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  • Psychological Injury Workers Compensation HR Breakfast Club - January Summary

    Psychological Injury Workers Compensation: HR Breakfast Club - January Summary

    This month, we discussed the impacts of Mental Health Workers Compensation.

    This month, we discussed the tricky minefield which is workplace psychological injuries, how they arise, and when they are compensable. Bill McCarthy, BAL Special Counsel who has extensive experience in workers compensation and insurance law, shared some of his insights on the topic. Bill touched on:

    The different types of workplace psychological injuries:

    • Psychological injury attributed to work-related stress may include such disorders as depression, burnout, anxiety, post-traumatic stress disorder and adjustment disorder.

    Some statistics about psychological injuries:

    • Psychological injury accounts for around 11% of accepted claims within the Comcare scheme.
    • Psychological injury accounts for approx. 30% of the cost of Comcare claims.
    • Workers with psychological injury are staying off work for longer. 55% of psychological claims that reach four weeks lost time continue on to 13 weeks of lost time.
    • The impact of mental harm is delayed recovery, slow return to work and increasing claim liabilities resulting in premium pressures.

    What is adjustment disorder, and why is it controversial

    • The specific signs and symptoms of an adjustment disorder may vary greatly from one affected person to the next. There are currently 6 recognised sub-types of adjustment disorder – Adjustment disorder with depressed mood, Adjustment disorder with anxiety, Adjustment disorder with mixed anxiety and depressed mood, Adjustment disorder with disturbance of conduct, Adjustment disorder with mixed disturbance of emotions and conduct, and Adjustment disorder unspecified. There are so many different presentations of this disorder, and sometimes it feels as though it is a “waste-basket diagnosis” which is assigned to those who fail to meet the criteria for other mental disorders.

    When is a psychological injury compensable?

    A psychological injury is only compensable if it arises out of or in the course of employment. The employment must have been a significant, material, substantial or the major contributing factor to the injury. However, psychological injuries that have arisen out of ‘reasonable action’ taken by the employer are not compensable. For example, if an employee develops anxiety or depression as a result of a (fair) poor performance review, it is unlikely that that injury will be compensable.

    This answer is, of course, general commentary only.  It is not legal advice.  Readers must contact us and receive our specific advice on the particular situation that concerns them before acting or refraining from acting.

    If you would like to join the HR Breakfast club, it runs on the third Friday of every month, please get in contact.

     

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  • ‘Over the top’ discipline: rethinking bullying in the public service

    ‘Over the top’ discipline: rethinking bullying in the public service

    Recent cases show that bullying in the public service can take place through otherwise legitimate mechanisms, such as reassignment decisions and misconduct investigations. Employment lawyer John Wilson explains.

    The Fair Work Commission’s anti-bullying jurisdiction has been the subject of controversy since its inception in 2014.

    Legislative amendments to the Fair Work Act 2009 empowered the commission to issue “stop bullying orders” to protect employees from continuing to be bullied at work. But the jurisdiction has been lambasted as ineffective, with only a handful of orders made in the past three years.

    To establish bullying under the Fair Work Act, a worker needs to show that an individual, or group of individuals, has repeatedly behaved unreasonably towards the worker, and that behaviour creates a risk to health and safety. Actions which constitute reasonable management action carried out in a reasonable manner are not bullying (regardless of the health consequences). For the commission to make a stop bullying order, they must also be satisfied that there is a risk the worker will continue to be bullied at work.

    Bullying in the public sector can be particularly pernicious. This is because public sector employees are often inclined to remain in the public service, whereas their private sector counterparts are more likely to jump ship to escape poor workplace behaviours. Also, the kind of easily identified conduct that amounts to classic bullying (such as swearing, and physical and verbal abuse) is often absent in public sector clerical workplaces, but replaced with more subtle forms.

    If Sabrina in accounts deliberately sneezes in your lunch every Friday, it is probably relatively easy to show that you are being bullied by Sabrina. But consider the scenario where Sabrina makes a complaint that you have been ignoring her, and that you adopted a disrespectful tone in a staff meeting a few months ago. Sabrina is finding this very stressful. HR commences an investigation to determine if you have misconducted yourself. HR decides that in the meantime, you need to be removed from your usual duties. Could you be the victim of workplace bullying by HR?

