Volanne Pty Ltd & Ors v Donohue
[2021] ACTSC 48
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Volanne Pty Ltd & Ors v Donohue |
Citation: | [2021] ACTSC 48 |
Hearing Date: | 19 February 2021 |
Decision Date: | 31 March 2021 |
Before: | McWilliam AsJ |
Decision: | See [63] |
Catchwords: | PRACTICE & PROCEDURE – INTERLOCUTORY APPLICATION – summary dismissal – strike out – advocates’ immunity from suit |
Legislation Cited: | Court Procedures Rules 2006 (ACT) rr 425, 1147 |
| Cases Cited: | Agar v Hyde [2000] HCA 41; 201 CLR 552 |
Parties: | Volanne Pty Ltd (ACN 077 412 232) (First Plaintiff) John Fragopoulos (Second Plaintiff) Anthoula Fragopoulos (Third Plaintiff) Christopher John Donohue t/a Donohue and Co (Defendant) |
Representation: | Counsel P H Greenwood SC and K Pattenden (Plaintiffs) I Griscti (Defendant) |
| Solicitors Aulich Civil Law (Plaintiffs) Gilchrist Connell (Defendant) | |
File Number: | SC 380 of 2020 |
McWilliam AsJ:
Mr Donohue, a solicitor, is the defendant in the present proceedings brought against him for professional negligence and breach of contract by three former clients (the plaintiffs). The defendant previously acted for the plaintiffs in a separate dispute which was litigated and determined by a series of judgments in this Court.
The first plaintiff, Volanne Pty Ltd (Volanne), is a proprietary company which operated a seafood business. The second and third plaintiffs, John and Anthoula Fragopoulos, are shareholders and directors of Volanne.
In the present application, the defendant seeks summary dismissal of the entire claim now brought against him, pursuant to r 1147 of the Court Procedures Rules 2006 (ACT) (the Rules). The basis of the application is the doctrine of advocates’ immunity from suit, which the defendant says provides a complete defence to the plaintiffs’ claim.
That is the sole issue for determination. An alternative argument raised in the application is that the plaintiffs’ claim should be struck out pursuant to r 425 of the Rules. However, that part of the application argued that no reasonable cause of action was disclosed. It was also founded on the application of the advocates’ immunity doctrine. To the extent that any other basis for striking out the pleading was intended to be agitated, it was not pressed by the defendant at the hearing and the parties agreed during oral argument that there were no other issues requiring consideration in these reasons.
For the reasons that follow, the pleading raises triable issues about whether the advocates’ immunity applies. Accordingly, this is not a case where the Court is able to grant summary judgment dismissing the proceedings.
The Court’s discretionary power to grant summary dismissal
The grant of summary relief (whether in part or in whole) is a discretionary remedy, to be exercised with the utmost caution and only in very clear cases: O’Brien v Bank of Western Australia Ltd [2013] NSWCA 71 at [66]; Young v Hones [2014] NSWCA 337 at [163], citing General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; 112 CLR 125 at 128-129. A case is not to be summarily dismissed unless there is a high degree of certainty that it would fail if it were allowed to go to trial in the ordinary way: Agar v Hyde [2000] HCA 41; 201 CLR 552 at [57].
The principles applying to an application for summary judgment (whether in the plaintiff’s or in the defendant’s favour) have been set out in Galovac Pty Ltd v Australian Capital Territory [2010] ACTSC 132 (Galovac) at [5] per Jagot J. Her Honour there helpfully collected the leading authorities from which the principles guiding the exercise of the Court’s discretion have emerged.
The principles set out in Galovac are well-established: see Commissioner for ACT Revenue v Arcidiacono t/as Rose Cleaning Service [2017] ACTSC 379 at [18] per Murrell CJ; McColley v Commonwealth of Australia [2014] ACTCA 2014 at [31] per Murrell CJ, Refshauge and Penfold JJ; and Bolas v Calvary Healthcare Limited [2016] ACTSC 58 at [1] per Mossop AsJ (as his Honour then was). They include the following:
(a)There is a very high threshold that must be met. The Court must be satisfied the claim is “obviously untenable”, in that there must be a high degree of certainty that there is no real prospect of success on all or part of the plaintiff’s claim.
