I gave judgment in these proceedings on 30 July 2021: Harden v Willis Australia Group Services Pty Ltd; Willis Australia Group Services Pty Ltd v Harden [2021] NSWSC 939. There were two separate proceedings which were heard together. The history of those proceedings is set out in my judgment in the introductory paragraphs, and I won't rehearse that chronology.
Numerous issues arose for determination. One issue that both sides contested was whether or not there was repudiatory conduct, and if so, to what extent that might have an effect on the outcome of the respective rights of the parties. In the end, I determined that issue in favour of Willis, that there was no repudiatory conduct.
However, I should note that the issue of repudiation, as is well accepted in the authorities, involves an objective test. The actual time spent in the trial and the actual amount of evidence devoted to that issue, in the scheme of things, was relatively small, and basically turned upon, in the end, arguments about the effect of correspondence in the circumstances of the case. It is a factor, Willis having succeeded on, that should be taken into account as a matter of discretion in relation to the ultimate decision on costs.
As I have said, there were a multitude of issues that were raised, and indeed sub issues. On all of the other issues - and by that I mean what was the contractual status of Mr Harden; was he on gardening leave or was he suspended; was the restraint in all the circumstances in any event reasonable; did he solicit clients or attempt to do so; did he solicit employees or attempt to do so - those issues, both as a matter of fact and as a matter of law, were determined in favour of Mr Harden. I'll come back to the effect of that in a moment.
Both sides have presented to the court competing short minutes. It is agreed that, in relation to those short minutes, I should make a declaration in accordance with para 1 of what I may describe as the Harden short minutes, which I think is replicated in the Willis short minutes identified as para 1. However, both sides, in addition, seek additional declaratory relief of a kind which either was not sought in the proceedings, or which I regard as lacking in utility.
The Harden short minutes propose a declaration to the effect that the restraint period referred to in cl 13.2 of the agreement expired on 1 July 2021. That was not sought in the proceedings, but it is set out in my judgement in various paragraphs as to why that is the effect of my judgement. But I do not see any particular utility in making that declaration especially given it wasn't sought.
The Willis interests, on the other side, invite me to make a declaration to the effect of para 2 of their proposed short minutes, that by suspending Mr Harden, they did not repudiate the agreement. Again, I see no utility making that declaration. That is indeed my finding, that the effect of what occurred was a suspension, but again, I do not see any utility in it. So in respect of both the Harden interests and the Willis interests, I would refuse to make the declarations I am invited by each side to make.
That comes down to the question of costs, and to a particular claim by Mr Harden for indemnity costs in respect of one aspect of the litigation in the Willis proceedings. He seeks an order that his costs be paid on an indemnity basis in relation to the issue concerning solicitation of clients and solicitation of employees. It is based upon a number of arguments articulated both in written outline and again this afternoon by Mr Jones in oral argument. Essentially, it is that the case was hopeless, it should never have been brought, and therefore indemnity costs would be appropriate.
The cases on indemnity costs make it abundantly plain that there needs to be the requisite degree of unreasonableness. It might be said that the case could be described as untenable or hopeless, indemnity costs may be appropriate. Essentially, though, that part of the case was brought by Willis, and there was a great volume of evidence concerning telephone contact and other communications, was largely if not entirely circumstantial. However, it did provide, in my view, a basis upon which Mr Harden was and could be cross examined about what indeed occurred.
The telephone records necessarily only showed contact, they did not show content. That does not mean that one can speculate in litigation and see how you go in cross examination, but I think, given the volume of telephone contact which prima facie was exposed in the materials, I would not go as far as to find it so unreasonable on the issues of solicitation of clients and employees to the requisite degree of unreasonableness that the case was hopeless in the necessary sense.
As it turned out, I accepted Mr Harden's denials about the various matters put to him about contact with clients and/or employees. Matters were put to him fairly and squarely, and the judgement makes abundantly plain my particular findings in relation to him and his credit. That said, I do not regard, in the exercise of my discretion that an order for indemnity costs is appropriate on those issues.
The last argument which I need to deal with is more complex. It turns upon, as a foundation, some evidence which Mr Harden gave in cross examination, in particular at pp 119 lines 5 to 18. Mr Harden was asked by Mr Moses of senior counsel about the understanding Mr Harden had about the payment of fees. He said in answer to a number of questions that his belief was that Guy Carpenter was paying his fees. He was also asked to confirm that it was Guy Carpenter and not some generous benefactor. He was asked to concede - which he did - that Guy Carpenter also indemnified him or intended to indemnify him, according to his belief, if he went down in the proceedings, and that they would pay the costs of Willis.