    The 2017 case of Coulson raised this possibility. The applicant alleged that she had been bullied by a number of senior personnel at a federal department via:

    1. Being subjected to several unnecessary decisions to suspend or reassign her duties during a misconduct investigation; and
    2. A continuation of the reassignment decision after the misconduct investigation concluded there had been no misconduct.

    The department applied to have the stop bullying application dismissed on the grounds that it was frivolous or vexatious or had no reasonable prospects of success. In particular they argued that the initial reassignment decision was reasonable management action.

    Commissioner John Kovacic refused to accept that the claim had “no reasonable prospects of success” and permitted the case to proceed to hearing. This judgment suggests that “over the top” disciplinary actions can amount to bullying. Admittedly, the bar for the commission to dismiss was a high one but the judgment does give hope to public sector employees who find themselves the subject of a string of administrative actions as part of bullying conduct.

    In another recent case, Burbeck v Alice Springs Town Council, the commission issued a stop bullying order after finding that disciplinary action was “retaliatory and punitive”. While commissioner Nicholas Wilson found both the employer and employee to be at fault, he wished to “reset the employment relationship” and therefore made a range of orders. These required the council to arrange anti-bullying training for staff, and to review its disciplinary procedures.

    We may need to expand the stereotypical, steal-your-lunch-money concept of bullying to address the potentially more insidious forms of workplace bullying that can emerge in modern bureaucratic workplaces. There are signs the law is adapting to accommodate this reality.

    John Wilson is managing legal director at Bradley Allen Love. His firm acted for the applicant in Coulson.

    First published in the Mandarin.

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  • Assignment of a Lease by Conduct & Agreement for Lease AFL

    Agreements for Lease: Kicking goals with AFLs

    An agreement for lease (AFL) is quite simply an agreement between two parties to enter into a lease in the future.  Unlike a lease, it does not create an immediate legal right to take possession of the land, however it does create enforceable rights between the parties.

    When to use an AFL

    An AFL can be vital when a landlord and potential tenant want to create a binding legal relationship for the leasing of property, but when a final lease cannot be entered into right away.

    There are many reasons why a lease might not be able to be entered into immediately:

    • the Landlord might not yet hold title to the premises;
    • there might be a previous tenant still in occupation of the premises;
    • third party approvals might be necessary before the premises can be occupied; and
    • finally, and most importantly, the premises might require substantial repairs, renovation or fitout prior to the tenant taking occupation, often purpose built for the tenant.

    Why an AFL is important

    Where both a landlord and potential tenant are relying on a lease being entered into in the future, but have no legal agreement recording that, each is exposed to risk if the other should pull out.  Particularly, in circumstances involving premises being refurbished or fitted out for the specific needs of a particular tenant, both parties are taking on a significant amount of risk.  The landlord may be spending a substantial amount of money on the premises and could be left out of pocket if the tenant does not end up moving in.  On the other hand, a tenant may be forced to pay extra if it needs to find alternative premises in a hurry because a prospective landlord does not complete the required fitout or rents it to someone else.

    It is to mitigate these risks to both parties that it would be wise to enter into a formal AFL.  An AFL provides clarity around important issues, such as time frames for completion of works and when the lease is to commence.  An AFL also provides enforceable obligations on both parties in the event that the lease falls through, which can reduce the loss suffered.

    What should an AFL cover?

    An AFL needs to cover all the issues which may arise prior to a lease being entered into, as well as the form of the lease that will eventually be in place.  Among the things that may need to be covered are:

    • key dates and timeframes for any events precedent to entering into the lease;
    • what works are to be carried out by the landlord or tenant;
    • who is responsible for paying for any works and any financing or loan arrangements;
    • obligations to obtain finance or development approvals by third parties;
    • the terms under which the lease will be entered;
    • lease incentives;
    • guarantees and indemnities; and
    • dispute resolution.

    Due to the wide range of issues that need to be covered, AFLs can actually be larger and more complicated than the leases that arise out of them.