(b)The application is assessed on the substance, not the form or expression of the claim.
(c)The necessity for argument, even extensive argument, is no bar to summary relief. However, as soon as it appears that there is a “real question” to be determined on which relief depends, the summary judgment procedure is not available.
(d)On such a summary application the Court assumes that every fact pleaded by the plaintiffs is true.
The claim pleaded in the present proceedings
The last of the above principles directs attention to the facts pleaded in the Amended Statement of Claim filed on 2 February 2021. They have been paraphrased for ease of reading.
The previous litigation giving rise to the allegations against the defendant
The earlier litigation primarily involved a debt arising from a loan agreement (the Loan Agreement) between Volanne and an unrelated company, International Consulting and Business Management Pty Ltd (ICBM), the performance of which was guaranteed by the second and third plaintiffs pursuant to a deed of guarantee and indemnity (the Guarantee).
In or around June 2007, ICBM commenced proceedings against the second and third plaintiffs as guarantors of the loan, claiming a debt of $523,587.28 (the ICBM claim).
In or around September 2007, an entity related to the director of ICBM, Skybase (Vic) Pty Ltd (Skybase), commenced proceedings in this Court against Volanne, claiming $100,000 in what was alleged to have been money paid by mistake (the Skybase claim).
In April 2009, the ICBM claim and the Skybase claim were consolidated into one proceeding and an amended statement of claim was filed.
On 25 July 2014, judgment was awarded in favour of ICBM against the plaintiffs for repayment of the loan and interest payable: International Consulting and Business Management Pty Ltd and Anor v Volanne Pty Ltd and Ors [2014] ACTSC 175 (the First Instance Judgment).
On 26 September 2014, following unsuccessful negotiations between the parties, orders were ultimately entered in favour of ICBM in the amount of $472,948.48, of which approximately $415,582.61 comprised interest.
The First Instance Judgment was then appealed, with the Court of Appeal delivering its decision on 30 September 2016: Volanne Pty Ltd v International Consulting and Business Management (ICBM) Pty Ltd [2016] ACTCA 49 (the Appeal Judgment). The plaintiffs were partially successful, in that interest on the judgment sum was held to be payable on the ordinary simple basis, rather than the compound basis determined at first instance.
The Court of Appeal directed the parties to confer and file an amended summary setting out the amount for which judgment should be entered, giving effect to its reasons in the Appeal Judgment.
While the parties were attempting to determine the appropriate judgment sum, it became apparent that there was an issue with how ICBM had been appropriating loan repayments made by Volanne. The case at first instance and on appeal had proceeded on the basis that the monies paid by Volanne were appropriated to the interest component of the debt first.
ICBM’s tax returns and financial documents between 2000 and 2007, which had been produced during the proceedings at first instance, caused the plaintiffs to assert that in fact, when payments were received by ICBM, it treated them as appropriated to the capital first, rather than the interest. This indicated that ICBM had been appropriating Volanne’s loan repayments to the principal of the loan and not to the interest (the Appropriation Issue).
The plaintiffs allege that if the payments were in fact appropriated first to the capital, the judgment sum payable by the plaintiffs would be significantly less than if the payments had been allocated to first paying down the interest.
On 5 May 2017, an application to reopen the appeal to adduce fresh evidence was brought. It was unsuccessful: see Volanne Pty Ltd v International Consulting and Business Management (ICBM) Pty Ltd (No 3) [2017] ACTCA 43 (the Fresh Evidence Judgment). The Court of Appeal considered it would not be just to permit the issue to be opened and examined for the first time several years after the trial and after the appeal had already been heard: Fresh Evidence Judgment at [46]-[48].
Judgment was subsequently entered against the plaintiffs in these proceedings.
The allegations concerning the defendant’s conduct
The present pleading deals with the defendant’s conduct at two stages. At first instance, it is pleaded that the defendant was retained by the plaintiffs to:
(a)advise the plaintiffs in relation to the Loan Agreement and the Guarantee;
(b)advise the plaintiffs in relation to the ICBM claim and the Skybase claim; and
(c)to act for the plaintiffs in relation to those matters.
