Sims v Suda Ltd
[2014] WADC 161
•20 NOVEMBER 2014
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: SIMS -v- SUDA LTD [2014] WADC 161
CORAM: DAVIS DCJ
HEARD: 21 & 22 AUGUST 2014
DELIVERED : 20 NOVEMBER 2014
FILE NO/S: CIV 3938 of 2012
BETWEEN: DOUGLAS ARTHUR SIMS
Plaintiff
AND
SUDA LTD
Defendant
Catchwords:
Contract - Construction and interpretation - Contractual indemnity to plaintiff as officer and employee of defendant - Email written by plaintiff after he ceased to be a director and employee of defendant - Claim against plaintiff pursuant to the Racial Discrimination Act 1975 (Cth) based on contents of email – Whether costs incurred by plaintiff in defending the claim covered by the contractual indemnity - 'Arising from' - 'In connection with'
Legislation:
Nil
Result:
Action dismissed
Representation:
Counsel:
Plaintiff: In person
Defendant: M L Bennett
Solicitors:
Plaintiff: Not applicable
Defendant: Bennett & Co
Case(s) referred to in judgment(s):
Andar Transport Pty Ltd v Brambles (2004) 217 CLR 424
Bofinger v Kingsway Group Ltd [2009] HCA 44; (2009) 83 ALJR 1210
Bowtell v Goldsbrough, Mort & Co Ltd (1905) 3 CLR 444
Butler v St John of God Health Care Inc [2008] WASCA 174
Dickinson v Motor Vehicle Insurance Trust (1987) 163 CLR 500
Drayton v Martin (1996) 67 FCR 1; (1996) 137 ALR 145
Eastland Medical Systems Ltd v Sims [2010] WASC 33
Eastland Medical Systems Ltd v Sims [2012] WASC 241
Fraser v The Irish Restaurant & Bar Co Pty Ltd [2008] QCA 270
Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd [2012] WASCA 216; (2012) 45 WAR 291
Health Insurance Commission v Freeman (1998) 158 ALR 267
HIH Casualty & General Insurance Ltd v FAI General Insurance Co Ltd (1997) 9 ANZ Ins Cas 61‑376
JP Morgan Australia Ltd v Consolidated Minerals Pty Ltd [2011] NSWCA 3
McCann v Switzerland Insurance Ltd (2000) 203 CLR 579
National Roads and Motorists Association v Whitlam [2007] NSWCA 81
Rava v Logan Wines Pty Ltd [2007] NSWCA 62
Rickus v Motor Trades Association of Australia [2010] 265 ALR 112
Sims v Jooste [No 2] [2014] WASC 373
Sims v Suda Ltd [2014] WADC 7
Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [2014] WASCA 164
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165
Westina Corporation Pty Ltd v BGC Contracting Pty Ltd [2009] WASCA 213; (2009) 41 WAR 263
DAVIS DCJ: The plaintiff, Mr Sims, claims damages from the defendant, Suda Ltd (Suda) for breach of an indemnity.
The indemnity is contained in an employment contract between Mr Sims and Suda and dated 2 October 2007, entered into at a time when Mr Sims was a director of Suda, then known as Eastland Medical Systems Ltd or EMS.
Suda, described in the employment contract as 'the Company', is a publicly listed company which develops pharmaceutical products and distributes medical products for sale.
Pursuant to the employment contract, in which he was referred to as 'the Executive', Mr Sims was appointed from 1 October 2007 as 'the current International Business Director of the Company'.
Mr Sims ceased to be a director of Suda on 9 June 2009. It was not in issue before me that the employment contract terminated once he ceased to be a director. (In other proceedings in this court, Mr Sims brought a claim for constructive dismissal and damages under the employment contract: see Sims v Suda Ltd [2014] WADC 7. Mr Sims has appealed from that decision).
In 2011 the chairman of the board of directors of Suda, Mr Peter Jooste QC, commenced Federal Court proceedings WAD 372 of 2011 (the Federal Court proceedings) against Mr Sims pursuant to the provisions of the Racial Discrimination Act 1975 (Cth). The claim by Mr Jooste against Mr Sims was based upon remarks made by Mr Sims about Mr Jooste in an email which Mr Sims had sent to Mr Jooste and others on 10 June 2010 (the email). The Federal Court proceedings were defended by Mr Sims and eventually settled.
Mr Sims claims that his costs of defending the Federal Court proceedings ought to be indemnified by Suda pursuant to the terms of the indemnity in the employment contract. He has argued that the claim made by Mr Jooste is connected with Mr Sims' time as a director of Suda and that the indemnity is a continuing one, not voided or affected by Mr Sims resigning or otherwise ceasing to be or to act as an officer of the company for any reason.
Suda has denied any liability to pay Mr Sims's costs of defending the Federal Court proceedings. Suda submitted that the indemnity has no application to the Federal Court proceedings commenced by Mr Jooste in his personal capacity, against Mr Sims in his personal capacity, in respect of personal derogatory remarks about Mr Jooste made in the email by Mr Sims one year after his resignation from Suda.
I must determine both liability and quantum in this action.
Evidence in relation to plaintiff's claim
The only witness to give evidence was Mr Sims. He did so by way of a witness statement which I ordered to stand as his evidence‑in‑chief. Some time was taken during the trial, before his witness statement was tendered, dealing with objections raised by Suda to the contents of Mr Sims' statement.