    If you need an Agreement for Lease, contact Penelope Coffey to help you prepare an AFL to ensure that your complex leasing arrangements run with a minimum of risk.

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  • Can strata subdivision avoid minimum lot sizes in NSW

    Can strata subdivision avoid minimum lot sizes in NSW?

    Clause 4.1 of the standard instrument local environmental plan provides that the size of any lot resulting from a subdivision of land must not be less than the minimum lot size for the land shown on the Lot Size Map.  Does the same minimum lot size apply if the proposed lots are to be created by the registration of a strata plan?

    This question was considered by the Land and Environment Court in a decision handed down on 11 December 2017.

    In DM & Longbow Pty Ltd v Willoughby City Council [2017] NSWLEC 173, the applicant sought development consent for the conversion of an existing dwelling to a dual occupancy and the strata subdivision of the land into 2 lots (one for each unit) and one common lot.

    The Council originally refused development consent for both developments but ultimately agreed that the dual occupancy development was acceptable.  However, it maintained its opposition to the approval of the strata subdivision of the dual occupancy.

    The Council argued that the lots proposed to be created were less than the minimum lot size for the land shown on the Lot Size Map and that the development standard setting the minimum lot size for the land was specified in clause 4.6 of the LEP as one that could not be varied.  The applicant argued that the minimum lot size did not apply to the subdivision because of clause 4.1(4).  That clause provides that clause 4.1 does not apply to the subdivision of individual lots in a strata plan or community title scheme.

    The Council was successful before Commissioner Dixon who held that the subdivision was not capable of being approved. The applicant appealed arguing that clause 4.1(4) applied to all strata subdivisions, not only the subdivision of individual lots in an existing strata plan but also the creation of individual lots in a new strata plan, saying this was “the most obvious reading” of the phrase “the subdivision of lots in a strata plan” as that phrase is used in clause 4.1(4).

    Preston CJ, however, preferred the Council’s interpretation of the provision.  The Council had argued that clause 4.1(4) applied only to the subdivision of individual lots in an existing strata plan and not the subdivision of a lot to create a new strata plan.  His Honour observed that the basic rules of statutory construction required the language of clause 4.1(4) to be read in context and having regard to the objective it was designed to promote, but that the primary focus must remain upon the text.  His Honour found that the text of clause 4.1(4) was “clear and unambiguous” and that:

    “The object of the action of subdivision is the ‘individual lots in a strata plan’.  The subdivision is ‘of’ those lots. Those ‘individual lots’ must be ‘in a strata plan’. A ‘strata plan’ is ‘a plan that is registered as a strata plan’… It is a strata plan that is already in existence. If there is no strata plan yet in existence, there can be no individual lots ‘in a strata plan’ that can be subdivided.”

    The Court held that the applicant’s proposed subdivision was not of land in an existing strata plan (it was land under the Real Property Act 1900) and that the subdivision was therefore not capable of being approved as the size of the lots to be created was less than the minimum lot size for the land specified on the Lot Size Map.

    Comment

    This decision highlights the need for Councils to consider whether different lot sizes should be specified in their local environmental plan for lots in strata plans. Not doing so will result in the general minimum lot size applying whether or not land is being subdivided by registration of a plan of subdivision or a strata plan.

    If you need advice about strata subdivision, or would like to know more, please contact Alan Bradbury.

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  • Opera stars and chorus girls The vexing tort of inducing breach of contract

    Opera stars and chorus girls - the vexing tort of inducing breach of contract

    “Contracts should be kept rather than broken.” — Lord Justice Rix in Stocznia Gdanska SA v Latvian Shipping Co (No 3).

    An economic tort is a curious beast. The field is infrequently litigated, partly because these common law actions have had their utility curtailed by legislation, and beset by jurisprudential uncertainty. The situation is not improved by the patchwork quilt of distinct claims within this category, ongoing disagreement about unifying threads and the divergent approaches taken by courts in Australia, New Zealand and the United Kingdom.

    While a practitioner might therefore approach this topic with hesitancy, it is imperative that lawyers — particularly those in employment and commercial practices — have a firm grasp of the topic.