The pleaded breaches of duty of care or alternatively of the retainer include:
(a)A failure to identify the Appropriation Issue.
(b)A failure to advise the plaintiffs of an available defence on the basis that payments made by Volanne were appropriated to capital not interest, and to seek instructions to plead those matters.
(c)A failure to properly analyse the evidence produced by ICBM and its director well before the hearing of the proceedings.
(d)A failure to seek instructions to obtain documents regarding the appropriation of payments prior to the hearing of the proceedings.
The second stage concerns the appeal. It is alleged the defendant was retained by the plaintiffs to:
(a)advise on the prospects of appeal; and
(b)advise and act for the plaintiffs in the conduct of the appeal.
At this second stage, among the pleaded beaches of duty of care or alternatively the retainer are:
(a)a failure to advise that the Appropriation Issue could and should be raised on appeal;
(b)a failure to advise the plaintiffs to seek independent legal advice;
(c)a failure to raise the Appropriation Issue in the Notice of Appeal; and
(d)a failure to include the necessary financial documents in the appeal books.
Doctrine of advocates’ immunity from suit
In Australia, an advocate is immune from suit in relation to work done in court, and also in relation to work done out of court that bears upon the court’s determination of proceedings: Attwells v Jackson Lalic Lawyers [2016] HCA 16; 259 CLR 1 (Attwells) at [46]; Kendirjian v Lepore [2017] HCA 13; 259 CLR 275 (Kendirjian) at [31].
In order for the immunity to apply, what is required is an intimate connection with work in a court leading to a judicial decision: D’Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; 223 CLR 1 (D’Orta-Ekenaike) at [86]. That has been described as a ‘functional connection’ between the work of the advocate and the court’s determination of the case: Attwells at [5]; Kendirjian at [31].
The immunity is not engaged merely by ‘any plausible historical connection’ between an advocate’s work and a client’s loss: Kendirjian at [31], citing Attwells at [46]. It is not attracted by out of court work which does not progress the litigation towards a judicial determination: Attwells at [38], [48]-[49].
The rationale behind the immunity is to be found in the public policy consideration of protecting the finality of judicial decisions from collateral attack, rather than protecting lawyers per se in the performance of their professional obligations: Attwells at [38], [52].
In Rogers v Roche (No 1) [2016] QCA 340; [2017] 2 Qd R 306 (Rogers (No 1)), the Queensland Court of Appeal has said of the test at [27] (emphasis added, citations omitted):
That test is expressed in unambiguous and quite specific terms but in some cases the result of its application may be debateable. In order to decide whether the immunity is attracted in those cases it will be necessary to take into account the underlying rationale for advocate’s immunity. In that respect, Attwells is authority for the propositions that advocate’s immunity is attracted by the advocate’s participation as an officer of the court in the quelling of controversies by the exercise of judicial power and that the immunity is grounded in the high value which the law attributes to certainty and finality of judicial decisions and the consequential undesirability of allowing collateral attacks on those judicial decisions.
In Alpine Holdings Pty Ltd v Feinauer [2008] WASCA 85 (Alpine Holdings), the Court of Appeal of Western Australia discussed the ambit of the advocates’ immunity for out of court work. The Court of Appeal there held that it was arguable that some of the appellant’s claims in that case did not fall within the ambit of the immunity. Referring to an observation of Priestley JA in Keefe v Marks (1989) 16 NSWLR 713 (Keefe v Marks), Steytler P and Newnes AJA said at [84] (emphasis added):
… As Priestley JA observed in Keefe v Marks, the rule in relation to out of court work is a relative one and the degree of connection is a matter of assessment. Hard and fast distinctions are therefore likely to be elusive. What is clear, however, is that the justification for the immunity is the principle that once a controversy is resolved a party is not entitled to re-open it, except in the few narrowly defined circumstances referred to by the High Court in D'Orta-Ekenaike, and it is to that end that the immunity is directed.
