Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Cappello v Lyons [2023] NSWCA 137 Hearing dates: 1 June 2023 Date of orders: 23 June 2023 Decision date: 23 June 2023 Before: Meagher JA at [1] Simpson AJA at [2] Griffiths AJA at [85] Decision: 1. Appeal dismissed. 2. The appellants to pay the respondent's costs. Catchwords: OCCUPATIONS – legal practitioners – professional negligence – advocate's immunity – whether advocate's immunity extends to the drafting of pleadings – whether advocate's immunity applies to omissions by a legal practitioner Legislation Cited: District Court Act 1973 (NSW) s 127 Home Building Act 1989 (NSW) s 8A, Sch 1 Civil Liability Act 2002 (NSW) ss 5R, 5S Cases Cited: Attard v James Legal Pty Ltd [2010] NSWCA 311 Attwells v Jackson Lalic Lawyers Pty Limited (2016) 259 CLR 1; [2016] HCA 16 Cappello v Hammond & Simonds NSW Pty Ltd [2020] NSWSC 1021 Cappello v Hammond & Simonds NSW Pty Ltd [2021] NSWCA 57 Creative Building Services v Jolene Investments [2013] NSWSC 391 D'Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1; [2005] HCA 12 Giannarelli v Wraith (1988) 165 CLR 543; [1988] HCA 52 Keefe v Marks (1989) 16 NSWLR 713 Mann v Paterson Construction Pty Ltd (2019) 267 CLR 560; [2019] HCA 32 Rees v Sinclair [1974] 1 NZLR 180 Rondel v Worsley [1969] 1 AC 191 Rosario Cappello v James William Lyons (District Court (NSW), Olsson SC DCJ, 22 August 2022, unrep) Saif Ali v Sydney Mitchell & Co [1980] AC 198 Category: Principal judgment Parties: Rosario Cappello (1st Appellant) Maria Cappello (2nd Appellant) James William Lyons (Respondent) Representation: Counsel: Self-represented (Appellants) G Ng (Respondent) Solicitors: Moray & Agnew (Respondent) File Number(s): 2022/274797 Decision under appeal Court or tribunal: District Court of NSW Jurisdiction: Civil Date of Decision: 22 August 2022 Before: Olsson DCJ File Number(s): 2021/115214 [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.] HEADNOTE [This headnote is not to be read as part of the judgment] In July 2020 the appellants, Mr Rosario Cappello and Ms Maria Cappello (together, "the Cappellos"), were the plaintiffs and cross-defendants in proceedings in the Equity Division of the Supreme Court. Those proceedings were brought against a building company ("the builder") and its director, who had conducted substantial renovation works on a property owned by the Cappellos. The proceedings turned, in part, on the entitlement of the builder to recover an amount claimed under a progress claim issued to the Cappellos, which the Cappellos had refused to pay in full. Judgment was entered for the builder and its director. The entitlement of the builder to issue progress claims arose from cl 15 of the contract between the builder and the Cappellos. Clause 15.4 required any progress claim to include details of the cost of the building works carried out. Clause 15.5 required any progress claim to be accompanied by such invoices, receipts or other documents as may reasonably be expected to support the claim and evidence the cost of the building works being claimed. At no time in the proceedings in the Equity Division did the Cappellos assert any failure on the part of the builder to comply with cl 15. The Cappellos sought to introduce this as an issue in an appeal to the Court of Appeal. The Court refused to allow the new point to be argued, and the Cappellos' liability to pay the amount outstanding on the progress claim was not disturbed. Initially, the Cappellos were represented in the proceedings in the Equity Division by the present respondent, Mr James William Lyons, a solicitor, who was identified as their legal representative in their pleadings. Five months before those proceedings were heard, Mr Lyons filed a Notice of Ceasing to Act. In April 2021 the Cappellos commenced a proceeding against Mr Lyons in the District Court, claiming damages for professional negligence. The asserted negligence was failure to plead in the proceedings in the Equity Division that the builder, in issuing its progress claims, had breached cl 15 of the contract. The Cappellos asserted that, had those breaches been pleaded, they would not have been liable to the builder for non-payment of the builder's final progress claim. Further, the Cappellos asserted that they would have been entitled to be repaid all monies that they had previously paid pursuant to earlier progress claims. The District Court dismissed the Cappellos' claim. The Cappellos appealed to the Court of Appeal. The primary issues on appeal were: (1) whether Mr Lyons could rely on a defence of advocate's immunity; (2) whether the Cappellos had established that the builder failed to comply with cl 15; and (3) whether non-compliance with cl 15 could, in fact, disentitle the builder to payment under the contract, to damages for breach of contract or to damages on a quantum meruit, such that a failure to plead a breach of cl 15 could have caused the Cappellos any loss. The Court (Simpson AJA, Meagher JA and Griffiths AJA agreeing), dismissing the appeal, held: Any negligent omission to plead a breach of cl 15 attracted advocate's immunity. Pleadings define the issues for determination and are thus intimately connected with the conduct of the case in court and the outcome of the litigation. It was immaterial that the asserted breach of duty by Mr Lyons was an omission, as opposed to a conscious or articulated decision: [1] (Meagher JA), [59]-[62] (Simpson AJA), [85] (Griffiths AJA). Attwells v Jackson Lalic Lawyers Pty Limited (2016) 259 CLR 1; [2016] HCA 16; D'Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1; [2005] HCA 12; Giannarelli v Wraith (1988) 165 CLR 543; [1988] HCA 52, applied. The Cappellos had failed to prove any non-compliance by the builder with cl 15: [1] (Meagher JA), [66] (Simpson AJA), [85] (Griffiths AJA). The Cappellos had not established that non-compliance with cl 15 would have extinguished the builder's rights to damages, either for breach of contract or on a quantum meruit: [1] (Meagher JA), [73] (Simpson AJA), [85] (Griffiths AJA). JUDGMENT 1. MEAGHER JA: I have had the benefit of reading in draft the judgment of Simpson AJA. I agree for the reasons given by her Honour that this appeal should be dismissed with costs. 