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

1 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.

2 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.

3 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.

4 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).

5 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

6 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.

7 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.

8 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.

9 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.

10 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

11 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.

12 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.

13 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."

14 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."

15 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".

16 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.

17 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."

18 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.

19 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.

20 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".

21 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].)

22 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.

23 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."

24 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.

25 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.

26 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.

27 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.

28 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

29 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.

30 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."

31 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.

32 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 ..."

33 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."

34 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.

35 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.

36 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.

37 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.

38 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.

39 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)

40 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."

41 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."

42 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".

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

44 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".

45 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.

46 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.

47 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.

48 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.

49 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

50 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.

51 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.

52 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.

53 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".

54 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.

55 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".

56 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."

57 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

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

59 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.

60 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.

61 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."

62 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."

63 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

64 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."

65 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

66 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."

67 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].

68 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.

69 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].

70 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

71 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.

72 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."

73 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".

74 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."

75 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

76 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.

77 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".

78 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

79 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."

80 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.

81 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.

82 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".

83 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."

84 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.

85 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".

86 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.

87 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

88 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.

89 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."

90 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.

91 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)

92 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.

93 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).

94 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.

95 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:

"· 'A solicitor who brings a reasonable degree of skill and knowledge to a task and exercises reasonable care in carrying it ... out will not be liable for an error of judgment.": Ormindale Holdings Ltd v Ray (1982) 36 BCLR 378 at 387, per Taylor J.

· 'A lawyer ... is not ... normally required to warn experienced business clients of the possibility that [his] opinion, although firmly held, may not, in fact, prevail': Ormindale Holdings (at 389); affirmed on appeal (at 392).

· 'A solicitor is not liable for mistake in a nice and difficult point of law': Bannerman & Co v Murray [1972] NZLR 411 at 422, per North P and at 429, per Woodhouse J, quoting from Stevenson v Rowand (1830) 2 Dow & Clark 104; 6 ER 668."

96 The authorities are also clear that the decision whether or not to settle a claim is the decision of the client. The duty of the solicitor where questions of settlement arise was discussed in Studer v Boettcher [2000] NSWCA 263. The allegation in that case was that the solicitor had pressured the client into a settlement. Handley JA was of the opinion that the solicitor had given the client correct advice. In dealing with the question of settlement, Fitzgerald JA observed, at [75], that the practitioner:

"... should assist a client to make an informed and free choice between compromise and litigation, and, for that purpose, to assess what is in [the client's] best interests."

97 Sheller JA expressed a similar view, stressing the importance of the particular circumstances of the case in assessing whether the conduct of a solicitor in relation to settlement negotiations was negligent.

(ii)(a) No negligence in advising Mr Woodland he had a strong case

98 Mr Donnellan's advice to Mr Woodland in relation to the s 88K application was given at a time when there were differences of opinion within the Equity Division of the Court as to the application of the statutory test in s 88K and where, in any event, the determination of whether a particular proposed easement satisfied the test involved an evaluative task, which, of necessity, meant that judicial minds may differ as to the outcome. As indicated earlier, at [53], Hodgson CJ in Eq in 117 York Street v Proprietors of Strata Plan 16123 had expressed the statutory test in terms that "use or development with the easement must be (at least) substantially preferable to the use or development without the easement". His Honour noted, at 512, that the section was remedial and should not be interpreted in the inflexible way that had been submitted in that case. His Honour, at 509, also treated as relevant, evidence of the cost of carrying out the development with the easement as opposed to the cost without the easement.

99 R S Hulme J considered that the test of reasonable necessity was a stringent one and this has now been confirmed in ING Bank (Australia) Ltd v O'Shea [2010] NSWCA 71; 14 BPR 27,317. However, at the time Mr Donnellan was giving advice, not only was there a decision of the then Chief Judge in Equity, later a judge of appeal, that indicated a more flexible approach to the application of s 88K was appropriate, in addition all of the case law indicated that whether an easement would be granted by the court depended upon the court's assessment of all of the circumstances. In this regard, the case law was consistent in that the test did not mean "absolutely necessary". Even in Tregoyd Gardens Pty Ltd v Jervis, where Hamilton J had applied the section more narrowly than Hodgson CJ in Eq in 117 York St v Proprietors of Strata Plan 16123, Hamilton J accepted an easement might still be granted under the section, notwithstanding that there was an alternative right of way available. Other cases had also accepted the relevance of financial factors in the determination of whether an easement was "reasonably necessary": see Goodwin v Yee Holdings.

100 The meaning of "reasonably necessary" in s 88K and the considerations relevant to the statutory test had not been the subject of any appellate determination in New South Wales until the decision of this Court in ING Bank (Australia) Ltd v O'Shea. There, Giles JA emphasised the importance of necessity in the statutory test and either explained or perhaps implicitly rejected the approach of Hodgson CJ in Eq in 117 York Street v Proprietors of Strata Plan 16123.

101 In my opinion, in stating the law as to the proper construction of "reasonably necessary" for the purposes of s 88K, ING Bank (Australia) Ltd v O'Shea has another relevance for present purposes. In that case, an argument was advanced that the trial judge had applied a notion of "reasonably necessary" that was too stringent, in that he had stated it was "appropriate to look for a requirement that is far closer to necessity than it is to convenience".

102 The applicant for the easement had argued on the appeal that the test stated in those terms was not consonant with the test stated in 117 York Street v Proprietors of Strata Plan 16123 and that an applicant for an easement was required to demonstrate that the use of the land with the easement was substantially preferable to its use without the easement. This argument was, in effect, a challenge to a line of first instance decisions substantially based upon the approach taken by Hamilton J in Tregoyd Gardens Pty Ltd v Jervis. One would be hard pressed to say that the argument, although held in that case to be wrong, could not be characterised as a reasonable one for competent counsel to advance.

103 In my opinion, his Honour's underlying criticism of Mr Donnellan's advice did not give sufficient weight to the existence of differing views as to the proper application of s 88K that had been expressed by judges of the Equity Division of the Court. It will also be remembered that R S Hulme J considered the case was arguable. This must mean that the underlying advice of the availability of an action under s 88K was correct. The question for determination for R S Hulme J, then, was whether Mr Donnellan's assessment of the prospects of success of the s 88K application as "strong" was negligent, as opposed to being an error of judgment for which no liability attached. On balance, although Mr Donnellan could have given more cautious advice, his assessment that Mr Woodland had a strong case for the grant of an easement pursuant to s 88K was an error of judgment of a kind that was not actionable. It would have been different if his advice had been clearly wrong as a matter of law.

104 Before leaving this issue, one further matter should be mentioned, so as to put to rest an argument raised by Mr Donnellan. Mr Donnellan's advice that Mr Woodland had a strong case was first given in 1999. Mr Donnellan thus submitted that any claim based upon negligence in 1999 was statute barred, so that it was not open to his Honour to make a finding relating to negligent conduct that occurred at that time. However, as the first pleaded allegation of negligence was in respect of a failure to give advice in January 2002 and as Mr Woodland expressly disavowed any reliance on advice prior to then, the issue raised in Mr Donnellan's submission does not arise for consideration.

(b) No negligence in failing to advise that Mr Woodland would probably be liable for the Council's costs

105 The trial judge found, at [151], that although Mr Donnellan had advised Mr Woodland that there were good grounds to argue that each party should be left to pay his or its own costs, that advice was negligent in that having regard 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".

106 His Honour's finding as to the substance of the advice given by Mr Donnellan was based upon his assessment of the conversations between Mr Donnellan and Mr Woodland in respect of costs. However, Mr Donnellan also gave written advice on the question of costs. As early as 14 April 1999, Mr Donnellan wrote to Mr Woodland, stating that the terms of s 88K required the applicant for an easement to pay the costs of the application. On 8 January 2002, Mr Donnellan advised that ordinarily the applicant for an easement was required to bear the costs of the other side if the easement was granted. He pointed out that this was not a "hard and fast rule" and that an argument would be put to the court that "at the very least each party should pay their own costs". Mr Donnellan also stated that was "probably the best we could do". On 21 January 2002, Mr Donnellan wrote to Mr Woodland. The letter is set out at [39] and is considered below at [114].

107 Mr Donnellan clearly put Mr Woodland on notice of the terms of the statutory provision as to costs and that Mr Donnellan could not make any prediction with complete confidence. He advised Mr Woodland that it would be hard to overcome the statutory prescription as to costs but that there were good grounds to argue a different order should be made. The effect of the written advice was that there was a probability Mr Woodland would be liable for costs even if successful: one might ask rhetorically, "What else does a statement that it would be hard to overcome the statutory prescription mean"? In my opinion, the advice contained in the correspondence stated what needed to be stated in respect of costs.

108 The question for determination, therefore, is whether Mr Donnellan's oral advice diminished, neutralised, or negated the effect of the written advice. In my opinion, that question should be answered in the negative. Notwithstanding that Mr Donnellan gave advice that there were good grounds to argue each party should pay its own costs, that advice did not overshadow, neutralise or otherwise render the earlier advice nugatory. Advice that there are good grounds to argue for a different order itself carries the implied qualification that the argument may not be successful. The reason such an argument may not be successful was because there was a statutory prescription that an applicant pay costs unless the court made some other order. Mr Woodland had been advised of this from the outset.

109 His Honour's finding of negligence included a finding that Mr Donnellan should have warned Mr Woodland there was a risk that the costs would be ordered on an indemnity basis. In my opinion, even if there was such a risk, it was not one that eventuated in this case. The indemnity costs order made by Hamilton J flowed solely from Hamilton J's determination that the offer of 16 May 2002 was a Calderbank offer and that it had been unreasonable for Mr Woodland to refuse it. Accordingly, even if Mr Donnellan was negligent in failing to warn of that risk, that negligence did not cause loss.

(c) No negligence in failing to advise Mr Woodland to accept the offer of 21 December 2001

110 The trial judge's reasoning in respect of the advice Mr Donnellan gave relating to the Council's letter of 21 December 2001 is contained at [152] ff of his Honour's reasons: see at [79] ff above. In essence, his Honour held that Mr Donnellan should have advised Mr Woodland of the advantages of accepting the Council's offer contained in the letter of 21 December 2001 and of the risks of rejecting it.