Although that case was decided before Attwells and Kendirjian, the passage is not inconsistent with those later High Court authorities. The plaintiffs sought to rely upon this passage to demonstrate the inherently fact-dependant and relative nature of the test for work done out of court and how it relates to the standard of satisfaction required for summary dismissal. At least to that extent, the characterisation of the test in Alpine Holdings remains relevant.
Similarly, in Walters & Ors v Kemp (No 2) [2014] ACTSC 251, Burns J stated at [12] that much may depend upon the facts as determined by any court where a claim of advocates’ immunity is raised.
Has the defendant established the claim is obviously untenable?
The defendant submits that the plaintiffs’ allegations amount to a number of failures, all of which arise in the circumstances surrounding the earlier litigation at first instance and on appeal.
In two sets of written submissions, the defendant extracted a number of failures from the various paragraphs in the Amended Statement of Claim, including:
(a)a failure to advance alternative arguments that were plainly open on the facts;
(b)a failure to properly analyse the evidence that had been served;
(c)a failure to identify, advise and instruct counsel in relation to the Appropriation Issue at first instance and on appeal;
(d)a failure to instruct an expert in relation to the financial documents and the Appropriation Issue;
(e)a failure to exercise care and skill in connection with the drafting and hearing of the fresh evidence application; and
(f)a failure to advise the plaintiffs to obtain independent legal advice regarding making a claim against the defendant.
The defendant submits that allegations of inadequate preparation, inadequate evidence and failure to identify relevant issues go to the core of the presentation of the case in court.
Further, the defendant contends that in order to determine whether his handling of the case caused any loss, it would be necessary to posit what the outcome would have been in the proceedings had the Appropriation Issue been raised. That is tantamount to a re-litigation of the earlier proceedings.
The same is true for the separate allegation that the defendant should have advised the plaintiffs to obtain independent advice in respect of the proceedings at first instance or on appeal. Because there is no loss unless the plaintiffs establish a different judicial outcome would have been achieved, it would again be necessary to consider what the judicial outcome would have been, had the case been handled in the manner for which the plaintiffs contend.
Accordingly, the defendant argues that the facts pleaded fall squarely within the advocates’ immunity doctrine, with every allegation of breach suffering from the same vice. The defendant submits the pleaded facts fall into the ‘paradigm cases’ category where the immunity has been applied. In Symonds v Vass, [2009] NSWCA 139; 257 ALR 689, Ipp JA (the only judge who decided that there were sufficient facts to determine whether the advocates’ immunity applied) stated at [116]:
[A]paradigm case to which advocate's immunity applies is where the client asserts that, 'if the case had been prepared and presented properly, a different ... result would have been reached' (D'Orta-Ekenaike at [70]).
The defendant drew the Court’s attention to Day v Rogers [2011] NSWCA 124 at [116]-[118], where it was stated (per Giles JA, Allsop P and Sackville AJA agreeing):
… The work and decision were combined; there was a decision out of court, maintained as a decision at the hearing, upon how the case should be conducted in court…
Calling what the appellant did failure to advise upon what evidence was required and marshalling the evidence does not change its character…
The evidence adduced is central to the conduct of a case in court, and a decision on what evidence to lead or not lead is a decision affecting the conduct of the case in court.
Applying these authorities to the present case, the defendant submits there is “no concrete area of doubt” to make the application of the immunity at all arguable. Accordingly, the defendant argues he has a complete defence to the claim, satisfying the very high threshold for summary dismissal.
I accept that some of the allegations made as to the breaches of duty could be categorised as being work intimately connected with the conduct of a case in court so as to attract the immunity. In D’Orta-Ekenaike at 52, McHugh J outlined some of the work that the courts had held to be intimately connected with the conduct of a case. These included examples earlier given by Gleeson CJ (Meagher JA agreeing), when sitting in the NSW Court of Appeal, in Keefe v Marks at 718. The examples given included: the failure to raise a matter pertinent to the opposition of an application in family law; failing to plead a statutory prohibition on the admissibility of material evidence; giving advice and making decisions about what witnesses to call; working up necessary legal arguments; and taking steps to have pleadings amended.
These are the very types of allegations that are among those alleged in the present case. A failure to raise a defence, a failure to give advice about that defence, and a failure to take steps to plead that defence (either at first instance or through a notice of appeal) are all conduct that may be thought to fall within the examples given by McHugh J.