2. SIMPSON AJA: This is an appeal against orders made in the District Court dismissing a claim by the appellants for damages for professional negligence against a solicitor, the present respondent, James William Lyons: Rosario Cappello v James William Lyons (District Court (NSW), Olsson SC DCJ, 22 August 2022, unrep). Background 1. In July 2020 the appellants, Rosario and Maria Cappello (together, "the Cappellos"), were the plaintiffs in a proceeding in the Technology and Construction List of the Equity Division of the Supreme Court ("the Supreme Court proceeding"). They sued a builder, then known as Hammond & Simonds NSW Pty Ltd ("H&S"), with whom they had, in September 2017, contracted for alterations and additions to their residential property in suburban Sydney, and Mr John Re, a director of H&S. The contract was a standard form Housing Industry Association NSW Residential Building Contract for Works on a Cost Plus Basis. The contract provided for the building work to be completed in 26 weeks. It was not in fact completed until 7 months after the contracted date. By cl 3 of the contract the Cappellos were obliged to pay the price of the building works in accordance with the provisions of the contract. By cl 15, to which it will be necessary to return in due course, a detailed regime for progress claims and progress payments was laid out. Clause 16 provided for variations to the contract. Clause 31 provided a procedure for dispute resolution. 2. Work commenced on 4 September 2017. From time to time, H&S rendered progress claims to the Cappellos. Until about August 2018 the Cappellos paid the claims without protest or demur. They paid four progress claims. There was evidence that the amount paid exceeded $130,000. On 23 August 2018 H&S rendered a fifth progress claim (Invoice 104) for $156,113.54, of which the Cappellos paid $75,000, but declined to pay the balance of $81,113.54. 3. On 20 November 2018 H&S terminated the contract. On 9 January 2019, by summons filed in the Equity Division, the Cappellos commenced the Supreme Court proceeding. They named H&S and Mr Re as, respectively, first and second defendants. In accordance with the practice in the Technology and Construction List, the Cappellos filed a List Statement. In or about July 2019 they filed an Amended List Statement. 4. The Cappellos claimed: * that there were defects in the building work performed and that H&S had improperly invoiced them for the cost of rectification of the defects; * that H&S had failed to complete the work within the contracted time; * that H&S carried out unnecessary work for which they rendered invoices; * that H&S rendered invoices claiming wages for Mr Re and for a builder's margin on those wages, to neither of which they were entitled; * that, as a consequence of the above, they (the Cappellos) suffered loss and damage, including loss of the amenity of the property and diminution in its market value. The Cappellos did not assert any claim of specific breaches of provisions of the contract, including cl 15. They claimed reimbursement for the alleged overpayments, damages, interest and costs. 1. On 23 August 2019 H&S and Mr Re filed a cross-summons and a List Statement. They identified work carried out pursuant to contract variations requested by the Cappellos. They claimed damages equal to the amount unpaid on Invoice 104 ($81,113.54), and payment in accordance with the contract for work carried out between August and September 2018 which had not been the subject of invoice. In the alternative to the claim under the contract, H&S and Mr Re claimed "under the principles of Quantum Meruit". 2. The Cappellos subsequently filed a response to the List Statement filed on behalf of H&S and Mr Re. 3. Initially, the Cappellos were represented by the respondent, a solicitor of Murphy Lyons Lawyers. The List Statement, the amended List Statement filed on behalf of the Cappellos, and their response to H&S and Mr Re's List Statement all identified Mr Lyons as the Cappellos' legal representative. In February 2020 Mr Lyons filed a Notice of Ceasing to Act. This followed an exchange of emails in which Mr Lyons attempted to arrange a conference with Mr Cappello and the counsel briefed in preparation for the hearing, attempts to which Mr Cappello was resistant. 4. The proceedings were heard before Ball J over 3 days in July 2020. The Cappellos appeared unrepresented. Ms Cappello took no part in the proceeding. Mr Cappello represented himself and was taken to have spoken on behalf of Ms Cappello. 5. Ball J found that the contract had been validly terminated by H&S. He upheld H&S's claim for payment of the unpaid balance of Invoice 104. He rejected H&S's claim for damages for unpaid work calculated in accordance with the contract on the basis that the only evidence adduced by H&S was as to the value of the work calculated on a quantum meruit basis. He considered, citing the decision of the High Court in Mann v Paterson Constructions Pty Ltd (2019) 267 CLR 560; [2019] HCA 32 ("Mann") (at [19]), that, where a party has an enforceable right under contract, quantum meruit is an inappropriate (and unavailable) basis for calculation and therefore rejected H&S's alternative claim for payment calculated on that basis. His Honour found that some of the defects alleged by the Cappellos were established and, accordingly, allowed a total of $10,363.65 (plus $152 as liquidated damages), to be set off against the $81,113.54. After an allowance for interest, his Honour gave judgment for H&S and Mr Re in the sum of $76,510.68: Cappello v Hammond & Simonds NSW Pty Ltd [2020] NSWSC 1021. 6. The Cappellos appealed to this Court. They were legally represented. They sought to introduce into the appeal an issue that had not been raised in the Supreme Court, namely the validity of Invoice 104. The asserted invalidity was based on non-compliance by H&S with the provisions of cl 15 (specifically cll 15.4 and 15.5). They invoked s 8A(4) of the Home Building Act 1989 (NSW), to which I will return. The Court refused to allow the new point to be argued. 