Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Bird v Ford [2014] NSWCA 242 Hearing dates: 10 June 2014 Decision date: 28 July 2014 Before: Bathurst CJ at [1]; Barrett JA at [2]; Emmett JA at [28] Decision: Appeal 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 - professional negligence - solicitors - solicitor acted for a pupil and his parents as plaintiffs in proceedings brought against a school from which the pupil was expelled - denial of natural justice alleged - the proceedings failed because the school's decision was held not amenable to judicial review and no basis for implication of a contractual term requiring natural justice had been shown - a negligence action brought by the parents against the solicitor was dismissed - the parents contended on appeal that the solicitor was in breach of duty because he did not advise the parents that they had no prospects of success in the earlier proceedings - the state of the law in Australia was accepted as being uncertain - but approaches in other common law jurisdictions indicated the availability of cogent arguments on the basis of implied contractual term and perhaps judicial review - the proposition central to the appeal was therefore not made good. Legislation Cited: Education Act 1990 (NSW) Fair Trading Act 1987 (NSW) Supreme Court Act 1970 (NSW) Cases Cited: Bird v Campbelltown Anglican Schools Council [2007] NSWSC 1419 Burke v Yeshiva Beit Yitzchak of Hamilton and DC (1996) 90 OAC 81 CD v Ridley College (1996) 140 DLR (4th) 696 Dage v Baptist Union of Victoria [1985] VR 270 Degiorgio v Dunn (No 2) [2005] NSWSC 3; 62 NSWLR 284 Donnellan v Woodland [2012] NSWCA 433 Electoral Commission v Cameron [1997] 2 NZLR 421 Fitzgerald v Northcote (1865) 4 F & F 656; 176 ER 734 Forbes v New South Wales Trotting Club Ltd [1979] HCA 27; 143 CLR 242 GC v Taylors Institute of Advanced Studies Ltd [2003] VSC 354 Gianfrancesco v The Junior Academy Inc (2003) 169 OAC 169 Gray v Marlborough College [2006] EWCA Civ 1262 Hutt v The Governors of Haileybury College (1888) 4 TLR 623 Neat Domestic Trading Pty Ltd v AWB Ltd [2003] HCA 35; 216 CLR 277 R v Panel on Take-overs and Mergers, ex parte Datafin plc [1987] QB 815 Royal Australasian College of Surgeons v Phipps [1999] 3 NZLR 1 White Industries (Qld) Pty Ltd v Flower & Hart (1998) 156 ALR 169 Wilson v White [2005] 1 NZLR 189 Wood v Prestwich (1911) 27 TLR 268 Category: Principal judgment Parties: Vrede Jane Bird (Appellant) David Clifton Ford (First Respondent) Garry Cedric Pritchard (Second Respondent) Representation: Counsel: Mr D E Baran (Appellant) Mr G P Craddock SC (Respondents) Solicitors: John Stonham & Co (Appellant) Mullane & Lindsay (Respondents) File Number(s): CA2013/125008 Decision under appeal Jurisdiction: 9111 Citation: [2013] NSWSC 264 Date of Decision: 2013-03-28 00:00:00 Before: Schmidt J File Number(s): 2010/232539 Judgment 1BATHURST CJ: I agree with the judgment of Barrett JA and with his Honour's reasons. 2BARRETT JA: This is an appeal from a decision of a judge of the Common Law Division (Schmidt J) dismissing proceedings brought against solicitors for alleged professional negligence. 3The appellant is the mother of a child who, in March 2007, was expelled from a private school. Equity Division proceedings were brought against the school by the child (suing by his mother as tutor) and the child's parents. Those proceedings were heard by Einstein J and dismissed on 7 December 2007: Bird v Campbelltown Anglican Schools Council [2007] NSWSC 1419. 4The first respondent acted as the solicitor for all three plaintiffs in the Equity Division proceedings. He was, at material times, practising in partnership with the second respondent. 5Following dismissal of the proceedings brought against the school, the appellant and her husband sued the respondents claiming damages for breach of retainer, negligence and conduct proscribed by s 42 of the Fair Trading Act 1987 (NSW). Their claims were pleaded in an amended statement of claim dated 19 August 2010. The issues in the proceedings were described by Schmidt J as follows: "1. The terms of the defendant's retainer by the plaintiff. 2. Whether there was one retainer or two? 3. The content of the defendant's duty of care? 4. Was there a breach of the retainer and/or duty of care? In particular: (i) were the proceedings in the Equity Division against the school manifestly hopeless and (ii) if yes to (i) does that amount to a breach of the retainer(s) or the duty of care? 5. If there was a breach of the duty of care or retainer(s), did it cause loss or damage? 6. Does the Fair Trading Act (as it applied in 2007) apply to the work of a solicitor engaged in litigation? 7. If so, were there representations by the defendant that were misleading or deceptive within the meaning of s 42 (repealed) of the Fair Trading Act? 8. If there were representations that were misleading or deceptive, did they give rise to loss or damage compensable under s 68? 