Seven Network (Operations) Limited and Anor v Amber Harrison [2017] NSWSC 952 (17 July 2017)

Last Updated: 17 July 2017









Supreme Court New South Wales

JUDGMENT

The proceedings

These proceedings concern alleged breaches of a contract of employment dated 17 October 2013 (Employment Contract) and deed of release dated 14 November 2014 (Deed) entered into by the Defendant (Ms Amber Harrison) with the Plaintiffs (Seven Network (Operations) Limited and Seven West Media Limited). The Plaintiffs seek final injunctive and declaratory relief for numerous breaches by the Defendant of the Deed and Employment Contract. The Defendant does not oppose the injunctive relief sought, but does oppose the declaratory relief. The Plaintiffs also seek an order the Defendant pay the Plaintiffs’ costs of the proceedings, including the Defendant’s cross-claim, on an indemnity basis. The Defendant opposes this costs order, and seeks an order each party bear their own costs. The Defendant also opposes entry of judgment for the Plaintiffs.

Background facts

The background facts leading up to the commencement of these proceedings are comprehensively set out in both Seven Network (Operations) Limited v Amber Harrison [2017] NSWSC 129 at [3] – [17] per McDougall J and Seven Network (Operations) Limited and Anor v Amber Harrison [2017] NSWSC 405 at [5] – [15] per Sackar J. The salient facts are as follows. On 17 October 2013, the Defendant executed the Employment Contract with the First Plaintiff. Pursuant to the Contract, the Defendant commenced employment on 23 October 2013 as an executive assistant to Mr Chan, the then Chief Operating Officer. This followed the Defendant’s employment as an executive assistant for Mr Chan in his capacity as Chief Executive Officer with Pacific Magazines Pty Ltd (Pacific Magazines), a related body corporate to the Plaintiffs, from 1 July 2009 – 30 September 2013. In or around December 2012, while employed by Pacific Magazines, the Defendant alleged she formed a consensual sexual relationship with Mr Tim Worner, the now Chief Executive Officer of the Second Plaintiff. This relationship seems to have continued up to mid-2014. On or about 11 July 2014, the Plaintiffs began an internal investigation into expenses incurred by the Defendant on the corporate credit cards held by her and Mr Chan. During the investigation, the Defendant was allegedly directed not to attend work or perform duties of employment. At the same time as the investigation, the Defendant disclosed her relationship with Mr Worner to the Plaintiffs’ senior human resources executives. On 1 August 2014, the Plaintiffs and Defendant reached an agreement where the Plaintiffs agreed to pay the Defendant $100,000 and employ her in a new role. The Defendant undertook to repay the $14,000 she conceded she spent on personal expenses using the corporate credit card. On 1 August 2014, the Plaintiffs commissioned Deloitte Touche Tohmatsu (Deloitte) to conduct a further investigation into the use of the corporate credit cards held by the Defendant and Mr Chan. In late September 2014, Deloitte reported it was likely the Defendant had charged about $180,000 worth of unauthorised personal expenses to those cards from October 2009 – July 2014. On 14 November 2014, following mediation, the parties executed a further agreement in the form of a deed of release (the Deed). Relevant provisions of the Deed included the following. Clause 2.1 imposed obligations on the Defendant: (a) Not communicate to the media about the Plaintiffs or the details of her employment, relationship with Mr Worner, the expenses investigation and termination, whether this be by giving or procuring interviews, off the record comments, background information, publications, press releases, public statements, press conferences or participating in social media (clause 2.1(a));

(b) Not make any statement publicly or otherwise about the Plaintiffs or the details of her employment, relationship with Mr Worner, the expenses investigation and termination (clause 2.1(c));

(c) Not make any adverse statement about, publicly disparage or otherwise bring into disrepute the Plaintiffs (clause 2.1(d));

(d) Keep confidential all Confidential Information and not copy or reproduce Confidential Information (clause 2.1(i));

(e) Comply with the Undertakings set out in Schedule 1 to the Deed ( Undertakings ) (clause 2.1(j)); and

) (clause 2.1(j)); and (f) Return all Company Property by the date of the Deed (clause 2.1(k)). Schedule 1 of the Deed contained the Undertakings. These included undertakings by the Defendant that she would do, or had done at the date of the Deed, the following: (a) Deleted or left in the custody of her lawyers all Confidential Information, which included text messages, emails, photographs and all other forms of electronic and physical documents and communications ( Information ) (Schedule 1, clause 1);

) (Schedule 1, clause 1); (b) Returned all of the Plaintiffs’ records or documents in her custody (Schedule 1, clause 2);

(c) Refrained and will refrain from using, reproducing or disclosing to anyone the whole or any part of the Information, or document or information she had obtained through her employment with the Plaintiffs, except for legal or professional advice (Schedule 1, clause 3 and 4);

(d) Comply with post-employment restrictions in the Employment Contract other than clause 14.1(b), and her confidentiality obligations under the Deed (Schedule 1, clause 5); and