7. On 14 April 2021 the appeal was allowed in part. The Court reduced the judgment amount by $26,413.36 and entered judgment for H&S and Mr Re in the sum of $50,097.32, and ordered the Cappellos to pay 75% of H&S's costs: Cappello v Hammond & Simonds NSW Pty Ltd [2021] NSWCA 57 per Leeming JA, Macfarlan and McCallum JJA agreeing (the "Court of Appeal decision"). It is not necessary to go into the reasons for the reduction in the judgment amount. The District Court proceeding 1. On 23 April 2021 the Cappellos commenced a proceeding in the District Court naming Mr Lyons as defendant. Their claim was finally formulated in an Amended Statement of Claim filed on 14 July 2022. The Cappellos claimed that, as their solicitor, Mr Lyons owed them a duty of care; that he had breached that duty; and that his breach of duty caused them loss and damage. They claimed, by way of damages, $750,000, being the upper limit of the jurisdiction of the District Court. The basis of their claim (to be more fully explained below) was that Mr Lyons, in preparing the pleadings for the Supreme Court proceedings, had negligently failed to plead, against H&S and Mr Re, breaches of cll 15 and 16 of the contract. It was their assertion that, had breaches of those clauses been pleaded, the outcome in the Supreme Court proceeding would have been different. In particular, the Cappellos asserted that they would not have been held liable to H&S and Mr Re for non-payment of Invoice 104, and would have been entitled to repayment of all monies they had paid to H&S pursuant to the progress claims. Although cl 16 was mentioned as an alleged pleading deficiency of Mr Lyons, it received little attention and none of any significance. 2. Mr Lyons filed a defence. He admitted that he acted for the Cappellos in the Supreme Court proceedings from January 2019 until 18 February 2020, when he terminated his retainer, and that, during that period, he owed the Cappellos a duty of care. He pleaded numerous matters which, he said, precluded his liability or otherwise provided him with a complete or partial defence. 3. First, Mr Lyons pleaded that due to the failure of the Cappellos both to provide him with adequate instructions and, after he terminated his retainer, to engage any other lawyers, any loss suffered by the Cappellos was not causally connected to any of his acts or omissions. Second, Mr Lyons pleaded that, for the same reasons, any loss or damage suffered by the Cappellos was attributable to their own contributory negligence and that any judgment against him should thereby be reduced by 100%: Civil Liability Act 2002 (NSW) ss 5R, 5S. 4. Third, Mr Lyons said that, to the knowledge of the Cappellos, the pleadings in the Supreme Court proceedings (both the Cappellos' List Statement and their Response to the List Statement filed by H&S and Mr Re) had been drafted by a Mr Robert Coshott on the Cappellos' instructions, and that Mr Coshott had acted as agent for the Cappellos in giving him (Mr Lyons) instructions. Mr Lyons pleaded that the claim was an apportionable claim pursuant to Pt 4 of the Civil Liability Act, and that Mr Robert Coshott, having drafted the pleadings said to be deficient, was a concurrent wrongdoer. 5. Fourth, Mr Lyons pleaded that the claim was not maintainable by reason of the doctrine of advocate's immunity: Giannarelli v Wraith (1988) 165 CLR 543; [1988] HCA 52 ("Giannarelli"); D'Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1; [2005] HCA 12 ("D'Orta"); Attwells v Jackson Lalic Lawyers Pty Limited (2016) 259 CLR 1; [2016] HCA 16 ("Attwells"). Finally, Mr Lyons pleaded that the Cappellos had failed to establish that any defect in H&S's compliance with cl 15 of the contract could not have been remedied by the issue of compliant invoices, or that H&S could not otherwise have sued for a quantum meruit in an amount equivalent to the invoices. The trial in the District Court 1. A trial took place in the District Court on 17 and 18 August 2022. The Cappellos were legally represented. They relied on two affidavits sworn by Mr Cappello, on 2 May 2022 and 13 July 2022. Mr Cappello gave oral evidence. Mr Lyons relied on a bundle of documents admitted into evidence but did not give oral evidence or provide an affidavit. 2. In evidence, inter alia, was the contract, cl 15 of which dealt with progress payments. Clause 15 relevantly provided as follows: "15.2 The owner must pay the price of the building works progressively as claimed by the builder. The price of the building works is an amount equal to: (a) the cost of the building works plus; (b) the builder's fee; plus (c) any GST attributable to the supply of the building works at each progress stage, calculated on the value equal to the total of Clauses 15.2(a) and 15.2(b). 15.3 The builder must give the owner a written claim for a progress payment at each stage described in Schedule 3. 15.4 A progress claim is to include details of the cost of the building works for the building works carried out, the proportion of the builder's fee claimed, any GST payable and of any moneys then due to the builder pursuant to the provisions of the contract. 15.5 A progress claim is to be accompanied by such invoices, receipts or other documents as may reasonably be expected to support the claim and evidence the cost of the building works being claimed. 15.6 The owner must pay a progress claim within 5 working days of the builder giving the claim. 15.7 Unless the owner disputes the amount of a progress claim by giving the builder a written notice detailing the dispute within 5 working days of receiving a progress claim, the progress claim is accepted by the owner as the cost of materials, labour and other items provided by the builder which are the subject of the claim. This clause does not limit the owner's right to claim that the building works done by the builder are not in accordance with this contract." 1. The case advanced by the Cappellos in the District Court may be summarised as follows. 2. Clause 15 of the contract with H&S laid out a mandatory regime pursuant to which H&S was entitled to make claims for progress payments. That regime included subcl 4, which required that the claim include certain details (for example, costs of the building works carried out, and any proportion of the builder's fees claimed). Importantly, subcl 5 required a progress claim to be accompanied by: "… such invoices, receipts or other documents as may reasonably be expected to support the claim and evidence the cost of the building works being claimed." 