Mr Sims was self-represented, although he has had some experience as a litigant in person. Many passages contained in his witness statement were confusing and vague and what was not confusing was often irrelevant to the pleaded issues. Other passages were in the nature of argument or submission, or vexatious, and therefore inadmissible. After dealing with Suda's objections, very little of the witness statement remained. However, other evidence was elicited from Mr Sims in cross‑examination and there were a number of documents tendered at trial.
One of the documents tendered into evidence was a decision of Murphy J in Supreme Court action CIV 3039 of 2009 delivered 22 February 2010: Eastland Medical Systems Ltd v Sims [2010] WASC 33. Mr Sims agreed during the course of his cross-examination that the facts as summarised in Murphy J's judgment were accurate (ts 156 ‑ 157).
There were also some agreed facts between the parties about which I was informed during the course of the hearing and which were later condensed to writing and tendered as an exhibit (exhibit 8).
The following is a summary of the evidence, starting with the agreed facts, supplemented by the other evidence in this trial.
The first agreed fact was that Mr Sims was a party to the employment contract.
Secondly, it was agreed that Mr Sims ceased to be a director of Suda, or EMS as it was then known, as of 9 June 2009.
After Mr Sims ceased to be a director of Suda, he remained as a major shareholder of Suda (ts 170).
Also after Mr Sims ceased to be a director, Suda made allegations that Mr Sims had breached his fiduciary duty as a director. This alleged breach of duty related to a licence agreement entered into between Suda and a German company, HC Berlin Pharma AG (Berlin Pharma). Suda had licensed its intellectual property rights in relation to a malaria treatment to Berlin Pharma in consideration of Berlin Pharma issuing 8 million shares to Suda. Suda alleged that in breach of his fiduciary duty Mr Sims had arranged for approximately 2 million of those 8 million shares to be issued to other persons: Eastland Medical Systems Ltd v Sims [5], [37] and [42].
Mr Sims disputed that he had breached his duty as a director. His evidence was that (ts 154 ‑ 155) another officer of Suda, Mr Dermott Patterson, had 'signed the patents to those rights which was the exclusive beneficial ownership of the patents to Berlin Pharma and that had caused the problem'. Then Mr Patterson had given a direction for the distribution of shares 'because the Suda and the supervisory board had been misled by the CEO and the chairman':
What took place was that somewhere in Germany within the workings of moving to list, Berlin Pharma had listed on the malaria only - only for eight million shares but Mr Patterson had issued a number of invoices discounting the eight million shares. Secondly, Mr Jooste and I had to direct some of those eight million shares, for example, to EMSSA in South Africa for the transfer of the manufacturing rights and a – another million shares to the professor - or scientist in England, 1 million shares. But at that point, we were unaware - both Mr Jooste and I were unaware that this - this - this had taken place, that the actual company had moved to list only on malaria because our understanding was that the valuer couldn't value the malaria because the first patent was in the wrong company and they'd put in a second patent which was only a few months old, so it was only a provisional patent that had no value, where the patents that were put in by my company had world-granted patents, and they had the value…
On 7 December 2009, however, Suda made an ASX announcement (annexure DAS 12 to Mr Sims' witness statement) stating that EMS had not received all of the Berlin Pharma shares and had commenced legal action in the Supreme Court 'which, if successful, will lead to the recovery of nearly 2 million of those shares from parties including related parties'.
The legal action commenced by Suda was Supreme Court Action No CIV 3039 of 2009. The defendants were Mr Sims and 11 other defendants, some of whom held Berlin Pharma shares, including Mr Sims' wife and three other companies in which Mr Sims had an interest. Mr Sims, the 11th defendant, did not hold any Berlin Pharma shares in his name. The claim made by Suda against Mr Sims related to his alleged breach of fiduciary duty.
Initially in this action Suda was successful in obtaining an injunction, granted by EM Heenan J, to restrain any dealing in the Berlin Pharma shares in issue. In the hearing before Murphy J, Suda applied to continue the injunction, on the basis that the prohibition against 'dealing' in the order made by EM Heenan J should also include a restraint on voting. For the reasons set out in his judgment in Eastland Medical Systems Ltd v Sims, delivered on 22 February 2010, and on the basis of undertakings given by the parties (an undertaking given by the first to fifth defendants who held the Berlin Pharma shares not to deal in those shares, and an undertaking as to damages given by the plaintiff applicable to the first to fifth defendants' undertaking), Murphy J discharged the injunction granted by EM Heenan J.
Mr Sims was a member of the supervisory board of Berlin Pharma. In December 2009 Suda made an ASX announcement that it was requisitioning an extraordinary general meeting to remove Mr Sims and another, Dr Rudolph Schottledrier, from the supervisory board, to appoint a special auditor and to cancel certain share capital: Eastland Medical Systems Ltd v Sims [54]. It is not clear from any of the evidence before me (including the summary of facts in Murphy J's decision in Eastland Medical Systems Ltd v Sims) whether an extraordinary general meeting was set, but there was an annual general meeting of Berlin Pharma scheduled for 13 April 2010. Suda proposed that Mr Jooste (who also had shares in Berlin Pharma) and two others be appointed to the supervisory board of Berlin Pharma: Eastland Medical Systems Ltd v Sims [54] to [57] and [75]; ts 156, ts 169 and exhibit 5.