9. Is the defendant immune form suit under the principles stated in D'Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1? 10. What is the plaintiff's compensable loss or damage if any? In particular was any act or omission of the defendant the legal cause of the plaintiff's psychiatric condition? 11. Is this an apportionable claim within the meaning of Part IV of the Civil Liability Act 2002?" 6Schmidt J found that there had been two retainers - one concerning pursuit of a negotiated settlement with the school and the other concerning litigation. In relation to the first retainer, her Honour concluded that advice given on the matter of negotiated settlement had been neither negligent nor clearly wrong. The first respondent's representations in fact produced an offer by the school to take the child back at the start of 2008, an offer that the parents did not accept. 7As to the separate retainer concerning the Equity Division litigation, Schmidt J held that, if there had been a breach of duty by the first respondent (in the form of faulty advice regarding prospects of success in the litigation), the principle of advocates' immunity applied. Her Honour nevertheless addressed (unnecessarily and inappropriately, on one view: see Donnellan v Woodland [2012] NSWCA 433 per Basten JA) the question whether the first respondent had been negligent by not advising that the proceedings brought were manifestly hopeless. That question was answered adversely to the appellant and her husband. Judgment was given for the present respondents as defendants. 8On appeal, the appellant maintains that the primary judge erred in various respects. At the centre of her case, however, is the proposition that the judge erred because she did not hold that the first respondent failed to provide advice to the appellant that she had no arguable cause of action capable of adjudication in the Supreme Court and that the proceedings were entirely misconceived and manifestly hopeless. 9It is accepted by the appellant that she cannot succeed on appeal unless she shows that the primary judge should have found that the Equity Division proceedings were, as an objective matter, entirely misconceived and manifestly hopeless. I concentrate, therefore, on that issue. 10In the first instance, it is necessary to look at the way in which the claims in those proceedings were formulated. By a further amended statement of claim dated 30 November 2007, the parents, as plaintiffs, claimed declaratory relief, judicial review (by way of an order in the nature of certiorari) and an injunction. The declarations sought were to the effect that the school's decision to expel the child was subject to conditions precedent for the observance of principles of procedural fairness, which conditions had not been satisfied; and, that the decision to expel was invalid. The judicial review claim sought an order setting aside of the school's expulsion decision. The injunction claimed was an injunction restraining the school from preventing the child from attending. 11The pleading and particulars began by referring to the enrolment of the child at the school and the expulsion by decision of the headmaster. It was then pleaded that the school owed obligations to accord the child "natural justice and procedural fairness before expelling" him, which obligations "arose at common law" or by reason of a provision of the Education Act 1990 (NSW), or from the child's "legitimate expectation to be accorded procedural fairness", or pursuant to "contractual arrangements" between the school and the child's parents. Allegations of breach of such obligations followed. 12Thereafter, under a heading "Expulsion in breach of contract between the defendant and Mr and Mrs Bird", the pleading and particulars proceeded to plead such a contract, including "an implied condition precedent" requiring procedural fairness, which condition precedent was "implied by law". 13Einstein J held that the school was not bound by rules of procedural fairness and natural justice in the way that had been pleaded. The decision was, in summary, that no principle of private law requires the headmaster of a non-government school, as a domestic decision-maker within a private institution, to observe the rules of natural justice in making disciplinary decisions, which decisions are not amenable to judicial review under s 69 of the Supreme Court Act 1970 (NSW); also that neither the Education Act nor the fact that the school received public funding made such decisions susceptible to judicial review. Turning to the contract aspect and the question of implied terms for which the plaintiffs contended, Einstein J held that "there is no basis on which such a term would be implied at common law". 14The case the appellant and her husband sought to make before the primary judge was that the decision of Einstein J represented, in effect, a ruling that the claims brought in the litigation he determined were entirely misconceived and manifestly hopeless. Of course, Einstein J made no such finding. Nor was it his function to do so. He decided that the plaintiffs before him had not established an entitlement to the relief they sought. It is true that Einstein J expressed himself in definite terms. He regarded the result as clear. But it was no part of Einstein J's function to say that the proceedings were doomed to fail or should never have been brought. 