1. In his affidavit of 2 May 2022, Mr Cappello swore that at no stage did H&S "provide a progress claim with respect to the amount(s) claimed in the cross-claim or for which they had received monies from us". In his affidavit of 13 July 2022, Mr Cappello swore that: "At no time throughout the period of construction did [H&S] provide an invoice of account describing the portion of works undertaken in respect of the total works arising under the contract, setting out the amount of profit cost or income under the contract to which [H&S] claimed to be entitled, or annexing copies of supporting invoices for out of pocket expenses and disbursements as may reasonably have been expected to be attached to any invoice of account that was issued to [the Cappellos], by [H&S]." 1. The Cappellos contended that, because in making the progress claims H&S had not complied with the requirements of cll 15.4 and 15.5, it was not entitled to any payment and that they (the Cappellos) were entitled to a refund of the monies they had paid. This, the Cappellos contended, would, if pleaded, have entitled them to succeed on their claim in their Supreme Court proceeding, and constituted a complete answer to H&S's cross-claim. Accordingly, had cl 15 been pleaded in the Supreme Court proceedings, their claim would have succeeded, H&S's cross-claim would have been dismissed and judgment would have been entered in their favour. 2. The Cappellos' case in the District Court was that the failure of Mr Lyons to plead non-compliance with cl 15 (specifically, cl 15.5) in the List Statement (and the Amended List Statement) or in answer to H&S's cross-claim was a breach of his duty of care to them as their solicitor, and caused them loss and damage. 3. It is worth emphasising that, even before the matters pleaded by Mr Lyons in defence are brought into account, the Cappellos' claim against Mr Lyons depended on two things. First, the Cappellos had to establish non-compliance by H&S with cl 15.5 of the contract; that is, that H&S failed to provide, with the progress claims, the documentation required by that subclause. If they failed to establish that fact, then their case must fail. Proof of this fact, however, did not necessarily entail success. If the Cappellos proved non-compliance with cl 15.5, it would then have been necessary that they also establish that the non-compliance had the effect of rendering the progress claims invalid, to the point that even monies that had been paid in response to the progress claims without protest or demur were refundable, and that non-compliance by H&S was a complete answer to its cross-claim. 4. There were thus two steps in the Cappellos' claim – first, that the progress claims made by H&S were not accompanied by the documentation required by cl 15.5: second, that non-compliance with cl 15.5 had the effect of nullifying the progress claims and entitling the Cappellos to a refund of all payments made in response to the progress claims. 5. Notwithstanding his affidavit assertions, in oral evidence Mr Cappello accepted that he had received, and paid, progress claims and that the progress claims that he had paid had included at least spreadsheets identifying the components of the claims. In cross-examination, after having been shown a number of invoices produced on subpoena, he conceded that many had been forwarded to him. 6. Despite the range of matters pleaded on his behalf, Mr Lyons defended the claim on three principal bases. First, he contended that cl 15.5 did not have the effect for which the Cappellos urged – that is, that the failure to provide the documentation as required by the subclause to accompany the payments did not have the effect that H&S was not entitled to be paid for the building work. That was because it was cl 3 of the contract that laid out the entitlement to payment. Second, Mr Lyons contested the factual basis for the Cappellos' claim that the required documentation had not been provided. 7. The third basis for Mr Lyons' defence lay in the doctrine of advocate's immunity – the doctrine that, within certain limits, immunises an advocate from a claim of negligence in the conduct of litigation. The primary judgment 1. On 22 August 2022 the primary judge (Olsson DCJ) delivered judgment (labelled as an ex-tempore judgment). The primary judge recorded some of the history of the engagement between the Cappellos and Mr Lyons. 2. Her Honour rejected the case advanced by the Cappellos, and entered judgment for Mr Lyons. She did this on two independent bases. 3. First, she found that the Cappellos could never have succeeded in their cl 15 claim or defence had either been brought in the Supreme Court proceedings. That is, she rejected the Cappellos' case as to the consequences of non-compliance with cl 15. 4. The primary judge noted that there was no direct evidence of the instructions Mr Lyons had been given by the Cappellos, but her Honour assumed, having regard to Mr Cappello's affidavit evidence, that Mr Lyons had been instructed that no supporting invoices or other cl 15.5 documentation had been provided by H&S. The question was therefore whether (in the light of those assumed instructions) Mr Lyons was negligent in failing to plead breach of or non-compliance with cl 15. Her Honour concluded that he was not, because: "Clause 15 would never … have allowed [the Cappellos] to recover all of the amounts that they had paid for the building works". 1. That was because it was not cl 15 that entitled H&S to payment. That entitlement was created by cl 3 which expressly created an obligation in the Cappellos to pay the (contracted) price of the building work "in the manner and at the time stated in the contract". (The contract being a "cost plus" contract, the "price of the building works" was as defined in cl 15.2.) Her Honour, citing Creative Building Services v Jolene Investments [2013] NSWSC 391, noted that the obligation on the Cappellos to pay H&S arose not from cl 15 but from cl 3, and that cl 15 merely provided a regime for H&S to follow to make progress payment claims. 2. Her Honour also held that the Cappellos could not have recovered the amounts paid in response to the accepted progress claims because, even in the event of non-compliance with cl 15, H&S would have been entitled to cross-claim (based on the contract) or to claim on a quantum meruit basis. 