111 I have a number of difficulties with his Honour's findings. In the first place, the only offer made in the letter of 21 December 2001 was an offer to negotiate. The subject matter of the proposed negotiations was for the creation of two proposed easements, one being that sought in the s 88K application and the other being the easement relating to drainage of other properties to the north of the Woodland land, including the Woodland company land. There was no detail contained in the letter as to the technical requirements for either easement or for their respective locations. Nor was there any identification of the amount of costs and compensation claimed. At the most, the letter of 21 December 2001 indicated that the Council was offering to negotiate and that advantage should be taken of that opportunity.

112 Secondly, it is reasonable for a legal practitioner to suggest to a client to make a counter offer so as to obtain a settlement which is closer to the client's wishes than that offered by the other party. Mr Donnellan did just that. He suggested to Mr Woodland that he make a counter offer. Mr Woodland accepted that suggestion. The counter offer that was made essentially picked up on the third proposal contained in the Council's offer of 21 December 2001 and put detail to it. In this regard, his Honour recognised that the Council's offer to treat in respect of the third proposal was not substantially different from the actual offer made by Mr Woodland on 10 January 2002.

113 Thirdly and linked to the previous point, as his Honour also recognised, the letter of 21 December 2001 did not really contain any compromise. The Council was looking for full compensation and all of its costs, both of which were unspecified in quantum. As anyone who has engaged in litigation knows, the quantum of costs payable is an important consideration in a party's decision-making process. The quantum of compensation was also an important consideration for Mr Woodland, as became apparent in late January 2002.

114 Fourthly, Mr Donnellan in fact advised Mr Woodland that he should meet with the Council's officers. Although this occurred later, after receipt of the Council's letter of 18 January 2002, that letter should be seen as part of an ongoing process that commenced with the letter of 21 December 2001, rather than that letter being considered in isolation. In advising Mr Woodland to meet with the Council, Mr Donnellan gave Mr Woodland advice as to what was in his best economic interests: see letter of 21 January 2002 at [39] above. His Honour recognised that the advice in this letter was "more measured". The letter included advice as to the advantages of attempting to settle the matter on the basis of Mr Woodland paying costs and compensation and as to the disadvantages of not doing so. Mr Donnellan clearly stated in his letter of 21 January 2002 that it would be "a difficult prescription to overturn" the statutory position that an applicant for the grant of an easement was responsible for the costs of the other side, unless the court made a different order. As Mr Donnellan also pointed out in that letter, regardless of his feelings on the matter, "I don't think that it is sensible to put you to the risk of an adverse finding if that risk can be avoided". Likewise, in the final paragraph of the letter of 21 January 2002, Mr Donnellan specifically advised that settlement along the terms he was suggesting was "preferable to the one where the costs of the hearing" would be added.

115 Next and allied with the previous point, Mr Donnellan gave Mr Woodland advice as to the likely amount of compensation and costs he ought to offer to pay. The amounts suggested by Mr Donnellan were reasonable estimates in all the circumstances. Insofar as the assessment of the Council's costs was concerned, the Council had given Mr Donnellan a "ballpark figure" for costs of $20,000-$25,000. In his letter, Mr Donnellan suggested to Mr Woodland that he offer costs of $20,000. Likewise, the advice to offer compensation of $5,000 was eminently reasonable. By that time, Mr Woodland had obtained a valuation for compensation purposes of $3,000 and the Council had obtained a valuation of $7,000.

116 In my opinion, what happened at the end of January, that is, having a meeting between Mr Woodland and the Council to discuss settlement, was precisely what could have and would have happened had the offer to negotiate been accepted immediately upon receipt of the letter of 21 December 2001 and without the interposition of the counter offer of 10 January 2002. There was no negligence, in my opinion, in giving that advice after the letter of 18 January 2002, rather than immediately after receipt of the letter of 21 December 2001.

117 The reason for the failure of the negotiations on 23 January 2002 was twofold. First, it appeared, at least from Mr Woodland's account, that the representatives of the Council had decided to approach the meeting without any intention to compromise as to the amount payable for costs or compensation. The amount for costs the Council claimed at the meeting was significantly higher than had been indicated to Mr Donnellan. The amount claimed for compensation was higher than had already been assessed by the Council's valuer. The Council's stance was not something in Mr Donnellan's control, nor did it make Mr Donnellan's advice of 21 January 2002 negligent, that advice being based on the only information to which Mr Donnellan was privy.

118 It is also relevant, in my opinion, that even after that failed meeting, Mr Donnellan again attempted to settle the matter on the basis of the payment of costs and compensation. Although at that time the amount Mr Donnellan offered by way of costs was less than the Council had indicated to Mr Donnellan on 18 January 2002 and less than that claimed at the meeting, it cannot be forgotten that Mr Donnellan had already advised Mr Woodland to negotiate to a higher amount. It is not unusual in negotiations for there to be considerable 'to-ing and fro-ing' about such matters. In addition, Mr Donnellan also suggested to the Council that the parties' respective valuers meet to agree as to the appropriate amount of compensation.

119 The difficulty I have with the approach taken by the trial judge is that his Honour appeared to consider Mr Woodland should accept precisely what the Council demanded. That would be an unusual approach in litigation and, with respect to his Honour's view on the matter, appears to have been based upon a hindsight view of what in fact occurred, as opposed to considering the matter in the context in which these negotiations occurred.

120 For these reasons, I am of the opinion that there was no negligence by Mr Donnellan in the advice that he gave to Mr Woodland at this time.

(iii) The contention point: Failure to advise Mr Woodland to accept the offer of 16 May 2002

121 It will be recalled that Hamilton J, in making his costs order in relation to the s 88K application, held that the Council's offer contained in the letter of 16 May 2002 was a valid Calderbank offer and that the result at trial was more disadvantageous to Mr Woodland than the offer contained in that letter.

122 R S Hulme J rejected that there was any negligence relating to the failure to accept the offer of settlement contained in the Council's letter of 16 May 2002. His Honour held, at [165], contrary to the finding of Hamilton J, that the letter was not a valid Calderbank offer. His reasons for this finding were interrelated: first, the offer was only open for 26 hours; and secondly, the offer contained complex requirements in relation to the size of pipes that were to be used for drainage. It should be noted that this latter requirement, together with the question of drilling through rock, had been raised for the first time by the Council on 9 May 2002.

123 His Honour, at [164], considered that the demands relating to the size of pipes and that there be no drilling through rock required the input of an expert engineer. It followed, in his Honour's opinion, that when these demands were contained as part of the offer in the letter of 16 May 2002, Mr Donnellan "could not reasonably have advised [Mr Woodland] to accept the 16 May offer that required [him] to commit to the pipe and drilling". Indeed, in his Honour's view, it would have been a breach of Mr Donnellan's duty to Mr Woodland to advise acceptance of that proposal. This conclusion was based upon Mr Staniland's advice that the Council's requirements raised on 9 May 2002 were not practicable and may not even have been feasible.

124 His Honour concluded, at [165], that the offer contained in that letter "certainly was not" a valid Calderbank offer. In particular, his Honour considered that it was not unreasonable for the offer not to be accepted in the time limit set by the terms of the offer. In any event, his Honour was of the opinion that it was not unreasonable for Mr Woodland's counsel to take the view that the letter of 16 May 2002 was not a Calderbank offer.

125 His Honour's opinion that the letter was not a valid Calderbank offer was contrary to the basis upon which Hamilton J had proceeded in ordering Mr Woodland to pay the Council's costs on an indemnity basis from 17 May 2002. In that regard, however, his Honour stated, at [166]:

"... there is no reference therein to the issues of the time limited for acceptance or to the complexities faced by [Mr Woodland] and Mr Donnellan in consequence of terms of the offer involving drilling and the concrete pipe and his Honour's decision does not incline me to depart from the conclusions I have expressed."

126 His Honour rejected, at [167], the claim that the effect of a Calderbank offer had not been explained to Mr Woodland at the time the offer of 16 May 2002 was received.

127 R S Hulme J also rejected Mr Woodland's allegation that Mr Donnellan was negligent in failing to respond promptly to the letter of 16 May 2002 with a counter offer that omitted the requirements relating to the 375 mm pipe, but which otherwise accepted the offer. It will be recalled that Mr Donnellan forwarded a counter offer in his letter dated 19 June 2002: see [48]. Although over the succeeding months, it became apparent that both Mr Woodland and the Council were prepared to put aside the requirement for the pipes, there was, nonetheless, a significant difference in the parties' respective positions. In his Honour's opinion, the Council would not have agreed to the counter offer contained in the letter of 19 June 2002, particularly having regard to the offer regarding costs made in that letter.

128 In the result, his Honour concluded, at [171], that Mr Donnellan did not breach his duty of care in relation to the offer contained in the 16 May 2002 letter.

129 In his written submissions in support of the notice of contention, Mr Woodland expressly stated that he did not cavil with the trial judge's finding that there was no negligence in failing to advise acceptance of the offer of 16 May 2002, having regard both to the limited time period for acceptance and the fact that Mr Donnellan could not be expected to assess the practicality or costs of the 375 mm pipe requirement within that time frame. Rather, his Honour should have found that Mr Donnellan was negligent in failing to advise Mr Woodland to make a counter offer that omitted the 375 mm pipe requirement, but otherwise reflected the terms of the offer contained in the letter of 16 May 2002.

130 The formulation of the contention is wider than the pleadings, which, on this point, were in the following terms:

"In and from December 2001, [Mr Donnellan] was negligent and in breach of the pleaded duty of care and the pleaded implied term of the Retainer in:

... failing to advise [Mr Woodland] that in light of the matters pleaded ... above [he] should accept the Council's ... Second Offer to Settle rather than continue with the Proceedings ..."

131 The notice of contention requires a consideration of the following factual matters that have not yet been the subject of consideration.

132 On 19 June 2002, Mr Donnellan made an offer of settlement on behalf of Mr Woodland whereby Mr Woodland would pay compensation of $4,000 for the grant of the easement sought in the s 88K application, together with the payment of 20 per cent of the Council's costs up to a maximum of $15,000. In this letter, Mr Donnellan suggested that the question of the road opening that had been raised in the Council's letter of 16 May 2002 and the 375 mm specification for the pipes were separate issues. Although that offer was not accepted, the Council made a counter offer on 3 October 2002 in respect of which the substantial difference was that it sought its costs in full. Those costs, by that stage, had run to over $200,000.