However, his Honour also referred to negligently advising a settlement, which, following the authorities of Attwells and Kendirjian, is no longer a circumstance that would attract the immunity.
Further, Priestley JA in Keefe v Marks dissented on whether it was arguable that a failure to make a claim for interest was conduct that fell within the immunity from suit. His Honour said at 725 (emphasis added):
The degree of connection between the in-court and out-of-court work must be assessed. … It seems to me to be arguable that the rule does not apply to a simple out-of-court omission to consider whether a claim for interest was available in the proceedings…
It will be recalled that the Court of Appeal (WA) in Alpine Holdings applied that idea in also finding the question of whether the advocates’ immunity applied, in relation to the facts in the case before it, to be arguable. The observations of a dissenting judge at intermediate appellate level were thus applied as part of majority reasoning by a different intermediate appellate court.
This highlights the difficulty for the defendants on the summary dismissal application of the particular pleading under consideration. Facts that once might have been considered to fall unarguably within the doctrine of advocates’ immunity from suit may need to be revisited and ‘assessed’ in light of the clarification given to the scope of the advocates’ immunity by recent High Court authority. In particular, the focus is on the rationale for the application of the doctrine, and the potential for a collateral attack on judicial determinations.
As submitted by Senior Counsel for the plaintiffs, where the work that is the subject of complaint is done out of court, the degree of connection is a matter of assessment. It requires consideration of the particular factual circumstances surrounding the solicitor’s work and its effect on any court decision. The assessment is highly dependent on the facts to be established by evidence at trial, and how intimately connected each alleged act or omission of the defendant was to the court’s determination. This makes the issue quite difficult to determine at summary stage, save for the clearest of cases.
Recently in FEV Mono Constructions Pty Ltd v Beattie [2021] NSWCA 18, Meagher JA (with whom Gleeson JA and Emmett AJA agreed) described circumstances where summary determination may not be appropriate at [20]:
… In Young v [Hones][2014] NSWCA 337 at [5], Bathurst CJ emphasised that it would not be “appropriate in all cases for questions of advocate’s immunity to be decided” as preliminary questions and by reference to the pleadings as they exist at that time. For, as Beazley JA explained in Donnellan v Woodland [2012] NSWCA 433 at [7], the pleadings may not sufficiently enable the negligent conduct to be identified. In such a case the court may decline to strike out the pleading or enter summary judgment, not being satisfied either that the pleaded allegations are not capable of supporting a cause of action to which the immunity would not apply or that those allegations might not be reformulated with the same outcome: as to which see Bott v Carter [2012] NSWCA 89 at [10]- [13] (Basten JA, McColl and Whealy JJA agreeing).
That concern applies to the present pleading, illustrated through three examples. The first example concerns the allegation of negligent general advice on the documents which became the subject of litigation, namely the Loan Agreement and the Guarantee.
In Paltos v Bartier Perry Pty Ltd [2020] NSWSC 705, Rothman J referred to the conduct of the defendant in the proceedings before his Honour as relating to ‘a failure to advise adequately or not to advise at all’. His Honour stated at [408]:
… It is the advice, or failure to advise adequately on the rights under the Partnership Documents, when giving advice on the plaintiff’s Partnership and the protection of his position against the then non-litigious demands of [another partner] that gives rise to liability and that conduct had little or nothing to do with litigation. The only connection of the work of the defendant and litigation is historical. …
Here, all of the advice given by the defendant was after legal proceedings had been commenced by ICBM and Skybase. In that sense, it is advice connected with legal proceedings which resulted in a judicial determination. However, the pleaded retainer is broader than one simply to defend the litigation. One aspect of the conduct in respect of which the plaintiffs allege the defendant owed them a duty of reasonable care and skill concerns advice given ‘in relation to the Loan Agreement and Guarantee’. Although such advice may well be categorised as being connected to the litigation, depending on the precise nature of the advice and issues discussed, it may also stand as advice independent from the litigation. One available argument is that the advice, at least in part, may not have had the requisite functional connection to work done in court leading to a judicial determination. At present, the material facts pleaded are insufficient to identify with precision the negligent conduct, and therefore to determine that question on a summary basis.