(e) Allow access by an independent information technology expert, on request by the Plaintiffs, to any equipment or records on which the Information has been recorded or stored for the purposes of ensuring she complied with clause 1 of Schedule 1 (Schedule 1, clause 6). Clause 4.1 was a broadly drawn release by the Defendant, discharging the Plaintiffs from and against all Claims she may have against the Plaintiffs, and providing the Plaintiffs could rely on the Deed as a complete bar to any Claims, to the extent permitted by law. Clause 7.4 included a warranty the Defendant had obtained independent legal advice concerning the nature, effect and extent of the Deed, she understood the consequences of entering the Deed, in particular the release and indemnity in clause 4, and she had entered into the Deed voluntarily and without any duress (see clause 7.4(b), (c), and (d)). Clause 7.8 provided the parties waived any rights to object to any proceedings being brought in the Courts of New South Wales. Relevant defined terms in clause 1.1 of the Deed included the following:

Claims includes all present and future actions, applications, causes of action, claims, complaints, demands, suits, proceedings, liabilities, sums of money, damages, debts due, determinations, inquiries, judgments, verdicts and costs arising, whether directly or indirectly from or in any way related to:

(i) The matters recited;



(ii) The Contract or any previous contract, agreement or understanding between the parties;



(iii) The Employment;



(iv) The Expenses;



(v) The terms of Employment;



(vi) The Position;



(vii) The Redundancy;



(viii) The Relationship;



(ix) The Restructure;



(x) The Termination; and



(xi) The Disputed Expenses,

Whether at law, in equity, arising under any statute, regulation or other legislative instrument or any award, enterprise agreement or other instrument made or approved under any law, except for claims for workers’ compensation under applicable workers’ compensation legislation from which the Employee cannot give release under this Deed.



Company Property includes:



(a) any property of the Group (including property leased by the Group) including all machine readable material, software, computers, iPads or tables, laptops, passwords and other access codes, credit cards, keys mobile telephones, security passes and vehicles; and



(b) any document (including any form of electronic record such as screen shots and photographs) which includes any Confidential Information.



Confidential Information includes all confidential information, including, but not limited to:



(a) any information (whether written, oral or in electronic form) concerning the Company or any of the other Beneficiaries, or any of its Related Bodies Corporate including but not limited to information of a commercial, operational, marketing and sales, technical, accounting or financial type (including client and contact lists, research results and analysis, price lists, data bases, source codes and methodologies, trade secrets, proprietary systems and know-how) of which the Employee is aware of or has generated in the course of, or in connection with the Employment (including confidential information belonging to a third party);



(b) any information developed, created or otherwise arising from the information in paragraph (a) above; and



(c) all copies, notes and records based on incorporating the information referred to in paragraphs (a) to (b) above, except where such information has come into the public domain other than by breach of confidentiality involving the Employee.

On 15 March 2015, the Defendant alleged the Plaintiffs suspended payments to her due and payable under the Deed, and that this amounted to a repudiation of the Deed (Amended Cross-Claim [66]). The Plaintiffs alleged this was on the grounds they believed they were no longer obliged to pay her because she had refused to comply with a request made pursuant to clause 6 of Schedule 1 of the Deed that she provide access to her electronic devices and records (Defence to Cross-Claim [66]). On 29 May 2015, the Defendant lodged a complaint with the Australian Human Rights Commission (AHRC) based on allegations of sexual harassment, discrimination and victimisation by the Plaintiffs and certain of the Plaintiffs’ employees (AHRC Complaint). The Defendant alleged this amounted to an acceptance of the repudiation of the Deed (Amended Cross-Claim [77]). In or about November and December 2016, the Defendant went public with her relationship with Mr Worner and alleged mistreatment by the Plaintiffs, making statements to several print and online media outlets. The Defendant admitted such material included the release of a media statement on 18 December 2016 detailing confidential information regarding the Deed and the background facts leading up to that Deed (December 2016 Media Statement) (Notice Disputing Facts [1]). The Defendant alleged this action was, in the alternative to the AHRC Complaint, an acceptance of the Plaintiffs’ repudiation of the Deed (Amended Cross-Claim [78]). On 13 February 2017, the Plaintiffs commenced proceedings in this Court by summons before the Duty Judge, McDougall J, seeking interlocutory and final injunctive relief restraining the Defendant from breaching her alleged obligations under the Deed. That same day, his Honour granted an ex parte injunction, enjoining the Defendant from, in short, disclosing, copying or reproducing confidential information under the Deed, talking to or through the media and to the public about any aspect relating to the Plaintiffs, her agreements with the Plaintiffs, her relationship with Mr Worner and her employment and termination, encouraging others to make such comments, and/or disclosing the contents of the Deed. On 14 February 2017, these orders were extended by McDougall J until 5pm on 21 February 2017. On 21 February 2017, the Defendant, represented by Mr Catlin of counsel and Mr Westcott, contested the interlocutory orders. Mr Bell SC and Mr Thomas of Counsel appeared for the Plaintiffs. McDougall J found in favour of the Plaintiffs, granting the continuation of the orders, with the exception of no longer enjoining the Defendant from disclosure of the Deed. His Honour also ordered the parties to apply for expedition of final hearing of the proceedings. The following day, on 22 February 2017, his Honour gave judgment with his reasons for the continuation of the orders; see Seven Network (Operations) Limited v Amber Harrison [2017] NSWSC 129 (Interlocutory Judgment). His Honour’s key findings included: (1) While the evidence was circumstantial, the Defendant never denied her involvement with the December 2016 Media Statement and Mr Catlin effectively accepted she procured the release of the Statement (Interlocutory Judgment [16]);