At some stage in around March or April 2010 (the exact date is not clear) Mr Sims lodged a complaint with the Legal Profession Complaints Committee of the Legal Practice Board (WA) against Mr Jooste and another lawyer (exhibit 6; exhibit 9 par 28; ts 161 ‑ 162, 164, 180). From other evidence in this trial, (in particular the email, exhibit 6), it is apparent that in the complaint Mr Sims alleged that Mr Jooste and the other lawyer had filed a false affidavit or affidavits in the Supreme Court Action No CIV 3039 of 2009 in support of Suda's initial injunction application before EM Heenan J. Mr Sims stated that the allegation that he had arranged for approximately 2 million of the shares to be issued to other persons without the knowledge of the Board of Suda was not true.
On 26 and 27 May 2010 representatives of Suda and Berlin Pharma met in Berlin, Germany to discuss certain issues, at what Mr Sims described as the 'Berlin meeting of resolve'.
What were the issues discussed at the Berlin meeting of resolve? The evidence I heard about this was far from clear.
In his written submissions for trial (par 11) Mr Sims submitted that the meeting of resolve was to 'resolve the allegations against the Plaintiff (Mr Sims) by the Defendant's (Suda's) Board. The allegations included allegations that the Plaintiff had diverted shares away from the Defendant, assigned its Patent rights to Berlin Pharma and paid his company Fee‑Zone Pty Ltd $60,000 without the knowledge or approval of the Board (the business of the Defendant, and its subsidiaries and associated companies)'. Essentially these were the allegations by Suda that Mr Sims had breached his fiduciary duty as a director.
I clearly explained to Mr Sims that his submissions were not evidence. His witness statement, even in its inadmissible form, was not clear as to exactly what matters were discussed at the Berlin meeting of resolve.
Mr Sims' witness statement which discussed the meeting said this (par 27):
On the 25th [sic] and 26th [sic] May 2010, the Defendant in Jooste, Chairman and renumerated legal Advisor, and Director Stewart met in Berlin to attempt to resolve the allegations.
That followed an earlier reference to the ASX announcements made by Suda on 7 December 2009 and that, following the ASX announcements, comments about Mr Sims were posted on an internet chat forum known as HotChopper. Those comments essentially alleged corporate mismanagement by Mr Sims (and have been the subject of another action, brought against Mr Jooste's son, on which judgment has now been delivered: Sims v Jooste[No 2] [2014] WASC 373).
During cross-examination, Mr Sims agreed (ts 152) that the Berlin meeting of resolve was 'an EMS, Berlin Pharma discussion going on'. He later stated that (ts 158):
The meeting of the 26th and 27th evolved around the fact that Dermot Patterson had assigned the patents to - to Berlin Pharma. I - I ‑ Mr Jooste and I as late as April 2009 were trying to claw back those patents. The problem was that Berlin Pharma owned - and still own - and the problem was that the EMS board, at the direction of Mr Jooste in compliance had not informed the market that there is a dispute as to the ownership of the patents …
Mr Sims also gave evidence (ts 160) that the meeting 'concluded that the parties would work together to find a resolve for the benefit of both lots of shareholders', the EMS shareholders and the Berlin Pharma shareholders'.
Later in his evidence, however, (ts 164) Mr Sims suggested that settlement was to include the action taken by EMS in Supreme Court action CIV 3039 of 2009.
As part of the Berlin meeting of resolve there was a protocol agreed that the parties would cooperate with each other (ts 160). This was sometimes referred to as the 'agreed protocol'.
The third and fifth agreed facts were that the email (which I have referred to in [6] above and is exhibit 6) was sent by Mr Sims on 10 June 2010 to the following people:
(a)Kwame Amuah. Mr Amuah was a director of Star Medical (Botswana) Limited and a member of the supervisory board of Berlin Pharma.
(b)Mr Peter Jooste QC (Chairman of EMS);
(c)Mr Mike Stewart (Director of EMS);
(d)Email address ETC Germany – being the email address of Dr Schotteldreier (Chairman of Berlin Pharma); and
(e)Mr Toby Barrie, Solicitor at DLA Phillips Fox, Mr Sims' then advisor nominated by Chubb, professional indemnity insurers – although it is noted that the email address of Mr Barrie was spelt incorrectly.
The fourth agreed fact was that the email (in particular the second last and third last paragraphs on page 1) was the subject of proceedings pursuant to the Racial Discrimination Act commenced by Mr Peter Jooste QC against Mr Sims in the Federal Court proceedings WAD 372 of 2011.
I pause here to note that the above agreed fact when it was first read out to me, before it was reduced to writing, included that the email constituted racial vilification. Mr Sims in his witness statement (exhibit 9, pars 40 and 43) referred to the fact that Mr Jooste lodged a complaint claiming racial vilification against Mr Sims surrounding the email, and then commenced the Federal Court proceedings.
I do not consider it is appropriate that I reproduce in this judgment the remarks in the email which were the subject of the Federal Court proceedings. It is sufficient to say that I find that the remarks made were personal, relating to the background and upbringing of Mr Jooste and, I find, derogatory.
The circumstances in which the email was written has been the subject of evidence and submissions in this action.
On 9 June 2010 Mr Sims wrote an email to the same recipients as set out in [35], which said:
I have tonight reviewed a phone message recording of Peter Jooste QC to Chairman hcBPAG Mr Schotteldreier whereby Mr Jooste has again accused me of breaking protocol of the recent Berlin meetings of resolve.