15That question, as it concerns the advice given by the first respondent, fell to be considered by Schmidt J. Her Honour answered the question in the negative or, to be more precise, held that it was not incumbent upon the first respondent to advise that the proceedings ultimately determined by Einstein J were devoid of prospects of success and should not be brought. Schmidt J said (at [154] - [156]): "154 It is not in issue that at that time, there was no Australian authority which established that private schools are obliged to give a student procedural fairness, before a decision to expel is made. In 1976 the view had been taken in Seymour v Swift (1976) 10 ACTR 1 that the headmistress of a private school did not have to act in a quasi judicial capacity and so did not have to apply the rules of natural justice. 155 Since then other cases where complaints were made as to a failure to afford a student procedural fairness have been resolved at an interlocutory stage, on the basis of undertakings. There have also been English authorities which suggested that the rules of procedural fairness could be a source of rights against such a school, but there was no Australian authority deciding the point either way. There were Australian authorities where an obligation to afford procedural fairness had been found in respect of other private bodies, where, for example a person's livelihood might depend on membership of a voluntary association. Courts have intervened where a decision to expel was made without good faith or dishonestly or were processes required by the rules were not followed (see for example Carter v NSW Netball Association). 156 In Hedges v Australasian Conference Association Limited declaratory relief had been given in a case where allegations of sexual abuse had been determined against the plaintiff, a teacher of a school conducted by the Seventh Day [sic] Church, of which he was a member, by a committee of the church. The adequacy of the investigation was in issue. It arose to be considered in a context where the provisions of the Commission for Children and Young People Act 1998 applied." 16At trial, it was put to the first respondent in cross-examination that, as at August 2007, he did not have any basis, founded on authority, for thinking that, in relation to disciplinary matters, "a school should be the subject of a declaration that they had acted unreasonably" or that "pure prerogative relief" could be had against a school. The first respondent disagreed. He accepted that there was no such case in New South Wales but went on to refer in his testimony to cases decided elsewhere in Australia and in England. 17The first respondent referred, in particular, to Dage v Baptist Union of Victoria [1985] VR 270 in which a pupil and his parents sued a private school seeking a declaration that the principal's decision to expel the pupil was wrongful and void and an injunction to enable the pupil to continue until his final examinations. The reported judgment is that of Starke J on a motion for interlocutory injunctive relief. Starke J said (at 272-3): "Mr Chernov QC, who appeared with Mr. Golombek for the defendant, relied primarily on a decision of Blackburn J in J D and I B Seymour v Swift (1976) 10 ACTR 1. That was a case where the headmistress of a school suspended a girl at the school and amongst other things the learned Judge held that: "There is no rule or principle of law from which it can be made out that the principal of a private school has to act or acts in a quasi judicial capacity and therefore has to apply rules of natural justice." The learned Judge refused an interlocutory injunction. On the other hand Dr. Pannam QC, who appeared with Mr. Shatin for the plaintiff, relied on Hutt v The Governors of Haileybury College (1887) 4 TLR 623. Field J, at p. 623, said this: 'Referring to Sir Henry James' application of this morning, he said he was prepared to hold that there was no such absolute discretion in masters of schools as that claimed in the governor's statement of defence as was originally pleaded. Such a power would be far too great and dangerous--viz., that any boy at school should be liable to be branded for life by expulsion simply because a master on his sole authority and discretion--however distinguished he may be--had come to the conclusion that such a course was necessary for the well-being of this school. Such an absolute discretion could never be permitted. All large bodies must of course be governed in the public interest, and in some cases such absolute discretion is necessary, but not in such a case as this'. Dr. Pannam also referred to two other cases in similar vein, one is Fitzgerald v Northcote (1865) 4 F and F 656; 176 ER 734, and Wood v Prestwich (1911) 104 LT 388; 27 TLR 268. So it is clear that there are conflicting authorities, one in the Australian Capital Territory and three in the United Kingdom and it is beyond question, I think, that this has raised a serious question of law for the judge to decide, namely what the law is in this regard in this State. That it is a serious question of law I do not think can be doubted and can be identified as follows whether pupils at school--when it comes to serious matters such as expulsion--are entitled to rely on the principles of natural justice. I say no more of it. It would be improper, the matter not being fully argued of course in these proceedings, for me to endeavour to come to a final conclusion and would, in any event, be calculated to be embarrassing to the judge who finally hears the action." 18The three English cases to which Starke J referred in deciding that there was a serious question to be tried - Fitzgerald v Northcote (1865) 4 F & F 656; 176 ER 734, Hutt v The Governors of Haileybury College (1888) 4 TLR 623 and Wood v Prestwich (1911) 27 TLR 268 - were all common law actions in which damages were claimed in consequence of expulsion of a pupil by a school. In two of them, there were counts in contract. Much turned on the reasonableness of particular actions in particular circumstances. The judgments are replete with references to implied limitations upon the power of expulsion. There are statements that the power must be "properly and bona fide exercised", that it is available "for adequate cause to be judged by him" (that is, the headmaster), that the headmaster could properly act "subject to that power being exercised honestly" and that the power must be "exercised in good faith". In Wood v Prestwich it was said that expulsion was justified if the school's decision-maker had "reasonable grounds" for believing that the pupil had committed the disciplinary infraction of which he was accused. 19All this language is reflective of precepts that find a place in modern administrative law. It does not follow, of course, that judicial review applicable in public law contexts is available in respect of disciplinary decisions within private schools. Nor, however, does it follow that principles of natural justice are inapplicable. When the first respondent had the matter under review in the lead-up to the Equity Division litigation, the position in Australia was as stated by Kellam J in GC v Taylors Institute of Advanced Studies Ltd [2003] VSC 354 at [41]: ". . . I accept that the question of whether a student is entitled to rely on the principles of natural justice or procedural fairness, to challenge a decision to suspend or expel him or her from a school, is not the subject of clear and consistent authority in Australia." 20Case law in other common law jurisdictions would have assisted presentation of the case in contract that the appellant and her husband sought to establish. Three examples will suffice. In the English case of Gray v Marlborough College [2006] EWCA Civ 1262, it was accepted that the standard terms and conditions that formed part of the basis of the contract between a private school and a pupil's parent were subject to an implied term requiring the school to act fairly in requiring the removal of the pupil and, in particular, to consult with the parent in advance. In CD v Ridley College (1996) 140 DLR (4th) 696, an Ontario court took the view that, if it were necessary to regard the issues between a private school and the parent of an excluded child as issues of contract law, the conclusion would be that the contract contained an implied term of procedural fairness as a condition precedent to the right of the school to expel, such term having been reasonably within the contemplation of the parties at the time the child was enrolled. In Gianfrancesco v The Junior Academy Inc (2003) 169 OAC 169, another Ontario case, it was held that a private school breached an implied term of procedural fairness in its oral contract with a child's parents when it expelled the child without notice and without a hearing. 21It can thus be said that the case brought by the appellant and her husband on the basis of an implied contractual term requiring procedural fairness, although ultimately unsuccessful, had some measure of substance, based on the unsettled state of Australian law and a willingness of courts in some other countries to approve an implied term basis for the assertion of a private school's duty to observe procedural fairness in the making of expulsion decisions. 