(2) There was a strong prima facie case the Defendant breached a number of her confidentiality obligations under the Deed, with her failure to return information, documents and text messages as required under the Deed as an example (Interlocutory Judgment [36] – [37]);

(3) The Defendant’s obligations under clause 2.1 of the Deed were not dependent or conditional upon the Plaintiffs’ performance of obligations under the Deed (Interlocutory Judgment [39]);

(4) The Deed had not been terminated, by repudiation or otherwise (Interlocutory Judgment [40]) and in any event the Plaintiffs’ decision to suspend payments to the Defendant was not in breach of its obligations under the Deed given it followed the Defendant’s refusal to deliver her electronic devices and records (Interlocutory Judgment [41]); and

(5) Unless she was restrained, there was a serious risk the Defendant would continue to breach such obligations based on the “mass of evidence showing that Ms Harrison has threatened, in effect, to destroy Mr Worner’s career and reputation” and her retention of electronic devices and records (Interlocutory Judgment [45] - [48]). On 27 February 2017, Johnson Winter & Slattery (solicitors for the Plaintiffs) sent a Calderbank letter to Patron Legal (then solicitors for the Defendant) (Exhibit P4). In the letter the Plaintiffs detailed the key findings in the Interlocutory Judgment, noted they considered it highly unlikely a final hearing would reach any different findings of fact, but nonetheless made an offer of settlement on the basis the Defendant agreed to the injunctive relief on a permanent basis and returned the Company Property (as defined in the Deed) she had obtained, and that “each party bear their own costs of the proceedings”. The Defendant did not take up this offer. On 3 March 2017, the matter came before me in the expedition list. Mr Dawson SC appeared for the Plaintiffs and Mr Sykes appeared for the Defendant. At this hearing, with the consent of the Defendant, I granted expedition and fixed the matter for a four day final hearing commencing 10 July 2017. The Defendant was ordered to serve her evidence on or before 7 June 2017 (T1/20-25, T7/35-40, Transcript of 3 March 2017). As the Defendant also foreshadowed the filing of a cross-claim (T2/1-2, Transcript of 3 March 2017), the Defendant was ordered to file any cross-claim by 16 March 2017. On 17 March 2017, the Defendant filed a cross-claim (Cross-Claim), pleading the Plaintiffs breached the Deed for failing to make payments to the Defendant, breached the Employment Contract for failing to provide a safe workplace and/or system of work, and breached the adverse action provisions under the Fair Work Act 2009 (Cth) (Fair Work Act). The Defendant affirmed an affidavit verifying the Cross-Claim, stating she believed “the allegations of fact in the statement of cross-claim are true.” On 17 March 2017, the Defendant commenced proceedings against the Plaintiffs in the Federal Court Fair Work Division of the Melbourne Registry by statement of claim for contravention of the Fair Work Act (Federal Court Proceedings). That same day, on 17 March 2017, the parties appeared before me. Mr Burnside QC appeared for the first time for the Defendant and Mr Thomas of Counsel appeared for the Plaintiffs. Mr Burnside QC indicated in light of the Cross-Claim, the Defendant would file an application for the matter to be transferred to the Federal Court, and that the Defendant had already commenced proceedings in that court (T1/20-35, Transcript of 17 March 2017). Also on 17 March 2017, solicitors for the Plaintiffs were informed by the AHRC the Defendant had been issued with a Notice of Termination in respect of the AHRC Complaint, following a failed conciliation conference on 13 May 2016 and decision by the Defendant not to withdraw the AHRC Complaint as requested by the AHRC on 11 January 2017. On 3 April 2017, the Defendant made a formal application to transfer the proceedings before me to the Federal Court pursuant to section 5 of the Jurisdiction of the Courts (Cross Vesting) Act 1987 (NSW) (Cross Vesting Application). I heard the application on 6 April 2017, with Mr Bell SC and Mr Thomas of Counsel appearing for the Plaintiffs and Mr Burnside QC and Ms Kelly appearing for the Defendant. Judgment was delivered on 12 April 2017, dismissing the Cross Vesting Application; Seven Network (Operations) Limited and Anor v Amber Harrison [2017] NSWSC 405. On 1 May 2017, the Plaintiffs filed a Notice to Admit Facts. The Defendant responded in a Notice Disputing Facts filed 15 May 2017 (Exhibit P3). However, she made a number of important admissions, not the least of which was that she was responsible for the release of the December 2016 Media Statement (Notice Disputing Facts [1]). On 19 May 2017, the Defendant filed an amended cross-claim (Amended Cross-Claim). On 6 July 2017 at 10.21pm, the Defendant tweeted on her account @_Amber_Harrison to the following effect:

“I have made a realistic assessment of the court case and am choosing not to run it on Monday. I’ve asked my legal team not to represent me.”