Mr Jooste has requested that Mr Schotteldreier restrain Doug from his breaches of protocol of these meetings.
I have attached a copy of the complaint to which he refers which was lodged with the Legal Board in April.
This complaint is clearly defined within the letter and was the major contributor to the problems now encountered by EMS in the Courts.
There are also copies of the minutes of the meeting in the offices of MacdonaldRudder [sic] also lodged in the Supreme Court.
How Mr Jooste can bring this past complaint (which is being properly investigated by the Legal Practice Board) as a breach of protocol last week is beyond imagination.
For Mr Jooste, a representative of the Queen to continually attack me for breach of protocol is a major obstacle in resolve, bearing in mind that EMS are under the Undertakings to the Supreme Court of Western Australia for damages.
I believe that if a resolve is to be reached, Mr Jooste must return to ethical conduct and stop this undermining as he has a lot to answer to the courts and in the public arena.
The typical conduct of Jooste is contained within several letters of accusation as to my distribution of material to several shareholders.
As I recorded at the meetings in Berlin I am not the distributor of this material but Jooste continues to accuse me.
On the letter to EMS Albany Shareholder Jeremy Stevenson, I answered this in reply as a result of a letter of questions by Jeremy and these answers are accurate and correct.
Mr Jooste has again jeopardised settlement with me and the complete blame sits with him.
Most difficult to accept this man is a QC and Chairman of a public company.
Doug Sims
Reference to the complaint to the 'Legal Board' is a reference to the complaint which Mr Sims had earlier brought against Mr Jooste and another lawyer, which I have mentioned in [24] above. Mr Sims confirmed this in his cross-examination (ts 162) and explained that he had stated in his email 'How Mr Jooste can bring this past complaint, (which is being properly investigated by the Legal Practice Board), as a breach of protocol last week, is beyond imagination', because 'he's accusing me of doing it to break protocol after the 26/27 May meetings'.
The reference to Undertakings to the Supreme Court of Western Australia for damages referred to in Mr Sims' email of 9 June 2010 related to undertakings given by Suda in Supreme Court proceedings CIV 3039 of 2009 (ts 163).
In cross‑examination Mr Sims agreed (ts 163) that his reference in the email to the settlement which he said Mr Jooste had jeopardised was the settlement between EMS and Berlin Pharma which had been the subject of negotiations in May, or as Mr Sims put it, 'well, it was trying to find a resolve' (ts 164).
On the same day, 9 June 2010, Mr Amuah responded in a conciliatory way, saying:
Hi Doug
I have taken note of the content of your letter. I have not spoken to Peter or Rudi so not aware of the substance of the communication between the two. However, I will suggest we put on hold past and future legal actions until we have resolved the challenge we are facing regarding HCBPAG [Berlin Pharma]. To me it doesn't help the situation for us to spend energy on matters which are not going to help our course. The issue here is not one of restraining one another but respecting the undertaking we made of not inflaming the situation. So while I accept that you lodged your complaint in April this year it would have been proper to have advised the Legal Board of the effort we have embarked upon to resolve the issues which in part necessitated the lodgement of the complaint. Doug, while I'm not taking sides here, but given the situation we've found ourselves I sincerely plead with you consider an arrangement with Peter where you withdraw these complaints as part of the global settlement we are working on.
The reference in Mr Amuah's email to 'Peter' was a reference to Mr Jooste and the reference to 'Rudi' was a reference to Rudolph Schotteldreier.
Mr Amuah's email prompted a reply to all from Mr Sims the next day, which is the email in issue and led to the commencement of the Federal Court proceedings by Mr Jooste against Mr Sims. He began as follows:
Hi Kwame,
Firstly let me say I respect your advice and risk management with the greatest of respect.
To advise the Legal Board of the efforts in Germany was to [sic] late. They had already confirmed they were acting.
When you have an enemy that have attacked you like Peter and Mike have me personally, it means there is war.
When the enemy wears a red Jacket then they risk being shot at every possible chance.
…
Mr Sims then addressed the subject matter of the complaint to the Legal Practice Board, as I have summarised in [24] above. Mr Sims went on:
The actions of Thomas supported by Peter, led to the granting of the injunction by Justice Heenan and his public comment that I, Doug Sims had acted alone and without the knowledge of the EMS Board.
Of course this was not true and is evidenced in the Courts.
Since the time EMS (Peter & Mike) have continued to attack me on the ASX Platform.
Kwame, if I were Peter and Mike, I would have simply said 'Doug we have made a mistake and Dermott contributed to that mistaking by with holding the key correspondence, we are sorry and we are sorry for the pain and suffering we have caused you family. Can we move forward?
I would have said, yes we can but if you step out of the line again any bar to action is void and I will bring you to justice.
Immediately following this the remarks the subject of the Federal Court proceedings were made (which for the reasons I have explained I will not reproduce). Mr Sims then concluded:
Yes, I want both companies to survive and we have a huge task upon us but, Peter must stop his fabricated accusations and apoligise [sic]. Peter and Mike must take full responsibility to the damage and the restrictions their actions placed upon BP, and for that matter the contributing factors that restricted us from operating properly. In other words, their conduct has destroyed the shareholders value of both companies and most probably the companies and the project.
Instead they call the BP Supervisory Board cowboys.