3. Her Honour gave other reasons for reaching the same conclusion. She referred to subcl 7 of cl 15, which provides that, unless a progress claim is disputed within 5 days of receipt, it is taken to be accepted (without affecting the rights of the contracting owner to claim that building works are not in accordance with the contract). Her Honour then noted the dispute resolution procedure provided for by cl 31 of the contract, of which the Cappellos had not availed themselves. Her Honour found that Mr Cappello was not truthful in denying having been provided with invoices and supporting documentation with the progress claims. 4. For these reasons the primary judge determined that, if cl 15 had been pleaded in the Supreme Court proceedings, it would not have succeeded; failure by Mr Lyons to plead breaches of cl 15 was not indicative of negligence on his part and not causative of any loss to the Cappellos. 5. The primary judge then reached the same conclusion by a different, and independent, route. She upheld the defence of "advocate's immunity" pleaded by Mr Lyons. 6. Her Honour referred to, and extracted passages from, the decisions of the High Court in D'Orta and Attwells. She concluded, applying the principles stated in those decisions, that the preparation of pleadings (including, as in this case, the Cappellos' Amended List Statement, and their response to H&S's List Statement): "… serves to define the issues that require determination and necessarily affects the manner in which the case is to be conducted…" She considered that the preparation of the pleadings by Mr Lyons was therefore work that bore upon the ultimate determination of the Cappellos' proceeding in the Supreme Court and H&S's cross-claim. That was so notwithstanding that the preparation of the pleadings was work done out of court, because it leads to a decision affecting the conduct of the case in court. The appeal 1. On 28 October 2022 the Cappellos filed a notice of appeal pursuant to s 127 of the District Court Act 1973 (NSW) (although the notice of appeal stated, mistakenly, that the appeal was brought under s 101 of the Supreme Court Act 1970 (NSW)). No issue was or is raised by Mr Lyons as to whether the matter in issue was to the value of $100,000 or more (if it were not, the Cappellos would, by s 127(2)(c), have required leave). As the amended statement of claim filed in the District Court claimed damages of $750,000, it may be taken that the Cappellos' appeal is as of right. 2. Subsequently, the Cappellos provided to the court (and, presumably, to Mr Lyons) an unfiled amended notice of appeal. At the commencement of the hearing of the appeal leave was given to Mr Cappello to file the amended notice of appeal, and the court proceeded on that basis. Ten grounds are identified in the amended notice of appeal. The Cappellos filed written submissions in which they abandoned reliance on ground 2. 3. The Cappellos conducted the appeal without legal representation. Mr Cappello appeared, and spoke on behalf of Ms Cappello, but did not wish to add anything to the written submissions, and made no reply to the oral submissions made on behalf of Mr Lyons. 4. It may be observed at the outset that the finding that Mr Cappello was not truthful in his assertions that he had not received the cl 15.5 documentation alone was sufficient to defeat the Cappellos' claim; it meant that there was no evidence of non-compliance with cl 15. The Cappellos' claim was premised on failure by H&S to comply with the requirements of cl 15.5 of the contract to supply supporting documentation for the progress claims. The onus lay on the Cappellos to prove non-compliance. If H&S were not shown to have failed to comply with those requirements, then the Cappellos could not have made out their contention that they would have succeeded on their claim and defeated H&S's cross-claim, had breach of cl 15 been pleaded. The Cappellos failed to establish that essential fact. The foundation for this claim (and defence) was thus destroyed. 5. Ground 1 of the amended notice of appeal asserted error in the primary judge's conclusion that "advocate's immunity" constituted a complete defence to their cause of action. 6. In order to avoid doing injustice to the Cappellos, it is best to set out the remaining grounds in full. They are: "3. The court below erred in finding to the effect that the Appellants' carried a liability to [H&S], (on the basis that works were done), and hence that there was no maintainable action by the Appellants, (against the Respondent), given the underlying liability; 4. The court below erred in finding to the effect that [H&S] had a maintainable basis to be paid under a quantum meruit, where a quantum meruit was inconsistent with the provisions of the written contract as to the circumstances in which [H&S] was entitled to be paid. 5. The finding that Mr Ross Cappello's answers to questions at the trial was untruthful was irrelevant to the determination of the issues that had to be determined at the trial; 6. No positive inference was able to be drawn as to what Mr Lyons' evidence might have been, where Mr Lyons had elected to give [sic] not to give evidence himself; 7. The court erred in determining to the effect that the Appellants' rights to have refused payment or to seek compensation lay by reference to the construction contract (and the dispute resolution provisions of that contract), and were not otherwise maintainable against [H&S]; 8. The court below erred in finding that clauses 15.4, 15.5, and 16 of the building contract had been complied with by [H&S]. 9. The court below erred in finding that clause 3 of the building contract overrode clauses 15.4 and 15.5 of the building contract and the monies claimed by [H&S] were payable even if there was non-compliance with clauses 15.4 and 15.5 of the building contract. Her Honour erred by not taking section 8A Home Building Act 1989 [(NSW)] into account. 10. The court below erred in 'assuming' what Mr Cappello had told Mr Lyons regarding the progress claims and what was annexed thereto when Mr Lyons did not give evidence and Mr Cappello was not cross-examined on this." Ground 1: "advocate's immunity" 1. It is convenient, before coming to Mr Cappello's submissions with respect to ground 1 (which are brief) to outline the relevant legal principles, as stated in the three principal decisions of the High Court referred to above. The ground is, in my opinion, so plainly untenable that I propose to deal with it as briefly as possible. 