(Affidavit of Ms Ruveni Kelleher dated 10 July 2017, Annexure A).

On 7 July 2017 at 1.01pm, the Defendant notified the Court by email she had terminated her lawyer’s retainer, and she would not be able to attend the hearing in person on 10 July 2017 (Exhibit P5). On 9 July 2017 at 7.45pm, the Plaintiffs circulated short minutes of order to the Defendant (Proposed Short Minutes of Order) (Exhibit P1). The Proposed Short Minutes of Order sought final injunctive relief enjoining the Defendant (order 1), an order the Defendant return all the Plaintiffs’ property to the Plaintiffs (order 2), declaratory relief reflecting the Defendant’s breaches of the Deed (order 3(a)), in addition to the Employment Contract, section 183 of the Corporations Act 2001 (Cth), and her common law obligations of confidence (order 3(b)), judgment for the Plaintiffs (order 4), the dismissal of the Amended Cross-Claim (order 5) and costs on an indemnity basis (order 6). That same day, on 9 July 2017 at 8.51pm, the Defendant replied to the Plaintiffs and the Court indicating she consented to the injunctive relief sought (order 1), the return of the Plaintiffs’ property (order 2), and the dismissal of the Amended Cross-Claim (order 5) (Exhibit P1).

Consideration

As noted above, the Defendant made explicit in her email dated 9 July 2017 she did not oppose the injunctions, nor the return of Company Property as contained in orders 1 and 2 respectively of the Proposed Short Minutes of Order. By implication, what she did oppose was the making of declarations concerning breaches of the Deed and Employment Contract, and the basis costs would be awarded. The Defendant made oral submissions on the issue of costs on 12 July 2017, and provided written submissions in relation to the declaratory relief and entry of judgment for the Plaintiffs on 12 July 2017 (Defendant’s submissions on liability). In addition to making oral submissions on 10 July 2017, the Plaintiffs relied on two sets of written submissions: one on liability in relation to the declaratory relief (Seven’s outline of opening submissions dated 5 July 2017 (Plaintiffs’ submissions on liability)) and one on costs (Seven’s outline of submissions on costs provided to Court on 10 July 2017 (Plaintiffs’ submissions on costs)).