    At their essence, the torts permit a loss-suffering party to seek damages from the true wrongdoer, even where a third party stands in the middle and is seemingly responsible for the loss. Since the tort of inducing breach of contract was first promulgated in Britain in 1853, the action and its siblings have arisen in a diverse range of contexts. Opera impresarios, milkmen and the organisation behind World Series Cricket have all sought to take advantage of these torts, with mixed success. Their utility ranges from a helpful adjunct alongside other claims to a “useful measure of last resort”, and the spectre of these actions can also help ensure contractual relations are respected.

    It has been suggested that these separate torts — among them inducement to breach contract, unlawful interference with trade, intimidation and conspiracy — may flow from a common source. The prospect of a general tort of causing economic loss by unlawful means has been mooted; Lord Denning MR suggested that “if one person, without just cause or excuse, deliberately interferes with the trade or business of another, and does so by unlawful means … then he is acting unlawfully.”

    The High Court of Australia has similarly proposed that “independently of trespass, negligence or nuisance, but by an action for damages upon the case, a person who suffers harm or loss as the inevitable consequence of the unlawful, intentional and positive acts of another, is entitled to recover damages from that other.”

    This article will focus on the tort of inducing breach of contract, given its foremost relevancy in the employment law context. David Howarth has estimated that 40 per cent of British cases involving the tort concern industrial relations (predominantly strikes), 20 per cent arising in other employment disputes and the remainder in commercial settings. The article will begin with a discussion of the seminal case of Lumley v Gye, before outlining each element of the tort’s modern incarnation and the relevant remedies. The article will conclude with a brief discussion of the reformoriented criticisms levelled against the action.

    A German opera singer’s lasting legal legacy

    165 years after it escalated into the British courts, a competition between two rival London theatres for the services of a star German opera singer has enduring relevance for private law across the common law world.

    A much sought-after singer in the early 1850s, Johanna Wagner, was lured to London by Benjamin Lumley of Her Majesty’s Theatre in Haymarket on an exclusive singing contract. Before she arrived in Britain, Wagner’s services were poached by Frederick Gye of the Royal Italian Opera in Covent Garden. The day before her much anticipated debut for Gye, Lumley secured an ex parte
    injunction to prevent her performance.

    The ensuing litigation had two strands; the first, Lumley v Wagner, remains the starting point today for equitable injunctions enforcing negative covenants — Wagner was prevented from performing for a short period in London other than for Lumley’s company. The second, Lumley v Gye, gave birth to the tort of inducing breach of contract.

    In the end, Wagner sang for neither theatre and Lumley’s victory against Gye was pyrrhic — he won the legal claim on demurrer but lost an action for damages. As one legal historian observes, “in the end Lumley, Gye, Wagner and the opera-going public — everyone in fact except the lawyers — were all losers.”

    To understand the outcome in Lumley v Gye and its ramifications, it is necessary to briefly backtrack to an earlier opera-related case.

    In 1847, another famous singer of the era broke her contract with Drury Lane Theatre to sing for Lumley at Her Majesty’s Theatre. The resulting litigation between Drury Lane and the singer, Jenny Lind, ultimately settled for £2,000. Despite indemnifying Ms Lind and paying her handsomely, Lumley was still able to recoup a considerable profit from his new singer. SM Waddams thus suggests that Lind’s case, which demonstrated “that the ordinary remedy … was ineffective … and that the real dispute was between the rival employers, must almost certainly have been in the minds of the judges when they came to deal with Lumley’s cases against Wagner and Gye”.

    And so, with the shoe on the other foot, Lumley brought proceedings against Gye for £30,000. In a creatively-framed claim, Lumley argued that his rival had “wrongfully and maliciously enticed and procured” Lumley’s breach of contract. Standing against Lumley was the contractual principle of privity — counsel for Gye responded that “the breach of contract is a wrong between the plaintiff and Johanna Wagner alone, and against her he may maintain an action on the contract, but not of tort.”