2. The central principle was identified in D'Orta at [1] as: "… at common law an advocate cannot be sued by his or her client 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." (emphasis added) 1. The principle is of long standing and derives from English authority: Rondel v Worsley [1969] 1 AC 191; Saif Ali v Sydney Mitchell & Co [1980] AC 198. It was adopted as stating the law in Australia by a narrow majority (Mason CJ, Wilson, Brennan and Dawson JJ, Deane, Toohey and Gaudron JJ dissenting) in Giannarelli. 2. In that case, Mason CJ said that the rationale for the immunity "must rest on considerations of public policy": at 555. The primary public policy consideration is finality of the resolution of legal disputes. His Honour referred to: "… the adverse consequences for the administration of justice which would flow from the re-litigation in collateral proceedings for negligence of issues determined in the principal proceedings". Notwithstanding that the principle has come to be known as "advocate's immunity", Mason CJ made it plain that the protection it gives is afforded, not for the benefit of the advocate, but for the wider and more profound purpose of the protection of the administration of justice in promoting finality in the resolution of legal disputes: at 557. The immunity is that of the ultimate decision in legal proceedings. 1. That necessarily raises the question of the scope of the immunity, something discussed by Mason CJ in Giannarelli. His Honour observed that the public policy considerations underlying the immunity for in-court negligence had no application to liability for work done out of court which is unconnected with work done in court, and added (at 559-60): "The problem is: 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." 1. His Honour then endorsed a proposition stated in a New Zealand decision (Rees v Sinclair [1974] 1 NZLR 180 at 187) 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." 1. These observations from Giannarelli were adopted in D'Orta, in which the High Court was invited to reconsider its decision in Giannarelli, an invitation the High Court, by majority, refused. 2. The most recent consideration of the scope of the immunity by the High Court was in Attwells, in which a majority of the Court (French CJ, Kiefel, Bell, Gageler and Keane JJ) concluded that it does not extend to negligent advice that leads to settlement of a case by agreement between the parties – settlement by the parties not being a "decision affecting the conduct of a case in court". 3. The majority considered that: "the required connection is between the work in question and the manner in which the case is conducted in court." (at [5]) and "In short, in order to attract the immunity, advice given out of court must affect the conduct of the case in court and the resolution of the case by that court …." (at [6]) 1. At [37] their Honours held that the scope of the immunity "is confined to conduct of the advocate which contributes to a judicial determination". At [46] their Honours said: "Once it is appreciated that the basis of the immunity is the protection of the finality and certainty of judicial determinations, it can be more clearly understood that the 'intimate connection' between the advocate's work and 'the conduct of the case in court' must be such that the work affects the way the case is to be conducted so as to affect its outcome by judicial decision. The notion of an 'intimate connection' between the work the subject of the claim by the disappointed client and the conduct of the case does not encompass any plausible historical connection between the advocate's work and the client's loss; rather, it is concerned only with work by the advocate that bears upon the judge's determination of the case." 1. It was no doubt these conclusions that the primary judge had in mind when she held that the pleadings in the Supreme Court proceedings bore upon Ball J's determination of the case. 2. In his written submissions Mr Cappello acknowledged the principles stated above, and quoted from Attwells, D'Orta and Giannarelli. He then advanced a single argument against the decision of the primary judge. This was: "Attwells is binding authority for the critical element necessary to invoke advocate's immunity is that the work must have led to a decision (emphasis added) affecting the conduct of the case in court. In this case there was no decision by the solicitor. The solicitor did not consider clauses 15.4 and 15.5 of the building contract and the non-compliance therewith by the builder. He did not decide not to include it the pleadings. There was no evidence from the solicitor that he had considered and decided not to include it. It follows that advocate's immunity was not available to the solicitor as a complete defence to the claim against him." 1. The first thing to note about these submissions is that they are based on a premise not established in the evidence. As Mr Cappello noted, Mr Lyons did not give evidence, either by affidavit or orally. There was no evidence that he had not given consideration to cll 15.4 and 15.5 of the contract. It is simply speculation to say, as Mr Cappello does, that Mr Lyons did not make a decision not to include cl 15 in the pleadings. 2. More importantly, perhaps, Mr Cappello appears to misunderstand what was intended by Mason CJ in referring to "a decision affecting the conduct of the case in court". I do not understand his Honour to be saying that, in the absence of a conscious or articulated decision by the advocate (for example to plead a possible claim or defence), the immunity does not apply. A number of cases have determined that an omission may also attract the immunity: see, for example Keefe v Marks (1989) 16 NSWLR 713; Attard v James Legal Pty Ltd [2010] NSWCA 311 at [2] (Beazley JA), [9] (Giles JA). 3. The relevant "decisions" are those involved in the conduct of the litigation. The pleading is the fundamental document that underlies all decisions to be made in the conduct of litigation. As the primary judge said, the pleading defines the issues for determination. They are thus "intimately connected" with the conduct of the case in court. They are also foundational to the outcome of the litigation. 