Liability

The Plaintiffs submit the Defendant breached a number of express negative stipulations in the Deed. The Defendant disputes these breaches on a number of grounds, primarily based on allegations, unsupported by evidence, the Plaintiffs breached and repudiated the Deed. In oral submissions, Mr Bell SC who appeared with Mr Thomas of Counsel for the Plaintiffs took the Court through the evidence which, in their submissions, supports their claim. Without rehearsing all of the detail, the Plaintiffs particularise eight breaches of the Deed (Plaintiffs’ submissions on liability [3]). The Plaintiffs submit the Defendant breached the Deed, in particular clauses 2.1, 4.1 and 7.1, by retaining information and Company Property the Defendant was not entitled to ([16]-[22]), refusing to make her equipment and records available in accordance with the Deed ([23]-[25]), lodging the AHRC Complaint ([26]-[27]), making statements to the press regarding the Plaintiffs ([28]-[33]), disclosing confidential material to the public via twitter ([34]-[36]), making a claim for contractual damages in the Cross-Claim ([37]), instituting proceedings under the Fair Work Act in the Federal Court ([38]), and continuing to disparage the Plaintiffs while the interlocutory injunction was in place ([39]). The Plaintiffs seek declaratory relief in relation to all the above breaches except for the continual disparagement. Such an order would overlap with findings of contempt which, the Plaintiffs accept, I would be reluctant to make (T11/21-30). The Plaintiffs also submit much of this conduct is also in breach of the Employment Contract, in particular the continuing obligation of confidentiality reflected in clauses 9.2 and 9.3, and other post-termination obligations such as the return of property under clauses 9, 10 and 14 (T14/5-10). The Plaintiffs also seek declaratory relief for breach of section 183 of the Corporations Act and general law obligations of confidence, but did not advance submissions in support of such breaches (see T13/40-50). The Court must make an independent assessment of the need for proposed declaratory relief, whether that relief be contested or not; see Williams v Powell [1894] 1 WN 141; Rural Press Ltd v Australian Competition and Consumer Commission [2003] HCA 75; (2003) 216 CLR 53 at 91 per Gummow, Hayne and Heydon JJ. The Court’s power to grant declaratory relief is discretionary, but is shaped by “considerations which mark out the boundaries of judicial power” such as the utility of the relief, and whether the declaration resolves a real legal controversy; Ainsworth v Criminal Justice Commission [1992] HCA 10; (1992) 175 CLR 564 at 581-582 per Mason CJ, Dawson, Toohey and Gaudron JJ; Forster v Jododex [1972] HCA 61; (1972) 127 CLR 421 at 437 per Gibbs J. In my discretion, I am satisfied the declaratory relief sought is appropriate, with the exception of a declaration the Defendant is in breach of section 183 of the Corporations Act. My reasons follow. Numerous epithets have been used to describe the Defendant and her motivations. I do not feel the need to join in the histrionics. The evidence on any view is relevantly clear, unequivocal and largely uncontested. She had, and has engaged in numerous breaches of the Deed and Employment Contract, and these breaches have been persistent and flagrant. The allegations concerning the breaches are not, and have never been, challenged by admissible evidence in this Court, although they have been the subject of what has been referred to as a media campaign waged by the Defendant; see [47] of the Interlocutory Judgment. In my view there is no merit to the Defendant’s primary yet unsubstantiated argument she was not bound by the terms of the Deed because the Plaintiffs repudiated the Deed by suspending payments as required by clause 6.1(c) (Defendant’s submissions on liability [3](a)(iii)-(vi)). I accept the Plaintiffs’ submissions compliance with payment obligations under the Deed was contingent on the Defendant complying with the Deed. Once the Defendant breached the Deed in refusing to grant the Plaintiffs access to electronic devices and records, the Plaintiffs were no longer obliged to comply with their payment obligations under the Deed. Thus, consistent with McDougall J’s prima facie findings (Interlocutory Judgment [41]-[44]), and in light of the Defendant’s failure to provide any evidence to the contrary, I am satisfied the Defendant was at all times bound by the terms of the Deed. Turning to the particulars of each breach, first I am satisfied the Defendant has failed to return Company Property in breach of cl. 2.1(k) of the Deed. The evidence the Defendant provided on a USB on 21 February 2017 in response to the Plaintiffs’ Notice to Produce issued 13 February 2017, including screenshots of various confidential internal emails (Affidavit of Ruveni Kelleher dated 12 May 2017 at [67]), and the Defendant’s failure to provide the Plaintiffs’ with her remaining hard and/or electronic copies of these materials, is plainly in breach of cl. 2.1(k) of the Deed. This is consistent with the effective concession of such a breach by Mr Catlin, former counsel for the Defendant, made during the interlocutory hearing before McDougall J (T33/45 – T34/8, Transcript of 21 February 2017). It is also consistent with McDougall J’s findings, albeit on an interlocutory basis, at [37] of the Interlocutory Judgment. The Defendant has provided no evidence to support her assertion the property was in fact handed to Harmers Workplace Lawyers (Defendant’s submissions on liability [3](a)(i)). I am therefore satisfied she has failed to return Company Property and is therefore in breach of clause 2.1(k) of the Deed. I am equally satisfied the Defendant is in breach of clause 2.1(j) of the Deed, read in conjunction with clause 6 of Schedule 1, in refusing to give the Plaintiffs access to her electronic devices and records. As McDougall J found “Ms Harrison, by refusing Seven access to her electronic devices and records, breached cl 6 of schedule 1”; Interlocutory Judgment at [37], see also [41]-[44]. The Defendant has not submitted any evidence to challenge this finding. The Defendant makes an unsupported contention she made numerous attempts in March 2015 to allow the Plaintiffs access to her equipment and records (Defendant’s submissions on liability [3](a)(ii)). However, it is clear she did not do so in accordance with the Deed. As she herself conceded in the December 2016 Media Statement, she “refused to have [sic] over her personal computer and phone at Seven’s demand” (Exhibit RDK 7, Tab 22). The Defendant further submits the Plaintiffs’ request was “not in the spirit of the deed” and was “vexatious” (Defendant’s submissions on liability [3](a)(ii)). This is plainly incorrect and is contrary to the clear terms of the Deed, in particular clause 2.1(j). It is also clear the Defendant’s AHRC Complaint, the making of the claim for damages in the Amended Cross-Claim and institution of the Federal Court Proceedings is in breach of the release contained in clause 4.1, with all the actions falling squarely within the clear and broad scope of “Claims” as defined in clause 1.1 of the Deed. I am also satisfied the AHRC Complaint is plainly in breach of clause 2.1(f). Further, I am satisfied the Defendant’s series of statements made to media outlets in November and December 2016, in particular the December 2016 Media Statement she admitted she sent (Exhibit P3, Notice Disputing Facts [1]), is a clear breach of clauses 2.1(a), (c), (d) and (e) of the Deed. I am also satisfied the Defendant’s publication of the Plaintiffs’ confidential legal advice regarding the AFP raid relating to Schapelle Corby (Exhibit RDK-7, Tabs 31 and 32) on her twitter account is in breach of numerous confidentiality obligations under both clause 2.1 of the Deed and clause 9 of the Employment Contract. The Plaintiffs also seek a declaration the Defendant breached her general law obligations of confidence by disclosing the Plaintiffs’ confidential information to third-parties (order [3](b)). Clause 9 of the Employment Contract leaves little room for common law obligations of confidence to be imposed, so it is unnecessary for me to dilate on that point. However, in so far as the Employment Contract does not fill the void, the general law obligations of confidence would be imposed given the recognised fiduciary relationship between employer and employee; Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41 at 96-97 per Mason J. In the light of these findings, I am of the view it is appropriate to make declarations in accordance with paragraph 3, with the exception of an order declaring a breach of section 183 of the Corporations Act. I do not see any utility in granting such an order given the nature and extent of the other declarations.