On my personal issue of funds due:
If EMS do not settle the $339,554.00 and issue the 4,123,000 EMS Shares to me by Friday 18th June 2010 as agreed at the end of the meeting by Mike which was to be done within 14 Days (Tomorrow) then I am issuing the Writ for the $339,554.00 and distributing the Shareholder letter in response to the 21st May ASX announcement, and that brings all matters to a terminal end.
We try so hard to succeed this project and Peter just keeps fighting and we have to contend with disgracefull [sic] people like Ottmar stealing for all of us. Two months ago I was told to get my affairs in order as to my coronary disease and where are we, even further away.
We drop everything and travel to Germany (Our cost) think we are getting somewhere and Peter infers I break protocol on something that was lodged 3 months before. He continually distorts the truth to cause friction and damage. Of course EMS pay all their costs.
I will send under separate cover the actual message to Rudy:
EMS as of today, still owe BP Euro 8.0 MI so I hope Hasso Plattner co‑operates before a liquidator moves in.
Best Regards
Doug
The reference to BP is a reference to Berlin Pharma. Mr Sims' evidence was that when he spoke about wanting both companies to survive, he was talking about Suda (EMS) and Berlin Pharma (ts 167). When Mr Sims said that contributing factors had 'restricted us from operating properly', the reference to 'us' was a reference to Berlin Pharma (ts 168).
On the day after Mr Sims sent his email, 11 June 2010, Suda made an ASX announcement (exhibit 11), which included the following (Suda then being known and referred to in this ASX announcement as 'Eastland'):
As previously announced to the ASX on 21 April, Eastland has been in discussion with HC Berlin Pharma AG ('Berlin Pharma') in respect to various commercial issues.
Berlin Pharma has been Eastland's contracted manufacturer for the ArTiMist malaria treatment.
In late May, EMS representatives held meetings over two days in Berlin with Berlin Pharma in an effort to resolve commercial issues between the companies. The outcome of these meetings was positive. Eastland has since been informed by Dr Roland K Wildner, CEO of Berlin Pharma, that flowing from a complete review of the financial position of the company, he was forced to commence insolvency proceedings.
Mr Sims agreed in cross-examination (ts 151 ‑ 152) that the EMS representatives referred to in this ASX announcement who had met with Berlin Pharma were Mr Jooste and Mr Stewart, with lawyers for EMS by video link, and that the Berlin Pharma representatives were Mr Sims, Dr Schotteldreier, Mr Amuah and lawyers for Berlin Pharma.
The sixth, seventh and eighth agreed facts were that Eastland Medical Systems South Africa (Proprietary) Limited (EMSSA) and Star Medical (Botswana) Limited (Star Medical) were subsidiaries of EMS as at 10 June 2010. EMSSA was deregistered on 16 July 2010 and Star Medical was deregistered on 29 December 2010.
Mr Sims was a director of EMSSA. Some time before the deregistration of EMSSA, however, at a meeting of directors held 9 May 2008 those directors, including Mr Sims, resolved to cease the business operations of that company, effective from 9 May 2008 (exhibit 5). After that day, it had no further operations – in Mr Sims' own words 'we stripped it' (ts 172).
Mr Sims was also a director of Star Medical. His evidence (in his witness statement) was that he did not resign or terminate his position with Star Medical. Star Medical had, however, recorded Mr Sims' resignation effective 9 June 2009 (exhibit 13).
The Supreme Court Action No 3039 of 2009 and some other actions between Mr Sims and Suda settled in November 2010. Following the settlement, on 24 November 2010 Suda made an ASX announcement that 'the allegations against Mr D A Sims and Mrs L Sims in Supreme Court action CIV 3039 of 2009 have been settled, withdrawn and dismissed' (annexure DAS 16 to Mr Sims' witness statement).
Mr Sims was anxious that I receive the settlement deed recording this settlement, however, that deed is not relevant to the claim as pleaded. The issue in this action is whether Mr Sims is entitled to claim his legal costs of defending the Federal Court proceedings pursuant to the terms of the indemnity in the employment contract.
The first formal demand made to Suda on behalf of Mr Sims to be indemnified for his legal costs of defending the Federal Court proceedings was made by letter dated 13 December 2011 (exhibit 14). Other letters of demand followed (exhibits 15 and 16). In April 2012 a statutory demand was issued by Mr Sims against Suda (exhibits 17 ‑ 19; see also exhibit 10, second last page). That statutory demand was set aside and Mr Sims ordered to pay Suda's costs of the proceedings (exhibit 10; ts 131 ‑ 132 and 150): see also Eastland Medical Systems Ltd v Sims [2012] WASC 241 (Master Sanderson).
It is not in dispute that the Federal Court proceedings were resolved before trial, by a deed of settlement dated 21 November 2012. It was expressly agreed in the terms of the settlement that Mr Sims was free to pursue this action.
The terms of the indemnity
The employment contract set out Mr Sims' duties (cl 5), Suda's obligations (cl 6) and Mr Sims's remuneration (cl 7 to cl 11). Obligations of confidentiality were set out (cl 12) and there was a specific clause dealing with 'Protection of the Company's interests' (cl 13). Three clauses dealt with termination of the contract and the consequences of termination (cl 15 to cl 17).