133 Mr Woodland contended that it is apparent from the Council's counter offer that had an offer such as that made on 19 June 2002 been made in response to the letter of 16 May 2002, the Council would have accepted the offer. Mr Woodland also submitted that had he been advised that an offer of $15,000 by way of costs was insufficient, he would have instructed Mr Donnellan that a higher offer should be made.

134 There are a number of difficulties with Mr Woodland's contention. In the first place, there was no evidence before the Court as to the Council's costs as at 16 May 2002. They would, however, have been considerable. By that time, there had been three days of hearing. Senior Counsel had been retained by the Council in the matter. Expert witnesses had been engaged. Given the lateness of the offer on 16 May 2002, it is possible that the Council would also have incurred the costs of the following three days of hearing or a portion thereof. Although Mr Woodland said he would have paid more in costs, his evidence was not specific as to what he would have paid. There is a vast difference between paying costs of $20,000 and costs of, say, $100,000 or more.

135 Secondly, the Council's letter of 16 May 2002 expressly stated:

"Please note that this offer should be considered as a whole, and may not be accepted or rejected in part only. Rejection of any part of the offer will constitute a rejection by your client of the whole of the offer."

136 Accordingly, whatever the Council's position might have been in October 2002, this statement was strong evidence that at the time of making the offer, the Council would not have countenanced a counter offer in the terms that Mr Woodland contended ought to have been immediately made, in response to the Council's letter of 16 May 2002.

137 Thirdly, in response to Mr Woodland's contention, Mr Donnellan relied upon Mr Woodland's attitude, as well as Mr Woodland's knowledge of the legal position as to costs. Mr Woodland's attitude was exhibited by, inter alia, various comments he made during the period the proceedings were on foot. One example was his response to the outcome of the failed discussions held on 23 January 2002. Another was contained in his letter to Mr Donnellan of 18 June 2002, instructing Mr Donnellan to make an offer in terms of the letter of 19 June 2002. In that letter, Mr Woodland stated he had no expectation that the Council would accept the offer, but hoped it would lead to "some further sensible discussion". He also made reference in that letter to an individual which, in context, appears to have been a reference to an individual within the management of the Council, as he stated, "what a pity the new broom replacement for Collins was not more imminent, they might see the folly of this whole unfortunate exercise" and, his further comment, "I'd love to get stuck into these bastards immediately but I'll wait".

138 Next, Mr Woodland was reminded, from the terms of the letter of 16 May 2002, that pursuant to s 88K an applicant for an easement was responsible for the costs of the proceedings and that on the authorities, an order to the contrary would only be made "in truly exceptional circumstances". Although that comment was made by the Council, it reflected what Mr Donnellan had advised Mr Woodland in January 2002 and earlier.

139 There is another matter, which although not decisive, has some relevance. As I have pointed out earlier, one of the reasons the proceedings became protracted was because the Council introduced additional expert evidence. Mr Donnellan pointed this out to the Council in his letter of 19 June 2002, when he said:

"... [Mr Woodland has] been placed in a particular position of disadvantage because of the way in which [his] original application for an easement was managed by the Council, and the way in which the Council has conducted these proceedings. Many of the matters now raised by the Council in defence of the proceedings were never raised as objections to [his] application. The consequence has been that in conducting the proceedings, a number of matters were raised for the first time. Many of the issues now raised in opposition involve matters in respect of which the Council has not developed any policy."

140 There was no response by the Council to this allegation. Mr Donnellan made a similar complaint to the Council's solicitors on 15 August 2002. The Council did not respond to that letter either. Mr Donnellan was not responsible for the manner in which the Council conducted the litigation.

141 Further, on 2 May 2002, the Supreme Court gave judgment in King v Carr-Gregg [2002] NSWSC 379. Mr Donnellan forwarded a copy of this decision to Mr Woodland and to counsel he had briefed to appear for Mr Woodland. In his letter to Mr Woodland, Mr Donnellan said he considered that having regard to the decision, "I think there is no question you will get the easement". In King v Carr-Gregg, the relevant local council authority (which was not a party to the proceedings) had a policy against on-site pump out drainage systems, being the drainage system the Council was insisting Mr Woodland should construct. The trial judge in that case held, at [57], that he was "completely unpersuaded":

"... that a 'pump-out system' provides a viable alternative to the use of the existing pipe, such that the sought for easement should be found to be not 'reasonably necessary', or not 'substantially preferable'."

142 The last phrase was a reference to the decision of Hodgson CJ in Eq in 117 York St v Proprietors of Strata Plan 16123, although the trial judge in King v Carr-Gregg noted Hodgson CJ in Eq had used that phrase in a different context from that which he was considering. Nonetheless, it was not unreasonable for Mr Donnellan to consider that this decision supported Mr Woodland's claim.

143 In my opinion, therefore, the contention, even in the terms upon which it was argued, ought not to succeed for the reasons I have given and I would reject it.

144 As I have concluded that there was no negligence, it follows that the appeal should be allowed and orders made setting aside the orders made by the trial judge. The other grounds of appeal only arise if my conclusion that Mr Donnellan was not negligent is wrong. Nonetheless, in accordance with the principles in Kuru v State of New South Wales [2008] HCA 26; 236 CLR 1 it is appropriate that I deal with the arguments advanced in support of the remaining grounds of appeal.

Ground 7: Did his Honour err in finding that Mr Woodland would have been willing to settle?

145 The trial judge held, at [176], that if Mr Donnellan had advised Mr Woodland, after the Council's letter of 21 December 2001, that there were substantial risks that he would fail in any s 88K application because an easement was not "reasonably necessary" and that he would probably be liable for the Council's costs, Mr Woodland would not have pursued the proceedings as he did and would have been willing to settle on terms more disadvantageous to himself than those he had offered, on Mr Donnellan's advice, in his letter to the Council of 10 January 2002.

146 His Honour concluded it was probable that proceedings would have settled at that time. In that regard, his Honour said, at [178]:

"... it is clear that the first part of the Council proposal referred to [Mr Woodland] making only a contribution to the cost of a drainage line from the easement to Ross Street. This accords with the handwritten note of one of the Council officers associated with the meeting of 23 January 2002 and tends to make it likely that Mr Woodland was erroneous in his impression that in January 2002, the Council was seeking $89,000 from him for this drainage line."

147 His Honour, at [179], considered that "the sticking point" was costs. However, his Honour found that if Mr Woodland had been appropriately advised, it is probable that he would have agreed to the Council's demands in that respect.

148 His Honour continued:

"180 I do not ignore the fact that later in the year the Council was demanding a much larger pipe be constructed and imposing expensive or impossible methods of construction. If that proposal was as unrealistic as Mr Staniland suggested or the Council undertook the work as the offer of 21 December envisaged, then it seems unlikely that that form of work would ultimately have been insisted upon. In any event, the 21 December letter was merely seeking from Mr Woodland a contribution in this regard.

181 If these conclusions be right, then the costs incurred by Mr Woodland from that time on were a consequence of Mr Donnellan's erroneous, and in my view negligent, advice."

149 His Honour, at [182], noted the provisions of the Civil Liability Act, s 5D but considered that those provisions added nothing "of significance to the long accepted principles of negligence and causation". With respect to his Honour, that statement was not correct. Section 5D involves a different test of causation from that of 'common sense causation', which had been the law in Australia until the enactment of the Civil Liability Act: see Adeels Palace v Moubarak. Section 5D relevantly provides:

"5D General principles

(1) A determination that negligence caused particular harm comprises the following elements:

(a) that the negligence was a necessary condition of the occurrence of the harm (factual causation), and

(b) that it is appropriate for the scope of the negligent person's liability to extend to the harm so caused (scope of liability).

(2) In determining in an exceptional case, in accordance with established principles, whether negligence that cannot be established as a necessary condition of the occurrence of harm should be accepted as establishing factual causation, the court is to consider (amongst other relevant things) whether or not and why responsibility for the harm should be imposed on the negligent party.

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

(a) the matter is to be determined subjectively in the light of all relevant circumstances, subject to paragraph (b), and

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

(4) For the purpose of determining the scope of liability, the court is to consider (amongst other relevant things) whether or not and why responsibility for the harm should be imposed on the negligent party."

150 Mr Donnellan submitted that his Honour's finding was flawed in that it failed to grapple with the fact that the Council's letter of 21 December 2001 did not contain an offer that was capable of acceptance. At best, that letter contained an offer to negotiate, including in respect of the creation of an easement and the payment of compensation for same. This was confirmed by the letter from the Council's solicitors dated 18 January 2002, in which disappointment was expressed with the response to the Council's "offer to meet and negotiate this matter". The Council's solicitors noted that in the circumstances there was no alternative but to defend the s 88K application. However, the Council again suggested that the parties meet and that was accepted. A meeting was held on 23 January 2002.

151 Upon receipt of the letter of 18 January 2002, Mr Donnellan advised Mr Woodland that it would be advisable to meet with the Council.

152 I have already dealt with the advice Mr Donnellan gave in his letter of 21 January 2002. In addition, Mr Donnellan addressed the requirements of s 88K and stated that he could not predict with confidence what the outcome would be. In giving that advice, Mr Donnellan pointed out that there were no cases on the point and that any argument by Mr Woodland as to costs would most likely be the first time such a point had been argued. Mr Donnellan then set out the likely costs should the matter settle at that stage, combined with advice that if the matter did not settle and Mr Woodland was ordered to pay the Council's costs, "the benefit of the grant of the easement would evaporate".

153 Mr Woodland attended the meeting with the Council on 23 January 2002. In notes of that meeting, a Council officer recorded the Council's offer of the grant of an easement and the payment of compensation in an amount of approximately $50,000. The officer noted that Mr Woodland "did not seem to be impressed and sought to negotiate a compromise on the $50,000 which I was not prepared to accept". His Honour considered that Mr Woodland appeared to have erroneously understood that the Council was seeking compensation in the sum of $89,000. If that was so, that misunderstanding could not have been relevant to any alleged negligent conduct by Mr Donnellan.