    By a 3:1 majority, the Court of Queen’s Bench held for Lumley and thereby established a new tort that endures today. The comments of Crompton J are particularly illuminating. “[T]he servant or
    contractor,” he wrote, “may be utterly unable to pay anything like the amount of the damages sustained entirely from the wrongful act of the defendant: and it would seem unjust, and contrary to the general principles of law, if such wrongdoer were not responsible for the damage caused by his wrongful and malicious acts.”

    Lumley v Gye was not entirely novel. Since the 1500s, it had been accepted that an action arose where a master’s servant was enticed or harboured by another. But this tort was grounded on a master’s proprietary right to the servant (a concept which seems unthinkable today), and was distinguished by Coleridge J in dissent. His Honour chastised: “I should be glad to know how any treatise on the law of contract could be complete without a chapter on this [tort], or how it happens that we have no decisions upon it.” Yet while Lumley v Gye would go untouched for almost three
    decades, the tort it created has since become firmly established across the common law world.

    The tort of inducing breach of contract

    Despite one commentator suggesting that the tort today “is almost unrecognisable as a descendant of its ancestor”, Lumley v Gye still provides the essential foundation for the modern action. A helpful statement of the tort was offered in Crofter Hand-Woven Harris Tweed v Veitch:

    [I]f A has an existing contract with B and C and is aware of it, and if C persuades or induces A to break the contract with resulting damage to B, this is generally speaking, a tortious act for which C will be liable to B for the injury he has done him. In some cases, C may be able to justify his procuring of the breach of contract.

    The elements of 1) a contract between A and B; 2) C’s knowledge thereof; 3) C’s persuasion or inducement for A to breach the contract with B; 4) resulting damage; and 5) the defence of justification will be considered in turn.

    Contract between A and B

    There must be a contract on foot; inducing someone not to enter into a contract is not actionable. The contract must be valid, enforceable and not voidable or otherwise defective — cases involving mistake, a lack of capacity and contracts invalid for being contrary to public policy did not give rise to the tort.

    Continue Reading…

    First published in Ethos. Written by John Wilson, Managing Legal Director, and Kieran Pender.

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  • Mental health - a clients capacity to provide lawful proper and competent instructions

    Mental Health - a client's capacity to provide lawful, proper and competent instructions

    Rule 8 of the Legal Profession (Solicitors) Conduct Rules 2015 (ACT) provides that a solicitor must follow a client’s lawful, proper and competent instructions. Implicit in this is the requirement that a solicitor be confident that their client has the capacity to give those instructions.

    Some areas of the profession are likely more attuned to these requirements. Certainly, practitioners acting in wills and estates will very familiar with the requirements surrounding capacity and issues that may arise in respect of same. However, it is incumbent upon every solicitor to ensure that, when taking instructions, they can be reasonably satisfied that their client has the requisite mental capacity to give and understand the instructions that they are intending to convey. If not so satisfied, the solicitor must not act for or represent the client. As has been found recently, a failure to be alert to issues of incapacity has the potential to generate liability in negligence on the part of solicitors.[1]

    Presumption of mental capacity

    As a starting point, it is a presumption at common law that every adult person is competent to make their own decisions and, accordingly, has the capacity to provide proper instructions. This is the basis on which the majority of solicitors act for their clients, as questions regarding mental capacity and fitness to give instructions will not ordinarily arise (aside from in particular areas such as practitioners working in with persons under the age of eighteen or suffering from obvious or know mental health diseases).

    However, importantly this presumption can be displaced. Characteristics such as old age, incapacity, mental infirmity, suspicion of undue influence or fraud or the inability to communicate are stated as those which can displace the presumption.[2] In the first instance, it is for the solicitor to determine whether there is some question regarding the client’s capacity to give proper instructions. If they consider that there is, an obligation arises for the solicitor to carry out further investigation before they may act for the client.