The indemnity given by Suda was as follows (cl 14):
14Indemnity
14.1Indemnity
To the maximum extent permitted by law, the Company will indemnify the Executive and keep the Executive indemnified against any Legal Proceedings and any claims of any kind made against, suffered, paid or incurred by the Executive pursuant to, arising from or in any way connected with the Executive being an officer of the Company, the employment of the Executive by the Company and any act or omission by the Executive, directly or indirectly, connected therewith, or a breach by the Company of its obligations under this Deed.
14.2Continuing indemnity
(a)The indemnity contained in this Deed is a continuing indemnity and is not voided or affected by the Executive resigning or otherwise ceasing to be or to act as an officer of the Company for any reason, or by the occurrence of any other event.
(b)The indemnity given by the Company under this Agreement is irrevocable and will continue for the entire Access Period (which includes that period after the Executive ceases, for any reason, to be an officer of the Company) and is not affected by:
(i)any intermediate payments, settlement of accounts or payments;
(ii)delay on the part of the Executive;
(iii)the death, bankruptcy, insolvency or liquidation of any person; or
(iv)any other thing or matter which might otherwise affect the indemnity, whether in law or equity.
14.3Payment on Demand
(a)Any substantiated moneys payable by the Company under this Agreement and the indemnity are due and payable by the Company to the Executive on demand.
(b)Any obligations under this Agreement must be performed and fulfilled immediately.
14.4Notice of Claim
The Executive must give the Company notice of any possible claim the Executive may have under Clause 16.1 as soon as reasonably practicable after becoming aware of an actual or threatened claim, proceeding or other circumstance which could give rise to such an indemnity claim.
The definition of 'Access Period' in cl 1.1 of the employment contract is as follows:
Access Period means the period commencing on the Appointment Date and ending on the later of:
(a)the date which is 3 years after the Executive ceased to be an officer of the Company; and
(b)the date any Legal Proceedings have been finally resolved.
The definition of 'Legal Proceedings' in cl 1.1 of the employment contract is as follows:
Legal Proceedings means proceedings of any kind including any enquiry by any authority or other person and includes also any claim, action, suit or demand, whether civil or criminal, which relate to or arise from or are in any way connected directly or indirectly with the Officer being an officer of the Company or the employment of the Officer with the Company or any subsidiary and any act or omission by the Officer and includes legal costs.
Legal principles relevant to the construction of an indemnity clause
There are well known general principles of contractual interpretation which can be summarised as follows.
In construing the rights and liabilities of the parties to a contract the court acts objectively. The meaning of the terms of a contract is to be determined by what a reasonable person would have understood them to mean. This normally requires a consideration of not only the text, but the surrounding assumptions known to the parties and the purpose and object of the transaction: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 [40].
A business‑like interpretation should be applied having regard to the language used by the parties, the commercial circumstances which the contract addresses and the objects which it is intended to secure: McCann v Switzerland Insurance Ltd (2000) 203 CLR 579 [22].
When construing a contractual indemnity, the accepted approach to contractual construction is applied. However, where there is any doubt or ambiguity as to the terms of the indemnity, the construction of a provision in the contract must be resolved in favour of the indemnifier: Andar Transport Pty Ltd v Brambles (2004) 217 CLR 424 [17] ‑ [23]. Westina Corporation Pty Ltd v BGC Contracting Pty Ltd [2009] WASCA 213; (2009) 41 WAR 263 [49] ‑ [52]. The doubt may arise not only from the uncertain meaning of a contractual provision, but also from its apparent breadth of possible application: Bofinger v Kingsway Group Ltd [2009] HCA 44; (2009) 83 ALJR 1210 [53]; Westina Corporation Pty Ltd v BGC Contracting Pty Ltd [49].
Ambiguity can arise in any situation in which the scope or applicability of a contract is, for whatever reason, doubtful: Bowtell v Goldsbrough, Mort & Co Ltd (1905) 3 CLR 444, 456 – 457. It is not confined to lexical, grammatical or syntactical ambiguity: Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd [2012] WASCA 216; (2012) 45 WAR 291 [77]; Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [2014] WASCA 164 [73].
The words in the indemnity clause in this case, cl 14.1, are 'arising from or in any way connected with the Executive being an officer of the Company, the employment of the Executive by the Company and any act or omission by the Executive, directly or indirectly connected therewith'.
'Arising out of' has been held to connote a wider connection or radius of causal proximity than the words 'caused by' which requires a direct or proximate causal relationship. Unlike 'caused by', the phrase 'arising out of' is not analogous to or reliant on the common law doctrine of causation: Dickinson v Motor Vehicle Insurance Trust (1987) 163 CLR 500, 505.
There is no easy test for the nature or extent of the causal or consequential relationship involved in the words 'arising out of'. The relationship should not be remote, but must still be one of substance, albeit less than that required by words such as 'caused by' or 'as a result of'. Beyond that it is a question of judgment on the particular facts: Butler v St John of God Health Care Inc [2008] WASCA 174 [39].
'In connection with' is a phrase of wide connotation requiring merely a relationship between one thing and another: Drayton v Martin (1996) 67 FCR 1, 32; (1996) 137 ALR 145, 172 (affirmed on appeal in HIH Casualty & General Insurance Ltd v FAI General Insurance Co Ltd (1997) 9 ANZ Ins Cas 61‑376).