154 The trial judge concluded that it was probable that proceedings would have settled at that time had Mr Woodland been appropriately advised. In that regard, the Council officer's notes of the meeting of 23 January 2002 indicated that the Council identified its costs at that time to be approximately $29,000, but that additional costs would be incurred even if the matter settled. The estimate of the total costs should settlement have occurred was approximately $40,300. Mr Woodland made a file note at the time that he felt that Council had engaged in "[p]ure, unadulterated browbeating with obvious intent to intimidate". This file note did not, in my opinion, reflect an attitude of a willingness to settle.

155 By contrast, Mr Woodland, in his evidence, expressed his attitude in the following terms:

"At all times I was concerned about having to pay legal costs of the Court hearing and the prospect of paying Council's costs even if successful. The type of costs requested by Council were not beyond what I was prepared to pay if I was advised or believed that this was reasonable or appropriate in the circumstances or even if there was a reasonable debate as to whether the First Offer may be worth accepting. Based upon the advice of the First Defendant outlined above I did not think the First Offer was reasonable or appropriate in the circumstances."

156 Mr Woodland's evidence that he would have paid more in costs: see [134] above and the evidence in the preceding paragraph was inadmissible under the Civil Liability Act, s 5D(3). However, no objection was taken to the evidence at trial and no argument was raised on the appeal as to the admissibility of the evidence in the preceding paragraph. This is not the occasion to determine whether any reliance can be placed on inadmissible evidence such as this. The issues on the appeal can appropriately be dealt with on other bases.

157 Mr Woodland accepted that the letter of 21 December 2001 was not an "offer" that was capable of acceptance so as to be contractually binding. However, he submitted that it was never the basis of his claim that it was a contractual offer and pointed out that the trial judge did not find it to be such. Rather, his Honour, at [178], referred to the Council's "proposal" and posed the question, "[c]an one conclude that it is probable that proceedings would have settled at that time?" Mr Woodland pointed out that the fact that his Honour, at [176], considered Mr Woodland would have settled on terms "more disadvantageous" to those he had offered to the Council, was also indicative that his Honour considered that the Council would probably enter into negotiations that would result in an offer of a formal kind that Mr Woodland would have been prepared to accept.

158 In my opinion, the evidence did not support an inference that the Council would have settled at that time. Nor was there evidence as to the terms upon which it would have settled at that time, nor evidence from which any such inference could have been drawn. It is important in this regard that his Honour did not find that Mr Woodland would have settled on the terms the Council proposed at the meeting on 23 January. In my opinion, it was not sufficient for his Honour to find, at [176], that Mr Woodland would have been willing to settle on terms "more disadvantageous" than those contained in his letter of 10 January 2002. Rather, it was necessary for his Honour to find, at the least, that the Council probably would have settled at that time. I am also of the opinion that it was necessary for his Honour to find the terms upon which the Council would have settled and that Mr Woodland would have accepted those terms. Otherwise, it could not be said that the "but for" test in s 5D(1)(a) was satisfied.

159 In my opinion, in the absence of any such finding and any evidence that would have supported such a finding, his Honour's conclusion in respect of causation as to this breach cannot stand.

Ground 8: Immunity from suit

160 Ground 8 also only arises for determination if my conclusion, that Mr Donnellan was not negligent, is wrong. However, in deference to the significant focus on this ground in the argument of the parties, it is appropriate that I deal with it in some detail. In dealing with this ground of appeal, I propose to consider the statement of principle in D'Orta-Ekenaike; then to deal with the case law referred to by counsel and their arguments in relation thereto, including the arguments advanced in respect of the challenged decisions; and next to return to his Honour's determination of the immunity question.

161 The principles governing a legal practitioner's immunity from suit were stated by the High Court in Giannarelli v Wraith [1988] HCA 52; 165 CLR 543 and confirmed in D'Orta-Ekenaike where the plurality (Gleeson CJ, Gummow, Hayne and Heydon JJ), at [25], observed that in Giannarelli v Wraith the Court held that:

"... an advocate cannot be sued by his or her client for negligence in the conduct of a case, or in work out of court which is intimately connected with the conduct of a case in court ..."

162 In D'Orta-Ekenaike, the Court was concerned with advice in relation to a plea of guilty, given in chambers to an accused person by a solicitor employed by a State legal aid agency and a barrister. The advice was confirmed in conference at court on the morning of the committal hearing.

163 The importance of the decision in D'Orta-Ekenaike is that it establishes that the judicial function in quelling disputes, that is, the principle of finality, centrally underlies the immunity. As the plurality observed, at [34]:

"A central and pervading tenet of the judicial system is that controversies, once resolved, are not to be reopened except in a few, narrowly defined, circumstances."

164 The central qualification to this general statement lies in the appellate system, although, as the Court observed, at [35], "even there, the importance of finality pervades the law". By way of example, their Honours referred to the limitations on the points that may be taken on appeal and rules governing when further or fresh evidence may be adduced.

165 The Court explained, at [43], that the inevitable consequence of establishing that a client had suffered damage as a result of an advocate's negligence in the conduct of litigation was the "re-litigation of the controversy" that was the subject of the original action. In considering whether a particular claim would have that effect, the Court considered, at [65], it was necessary to identify, amongst other things, "the nature of the complaint made by a disappointed client who seeks to sue an advocate". In the Court's view, at [66]:

"... the complaint must be that a consequence has befallen the client which has not been, and cannot be, sufficiently corrected within the litigation in which the client was engaged."

166 Their Honours identified the "three chief consequences" that may befall a client as being "(a) a wrong final result; (b) a wrong intermediate result; and (c) wasted costs" and continued, at [70]:

"What unites these different kinds of consequence is that none of them has been, or could be, wholly remedied within the original litigation. The final order has not been, and cannot be, overturned on appeal. The intermediate consequence cannot be repaired or expunged on appeal. The costs order cannot be set aside; the costs incurred cannot be recovered from an opposite party. And in every one of these cases, the client would say that, but for the advocate's conduct, there would have been a different result. In particular, leaving cases of wasted costs aside, the client wishes to assert that, if the case had been prepared and presented properly, a different final, or intermediate, result would have been reached. And yet the judicial system has arrived at the result it did. The consequences that have befallen the client are consequences flowing from what, by hypothesis, is a lawful result. So, to take the present case, the imprisonment of which the applicant seeks to complain is lawful imprisonment. In a case where the client would say the wrong final result is reached, the result in fact reached is, by hypothesis, one that was lawfully reached. Whether the lawful infliction of adverse consequences (such, for example, as imprisonment) can constitute a form of damage is a question that may be noted but need not be answered." (emphasis added)

167 The present case is one of wasted costs, in respect of which their Honours stated, at [83]:

"... at first sight it might be thought that seeking to recover wasted costs would not cut across any principle of finality. But it is necessary to recall that the general rule is that costs follow the event. To challenge the costs order, therefore, will often (even, usually) involve a direct or indirect challenge to the outcome on which the disposition of costs depended. For the reasons given earlier, that should not be permitted lest a dispute about wasted costs become the vehicle for a dispute about the outcome of the litigation in which it is said that the costs were wasted."

168 Their Honours added, at [84]:

"... the legal principle which underpins [this] conclusion is fundamental. Of course, there is always a risk that the determination of a legal controversy is imperfect. And it may be imperfect because of what a party's advocate does or does not do. The law aims at providing the best and safest system of determination that is compatible with human fallibility. But underpinning the system is the need for certainty and finality of decision. The immunity of advocates is a necessary consequence of that need." (emphasis added) (citation omitted)

169 One of the issues in D'Orta-Ekenaike was where the appropriate line for the application of the immunity should be drawn. In Giannarelli v Wraith, the High Court had held that the immunity extended to "work done out of court which leads to a decision affecting the conduct of the case in court". In stating the test in those terms, the High Court accepted that the immunity was not confined to in court conduct: see Rees v Sinclair [1974] 1 NZLR 180 at 187 per McCarthy P, where the Court had used the following language to describe conduct that fell within the immunity, namely:

"... work so intimately connected with the conduct of the cause in Court that it can fairly be said to a preliminary decision affecting the way that cause is to be conducted when it comes to a hearing."

170 The language used by the New Zealand Court of Appeal was reflected in legislation in Victoria, which was the jurisdiction in which the litigation in D'Orta-Ekenaike was conducted. It was also the language used by McHugh J in his judgment at [94]. The plurality in D'Orta-Ekenaike observed, at [86], that there was no difference of significance in the language of "work out of court which leads to a decision affecting the conduct of a case in court" and the language of "work intimately connected with work in Court". Their Honours then observed, at [87]:

"As Mason CJ demonstrated in Giannarelli, 'it would be artificial in the extreme to draw the line at the courtroom door'. And no other geographical line can be drawn that would not encounter the same difficulties. The criterion adopted in Giannarelli accords with the purpose of the immunity. It describes the acts or omissions to which immunity attaches by reference to the conduct of the case. And it is the conduct of the case that generates the result which should not be impugned." (citation omitted)

171 Mason CJ's comment, at 559, in Giannarelli v Wraith to which the plurality referred was as follows:

"... where does one draw the dividing line? Is the immunity to end at the courtroom door so that the protection does not extend to preparatory activities such as the drawing and settling of pleadings and the giving of advice on evidence? To limit the immunity in this way would be to confine it to conduct and management of the case in the courtroom, thereby protecting the advocate in respect of his tactical handling of the proceedings. However, it would be artificial in the extreme to draw the line at the courtroom door. Preparation of a case out of court cannot be divorced from presentation in court. The two are inextricably interwoven so that the immunity must extend to work done out of court which leads to a decision affecting the conduct of the case in court. But to take the immunity any further would entail a risk of taking the protection beyond the boundaries of the public policy considerations which sustain the immunity."

172 The plurality's reasons in D'Orta-Ekenaike make it clear that the immunity is not confined to negligence on the part of a legal practitioner, whether barrister or solicitor, who acts in a case as an advocate. It extends to a solicitor who acts in the litigation qua solicitor provided that, on the facts, the negligent conduct falls within the reach of the immunity, namely, work done out of court that leads to a decision affecting the conduct of the case in court. This was expressly acknowledged by the plurality, at [90]-[91]. In the latter paragraph, the plurality stated:

"Because the immunity now in question is rooted in the considerations described earlier, where a legal practitioner (whether acting as advocate, or as solicitor instructing an advocate) gives advice which leads to a decision (here the client's decision to enter a guilty plea at committal) which affects the conduct of a case in court, the practitioner cannot be sued for negligence on that account."