There is no doubt that there was no costs agreement. I've been taken to the authorities about this matter. It is often referred to as the indemnity principle, and the indemnity principle operates such that a party ordered to pay the other party's costs is obliged to pay only those costs which the other party is legally obliged to pay to their solicitor, and that therefore the principle requires that the party has a legal liability to pay costs.
In Dyktynski v BHP Titanium Minerals Pty Ltd (2004) 60 NSWLR 203 ("Dyktynski"), Mason P at paras 7 and 8 commented that, if a party has agreed with their solicitor that they do not have to pay any costs, then costs cannot be recovered against the adversary under a party/party order. The situation is different when a client has the benefit of an indemnity from a third party, so long as the client remains under a legal liability to the solicitor.
Willis argues that Mr Harden would need to prove that he remained under a legal liability to the solicitor. There is an argument about who might bear the burden of proving whether or not that retainer exists. Willis submitted that, in the absence of a costs disclosure agreement - which is the fact here - between Mr Harden and the solicitors, and where invoices were sent to Guy Carpenter, Mr Harden has no legal liability to pay the costs in the proceedings.
Mr Harden admitted, it seems to me, or the Harden interests have admitted, that there was no executed costs agreement between himself and the solicitors. However, a formal agreement is unnecessary, in my view, to establish a retainer. Reliance was placed on Shaw v Yarranova Pty Ltd [2011] VSCA 55 ("Shaw") in support of the argument, submitting that where a litigant is aware that a person appears on the record as their solicitor and takes no steps to rectify it, then a presumption arises that there is a retainer between them. The solicitors here were acting for Mr Harden with his knowledge and assent, and that is clear, it seems to me, on the facts.
I accept the statement of principle of Redlich and Mandie JJ in Shaw at para 22 of that judgement, that the indemnity rule has been treated as permitting recovery of costs from a party against whom the order is made although a third party has indemnified the successful party or paid their costs. I also accept the evidence of Mr Wallman, solicitor on the record for Mr Harden, that he received instructions from Mr Harden, and in my view, on the facts, it could be inferred from that conduct that a retainer did exist, and therefore Mr Harden remains at least arguably liable to pay the solicitor's costs as discussed in Shaw.
The question of onus in this case is important. Mr Wallman said, in para 6 of his affidavit of 14 September 2021, that there was no agreement between Ebsworth's, if I may call them that in shorthand, and Guy Carpenter in respect of the payment of Mr Harden's legal costs, and that there is no agreement between Ebsworth's and Mr Harden to the effect that Mr Harden would under no circumstances be liable for the solicitor's costs. He clarified that in his second affidavit of 15 September 2021 in para 4, and he said: "By way of clarification, the basis for my statement at para 6A and the first sentence of 6B of my 14 September affidavit is that I did not enter into any such agreement on behalf of Ebsworth's with Guy Carpenter or Mr Harden."
It seems to me that the evidence therefore favours at least a basis for suggesting that a retainer did exist with one or both Mr Harden and or Guy Carpenter, which is theoretically possible. Further, in Dyktynski, at para 95, McColl JA concluded that the indemnity principle would not prevent the recovery of adverse costs provided there was a third party with an interest in the litigation and who incurred costs in the proceedings brought in another's name.
That principle has been confirmed in a decision of the full Federal Court in Cristovao v Registrar Trott [2019] FCAFC 88, and in particular the discussion of their Honours Derrington, Colvin, and Jackson JJ at para 26, where their Honours considered the judgment from which the appeal was brought below in the Federal Court, and at some considerable length considered the authorities, including Dyktynski. The full Federal Court endorsed the comments of McColl J in Dyktynski, concluding that therefore if the real party who incurred the costs of the litigation had an interest in the litigation, party party costs may rightfully be recovered.
In my view, therefore, this is analogous to that case, and I think, in the circumstances of this case and on the facts of this case, I see no barrier to Mr Harden being awarded costs despite Guy Carpenter in effect indemnifying him.
Coming back to the short minutes - I am dealing with the Harden short minutes for the moment - I would make an order in accordance with para 1 making a declaration which is an agreed declaration. I would not make an order in accordance with para 2 of those proposed minutes. I would make an order in accordance with para 3. I would make an order in accordance with the proposed para 4. I would make an order in relation to para 5 in the Willis proceedings. I would not make an order in relation to indemnity costs as proposed in para 6. Instead, I would make orders that Willis Australia Group Services Pty Ltd and Willis Reinsurance Ltd pay Mr Harden's costs of the proceedings.
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Decision last updated: 17 September 2021