4. It is perfectly plain that the failure by Mr Lyons to plead a breach of cl 15, whether by conscious decision or by omission to consider the consequences of non-compliance, and whatever the outcome might have been had it been pleaded, attracts the immunity discussed in Giannarelli, D'Orta and Attwells. It was "intimately connected" with conduct of the claim brought by the Cappellos, and the cross-claim brought by H&S. It no doubt led to multiple decisions in the conduct of that litigation, and therefore to the final decision by Ball J. The primary judge was correct to uphold Mr Lyons' defence. 5. In my opinion ground one of the appeal fails. 6. That being so, the appeal as a whole must fail. "Advocate's immunity" provides a complete answer to the case the Cappellos sought to make in the District Court. That makes it strictly unnecessary to proceed to deal with the remaining grounds. However, as the Cappellos are unrepresented, and as Mr Cappello provided some written submissions, I will attempt to address those grounds. The difficulty is that, in some cases, the import of the grounds as formulated is difficult to discern (see, most notably, ground 3), and, in some cases, the grounds are premised on a finding that was not made by the primary judge (see, for example, grounds 3, 7, 8 and 9). In a number of cases the written submissions advanced, purportedly in support of a specified ground, bore no relation to that ground as formulated in the amended notice of appeal (or the notice of appeal). With those limitations I will do the best I can to do justice to Mr Cappello's arguments. Grounds 3 and 8 1. Notwithstanding the formulation of ground 3 (see above), Mr Cappello's written submissions asserted that the subject of that ground was "the finding that clauses 15.4, 15.5 and 16 of the contract had been complied with". That was, in fact, the subject of ground 8 as pleaded. No such finding was made by the primary judge. Her Honour merely noted evidence that suggested that H&S had sent relevant documentation to the Cappellos. The effect of her finding that Mr Cappello was not truthful about not having received the documentation was that there was no evidence of non-compliance, and the Cappellos had failed to discharge their onus of proof. That is a long way from a positive finding of compliance with the provisions. Ground 8 should be rejected. 2. Mr Cappello then went on to argue that there was no evidence that copies of certain invoices had been provided to the Cappellos or attached to the progress claims, and that, "significantly", Mr Lyons had not called Mr Re or any other officer of H&S to give evidence that the required documentation had been provided in accordance with cl 15.5 of the contract. The short answer to this submission is that the onus of proving non-compliance lay on the Cappellos; no onus lay on Mr Lyons to prove compliance by H&S of the provisions of the contract. Finally, under ground 3, Mr Cappello submitted that it was "not open on the evidence and contrary to the unchallenged evidence of Mr Cappello" to find that the documentation was "attached". As indicated above, no such finding was made, and it was not for Mr Lyons to prove that the documentation was "attached" (that is, accompanied the progress claims); the onus to prove the contrary lay on the Cappellos. They failed to discharge that onus. Ground 3 should be rejected. Ground 4 1. Ground 4 as pleaded asserted error in the primary judge's conclusion that the Cappellos could never have recovered any of the money paid because H&S would have been entitled to advance its case on a quantum meruit basis. That conclusion of her Honour was addressed in the written submissions under the heading "appeal ground 4A" (neither in the notice of appeal nor in the amended notice of appeal is there an "appeal ground 4A"). Mr Cappello referred to the judgment of Ball J, in which his Honour, citing Mann, considered that a quantum meruit was not available in circumstances where the dispute arises under a contract. 2. Mr Cappello purported to quote from McCallum JA in the Court of Appeal decision as saying that it was not open to H&S, after termination of the contract, to issue progress claims that complied with cll 15.4 and 15.5. There is no observation to that effect in the judgment of McCallum JA, which was a simple concurrence with the judgment of Leeming JA. Mr Cappello went on to argue that a claim in contract was not available to H&S. He did not explain why that was so and it is contrary to the reasoning of Ball J which was to the effect that H&S may have made a claim in contract, but, as they advanced their quantification of the claim by reference to principles of quantum meruit, there was no, or inadequate, evidence to support it. 3. The passage in the reasons of the primary judge to which this appears to be a reference is: "Irrespective [Mr Cappello] could never have recovered all of the money that he had paid to H&S for the work for two reasons: One, [H&S] would have been entitled (and presumably would have filed) a cross-claim or advanced its cross-claim in respect of quantum meruit. Secondly, and most importantly, cl 15 does not create the obligation to pay the money; what it creates is the obligation to follow a particular regime." (WF 99) 1. Bearing in mind that these reasons were delivered ex tempore, it may be taken that her Honour saw the options as damages for breach of contract calculated by reference to the contract provisions, or calculated on a quantum meruit basis. 2. In Mann the majority in the High Court (Nettle, Gordon and Edelman JJ, with whose conclusions Gageler J agreed) distinguished between claims for damages for work completed before termination of the contract (to be measured by reference to the contract provisions) and work provided for by the contract but not completed at the time of termination (to be calculated, at the owner's option, by reference to the contract, or restitution (quantum meruit) but limited in accordance with the rates prescribed by the contract): at [57], [61] (Gageler J), [110] (Nettle, Gordon and Edelman JJ). 3. The primary judge was correct to say, in general terms, that non-compliance with cl 15 would not have extinguished H&S's rights to damages on either basis, depending on the timing of the work not invoiced. Ground 4 should be rejected. Grounds 5 and 9 1. Ground 5 as pleaded asserts that the finding that Mr Cappello's answers to questions at trial were not truthful was irrelevant to the issue for determination. First, the finding was not only as to Mr Cappello's answers at trial, but also as to his affidavit evidence. Second, the finding was of significant relevance because it undermined – indeed destroyed – the Cappellos' claim that H&S had not complied with cl 15.5 because there was no other evidence to prove non-compliance. No written submissions were directed to the proposition contained in ground 5 as pleaded. Ground 5 should be rejected. 