173 McHugh J, in commenting upon the importance of the finality of litigation noted, at [144], that:

"... [a] successful claim of negligence against a practitioner depends on demonstrating that at least one outcome of the principal litigation was wrong"

and therefore, the possibility of inconsistent outcomes arose. His Honour noted that the appellate system was the place where a lower court decision, otherwise final, fell for correction: see Giannarelli v Wraith at 595 per Dawson J. McHugh J dismissed argument that D'Orta-Ekenaike was distinguishable from Giannarelli v Wraith on the basis that it involved a failure to warn in the Rogers v Whitaker sense. His Honour stated, at [157]:

"The issue is whether the relevant connection with the conduct of the litigation exists, not the form of the negligence. An integral part of the advocate's role is the giving of advice on the basis of which the client will give instructions that direct the course of proceedings. The advice is critical to and often determinative of the client's decision. There is no relevant distinction between instructions given on negligent advice and the negligent carrying out of instructions if both are intimately connected with the conduct of litigation."

174 Negligent advice regarding a plea of guilty had been alleged in the English decision of Somasundaram v Melchior & Co [1988] 1 WLR 1394; [1989] 1 All ER 129. In that case, the Court of Appeal held that advice as to a plea was intimately connected with conduct of the case in court so that it could:

"... fairly be said to be a preliminary decision affecting the way that the cause is to be conducted when it comes to a hearing ..."

175 McHugh J, at [161], having noted the Court of Appeal's remark, observed that:

"... there may be a public policy purpose in protecting an advocate from vexatious claims arising from mere errors of judgment inherent in predicting a sentencing outcome."

176 His Honour continued, at [162], that the application of the immunity to such advice served:

"... the important public interests of avoiding re-litigation of issues and maintaining confidence in the administration of criminal justice insofar as that confidence rests on finality of outcome."

177 In McHugh J's opinion, at [164], the issue of causation distinguished a claim based on an advocate's negligence from every other action for negligence for the reason that "the opinion of a third party - a judge or a jury - is interposed between the negligence and the injury". His Honour's view was consistent with that expressed by the plurality, at [45], that re-litigation of a controversy already determined would be of a "skewed and limited kind". His Honour concluded, at [168]:

"... the immunity should extend to any work, which, if the subject of a claim of negligence, would require the impugning of a final decision of a court or the re-litigation of matters already finally determined by a court."

178 Callinan J stated, at [372], that Giannarelli v Wraith was "plainly right in its treatment of the common law as well as the relevant legislation" and agreed with the reasons of the plurality as to why the immunity should be maintained. His Honour examined additional reasons why that was so, which are not presently necessary to consider. Kirby J dissented on the question of the application of the immunity to in court conduct.

Case law applying the principle stated in D'Orta-Ekenaike

(i) The challenged decisions

179 Mr Donnellan submitted that, on the assumption the Court found he had breached his duty of care to Mr Woodland, he was protected from suit, as the negligence alleged fell within the reach of advocates' immunity discussed in D'Orta-Ekenaike. Mr Donnellan relied upon the decisions of this Court in Chamberlain v Ormsby t/as Ormsby Flower; Attard v James Legal Pty Ltd [2010] NSWCA 31 and Day v Rogers [2011] NSWCA 124 (the challenged decisions). Each of these decisions involved claims of wasted costs. Mr Woodland submitted that these decisions were distinguishable from the facts in the present case, but if they could not be distinguished on the facts, this Court should not follow them.

(a) Chamberlain v Ormsby

180 Chamberlain v Ormsby involved advice given by a barrister as to the settlement of a client's workers compensation claim and included advice as to the consequences that settling the workers compensation proceedings would have on such common law rights as the client had arising out of the work incident subject of the workers compensation proceedings. Although the Court's primary finding was that there had been no negligence, Tobias JA (Giles JA agreeing) considered that even had the barrister been negligent in the advice he gave, he was protected from suit by advocates' immunity. In this regard, the Court referred to the reasons of the plurality in D'Orta-Ekenaike, at [86], and those of McHugh J at [157] (see [170] and [173] above). Tobias JA stated, at [120], that given the "advice was critical to the decision of the appellant to accept the settlement", it was:

"... difficult to imagine a stronger case than the present where the advice given by the barrister led to the appellant's decision as to the conduct of his case before the Compensation Court or which was more intimately connected with the course of that case including its settlement."

(b) Attard v James Legal Pty Ltd

181 In Attard v James Legal, the appellants were the shareholders and directors of a company to which an administrator had been appointed, which was involved in a number of contractual disputes that culminated in the bringing of four separate proceedings. The appellants retained the respondents to advise and act in relation to the proceedings. The respondents failed to advise the appellants that pursuant to the Corporations Law, ss 440D(1) and 444E(1), the claims by and against the company were stayed due to the appointment of the administrator and the entry into the Deed of Arrangement. The cross-claim was ultimately dismissed with no order for costs.

182 The appellants, who had funded the company's defence of the cross-claim, brought proceedings in negligence against the respondents for the wasted costs incurred by continuing to defend the cross-claim. The Court (Tobias JA, Beazley and Giles JJA agreeing) held that the respondents' failure to advise as to the existence of a stay was negligent but that the solicitors' negligent conduct fell within the reach of advocates' immunity. Accordingly, the wasted legal costs incurred were not recoverable by the appellants.

183 Giles JA, in a separate judgment (with which Beazley and Tobias JJA agreed), examined the principle of finality and its application in the context of a wasted costs claim. His Honour, at [26], considered that the vice identified by the plurality in D'Orta-Ekenaike, at [83] and [84], was that there "could be", not that there would be, a challenge to the outcome of the litigation in which the client was involved. As his Honour noted, at [27], that otherwise:

"Seeking to recover wasted costs would not be permitted at all, even though sometimes ... challenging the costs order would not involve a challenge to the outcome." (emphasis added)

184 Giles JA observed, at [28], that the principle of finality, advanced in D'Orta-Ekenaike as the rationale for the immunity, meant that a court was not required to inquire "whether in the particular case there would be offence to finality". Rather, if the test for advocates' immunity was satisfied, the immunity would apply to the claim for wasted costs. Giles JA noted, at [29], that proceedings, which reopened a dispute resolved by a judicial order, clearly fell within the paradigm case contemplated in D'Orta-Ekenaike. Giles JA described the paradigm case as providing "a very wide notion of offence to finality". However, his Honour noted, at [30], that for the immunity to apply in the context of a wasted costs case, the principle of finality did not require "a challenge to finality of a judicial act at all".

(c) Day v Rogers

185 Day v Rogers involved a claim for wasted costs incurred by the client in proceedings that were dismissed pursuant to the UCPR, r 29.9 on the basis that, on the evidence given in the plaintiff's case, judgment for the plaintiff could not be supported. The defendant barrister was found to be negligent in forming an incorrect view as to the evidence required to support the plaintiff's case but was held to be protected from suit by advocates' immunity. The plaintiff had argued in the case that the rationale for advocates' immunity, namely, the finality principle, was absent: the controversy between the parties had not been quelled, as the client was entitled to recommence proceedings. The defendant had also argued before the Court of Appeal, albeit unsuccessfully, that the trial judge had been in error in exercising the discretion conferred by UCPR, r 29.9 to dismiss the proceedings.

186 Giles JA (Allsop P and Sackville AJA agreeing), having referred to the statement in D'Orta-Ekenaike at [83], stated at [132]:

"Litigation of the [client's] claim against the [barrister] does in fact call in question the correctness of [the trial judge's] disposal of the proceedings by granting the application for dismissal under r 29.9, ...although at the instance of the [defendant] rather than the [plaintiff]. As I endeavoured to explain in Attard v James Legal Pty Ltd at [15]-[30], the rationale explained in D'Orta-Ekenaike v Victoria Legal Aid does not require a challenge to finality of a judicial act in the particular case ..."

(d) Symonds v Vass

187 Before considering Mr Woodland's challenge to these decisions it is convenient to refer to a further wasted costs case: Symonds v Vass. In that case, the majority (Giles and Beazley JJA) considered that the question of advocates' immunity could not be decided on the appeal due to insufficient factual findings by the trial judge. The matter was thus remitted to the Supreme Court, Common Law Division for retrial. Ipp JA held that the immunity applied. In his oral submissions in this Court, Mr Woodland challenged the minority reasoning of Ipp JA.

188 The alleged negligence in Symonds v Vass included that the solicitors had failed to obtain counsel's advice as to the prospects of success, had failed to plead certain causes of action and had failed to properly particularise their claim. The plaintiffs claimed that as a result of the solicitors' negligence, they were compelled to settle the claim on a basis that was unsatisfactory to them. Ipp JA considered that the immunity applied as the case fell precisely within the reach of the immunity described by the plurality in D'Orta-Ekenaike at [70]. His Honour stated, at [115]:

"The appellants' case against the respondent falls within the 'kinds of consequence' referred to at [70] of D'Orta-Ekenaike ... The final order made by Dowd J cannot be repaired or expunged on appeal. Nor can the compromise be set aside. Patten AJ held that it was entered into without duress and that finding is not challenged. The appellants say that, but for the respondent's conduct, there would have been a different result. They wish to assert that, if the case had been prepared and presented properly, a different intermediate result (that is, no compromise) and final result (orders other than those made by Dowd J on 28 February 1996) would have been reached. The consequences that have befallen the appellants are, however, consequences flowing from what is a lawful result. The compromise was a lawful contract and the judgment granted by Dowd J was a lawful judgment."

His Honour continued, at [116]:

"I reiterate (because it is so important in the context of this case) that 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 case put by Mr Bennett on behalf of the appellants is that very case. Thus, the appellants' case falls squarely within the test for advocate's immunity laid down in D'Orta-Ekenaike. In my opinion, D'Orta-Ekenaike compels the conclusion that the respondent is immune from the appellants' suit."

189 His Honour considered that this conclusion was reinforced by the decision of this Court in Keefe v Marks (1989) 16 NSWLR 713, which is considered below.

(ii) Were the challenged decisions plainly wrong?