Costs

The Court’s discretion to determine by whom, to whom and to what extent costs are to be paid was established early in the development of common law, and is recognised in its modern form in New South Wales under section 98(1) of the Civil Procedure Act 2005 (NSW) (Civil Procedure Act). The usual rule is that costs follow the event and are payable on an ordinary basis as is reflected in rule 42.1 and 42.2 of the Uniform Civil Procedure Rules 2005 (NSW). However, given the Court’s largely unfettered discretion to award costs, the Court may theoretically depart from the usual rule, including making an order each party bears their own costs (as the Defendant seeks in this case), or an order costs be awarded on an indemnity basis (as the Plaintiffs seek in this case). There are no exhaustive or determinative categories which justify a Court exercising its discretion in departing from the usual rule. Rather, as Sheppard J observed, the question must always turn on whether the facts and circumstances of the particular case warrant the making of an order for the payment of costs other than on a party and party basis; Colgate-Palmolive Co v Cussons Pty Ltd (Colgate-Palmolive) [1993] FCA 536; (1993) 46 FCR 225 at 234 (Colgate-Palmolive). It is therefore necessary I make clear my findings on the circumstances of this case before determining what costs order should be made.

Findings on the circumstances of this case

These proceedings have, from the outset, been engulfed in a vitriolic atmosphere. The allegations from both sides, whether entirely true or not, have often been personal, scandalous, and sadly ripe for media and public consumption. As Allsop J (as his Honour then was) observed in White v Overland [2001] FCA 1333 at [4] “litigation is not a game”. If I may add, litigation is a serious business with serious consequences for plaintiffs and defendants, winners and losers, alike. Rarely does even a successful party recoup its legal expenses, whether or not indemnity costs are awarded. Indeed, every experienced litigator learns early in their career costs consequences must always be factored into the legal landscape of any piece of litigation. This is even more so when proceedings are as heated and acrimonious as those currently in question. In my view, the Defendant’s decision to persist in running a case without any admissible evidence to rely upon reflects a real disregard for any adverse costs consequences that naturally follow from such conduct. Contrary to her submissions (T37/5-10), the Defendant had every opportunity to bring these proceedings to an end. She had every opportunity to desist from her breaches, an opportunity at the interlocutory hearing before McDougall J to consent to final orders, and opportunities following the Interlocutory Judgment to negotiate a resolution of the issues, including the Calderbank letter of 27 February 2017. Indeed if she had accepted the Calderbank letter, she would not have borne the Plaintiffs’ costs. It is a pity the Defendant did not make a “realistic assessment” of her case at an earlier stage as opposed to some five days before the commencement of this final hearing (see tweet of 6 July 2017). Instead of such an assessment, the Defendant, represented by highly skilled, competent and reputable lawyers, chose to file and maintain her Amended Cross-Claim and commence the Federal Court Proceedings, all based on numerous allegations of apparent substance ranging from the Plaintiffs’ breach of the Deed to the Plaintiffs’ failure to provide a safe workplace. From the time these pleadings were served (17 March 2017), if not earlier, the question of what evidence she was ever going to deploy must have been the subject of active and ongoing consideration, particularly in light of the nature of evidence served by the Plaintiffs. Such consideration would have only become more pressing in light of McDougall J’s findings on the prima facie strength of the Plaintiffs’ case and flawed nature of the Defendant’s defence [36]-[40]. Whilst lawyers can assist in the drafting of documents, it is ultimately in the hands of the client to produce the factual materials to support the case. And yet the Defendant made no apparent attempt to substantiate the allegations and file evidence in genuine efforts to support her pleadings. She made no attempt to produce or file evidence at any stage of these proceedings, let alone by the deadline (she agreed to) of 7 June 2017, no attempt to apply for an extension of time for filing any evidence, and no attempt to explain such failures, save her tweet to the world on 6 July 2017. Any experienced litigator will know serious costs consequences can flow from the lack of success in a court case if allegations remain unsubstantiated. I can reasonably infer, given the experience of the lawyers who acted for the Defendant, she was made fully aware of the adverse consequences of not being able to substantiate any of the various serious allegations she made. As the Plaintiffs submit, I can also reasonably infer the reason no such allegations were substantiated by evidence is because no such evidence exists (Plaintiffs’ submissions on costs [5](e)). Further, I do not accept the Defendant’s contention her rights under the Deed were “manipulated” by the Plaintiffs (T37/10-15). The Plaintiffs submit, correctly in my view, the Defendant freely entered into the Deed with legal advice as evident in clause 7.4 of the Deed, and the obligations in that Deed were not imposed upon her but rather the subject of negotiation (T39/25-26). It is a fundamental principle of our law that persons should be held to their contracts. Lord Wright said Fender v St John-Mildmay [1938] AC 1 at 37-38:

The onus is always on those who assert that the Court is not to enforce a contract which is ex facie good, save on grounds of law substantial enough to outweigh the paramount policy of the law that people should keep faith and fulfil their promises. Pacta sunt servanda.