However, the connection must be such that one thing is 'bound up' with or involved in, or having to do with another: Drayton v Martin; Health Insurance Commission v Freeman (1998) 158 ALR 267, 273, applied in Fraser v The Irish Restaurant & Bar Co Pty Ltd [2008] QCA 270 [42] ‑ [44]; JP Morgan Australia Ltd v Consolidated Minerals Pty Ltd [2011] NSWCA 3 [41] ‑ [48].
What kind of relationship will suffice to establish the connection in a particular case will be a value judgment: Fraser v The Irish Restaurant & Bar Co Pty Ltd [42] and [43].
I have been referred to the cases of Rickus v Motor Trades Association of Australia [2010] 265 ALR 112 and National Roads and Motorists Association v Whitlam [2007] NSWCA 81 (NRMA v Whitlam).
In Rickus v Motor Trades Association of Australia Mr Rickus was the chairman of the board of directors of the trustee of the Motor Trade Association's industry superannuation fund. The Australian Prudential Regulation Authority (APRA) conducted a prudential review of the fund and served upon Mr Rickus a notice requiring him to produce books and records. He produced the documents required but shortly after this was removed from the board of the trustee. A month after his removal from the board, he provided to a committee of the board of directors of the trustee a list of the documents he had produced to APRA. The trustee then made demands upon him for copies of the documents he had so produced. When he did not provide the copies requested the trustee commenced proceedings against Mr Rickus seeking, inter alia, that he provide copies of the documents he had provided to APRA. Mr Rickus filed a cross‑claim seeking a declaration he was entitled to be indemnified by the trustee in respect of legal costs incurred by him in defending the proceedings and resisting the trustee's claims before the proceedings were commenced. He based his claim upon a deed of indemnity entered into between him and the trustee.
The Federal Court held that Mr Rickus was entitled to his indemnity in respect of the amount of legal costs incurred in defending the proceedings and in resisting the claims made by the trustee. It was held that his liability for legal costs incurred fell within the subject matter described in cl 2.2 of the deed as 'a liability incurred by the officer … in his capacity as a director of the trustee and by virtue of holding office as a director of the trustee'.
In NRMA v Whitlam the plaintiff, Mr Whitlam, claimed legal costs incurred in bringing two actions for defamation. The claims for defamation arose from a recorded television interview which Mr Whitlam had given in the course of his duties as president of the NRMA. Once the defamation actions were concluded Mr Whitlam sought indemnity for NRMA for his legal costs in bringing the actions. He claimed indemnity on the basis of one or both of two deeds entered into between himself and NRMA or alternatively on the basis of the general law. The NSW Court of Appeal held that Mr Whitlam was not entitled to be indemnified for these costs, either pursuant to the indemnity clauses in the deeds or the general law.
In relation to the contractual indemnities, in NRMA v Whitlam the indemnity under one of the deeds (repeated in the later deed, other than that NRMA was referred to by the name Association) was as follows:
1.1Indemnity
NRMA indemnifies the Officer on a full indemnity basis and to the full extent permitted by law against all Liabilities incurred by the Officer as an officer of any NRMA Group Company, including without limitation a liability for negligence and for reasonable costs and expenses, not limited to taxed costs incurred:
(a)in defending proceedings, whether civil or criminal, in which judgement is given in favour of the Officer or in which the Officer is acquitted; and
(b)in connection with an application in relation to such proceedings in which the Court grants relief to the Officer under the Corporations Law.
The costs of the defamation actions did not fall within either par (a) or par (b) of the indemnity. The contention on appeal was that they satisfied the text of by being costs that were 'incurred by the Officer as an officer of' NRMA. Campbell JA (with whom Beazley JA and Handley AJA agreed) explained that Mr Whitlam was not entitled to indemnity because [78] ‑ [80]:
[78]The expression 'as an officer' has in the present context the shade of meaning of 'while acting in the role of an officer'. If an officer is sued for a liability he or she is alleged to owe by reason of his or her actions in the role of an officer, it is within the scope of the indemnity. It is because any such liability is within the scope of the indemnity that reasonable costs incurred in defending any such assertion of liability are themselves also within the scope of the indemnity.
[79]The same cannot be said, however, about the legal costs that an officer sustains in bringing defamation proceedings by reason of an allegation made about the manner in which the officer has performed his or her duties as an officer, or where the performance of the officer's duties provided raw material that was intermingled with other material to produce a defamatory statement. In that case, for the reasons given earlier, the circumstances of the making of the defamatory statement do not themselves give rise to a Liability within the meaning of cl 1.1.
[80]When Mr Whitlam incurred the costs of the defamation actions, he was seeking to redress consequences of actions he had taken as an officer, but in incurring those costs, he was not, then and there, acting as an officer. In these circumstances, when Mr Whitlam incurred legal costs in connection with the defamation action, his commencement of those defamation actions was not part of his duties as an officer of NRMA. Nor, when he had specifically asked whether NRMA would meet any costs he incurred concerning the defamation action, and was told that NRMA would not meet those costs, could he have been of the impression that NRMA regarded itself as liable to pay for the costs of that litigation. In those circumstances, the incurring of the costs was not in his role as an officer of NRMA.
It was also held that Mr Whitlam was not entitled to an indemnity under the general law. As explained by Campbell JA [84] ‑ [92], there is a principle of law that a person acting on behalf of another is entitled to be indemnified for loss that the person may suffer as a result of so acting. That principle extends in some circumstances to a situation where a company director is entitled to an indemnity for his expenses in commencing and running litigation. However, that entitlement to indemnity is dependent on the litigation being part of the due performance of the director's office.