    Understandably, in the rush of receiving client instructions and ensuring that the work gets done, it can often be difficult to take the proper time to consider whether a client has capacity to give instructions. Solicitors also are not, or at least not by virtue of that legal ramification, medical practitioners, which can be an understandable point of unease for (particularly junior) solicitors in purporting to evaluate their client’s mental capacity.  In relation to these issues, the ACT Solicitors Conduct Rules refer to a guide drafted by the Law Society of NSW “When a Client’s Mental Capacity is in Doubt: A Practical Guide for Solicitors”, which contains practical advice for solicitors to refer to when their client’s capacity is in doubt. It also includes a list of red flags, which if present ought to at least raise further investigation on the part of the solicitor before commencing to act.

    Some red flags include:

    • difficulty with recall or memory loss
    • lack of mental flexibility
    • the client is in hospital or aged care
    • deterioration in personal presentation, mood or social withdrawal
    • difficulty with communications
    • disorientation
    • a limited ability to interact, including if others interact on the client’s behalf

    Standard of capacity

    The standard of capacity has been stipulated in Gibbons v Wright.[3] This case emphasises that there is no fixed standard of capacity that will be applicable in all interactions. Rather, the determination of capacity is whether a party can understand the nature of the legal consequence of their actions and decisions.

    The English authority of Masterman-Lister v Brutton and Co, Jewell and Home Counties Dairies,[4] which has been widely followed in Australia, puts forward two propositions: the mental capacity required is capacity in relation to the transaction to be effected, and what is required is the capacity to understand the nature of that transaction.

    The position is quite clear: the client must understand the nature of any instructions they give in relation to the transaction, including an understanding of the legal consequences of those instructions. Capacity is directly referable to the particular transaction concerned. What is important to note is that the ultimate decision reached, even if it is a poor one (in the opinion of the practitioner), is almost irrelevant. What is important is that the client fully understands the decision-making process and, accordingly, the decision and its consequences.

    Steps you should take

    Where a client’s mental capacity is in any doubt whatsoever, it is crucial that the solicitor take thorough and contemporaneous file notes of any interactions with the client. This becomes especially important in circumstances where proceedings may be commenced at a later date when the question of mental capacity may be raised. One example of this is where the validity of a will is later challenged. A contemporaneous record of events can help to resolve this argument.

    While solicitors may be in some position to determine whether a client can adequately give instructions, they are generally not experts when it comes to determining the mental health or otherwise of a person. As stated above, the concern is with the client’s capacity to understand and make the legal decisions which will affect them, and consequently receiving the opinions of qualified medical and psychiatric experts can be of great assistance in reinforcing, or alternatively changing, a solicitor’s preliminary view regarding capacity.

    Raising this matter with the client can be a delicate affair, and questions regarding proper capacity have the potential to lead to distress. However, framing it in terms of a legal need to ensure that the client can give proper instructions so that the decisions they make will stand up under future scrutiny can make this an easier process.

    No matter how necessary a solicitor may consider an expert assessment, it should only occur where the client has given fully informed consent. In order to give informed consent, the client must understand the benefits and risks, likely outcomes, and the potential impacts on the client’s control over other aspects of their lives (financial and business affairs) of undertaking the expert assessment. Where a client does not give their consent but their solicitor remains in doubt as to their capacity to give instructions, the solicitor must be cautious in how to proceed. In the event the solicitor is not confident the client has the capacity to provide instructions, the assessment should be recommended again. Without this, the solicitor may not be able to continue acting.

    In the realities of a busy practice, there will undoubtedly be occasions where it does not seem as if a solicitor has time to properly consider questions regarding a client’s capacity, for instance in litigation where the hearing of a matter is unfolding before the court in real time. However, and in spite of the protections offered by the advocate’s immunity (touched on below), where an issue regarding capacity is raised about a party to court proceedings, the proper course is for the proceedings to be adjourned so that the question of that party’s capacity can be determined by the court, one way or the other.

    While this may seem an inconvenience and contrary to the intention of a swift resolution of court proceedings, it is critically important to resolve any issue regarding capacity before proceedings can be continued. Where a person is found to not possess capacity, it would be an abuse of process, and likely negligence by the solicitor acting, for proceedings to continue. Indeed, were the issue to be raised by the solicitors for the other party, and it was found that the first party lacked proper mental capacity, proceedings would likely be stayed on that basis. Questions of costs may also arise (including against solicitors personally) if an opposing side later objects to the incurring of costs where a client without mental capacity is unable to meet a costs order but, in all likelihood, never understood the consequences of being involved in litigation.