22The prospects of showing that public law principles and remedies were directly applicable to a private school's decision to expel were much more problematic, although a reasonable argument might have been gleaned from current New Zealand views about the amenability of administrative action to judicial review which place much less emphasis on the source of the decision making power and, in particular, whether or not it is statutory. The tendency sanctioned by the New Zealand Court of Appeal is to treat as reviewable the exercise of any power having public consequences, even if the power is exercised by a private organisation: see Electoral Commission v Cameron [1997] 2 NZLR 421, Royal Australasian College of Surgeons v Phipps [1999] 3 NZLR 1, Wilson v White [2005] 1 NZLR 189, adopting an approach indicated by R v Panel on Take-overs and Mergers, ex parte Datafin plc [1987] QB 815. The importance attached to education and the rights of children to be educated, coupled with the fact that parents are required by law to have their children educated and private schools are regulated by statute, suggests that it is at least arguable that some measure of public power may be found to be at work in expulsion decisions: compare Forbes v New South Wales Trotting Club Ltd [1979] HCA 27; 143 CLR 242, Neat Domestic Trading Pty Ltd v AWB Ltd [2003] HCA 35; 216 CLR 277. Judicial review of a Canadian private school's expulsion decision was undertaken in Burke v Yeshiva Beit Yitzchak of Hamilton and DC (1996) 90 OAC 81 because the statutory requirement that the school provide secular education meant that there was "a public law component involved when the education of a pupil is interfered with by the drastic punishment of expulsion sufficient to merit this court's review of the process leading to expulsion". 23Schmidt J was clearly right when she said (at [214]): "This was clearly not a case where it can confidently be concluded that the only advice then, or earlier open to be given in the discharge of Mr Ford's obligations was that even if their version of the events which had occurred were accepted, the Court did not have any power to grant the plaintiffs or their son any relief in relation to the expulsion decision." 24The evidence before Schmidt J showed that the first respondent counselled the appellant and her husband against proceeding with the case that ultimately came before Einstein J. The respondent's advice was that it was a novel and difficult case. He agreed with senior counsel retained by him that there was an arguable view of the law in support of the claim but that the case could be lost because of jurisdictional questions, or on the facts, or on discretionary factors. That assessment was correct. The first respondent did not breach the duty of care that he owed to his clients in the matter of advising on prospects of success. It is also relevant to note that the appellant told the first respondent more than once that, if he did not wish to pursue the matter, she would continue without him. 25General law principles are to the effect that a lawyer may with impunity act for a client in proceedings which are apparently hopeless, provided that the lawyer is not aware that the proceedings might amount to an abuse of process; and that a client has a right to have his or her case conducted in court irrespective of the view that his or her lawyer has formed about the case and the prospects of success: White Industries (Qld) Pty Ltd v Flower & Hart (1998) 156 ALR 169; Degiorgio v Dunn (No 2) [2005] NSWSC 3; 62 NSWLR 284. The issue in the negligence action dealt with by Schmidt J went to the duty of care owed by the solicitor and the aspect of it that required him to bring to bear a reasonable degree of professional skill in advising on prospects of success. For the reason stated, there was no breach of that duty. 26That conclusion is sufficient to dispose of the appeal. Several grounds of appeal raise, in one way or another, issues of duty and breach. In accordance with the foregoing, those issues must be determined in favour of the respondents. The question of advocates' immunity is also raised but, in view of the principal conclusion, need not be determined. Nor is it necessary to address grounds of appeal going to causation, damages and apportionment. 27The appeal should be dismissed with costs. 28EMMETT JA: The appellant, Mrs Vredê Bird, and her husband retained the respondents (the Solicitors) to act for them and their son (the Student) in connection with proceedings to be brought against Broughton Anglican College (the School) in relation to the expulsion of the Student from the School. Mr and Mrs Bird and the Student (by Mrs Bird as his tutor) commenced proceedings in the Equity Division of the Supreme Court seeking both judicial review of the decision of the School to expel the Student and a declaration that the expulsion decision was invalid on the basis, inter alia, that it was in breach of an implied term of the contract between the School and Mr and Mrs Bird that procedural fairness would be afforded them before any expulsion of the Student. The Solicitors retained counsel to appear in the proceedings for Mr and Mrs Bird and the Student. The proceedings were heard by Einstein J, who dismissed them with costs. 