The second example concerns another of the breaches alleged, namely that the defendant provided advice about the prospects of appeal. In Kendirjian at [32] it was held (citing Attwells at [50]) that advice either to cease litigation or continue litigation does not itself affect the judicial determination of the case. I consider it is arguable that the advice given by the defendant on prospects (given that was directed to a decision whether to continue the litigation or not) may not have been covered by the immunity.
The third example concerns the failure to advise the plaintiffs to seek independent legal advice.
In Rogers (No 1), the plaintiff had brought a case against his former solicitors following a successful personal injuries claim. He alleged that because of the solicitors’ breaches of duty of care, retainer and fiduciary duty, he lost the opportunity to have received considerably more damages at three different stages: before litigation had commenced, during the litigation phase or, alternatively, through the judgment. At first instance, the claim was struck out, save for one aspect that sought relief in respect of fees. Among the reasons for striking out the pleading was the application of the advocates’ immunity.
On appeal, one of the allegations considered by Fraser JA (with whom Gotterson JA and Burns J agreed) was a claim concerning a breach of retainer and breach of fiduciary duty. The allegation was that the solicitor’s retainer was secured on the basis that it would be performed by a team of solicitors with specialist public liability expertise. It was next alleged that, without the knowledge and consent of the plaintiff, the solicitors delegated the performance of the retainer to a different entity – one that they did not supervise and that lacked the adequate experience or qualification. Fraser JA described the alleged circumstances as being a cause of ‘avoidable shortcomings in the evidence of economic loss upon which the appellant relied upon during the subsequent litigation’: Rogers (No 1) at [40]. Fraser JA went on to state at [40] (emphasis added):
It does not follow from these matters that advocate’s immunity is applicable. I accept the appellant’s contention that it is not applicable. The alleged conduct of the first and second respondents which is charged as breaches of fiduciary duty was not the work of an advocate. It concerned the formation and continuing existence of the retainer of the first and second respondents, rather than any decision by them which affected the taking of any particular step in court. The alleged conduct (including non-disclosures) did not have a direct or functional connection with the in court conduct of the appellant’s personal injuries claim. The test for advocate’s immunity is not satisfied in relation to this part of the appellant’s claim.
In the present case, the plaintiffs plead that the defendant should have given certain advice following the conclusion of the proceedings at first instance and following the appeal. It includes an allegation that the defendant, in accordance with its retainer, should have advised the plaintiffs to obtain independent legal advice regarding making a claim against the defendant after the First Instance Judgment. Subsequently, the plaintiffs sought legal advice from the defendant and retained the defendant to advise and act for the plaintiffs to conduct the appeal and the application to reopen the appeal (on the basis of fresh evidence).
It is arguable that these allegations concern, at least in part, the continuing existence of the retainer of the defendant, rather than any decision by the defendant which affected the taking of a step in court leading to the judicial determination of proceedings.
It should be emphasised that no view is expressed about the merits of the allegations or the potential arguments canvassed in these examples. There may be arguments available to the defendant or evidence that will be led, which will ultimately prove that the entire claim is answered by the application of the advocates’ immunity from suit.
What these examples indicate is that this particular pleading includes conduct where there might be an argument crafted as to why the pleaded conduct does not attract the immunity. Those arguments are interwoven with conduct that might be thought to squarely attract the immunity, and there is no bright line that enables the Court to carve out particular aspects of the pleading, with a view to striking out certain parts of the claim.
The result is that, contrary to the defendant’s submission, the pleaded facts of the present case are not so clear as to make it an obvious or inevitable conclusion that a complete defence is established on the basis of the doctrine of advocates’ immunity from suit. Accordingly, the argument must proceed to trial for final determination.
Orders
The orders of the Court are as follows:
1. The application is dismissed.
2.The defendant is to pay the plaintiffs’ costs of the application.
| I certify that the preceding sixty-three [63] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Associate Justice McWilliam. Associate: Dominic Page Date: 12 April 2021 |
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Amendments
12 April 2021 Replace “four” with “three” Paragraph [51]
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