2. Under ground 5, in his written submissions, Mr Cappello stated that ground 5 is a "finding that the Cappellos' only recourse was via dispute procedures provided for" in the contract. That is not what ground 5 asserts and, in any event, no such finding was made. What the primary judge did was to refer, first, to cl 15.7, which provides for a dispute to be raised (within 5 days of receipt of the progress claim) in the absence of which the progress claim is taken to have been accepted. As no such dispute was raised by the Cappellos they were taken to have accepted the progress claims (and until Invoice 104, they had in fact paid the claims). The primary judge then referred to cl 31 which provides a dispute resolution procedure. It is not at all apparent that her Honour treated cl 31 as the only avenue available to the Cappellos to dispute the progress claims. 3. Still in his submissions purportedly in respect of ground 5 Mr Cappello then asserted that s 8A of the Home Building Act 1989 (NSW) made the progress claims "invalid and illegal". This argument appears to be addressed to ground 9 of the amended notice of appeal which asserts two independent errors: first, that the primary judge found that cl 3 of the contract "overrode" cll 15.4 and 15.5, and second, failure to take into account s 8A of the Home Building Act. The first was not a finding made by her Honour. She correctly noted that it is cl 3 that imposes the obligation on the Cappellos to pay H&S and that cl 15 establishes a mechanism by which progress payments are to be made. She made no finding that cl 3 "overrode" cll 15.4 and 15.5. The first limb of ground 9 should be rejected. 4. Section 8A of the Home Building Act is not an easy provision to construe. By subs (1) it applies to contracts for residential building work at a price which exceeds a prescribed amount (which, it may be assumed, includes the present contract). Section 8A then (in subs (2)) identifies three species of "authorised progress payments", the second of which is: "A progress payment for labour and materials in respect of work already performed or costs already incurred (and which may include the addition of a margin), with provision for a claim for payment to be supported by such invoices, receipts or other documents as may be reasonably necessary to support the claim and with payment intervals fixed by the contract or on an 'as invoiced' basis." 1. By subs (4), s 8A prohibits, on pain of financial penalty, demanding or receiving "payment of a progress payment … unless the progress payment is authorised under this section". By cl 1 of Sch 1, "Progress payment" is defined, for residential building work, as: "any payment on account after work is commenced under a contract to do residential building work." 1. If I understand correctly the import of Mr Cappello's argument (and I am not sure that I do) it is that, by reason of s 8A(4), H&S was not entitled (and indeed was prohibited from) demanding or receiving progress payments unless, relevantly, the payments were "authorised progress payments"; and that the progress claims made by H&S were not authorised because they were not supported by "such invoices, receipts or other documents as may be reasonably necessary to support the claim". 2. In the proceeding before the primary judge Mr Cappello made only passing reference to s 8A. After setting out the section, in his written opening outline of the case, he wrote: "23 It follows that unless the invoices that are issues [sic] meet the requirements that a progress claim payment is required to address, then there is no lawful basis for the builder to even issue the invoices or receive payment under the invoices, where they do not comply with the provisions of the contract, or the Act, as the case may be." 1. It will not have escaped notice that the requirements for provision of documentation in s 8A(2)(b) closely reflect the requirements of cl 15.5 of the contract. The insuperable difficulty for the Cappellos in respect of this argument is that the asserted non-compliance with s 8A is precisely the non-compliance with cl 15.5 which they asserted and failed to prove. Had the primary judge addressed the Cappellos' s 8A argument it must have met the same fate as the same argument concerning the asserted non-compliance with cl 15.5. The second limb of ground 9 should be rejected. Grounds 6 and 10 1. By ground 6 the Cappellos complain of the primary judge's assumption about what Mr Lyons' evidence might have been had he given evidence. Ground 10 appears to make a similar complaint. This is a curious complaint. The only assumption made by the primary judge about what Mr Lyons' evidence might have been was that he had been instructed by the Cappellos (or by Mr Cappello) that the Cappellos had not been provided with the documentation required by cl 15.5. This was a factual matter that tended to support the Cappellos' case – that is that Mr Lyons had instructions that could have supported a cl 15 pleading. In any event, the assumption went nowhere, because her Honour was not satisfied, notwithstanding that Mr Lyons might have been given those instructions, that the documentation had not been provided. Grounds 6 and 10 should be rejected. Ground 7 1. Ground 7 asserts error in the primary judge determining that the Cappellos' rights to refuse payment or seek compensation were confined to the exercise of their right under the dispute resolution provisions of the contract (cl 31) and were not otherwise maintainable against H&S. No submissions were directed to this ground and no such determination was made. Ground 7 should be rejected. 2. There is no substance in any of the grounds of appeal advanced by the Cappellos. The appeal should be dismissed with costs. 3. The orders I propose are: 1. Appeal dismissed. 2. The appellants to pay the respondent's costs. 1. GRIFFITHS AJA: I agree with Simpson AJA. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 23 June 2023