29Mr and Mrs Bird then commenced proceedings in the Common Law Division of the Supreme Court against the Solicitors, claiming damages for breach of contract and negligence in the provision of advice in relation to the proceedings against the School. The allegations made by Mr and Mrs Bird against the Solicitors in their statement of claim may be summarised as follows: * On 6 June 2007, Mr and Mrs Bird retained the Solicitors and the Solicitors agreed to be retained by them (the Retainer Agreement). * The Retainer Agreement was to provide legal advice in relation to the expulsion of the Student from the School, to advise on the correct and appropriate application to be made to the appropriate court, to formulate the appropriate relief to be sought, to instigate any proposed proceedings in an appropriate process seeking the appropriate relief and to ensure that any adverse record in relation to the Student's alleged conduct was expunged from the School's records. * It was a term and condition of the Retainer Agreement that the Solicitors would use all due skill and care in the carrying out of their obligations under the Retainer Agreement in providing advice to Mr and Mrs Bird. * The Solicitors owed a duty of care to Mr and Mrs Bird to exercise all due skill and care in providing advice in relation to the Retainer Agreement. * The Solicitors breached the Retainer Agreement and acted negligently in the provision of advice in: * advising Mr and Mrs Bird that an application should be made to the Supreme Court for relief that the Court could not grant; * failing to advise or adequately advise that there was a risk that the Court could not grant the relief sought; * commencing proceedings in the Supreme Court that were misconceived and had no prospects of success; * failing to advise or adequately advise of the risks of the proceedings; * failing to make an application for a pseudonym to be used for the Student in the proceedings; * failing to advise properly on costs. * As a result of the breaches of the Retainer Agreement and the negligence of the Solicitors, Mr and Mrs Bird have suffered loss and damage. 30For reasons published on 28 March 2013, Schmidt J directed the entry of judgment for the Solicitors and ordered Mr and Mrs Bird to pay the Solicitors' costs of the proceedings. By notice of appeal filed on 29 June 2013, Mrs Bird appealed from the orders made on 28 March 2013. No point appears to have been taken that Mr Bird, who was a plaintiff before Schmidt J, was not a party to the appeal. 31The essence of the complaint made by Mr and Mrs Bird is that the Solicitors were in breach of their retainer and acted negligently in failing to advise that there was no possible prospect of succeeding in the proceedings. Schmidt J observed that it was not in issue that at the time when the Solicitors gave their advice, there was no Australian authority that established that private schools were obliged to give a student procedural fairness before a decision to expel was made. Her Honour referred to a 1976 decision and then said that, since that time, other cases in which complaints were made about a failure to afford a student procedural fairness had been resolved at an interlocutory stage, on the basis of undertakings. Her Honour also referred to English authorities that suggested that the rules of procedural fairness could be a source of rights against such a school, but noted that there was no Australian authority deciding the point either way. 32Schmidt J also referred to evidence given by counsel who appeared in the proceedings before Einstein J that he considered that the case was arguable and that there was no breach of professional obligation in his acting, though the probabilities were that the case would be lost. Finally, her Honour also referred to the advice given by the Solicitors to Mr and Mrs Bird to the effect that it was a novel and difficult case and that, while there was an arguable view of the law in support of the claim, the case could be lost because of jurisdictional questions, or on the facts, or on discretionary factors. Her Honour found that it was clearly not a case in which it could confidently be concluded that the only advice that should have been given in the discharge of the Solicitors' obligations was that, even if Mr and Mrs Bird's version of the events that had occurred were accepted, the Court did not have any power to grant any relief in relation to the expulsion of the Student. 33I have had the advantage of reading in draft form the proposed reasons of Barrett JA. I agree that there was no error on the part of Schmidt J in concluding that there was no breach of the Retainer Agreement or negligence on the part of the Solicitors in the advice that they gave to Mr and Mrs Bird. In those circumstances, it is unnecessary to rely on other matters raised by way of defence in the proceedings before her Honour. I agree with Barrett JA, for the reasons proposed by him, that the appeal should be dismissed with costs. ********** Amendments 31 July 2014 - Typo Amended paragraphs: Case details - Second Respondent's Name 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: 31 July 2014