11. April 2011 08:35
The appellants were directors of CMG (a building construction company) that entered into contracts with FCL and Orlando that resulted in litigation regarding the purported termination and novation of the contracts. During the course of the litigation, an administrator was appointed to CMG and a deed of company arrangement was subsequently entered into.
In the current proceedings, the appellants alleged a breach of contract and negligence, as well as breaches of s 52 of the Trade Practices Act 1974 and s 42 of the Fair Trading Act 1987, by the respondent (a Solicitor formerly engaged by the appellants) concerning legal professional services rendered during the original litigation. The appellants alleged that the respondent failed to advise that a stay applied to FCL’s cross-claim in proceedings against CMG as a result of CMG entering into a deed of arrangement: s 444E Corporations Act 2001. The appellants argued that the respondent’s failure to advise of the stay resulted in wasted legal costs in preparing a defence to the cross-claim. The repsondent filed a cross-claim seeking payment of outstanding costs and disbursements.
At first instance, Simpson J found in favour of R on both the appellants’ claims and the respondent’s cross-claim:
- Orlando Proceedings: the respondent had immunity from the claim based on the advocate’s immunity: – . See - for primary judge’s discussion on the advocate’s immunity.
- Hillig Proceedings: It was held that whatever the respondent did in respect of these proceedings was done in a manner to be “intimately connected” with litigation and the respondent was therefore entitled to advocate’s immunity: . In any event, there was no evidence that the respondent acted negligently in these proceedings.
On appeal, the court held that although the respondent’s negligence did lead to a decision by the appellants which affected the manner in which the case was conducted (incurring more costs), Simpson J was correct to find that this claim was subject to advocate’s immunity with the consequence it was rightly rejected: -. For a discussion of advocate’s immunity see - and - per Tobias JA who delivered leading judgment and – for discussion by Giles JA.
The key issue on appeal was the admissibility of statements as to what a person would have done: whether s 5D(3) of the Civil Liability Act 2002 required the court to ignore a statement in affidavit notwithstanding there being no objection to its admission. It was held that unless other objective evidence confirms its reliability, such statements should be given little, if any, weight: .
Simpson J was found to have erred in declining to determine the hypothetical question of whether leave would have been granted pursuant to s 444E(3) to FCL to proceed with their cross-claim: see – for a discussion of this element of the case. Although the court found that the grant would likely have been refused, ultimately the appellants’ claim on these proceedings must fail due to the respondent’s protection under advocate’s immunity: –.
- Hillig Proceedings: Confirmed primary judge’s findings that no relevant evidence was adduced on which to find the conclusion that the respondent had acted negligently: .
- Cross Claim: the appellants’ challenge to the determination of the respondent’s cross-claim was confined to Simpson J’s refusal to refer the quantum of the costs claimed to a referee pursuant to the Uniform Civil Procedure Rules r 20.14. For reasons why referral was refused, see .
- Held: the exercise of her Honour’s discretion was miscarried and on appeal, the court should re-exercise it. The court held that “the question of the fairness and reasonableness of the costs the subject of the cross-claim be referred to assessment by an appropriately qualified assessor. The consideration of the referee’s report should be by a judge of the Common Law Division of the Court”: at .
- The respondent submitted that such an order should only occur on condition that the appellants pay 85% of outstanding costs and interest as determined by Simpsons J prior to referral plus the costs of referral.
- Held: a condition of 60% should be imposed.
- There was no order as to costs of referral – this should be determined after the referee’s report is returned to the primary judge for her adoption or otherwise: .
Relevant paragraphs of Ford:
[26.070], [26.072], [26.300], [27.126]