In more recent times, Gleeson CJ (as his Honour then was) observed in Baltic Shipping Co v Dillon (The Mikhail Lermentov) (1991) 22 NSWLR 1 at 9:

The general policy of the law is that people should honour their contracts. That policy forms part of our idea of what is just. Moreover, there is a particular policy of the law to encourage resolution of litigation by settlement, and that particular policy is not advanced by encouraging plaintiffs who settle litigation and later repent of their bargains to seek to avoid their contracts on the basis that they were made in circumstances of emotional vulnerability. Litigation is stressful for most people who have the misfortune to become involved in it. Most people regard the prospect of a long and expensive court case with dismay. People often settle legal claims for less than they are worth because of a desire to avoid what they see as greater evil. In its own way, this is often a calculated decision and it is frequently a prudent one.

With the Defendant failing to honour the Deed on numerous and repeated occasions, and persisting with her Amended Cross-Claim nonetheless, the Plaintiffs had every entitlement to commence proceedings to protect their rights under the Deed, and every entitlement to take the proceedings seriously given the reputational damage at stake. I accept the Plaintiffs’ submission that rather than “deliberately” trying to increase legal costs (T37/17), they conducted the proceedings in an entirely orthodox and proper fashion, deploying evidence in accordance with the timetable in support of their claim and in defence of the Amended Cross-Claim, contesting the Cross-Vesting Application, and filing submissions for this hearing (T38/39 - T40/24). Irrespective of the depth of their pockets, the Plaintiffs will be significantly out of pocket following these proceedings – a position they would not find themselves in had the Defendant chosen to capitulate at an earlier time. The Plaintiffs also made submissions in passing on the Defendant’s conduct regarding another person from a separate media organisation based on a series of emails and articles (T7/27 – T8/15, Plaintiffs’ submissions on costs [5](f)). The evidence does not put the Defendant in a favourable light. However, I am entirely unaware of the context in which this material arose, the Defendant gave no evidence on the issue, and it is not relevant to the relief sought. For these reasons, in my view, it is not necessary for me to make any findings in relation to these allegations. I am also not disposed to factor in the Defendant’s financial position in my determination of costs. The Defendant’s assertion of impecuniosity as grounds for why costs orders should not be made against her is entirely unsupported by any evidence in admissible form that could be tested in Court. The Defendant sent an email on 13 July 2017, following the completion of the hearing on 12 July 2017, attaching a fee waiver application the Defendant made to the Supreme Court of New South Wales as evidence of her financial hardship. Objection was taken to this email. In my view, the time for filing evidence has passed, and I have not taken the material into account. In any case, whilst parties’ financial positions may be relevant to the question of security for costs, in principle the parties’ relative financial positions is not relevant in the Court’s inquiry of whether each party should bear its own costs; GE Dal Pont, Law of Costs, (3rd ed 2013, LexisNexis Butterworths) (Dal Pont) at [8.32]. As the New South Wales Court of Appeal (Spigelman CJ with Ipp JA and Hunt AJA agreeing) observed in Director General, Department of Education and Training v MT (No 2) [2006] NSWCA 320 at [18]:

there is no principle that the costs discretion will be exercised in such a way as to ensure that orders are not made against persons who are not in as good a position to bear the legal costs as the party in whose favour they are made.

In light of these findings, I will determine the appropriateness of the specific costs orders sought by each party. However, before I leave the topic I should note I understand the parties made recent attempts to resolve the case. Those attempts are, and I have ruled should, remain confidential.

Defendant’s claim: each party bear the costs

The losing party must point to and the Court must be satisfied of some “exceptional measure” to justify depriving a successful party of their costs; Smeaton Hanscomb & Co Ltd v Sassoon I Setty, Son & Co (No 2) [1953] 2 All ER 1588 at 1590 per Devlin J, see also Waterman v Gerling Australia Insurance Co Pty Ltd (No 2) [2005] NSWSC 1111 at [10] per Brereton J; Dal Pont at [8.25]. Without any admissible evidence to rely on, the Defendant has not satisfied me of any grounds for why she should not pay the costs of the Plaintiffs, at least on an ordinary basis, as the unsuccessful party in these proceedings. The Defendant’s failure to provide the Court with any evidence of circumstances that may justify the Court taking the exceptional measure of ordering each party bear their own costs speaks to the weakness of her claim for such an order. Having retained experienced and reputable lawyers up until the very eve of this hearing, I can only assume the Defendant was given proper advice on the costs consequences of a belated capitulation in such hotly contested proceedings, and the need to devise a fall-back position regarding costs. I accept the plain reality is the parties did attempt to negotiate a settlement on multiple occasions to no avail. Nonetheless it must have been plainly apparent to those advising the Defendant that capitulation, in the event no agreement was reached, would result in adverse costs consequences. I can also therefore only assume her failure to provide any cogent explanation supported by evidence for why the ordinary rule for costs should not be ordered is because neither such evidence nor explanation exists. On these grounds I am not satisfied it is appropriate to order each party bear their own costs.