190 Mr Woodland's principal submission in challenging each of these decisions, and the reasoning of Ipp JA in Symonds v Vass, focussed not on why they were wrong in principle, but why each was distinguishable from the facts of the present case. Nowhere did he make a submission that each decision was "plainly wrong", which is the test this Court has held must be satisfied before it will depart from an earlier decision: Gett v Tabet [2009] NSWCA 76; 254 ALR 504. Indeed he submitted that each was correctly decided. Given the absence of any such argument, the principle discussed in Gett v Tabet can be referred to briefly.

191 Intermediate appellate courts should only depart from their own earlier decisions or the authority of courts of co-ordinate jurisdiction if they form the view that the earlier line of authority is "plainly wrong" and that there are "compelling reasons" to not follow those earlier decisions. "Compelling reasons" for departure may encompass both jurisprudential and practical considerations.

192 An earlier decision of the court is "plainly wrong" if it satisfies two conditions. First, the later court must form the view that the earlier decision was erroneous. A mere preference by the later court for a different approach to that taken by the earlier court does not render an earlier decision erroneous. Secondly, the later court must be capable of demonstrating error in the earlier decision by the application of correct legal analysis: see RJE v Secretary to the Department of Justice [2008] VSCA 265.

(iii) Points of distinction between the challenged cases and this case

193 Mr Woodland sought to distinguish the challenged decisions on two principal bases. First, he placed emphasis upon the temporality of the alleged negligent conduct and the actual conduct of the proceedings in court as being determinative of whether the immunity applied in a given case. Thus, in Chamberlain v Ormsby, the advice that led to settlement was given on the day of the hearing, so that the connection between the negligent conduct and the proceedings was, on this argument, much closer than here, where, on Mr Woodland's argument, Mr Donnellan was not engaged in conduct that was preparatory to or leading to steps in the conduct of the case.

194 Secondly, Mr Woodland argued that for work done out of court to have the necessary link with work done in court so as to attract the immunity, the negligence must have resulted in a different order being made by the court than would have been made absent the negligent conduct. He submitted that the "quelling of a controversy is different in a case where a settlement was not taken up". In this regard, Mr Woodland submitted that the question whether advocates' immunity applied in a particular case turned upon the question "whether [the] claim against the advocate could or might involve a direct or indirect challenge to the outcome [of the litigation]".

195 Mr Woodland pointed out that Giles JA's observations in Attard v James Legal correctly recognised that if a wasted costs claim was founded upon an order of the court, then advocates' immunity could properly be invoked where the negligent conduct of the practitioner led to that outcome. It followed, on his submission, that the principles in D'Orta-Ekenaike were properly applied in both Attard v James Legal and Day v Rogers in that the negligence alleged in each involved a challenge to the outcome of the original proceedings. Mr Woodland contended that the obiter observations of Giles JA in Symonds v Vass also provided support for this submission. It followed, on this submission, that if there had been a capitulation by the client in agreeing to consent orders where a party alleged that but for the negligence of their legal practitioner, a better result would have been obtained, the negligence claim would involve a re-litigation of the issues originally in controversy. Mr Woodland said that this case was different. The wasted costs claim here was based on the lost opportunity to reach a settlement by a private agreement and was not due to negligence that resulted in the court making a wrong order.

196 Mr Woodland submitted that if Attard v James Legal was not distinguishable it ought to be reconsidered. In so arguing, Mr Woodland did not attempt to demonstrate that it, or any of the challenged decisions, were plainly wrong. Rather, he argued that each was correct. His complaint was that it would be erroneous for this Court to apply any of those cases to this case.

197 There is a clear jurisprudential distinction between a statement of principle and the application of principle. This case involves the application of a legal principle laid down by the High Court. Its application to a given case may be contestable and, in a given outcome, not necessarily obvious. Like snowflakes, no two cases are identical. Nonetheless, decided cases play an important role in the jurisprudential framework. 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 consistent application of principle in like cases promotes and enhances the predictability of the law, which is itself an important and recognisable strength of the common law. It is also a recognised feature of the common law that there is elasticity in the ultimate fact-finding process in which a court engages. The closer a case is to an earlier decision, the closer is the guidance that it provides. However, simply because a point of factual distinction can be drawn between two cases does not mean that the legal principle in issue has no application.

198 Mr Woodland's first submission does not give proper acknowledgement to this. The question is not when the advice was given, but whether the advice given led to a decision affecting the conduct of a case in court. As McHugh J stated, the giving of advice is an integral part of an advocates' role. If the giving of advice, or the omission to give advice, led to a decision to continue with the case, or meant that the case was continued because of that omission, such conduct would lead to a decision affecting the conduct of the case in court, namely, its continuance by way of full argument before a judge.

199 Mr Woodland contended that his second submission (see at [194] above) was supported by the Supreme Court of Western Australia, Court of Appeal decision of Alpine Holdings v Feinauer and the decision of Harrison J in Dansar Pty Ltd v Pagotto [2008] NSWSC 112. Both decisions were referred to and, it would seem, their reasoning applied by R S Hulme J.

200 In Alpine Holdings v Feinauer, the appellants had successfully brought a claim for damages for misleading and deceptive conduct. However, on appeal, the amount of damages awarded by the trial judge was substantially reduced. The appellants brought proceedings in negligence against their solicitor alleging that he had been negligent, relevantly, in respect of advice given as to the likely quantum of damages and in relation to an offer of settlement made between trial and appeal. The respondent, who had been the solicitor for the appellants in the proceedings, sought to strike out the claim on the basis that his negligence, if any, was protected by advocates' immunity.

201 In dealing with the advice given in respect of the offer of settlement, the Court (Steytler P and Newnes AJA) considered that it was not certain where the line was appropriately drawn as to the application of the immunity. Their Honours explained their concerns as follows:

"86 As matters stand, it is, in our view, arguable that the second claim does not fall within the immunity. In the first place, the advice in relation to the settlement was arguably not connected with 'work done out of court which leads to a decision affecting the conduct of the case in court' or 'work intimately connected with work in court'. That is, it did not affect the conduct of the appeal in court, nor was it connected with any work that would or might be done in court, except in the general sense that it determined whether or not there was ultimately any litigation to proceed to court. In that sense, however, it might be thought not to differ in principle to advice on the prospects of success before action on which a decision is based as to whether or not to commence proceedings. We do not think it could be suggested in light of the modern authorities that advice of the latter kind would attract the immunity.

87 It is also arguable, having regard to the justification for the immunity as described by the majority in D'Orta-Ekenaike, that there is no occasion for the application of the immunity in the present case as the claim does not involve any derogation from, or undermining of, the principle of the finality of court decisions by requiring the re-opening of earlier litigation. It is not alleged that the decision of the Court of Appeal was wrong or that the negligence of the defendant brought about a decision of the court that would otherwise have been different. The claim does not require reconsideration of the correctness of the decision of the Court of Appeal. That decision is simply the basis upon which the claim is founded."

202 In the result, the Court held that the trial judge had erred in striking out the statement of claim as it was arguable that the plaintiff's claim was not defeated by advocates' immunity. As is apparent from the manner in which the Court expressed their opinion in these paragraphs, the Court, at the most, raised questions as to the reach of the immunity. Their Honours did not engage in any analysis of, nor was it necessary to determine whether advocates' immunity applied. For that reason and with respect to their Honours, no assistance is to be gained from that case in the determination of this case.

203 The respondent also relied upon the decision of Harrison J in Dansar v Pagotto. That case involved a negligence claim brought by clients against a former solicitor for failing to advise that there was a condition precedent to a local council's approval to a development application. In the result, the clients failed in a number of proceedings brought in the Land and Environment Court challenging the council's refusal of the development application. Harrison J found that the solicitors had been negligent in failing to advise the plaintiffs that approval of a development application was subject to a condition precedent, which was required to be satisfied and which could not be resolved by the court. The solicitors were also found negligent in failing to advise that one set of proceedings did not have reasonable prospects of success.

204 Harrison J held that the solicitor's negligence was not protected by advocates' immunity because the solicitor was not acting as an advocate: Boland v Yates Property Corporation Pty Ltd [1999] HCA 64; 74 ALJR 209 at [141] per Kirby J. This reasoning is contrary to the plurality's observations in D'Orta-Ekeneike at [90]-[91]. His Honour, at [90], was also of the opinion that the advice the plaintiffs alleged the solicitor ought to have given:

"... was not connected with the conduct of the first proceedings but rather related to the question of whether or not they should have been brought to an end."

205 In his Honour's opinion, this did not involve a forensic decision about how the case was to have been conducted. His Honour, at [91], considered that "conduct" in the context used in D'Orta-Ekenaike was:

"... a reference to how, or the manner in which, litigation should be conducted, not a reference to whether or not it should be commenced at all or continued."

206 Harrison J's view in this regard was premised upon the High Court's reference to the statement of McCarthy P in Rees v Sinclair that:

"... the protection exists only where the particular work is so intimately connected with the conduct of the cause in Court that it can fairly be said to be a preliminary decision affecting the way that cause is to be conducted when it comes to a hearing." (Harrison J's emphasis).

207 The third basis upon which Harrison J considered the immunity did not apply was because the principle of finality was not, on the facts before him, offended. His Honour was of the view that the decisions of the Court were not reached wrongly by any failure on the solicitor's part. It had not become necessary to reconsider those decisions in the negligence proceedings. Rather, as his Honour pointed out, the correctness of those decisions was the basis upon which the negligence proceedings had been founded. His Honour said, at [94]:

"Where the principle of finality and the judicial system as part of the governmental structure do not arise, there is no occasion for the application of the doctrine of advocates' immunity: Donellan v Watson (1990) 21 NSWLR 335 at 337, 343-344 and 347."

208 Harrison J's reasons are not, of course, binding on this Court. Although respect is to be given to a reasoned decision of a superior court judge, I am unable, with respect to his Honour's opinion, to find myself to be in agreement with them. In my opinion, D'Orta-Ekenaike does not stand for the second and third propositions advanced by his Honour for the reasons I have already explained.

209 It follows, therefore, for the reasons I have given, Mr Woodland's second submission does not represent the law either as stated by the High Court in D'Orta-Ekenaike or as applied by the Court in Attard v James Legal.