    Protection offered by advocate’s immunity – a case study

    A case which examines the legal principles surrounding mental capacity and also the consequences for what Bell J termed “capacity negligence” is Goddard Elliott (a firm) v Fritsch [2012] VSC 87. The case goes into great detail regarding the standard of capacity required, and the consequences where a solicitor acts on the instructions of a client which are invalid.

    In this case, Mr Fritsch was sued by his solicitors, Goddard Elliott, for outstanding legal fees owed for work done in settling a Family Court matter regarding the property settlement resulting from his divorce. He counter-claimed against the firm, his argument being that he would never have settled his case had he been in proper mental health and that Goddard Elliott were negligent in acting on his instructions when he did not have the capacity to give them, a fact of which they ought to have been aware.

    Bell J went to great lengths to discuss the principles surrounding the area of a client’s capacity to give instructions, including the responsibilities of a solicitor and how proceedings in those circumstances should be managed. Many of those principles are those discussed above. His Honour found that Goddard Elliott had been negligent in acting on Mr Fritsch’s instructions to settle the case in circumstances where they should have been aware that he did not have the mental capacity to give those instructions.

    Despite Bell J’s findings regarding the negligence of Goddard Elliott, His Honour ultimately held that Goddard Elliott was not liable to Mr Fritsch, despite the finding of negligence, due to the advocate’s immunity. The firm was not held liable to Mr Fritsch because the instructions to settle was work which was intimately connected with the conduct of a case in court and thereby protected by the advocate’s immunity.

    His Honour found this conclusion “deeply troubling”, yet felt forced to it by authority. While in this instance the advocate’s immunity did protect the negligent solicitors, there is clearly a risk that the concerns raised by His Honour will ultimately lead to a situation in which solicitors cannot rely on the advocate’s immunity where they take instructions from clients who do not have the capacity to give them. Furthermore, solicitors taking instructions in non-litigious matters will not be afforded the protection of advocate’s immunity.

    It is thus fundamentally important that practitioners in all areas are aware of their requirements and duties regarding a client’s capacity and take all appropriate steps that are required to ascertain whether a client can competently give instructions. Not only does this serve the client’s best interests, but where it is subsequently found that a client lacks capacity and their solicitor continued acting regardless (and Goddard Elliott v Fritsch makes clear that this is a matter for determination by a court), the solicitor may well be exposed to personal liability.

    Consequences

    The consequences for breach of these principles can be severe, even where there has been no impropriety. From a financial standpoint, the solicitor may be liable to have indemnity costs awarded against them (if in the conduct of proceedings), and may also be liable for any damages caused by the negligence. Depending on the damage caused, this could be significant, with the solicitors in Goddard Elliott v Fritsch facing a claimed sum of near $1,000,000.

    From a professional standpoint, negligence such as this could well lead to findings of unsatisfactory professional conduct or professional misconduct. In the most serious of situations, it is easy to see an occasion where a solicitor could be struck off the roll for their negligence. The warning is clear: the matter of a client’s capacity is not something to be taken lightly.

    Because the question of a client’s mental health is undoubtedly a serious topic, it is a topic with which all practitioners should be very familiar. Where you hold concerns in a particular situation, remember that there are a wide range of resources you may turn to, including our Law Society, the NSW Law Society guide mentioned above, as well as fellow and more senior practitioners and/or medical experts.

    With today’s advances in mental health awareness, practitioners should ensure that their clients are capable of providing instructions at all times. With ever-present obligations and an often stressful work life, solicitors should also be encouraged to take steps maintain their own personal mental health as well. The support systems identified above are available for you personally as well, should you require. By protecting your own mental health, you assist not only yourself but your clients and the wider community.

    [1] Goddard Elliott (a firm) v Fritsch [2012] VSC 87

    [2] Kantor v Vosahlo [2004] VSCA 235.

    [3] (1954) 91 CLR 423.

    [4] [2003] 1 WLR 1511.

    First published in Ethos. Written by Laura Scotton.

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