Plaintiffs’ claim: indemnity costs

The Court may also depart from the usual order for ordinary costs by awarding costs on an indemnity basis; s 98(1)(c) of the Civil Procedure Act. Such departure is again only appropriate where special circumstances justify the losing party compensating the successful party for the legal costs incurred by reason of the proceedings; Ex parte Venture Industries Pty Ltd (No 2) [1996] FCA 1942; (1996) 72 FCR 151 at 153 per Black CJ, 158 per Cooper and Merkel JJ. Most commonly, such an award will be appropriate where it can be said a party has maintained proceedings that they should have known had no real prospect of success: Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd (No 2) [2009] NSWCA 12 at [4] per Allsop P (with Beazley and Campbell JJA agreeing). The Plaintiffs submit this is a “clear case” for an award of indemnity costs (Plaintiff’s written submissions on costs [2]-[5]), relying on the summary of principles in Seller v Jones [2014] NSWCA 19 at [58] per McColl JA (with Ward JA, as her Honour then was, agreeing):

An indemnity order may be made in circumstances involving relevant delinquency on the part of the unsuccessful party in order more adequately to compensate the successful party to the disadvantage of what otherwise would have been the position of the unsuccessful party in the absence of such delinquency on its part: Oshlack (at [44]) per Gaudron and Gummow JJ. Such “delinquency” includes continuing or defending proceedings which, properly advised, a party should have known had no chance of success. In such a case, it will be presumed that the party so acted “for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law”: Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] FCA 202; (1988) 81 ALR 397 (at 401) per Woodward J.

The Plaintiffs also cite the New South Wales Court of Appeal (Basten JA with Giles JA and Young CJ in Equity agreeing) in Chaina v Alvaro Homes Pty Ltd [2008] NSWCA 353 at [105]- [114]. After discussing the earlier cases of Degmam Pty Ltd (In liq) v Wright (No 2) [1983] 2 NSWLR 354 and Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] FCA 202, the Court of Appeal noted at [108]:

In later cases it has been emphasised that the circumstances identified in Degmam and Fountain are not to be treated as exhaustive of the cases in which indemnity costs may be awarded: see, eg, J-Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers (WA Branch) (No 2) [1993] FCA 42 ; 46 IR 301 at 303 (French J). It was sufficient, his Honour said, to enliven the discretion to award such costs that “for whatever reason, a party persists in what should on proper consideration be seen to be a hopeless case”. An indemnity costs order will be warranted where proceedings were maintained by a party having “no reasonable prospect of success”: see, eg, Baillieu Knight Frank (NSW) Pty Ltd v Ted Manny Real Estate Pty Ltd (1992) 30 NSWLR 359 (Powell J); Huntsman Chemical Co Australia Ltd v International Pools Australia Pty Ltd (1995) 36 NSWLR 242 at 273 (Mahoney JA).

Further circumstances where indemnity costs may be appropriate include where allegations have been made which ought never to have been made or the proceedings were prolonged by groundless contentions; Colgate-Palmolive at 233 per Sheppard J, citing Ragata Developments Pty Ltd v Westpac Banking Corp (1993) 217 ALR 175 at 178 per Davies J. In my view in all the circumstances it is appropriate to order the Defendant pay the Plaintiffs’ costs of the proceedings, including the Defendant’s Cross-Claim, on an indemnity basis. As I have said, the Defendant decided to contest a claim and run a cross-claim mounted on allegations she could not substantiate, and continued to run this case in the face of adverse interlocutory findings, settlement offers, and a complete absence of evidence. This conduct is in my view unreasonable, resulting in the Plaintiffs’ incurring unnecessary and significant legal costs. An order for indemnity costs is not, as the Defendant frames it, punishing her “for taking a stand’ (T37/35-40), but rather necessary and appropriate to compensate the Plaintiffs for the unreasonable costs incurred in these proceedings.

Conclusion

I grant the orders consented to by the parties in the Proposed Short Minutes of Order (order 1, 2 and 5). In addition, in my view it is appropriate to grant the declaratory relief (order 3) with the exception of declaring the Defendant is in breach of the Corporations Act (part of order 3(b)), as well as enter judgment for the Plaintiffs (order 4), and order the Defendant pay the Plaintiffs’ costs of the proceedings, including the Defendant’s Cross-Claim, on an indemnity basis (order 6).

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I certify that this and the 25 preceding

Pages are a true copy of the reasons for

judgment herein of Justice Sackar.

Dated: 17 July 2017