith [1988] HCA 52; 165 CLR 543 Goodwin v Yee Holdings Pty Ltd (1997) 8 BPR 15,795 Grattan v Simpson (1998) 9 BPR 16,649 Hanny v Lewis (1998) 9 BPR 16,205 Hawkins v Clayton [1988] HCA 15; 164 CLR 539 Heenan v Di Sisto [2008] NSWCA 25; 13 BPR 25,213 Heydon v NRMA [2000] NSWCA 374; 51 NSWLR 1 In the Matter of an Application by Kindervater [1996] ANZ ConvR 331 ING Bank (Australia) Ltd v O'Shea [2010] NSWCA 71; 14 BPR 27,317 Katakouzinos v Roufir Pty Ltd (1999) 9 BPR 17,303 Keefe v Marks (1989) 16 NSWLR 713 Kelley v Corston [1998] 3 WLR 246; [1997] 4 All ER 466 Kent Street Pty Ltd v Council of the City of Sydney (2001) 10 BPR 18,757 King v Carr-Gregg [2002] NSWSC 379 Kuru v State of New South Wales [2008] HCA 26; 236 CLR 1 Malec v JC Hutton Pty Ltd [1990] HCA 20; 169 CLR 638 MacRae v Stevens [1997] ANZ ConvR 129; (1996) Aust Tort Reports 81-405 Rees v Sinclair [1974] 1 NZLR 180 RJE v Secretary to the Department of Justice [2008] VSCA 265 Roads and Traffic Authority of NSW v Dederer [2007] HCA 42; 234 CLR 330 Rogers v Whitaker [1992] HCA 58; 175 CLR 479 Sellars v Adelaide Petroleum NL [1994] HCA 4; 179 CLR 332 Somasundaram v Melchior & Co [1988] 1 WLR 1394; [1989] 1 All ER 129 Stephens v Giovenco; Dick v Giovenco [2011] NSWCA 53 Studer v Boettcher [2000] NSWCA 263 Symonds v Vass [2009] NSWCA 139; 257 ALR 689 Tonitto v Bassal (1992) 28 NSWLR 564 Tregoyd Gardens Pty Ltd v Jervis (1997) 8 BPR 15,845 Trust Co Australia v Perpetual Trustees WA (1997) 42 NSWLR 237 Vairy v Wyong Shire Council [2005] HCA 62; 223 CLR 422 Voli v Inglewood Shire Council [1963] HCA 15; 110 CLR 74 Walton t/as Pitcher Walton & Co v Efato Pty Ltd [2008] NSWCA 86 Wilson v Carter [2005] NSWSC 1351 Woodland v Manly Municipal Council [2003] NSWSC 524 Wyong Shire Council v Shirt [1980] HCA 12; 146 CLR 40
Texts Cited:	Walmsley, Abadee, Zipser, Professional Liability in Australia, 2nd ed (2007)
Category:	Principal judgment
Parties:	Patrick Donnellan t/as P J Donnellan & Co (Appellant) Peter Richard Woodland (Respondent)
Representation:	Counsel: J C Kelly SC; M Avenell (Appellant) R E Dubler SC; J S Emmett (Respondent) Solicitors: Colin Biggers & Paisley (Appellant) Esplins Solicitors (Respondent)
File Number(s):	CA 2007/265232
Publication restriction:	No
Decision under appeal	Jurisdiction: 9111 Citation: Woodland v Donnellan [2011] NSWSC 777 Date of Decision: 2010-07-29 00:00:00 Before: R S Hulme J File Number(s): 2007/20438

INDEX
Preliminary consideration							6
The background facts							11
The offers of compromise							29
Judgment of Hamilton J: The s 88K application
(a)					Determination of the s 88K application	50
(b)					Determination of the costs issues	58
Reasons of R S Hulme J: The professional negligence claim							64
Findings of negligence							66
(a)					Negligence in advising Mr Woodland that he had a strong case	71
(b)					Negligence in advising Mr Woodland that there were good grounds to argue that each party would be left to pay his or its own costs	76
(c)					Negligence in failing to advise Mr Woodland to accept the offer of 21 December 2001	79
Grounds 1-6: Did his Honour err in finding that Mr Donnellan breached his duty of care?
(i)				Legal principles		88
(ii)	(a)			No negligence in advising Mr Woodland he had a strong case		98
(b)		No negligence in failing to advise that Mr Woodland would probably be liable for the Council's costs		105
(c)	No negligence in failing to advise Mr Woodland to accept the offer of 21 December 2001		110
(iii)				The contention point: Failure to advise Mr Woodland to accept the offer of 16 May 2002		121
Ground 7: Did his Honour err in finding that Mr Woodland would have been willing to settle?							145
Ground 8: Immunity from suit							160
Case law applying the principle stated in *D'Orta-Ekenaike*
(i)			The challenged decisions			179
(a)		Chamberlain v Ormsby	180
(b)		Attard v James Legal Pty Ltd	181
(c)		Day v Rogers	185
(d)		Symonds v Vass	187
(ii)			Were the challenged decisions plainly wrong?			190
(iii)			Points of distinction between the challenged cases and this case			193
Other case law							210
Did the trial judge err in finding that the immunity did not apply?						220
Ground 9: Assessment of damages							235
Grounds 10 and 11: The costs issues							240
Application to amend notice of contention							245
Orders							252