Other case law

210 Rather than engaging in a complete review of the remaining decisions to which Mr Woodland referred, a task which has been undertaken in other authorities, it is sufficient at this stage to summarise the effect of those decisions.

211 In Biggar v McLeod [1978] 2 NZLR 9 the immunity was held to apply where a legal practitioner had advised on settlement during the course of a trial. It did not matter that the litigation was brought to an end by settlement and not by way of a determination of the court. This case would therefore support Mr Donnellan's argument, except for the temporal aspect that the settlement offer arose during the course of the trial. However, as I have already indicated, mere temporality is not determinative of whether the immunity applies.

212 A barrister's conduct in settling a matter prior to hearing was also held to be protected by the immunity: Kelley v Corston [1998] 3 WLR 246; [1997] 4 All ER 466. Kelley v Corston involved the settlement of a matrimonial dispute which required Court approval. In that circumstance it was said that the settlement negotiations were "intimately connected with the conduct of the trial". Mr Woodland submitted that this case fell within the immunity because a court order was required. Whilst that is correct, the fact that a court order is not made or is not directly challenged does not mean the immunity does not apply.

213 In Coshott v Barry [2009] NSWCA 34 this Court (Ipp JA, Beazley and Campbell JJA agreeing) held that the trial judge had erred in finding that advocates' immunity applied to a solicitor's negligence in respect of the relief claimed in a pleading. The trial judge had concluded that such conduct relating to the pleading was "work done out of court which led to a decision [a]ffecting the conduct of the case in court". Ipp JA observed, in obiter remarks, that the immunity would not have protected the solicitor's negligence in respect of the pleading. His Honour considered, at [62], that the trial judge's finding went too far, as it involved extending the protection of the immunity virtually from the commencement of the retainer. In his Honour's view, "[s]uch an alleged failure would be too far removed from the actual conduct of the trial to be covered by the doctrine of advocate's immunity". In his Honour's opinion, the failure to advise as alleged at the commencement of the retainer could not properly be regarded as leading to a decision affecting the conduct of the case in court.

214 Although I agreed in the outcome in that case, it could be argued that the Court's decision is contestable, given the approach to the application of the immunity which I have discussed in this case.

215 Keefe v Marks is an example of the application of the immunity where the outcome was different from that in Coshott v Barry. In that case, a client brought proceedings against his former solicitor for failing to claim interest under the Supreme Court Act 1970, s 94. In a cross-claim against the barrister, this Court held that the barrister was protected by advocates' immunity. Whilst acknowledging that the immunity does not extend to work done out of court which is unconnected with work done in court, Gleeson CJ, at 719, considered that the failure to claim interest in the statement of claim was connected with work done in court. As his Honour explained:

"... in so far as complaint is made of action or inaction prior to the commencement of the hearing it concerns a matter which was intimately connected with the work ultimately done in Court, that is to say the presentation of [the client's] claim for damages and any consequential relief to which he was also entitled."

216 His Honour continued at 720:

"The substance of the allegation against [the barrister] is that he was negligent in the way in which he conducted [the client's] action, and the principle of immunity which applies in such a case cannot be circumvented by drawing fine distinctions between the preparation and the conduct of the case or between [the barrister's] failure to advert to the matter of interest while he was in his Chambers and his failure to do so while he was in Court."

217 In MacRae v Stevens [1997] ANZ ConvR 129; (1996) Aust Tort Reports 81-405, the Court held that incorrect advice given by a barrister that proceedings were required to be commenced in another State was not protected by the immunity. Beazley JA (Priestley and Meagher JJA agreeing) stated, at 63,690, that it was artificial to say that such advice led to a decision affecting the conduct of the case in court merely because it could be said to have a connection with litigation. It was held that such advice neither fell within the test as stated by Mason CJ in Giannarelli v Wraith, nor was there any policy consideration based upon the proper and efficient administration of justice that required the immunity to be applied. The decision in MacRae v Stevens was given before the High Court's judgment in D'Orta-Ekenaike.

218 In Walton t/as Pitcher Walton & Co v Efato Pty Ltd [2008] NSWCA 86, Tobias JA (Beazley and Giles JJA agreeing) observed, in obiter, that the immunity was unlikely to apply where a solicitor had failed to obtain evidence of solvency in time to file an affidavit of solvency in winding up proceedings. Again, that was a case decided upon its facts and a different outcome, on the current understanding of D'Orta-Ekenaike, would not be surprising. The remarks of Ipp JA in Symonds v Vass, at [127], are appropriately recalled in this regard:

"... observations made by Tobias JA in Walton and the findings I made in Coshott should be understood as being confined to the specific facts in those cases and are not to be understood as laying down any principle of broader application."

219 Overall, the reviewed cases support the application of the immunity in this case. However, whether the immunity applies involves an examination of the found negligence and the determination of the question whether that conduct led to a decision affecting the conduct of the case in court. It is necessary, therefore, at this point, to consider the reasons of the trial judge on the immunity question.

Did the trial judge err in finding that the immunity did not apply?

220 The trial judge, at [190], identified Mr Donnellan's conduct for which the immunity was claimed as being concerned with the question whether the s 88K application should have been conducted, by which I understand his Honour to have meant commenced, or should have been continued to be conducted at all. His Honour noted that Mr Woodland's professional negligence claim did not involve challenging the correctness of Hamilton J's decision. Rather, on his Honour's analysis, at [201]-[202], Mr Woodland's claim against Mr Donnellan required the determination of whether Mr Donnellan's advice at various times fairly reflected the state of the law at the time the advice was given and whether it included appropriate qualifications regarding any risks. His Honour identified the issue on causation as being what Mr Woodland would have done if appropriately advised. The issue on costs was whether Mr Donnellan's action or inaction was unreasonable to a degree sufficient to amount to a breach of duty and whether his advice fairly reflected both the law and a reasonable assessment of the circumstances and again included appropriate qualifications concerning any risks.

221 His Honour, at [191], stated that advice not to institute proceedings could not fall within the test stated in D'Orta-Ekenaike. It was difficult, therefore, on his Honour's view, to see that advice to sue should be protected by the immunity. In his Honour's opinion, such advice did not bear on "the conduct of the case in court", or "on the way that cause is to be conducted". His Honour continued:

"Given the emphasis [made by the High Court] to 'affecting the conduct of the case in court' or work 'intimately connected with work in a court', I find it impossible to regard the immunity as encompassing advice given whether to institute proceedings or not merely because proceedings may be, or in fact are, instituted. The references to 'conduct of the case in court' and 'intimately' make it clear that mere connection or relationship between the conduct that subject of challenge and any litigation is not sufficient."

222 His Honour stated, at [193], that the question whether the immunity applied when advice was given during the currency of proceedings was more difficult, but concluded, at [197], that the remedy Mr Woodland sought did not "[depend] upon demonstrating that a different ... result should have been reached in the earlier litigation". As I have said, his Honour found support for his approach in the Western Australian decision of Alpine Holdings v Feinauer and first instance decision of Dansar v Pagotto.

223 His Honour also considered, without making a finding, that advice as to whether to accept the offer of 21 December 2001 was not advice "affecting the conduct of the case in court" or work "intimately connected with work in a court" in any meaningful way. In particular, his Honour considered it relevant that the Council's offer of 21 December 2001 did not refer to making orders in court, although he recognised that had the matter settled at that time, it would undoubtedly have resulted in some court order.

224 It will be apparent from those parts of his Honour's reasons to which I have referred that he favoured the hybrid terminology of work "affecting the conduct of the case in court" or work "intimately connected with work in a court". These references involved a combination of the first part of the test stated by the plurality and by McHugh J in D'Orta-Ekenaike, the language used in Rees v Sinclair and the language in the statute to which I have referred. Although the plurality said that the test they had enunciated was not significantly different to the language of "intimately connected with" the conduct of the case in court the combination of the two statements is apt to mislead as each tends to focus attention on different things. The language of the plurality, at [1], that a practitioner:

"... cannot be sued ... for negligence in the conduct of a case in court, or in work out of court which leads to a decision affecting the conduct of a case in court"

focuses, in its second limb, attention upon conduct that leads to a decision which has the stated effect. If the first part of the test stated by the plurality is combined with the language of 'intimate connection', there is a risk, it seems to me, to focus upon how close the connection is, rather than determining whether the conduct led to a decision affecting the conduct of the matter in court.

225 The risk that I have identified was one, in my opinion, that affected his Honour's reasoning. His Honour referred to a case where advice was given not to sue and considered such conduct would not be protected by advocates' immunity. His Honour contrasted that situation with advice to sue. However, the contrast could not, in my opinion, provide the answer to the question. The question for his Honour on breach 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.

226 It also seems to me that there are other difficulties with his Honour's conclusion that the immunity did not apply. The 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. Hence, his Honour's concern to identify the issue on causation in this part of his reasons was unnecessary. This, however, is not the central problem. I have identified above the breaches of duty found by his Honour. His Honour did not, in determining the immunity question, focus attention upon the breaches of duty that he had found. Rather, he approached the matter in the more generalised way that I have described above.

227 The question for determination, in my opinion, was whether Mr Donnellan's conduct relating to the letter of 21 December 2001, that his Honour found to be negligent, was protected by the immunity. The letter of offer came some seven weeks prior to the dates allocated for hearing. The litigation at that point was at an advanced state of preparation. On the assumption that Mr Donnellan's conduct in respect of the letter was negligent, that conduct led to a decision by Mr Woodland affecting the conduct of the matter in court. As the plurality explained in D'Orta-Ekenaike, at [70], the wasted costs that resulted from Mr Woodland pursuing the proceedings, being the consequence of the found negligence, could not be "wholly remedied within the original litigation". And, as McHugh J explained, at [157], the giving of advice is an integral part of a legal practitioner's role upon which the client then gives instructions. Further, the case law in this Court is that the principle in D'Orta-Ekenaike may apply to advice given in respect of settlement.

228 Further, to the extent that his Honour's finding of negligence in respect of the letter of 21 December 2001 related to the giving of advice that did not properly reflect the state of the authorities, his Honour's approach to this question involved a reconsideration of most of the case law upon which Hamilton J had relied in reaching his decision. A possible outcome of that undertaking was that R S Hulme J might have come to a different determination to that reached by Hamilton J. That is the type of re-agitation that is foreclosed by the finality principle.

229 In my opinion, therefore, the breach of duty his Honour found had been committed by Mr Donnellan relating to the Council's letter of 21 December 2001 was protected by the immunity. On his Honour's findings, the omission to give appropriate advice at that time led to Mr Woodland continuing the proceedings, with the consequent waste of costs. In my opinion, the effect of deciding to continue with proceedings is to make a decision that affects the conduct of the case in court.

230 The same result follows in respect of the negligence relating to costs for essentially the same reasons. The question of liability for costs was an important factor in the litigation. If Mr Donnellan's advice was negligent in that respect, Mr Woodland wasted costs that he otherwise would not have incurred. However, those wasted costs cannot be recovered in the original proceedings.

231 There are additional factors to which consideration must be given in relation to the found negligence relating to costs. In examining the question of wasted costs, the plurality in D'Orta-Ekenaike noted that the usual order for costs was that costs follow the event. Although that is not the case in respect of a s 88K application, that difference does not undermine the principle that the immunity applies where the relevant consequence of the negligent conduct is wasted costs. The reference to the usual rule simply provided an obvious explanation as to why the immunity applied.

232 Further, and perhaps fundamentally on the costs question, R S Hulme J came to a different conclusion from that of Hamilton J in respect of that part of the order that related to indemnity costs. That is the very vice to which the immunity is directed. The test of finality is not only, nor necessarily whether the final decision in the original case was correct. Rather, it extends to the case where, as explained by the plurality in D'Orta-Ekenaike, at [66]:

"... a consequence has befallen the client which has not been, and cannot be, sufficiently corrected within the litigation in which the client was engaged".

It is for that reason that wasted costs claims fall within the immunity.

233 In my opinion, therefore, if Mr Donnellan did breach his duty of care to Mr Woodland, the principle of advocates' immunity applied, so as to protect him from suit. For that reason also, I am of the opinion that the appeal should be allowed and Mr Woodland's professional negligence claim dismissed.

234 Having determined that Mr Donnellan was not negligent in respect of the advice that he gave Mr Woodland and that, even if he had been negligent, his conduct would be protected by advocates' immunity, grounds 9, 10 and 11 of the appeal also do not arise for consideration. Each of the grounds is dealt with briefly, should I be wrong in the conclusion I have reached on these issues.

Ground 9: Assessment of damages

235 The trial judge assessed the damages to which Mr Woodland was entitled on the basis of his actual loss, that is, being the costs he paid to Mr Donnellan, together with the costs that he was ordered to pay to the Council. Mr Donnellan contended on the appeal that his Honour erred in assessing damages in that way and that damages ought to have been assessed on the basis of the loss of a chance. In this regard, Mr Donnellan submitted that the essence of Mr Woodland's case, as found by the trial judge, was that Mr Woodland had lost the chance of settling his claim against the Council and had thus lost the chance of avoiding further costs. In other words, the trial judge was dealing with past hypothetical events and had to consider what would have happened had Mr Donnellan properly advised Mr Woodland.

236 The proper basis for the assessment of damages in the case of a lost opportunity was considered by the High Court in Malec v JC Hutton Pty Ltd [1990] HCA 20; 169 CLR 638 in relation to the award of damages due to an interference with economic capacity and in Sellars v Adelaide Petroleum NL [1994] HCA 4; 179 CLR 332 at 355 per Mason CJ, Dawson, Toohey and Gaudron JJ in relation to loss for the deprivation of a commercial opportunity. In Malec v Hutton, the plurality (Deane, Gaudron and McHugh JJ) noted, at 643, that:

"The future may be predicted and the hypothetical may be conjectured. But questions as to the future or hypothetical effect of physical injury or degeneration are not commonly susceptible of scientific demonstration or proof. If the law is to take account of future or hypothetical events in assessing damages, it can only do so in terms of the degree of probability of those events occurring. The probability may be very high - 99.9 per cent - or very low - 0.1 per cent. But unless the chance is so low as to be regarded as speculative - say less than 1 per cent - or so high as to be practically certain - say over 99 per cent - the court will take that chance into account in assessing the damages. Where proof is necessarily unattainable, it would be unfair to treat as certain a prediction which has a 51 per cent probability of occurring, but to ignore altogether a prediction which has a 49 per cent probability of occurring. Thus, the court assesses the degree of probability that an event would have occurred, or might occur, and adjusts its award of damages to reflect the degree of probability. The adjustment may increase or decrease the amount of damages otherwise to be awarded. See Mallett v. McMonagle (1970) AC 166, at p 174; Davies v. Taylor (1974) AC 207, at pp 212, 219; McIntosh v. Williams (1979) 2 NSWLR 543, at pp 550-551. The approach is the same whether it is alleged that the event would have occurred before or might occur after the assessment of damages takes place."

237 In Sellars v Adelaide Petroleum, the Court (Mason CJ, Dawson, Toohey and Gaudron JJ), at 355, held that the approach in Malec v Hutton was not to be confined to any particular kind of case:

"Notwithstanding the observations of this Court in Norwest, we consider that acceptance of the principle enunciated in Malec requires that damages for deprivation of a commercial opportunity, whether the deprivation occurred by reason of breach of contract, tort or contravention of s.52(1), should be ascertained by reference to the court's assessment of the prospects of success of that opportunity had it been pursued. The principle recognized in Malec was based on a consideration of the peculiar difficulties associated with the proof and evaluation of future possibilities and past hypothetical fact situations, as contrasted with proof of historical facts. Once that is accepted, there is no secure foundation for confining the principle to cases of any particular kind.

On the other hand, the general standard of proof in civil actions will ordinarily govern the issue of causation and the issue whether the applicant has sustained loss or damage. Hence the applicant must prove on the balance of probabilities that he or she has sustained some loss or damage. However, in a case such as the present, the applicant shows some loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value), the value being ascertained by reference to the degree of probabilities or possibilities. It is no answer to that way of viewing an applicant's case to say that the commercial opportunity was valueless on the balance of probabilities because to say that is to value the commercial opportunity by reference to a standard of proof which is inapplicable." (original emphasis)

238 These principles were applied by this Court in Heenan v Di Sisto [2008] NSWCA 25; 13 BPR 25,213, where Giles JA (Mason P and Mathews AJA agreeing) noted, at [30]:

"Damages from a negligent solicitor on the basis of loss of a chance has been recognised in a number of cases, and it is unnecessary to cite them."

239 In my opinion, Mr Donnellan's submission should be accepted. His Honour's finding that Mr Woodland would have settled in January 2002 was, of necessity, a finding made on the balance of probabilities. However, the amount of damages to be awarded falls to be assessed having regard to the probabilities or possibilities of what would have occurred.

Grounds 10 and 11: The costs issues

240 Mr Donnellan challenges his Honour's finding that he is liable for the Council's solicitor/client costs after 17 May 2002, that is, for the indemnity costs award following upon the failure to accept the offer contained in the Council's letter of 16 May 2002. Mr Donnellan submitted that Hamilton J was wrong in finding that it was unreasonable not to accept the offer, so that his conduct was not a cause of the damage thereby sustained by Mr Woodland. Rather, the cause of the damage was Hamilton J's erroneous judgment. Mr Donnellan further submitted that any such loss was not foreseeable.

241 In my opinion, both of these arguments fail. If Mr Donnellan was negligent in the advice he gave in respect of the letter of 16 May 2002, that was a cause of the loss that Mr Woodland suffered in having to pay indemnity costs. It was foreseeable that a trial judge might have exercised his discretion in favour of Mr Woodland. It was also foreseeable that a trial judge might be wrong or at least arguably wrong in the determination. That is an accepted vagary of litigation. I would, accordingly, reject ground 10.

242 Ground 11 is not as straightforward to determine. Mr Donnellan submitted that in circumstances where he was not acting for Mr Woodland at any time in respect of the application for leave to appeal against Hamilton J's costs order, he could not be liable for any costs incurred in bringing that application. Mr Woodland submitted that the possibility of a judgment being potentially the subject of an appeal was reasonably foreseeable. He relied upon the fact that R S Hulme J considered that it was at least arguable that Hamilton J's costs discretion had miscarried. Mr Donnellan submitted, therefore, that it was not unreasonable for him to have taken a step of applying for leave to appeal and that the costs incurred in doing so were reasonably foreseeable.

243 It is recognised that in personal injury litigation where an injured plaintiff requires surgery as a result of injuries suffered due to the negligence of the defendant, the defendant is liable to the plaintiff for any further damage suffered in the surgery, even if that surgery is performed negligently. In other words, the further damage is a foreseeable consequence of the original injury and is not too remote. That, in essence, is the argument advanced by Mr Woodland. However, it seems to me that there is a difference. In the example just given, the surgery was a necessary consequence of the original negligence.

244 However, in the present case, different solicitors advised Mr Woodland to make an application for leave to appeal from a discretionary decision. That was not a necessary consequence of any arguable error in Hamilton J's discretionary decision. Nonetheless, I have concluded that there was no error in R S Hulme J's determination that Mr Donnellan should be liable for the costs of the application. In my opinion, Mr Donnellan's negligence was a cause of Mr Woodland's decision to seek leave to appeal within the meaning of the Civil Liability Act, s 5D(1)(a). I am also satisfied that it is appropriate for the scope of Mr Donnellan's liability to extend to the harm so caused within the meaning of s 5D(1)(b). It was foreseeable that a party to litigation might seek to challenge a decision that was thought, at least arguably, to be wrong. It was also foreseeable that any such challenge was likely to be unsuccessful, given the principles that applied to an appeal against a discretionary decision in respect of which leave was required.

Application to amend notice of contention

245 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.

246 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)."

247 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".

248 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.

249 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.

250 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.

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

Orders

252 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.

253 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.

254 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.

255 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.

256 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].

257 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.

258 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.

259 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.

260 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.

261 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.

262 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.

263 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

264 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.

265 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])."

266 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).

267 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 Act 2002 (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.

268 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.

269 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."

270 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.

271 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.

272 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.

273 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.

274 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.

275 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.

276 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.

277 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.

278 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.

279 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.

280 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.

281 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.

282 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.

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

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

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

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Decision last updated: 18 December 2012