Discussion and findings
Having regard to the terms of the indemnity, I am not satisfied that the plaintiff is entitled to his costs of defending the Federal Court proceedings, as he has claimed.
The indemnity first refers to legal proceedings and claims pursuant to, arising from or in any way connected with:
(a)the Executive (Mr Sims) being an officer of the company; or
(b)the employment of the Executive by the Company.
The indemnity clause then refers to 'and any act or omission by the Executive, directly or indirectly, connected therewith'.
On a plain and objective reading of the words used, the reference to an act or omission 'directly or indirectly connected therewith' relates back to the previous two alternatives of being an officer or employee of the Company. Thus the act or omission must be directly or indirectly connected with Mr Sims' role as an officer or employee of the Company (Suda). So, if Mr Sims was sued for a liability he is alleged to have owed by reason of his actions in the role of an officer or employee, his costs of defending the claim would fall within the scope of the indemnity.
It is conceivable, on a purely hypothetical basis, that some act or omission which occurred after Mr Sims ceased to be a director and employee of Suda could enliven the indemnity, because the adverb 'indirectly' is capable of giving a wide application to the words 'connected therewith'. However, the act or omission would have to relate to Mr Sims' role as an officer or employee of Suda. Rickus v Motor Trades Association of Australia is an example of such a case. This is not such a case.
The subject matter of the Federal Court proceedings was not an after the fact dispute relating back to Mr Sims' time as an officer or employee of Suda. Mr Sims' remarks in the email about Mr Jooste, which led to the Federal Court proceedings, were entirely personal, as I have discussed in [38] above. For these reasons alone, the indemnity could not extend to cover Mr Sims' costs of defending the Federal Court proceedings.
Mr Sims has, however, argued that he is indemnified against any and all costs incurred by him directly or indirectly connected with his being an officer or past officer of Suda or its subsidiary companies. In summary, his arguments are that:
(a)based on cl 14.2 of the employment contract, the definition of Access Period and the Definition of Legal Proceedings, the indemnity under the employment contract is a continuing one which applied to not only Suda but also its subsidiaries;
(b)the indemnity applied to him because at the time of the email he was still a director or employee of Suda's subsidiaries, EMSSA and Star Medical; and
(c)the costs of the Federal Court proceedings are recoverable from Suda pursuant to the indemnity because the email he wrote is 'connected' with his time as a director and employee of Suda. His argument was to the effect that the Federal Court proceedings eventuated because of the allegations in Supreme Court action CIV 3039 of 2009 which relate to his time as a director.
I will address each of these arguments separately, although to some extent the issues overlap.
First, in relation to the continuing nature of the indemnity and its application to Suda's subsidiaries, in my view, what was intended by the plain words of cl 14.2, coupled with the definition of Access Period, was to ensure that Suda continued to indemnify Mr Sims for any claim or proceedings relating to his role as an officer of Suda, whether the claim was made or the proceedings brought while he was an officer, or whether the claim was made or proceedings brought after he had ceased to be an officer. For example, Mr Sims may have done something negligent while he was an officer of Suda, without a claim being brought or legal proceedings commenced until after his resignation. In those circumstances the indemnity would apply.
The definitions of Access Period and Legal Proceedings cannot and do not, in my view, expand the basis upon which Suda can be held obliged to indemnify pursuant to cl 14.1 for the following reasons:
(a)There is a conflict or ambiguity because of the difference in the wording of cl 14.1 and the definition of Legal Proceedings. Applying the legal principles I have set out in [66], that ambiguity must be resolved in favour of Suda and I find that the indemnity is confined to that provided in the principal clause, cl 14.1;
(b)In my view the construction as argued by Mr Sims would force upon the words of cl 14.1 a meaning which they cannot fairly bear, bending them to the point of 'breaking': Rava v Logan Wines Pty Ltd [2007] NSWCA 62 [56];
(c)A reasonable person would not have understood the words of cl 14.1 to mean that the indemnity extended to any role which Mr Sims had as a director or employee of a subsidiary company; and
(d)Such a construction is not a business like one having regard to the language used by the parties, the commercial circumstances of the contract and its objects.
Accordingly, I find that Suda's obligations to indemnify extend only to legal proceedings or a claim directly or indirectly connected with Mr Sims' role as an officer or employee of Suda. It does not extend to indemnify anything done by Mr Sims in his role as an officer of any of Suda's subsidiaries.
Secondly, if I am wrong and the indemnity does extend to cover Mr Sims while he was a director or employee of Suda's subsidiaries, I am unable to accept Mr Sims' contention that he was at the time of the email a director or employee of Suda's subsidiaries, EMSSA and Star Medical, for the following reasons:
(a)Mr Sims' evidence that he was an employee of either EMSSA and Star Medical is inconsistent with the evidence about the status of those companies as I have set out in [52] ‑ [54] above;
(b)Mr Sims' evidence that he was an employee of either EMSSA and Star Medical is also inconsistent with the first letter of demand which Mr Sims' former solicitors, HHG Legal Group, wrote to Suda's solicitors (exhibit 14). In that correspondence, which Mr Sims hesitantly but eventually acknowledged in cross-examination had been sent with his approval, the claim for indemnity was made solely on the basis of Mr Sims' directorship of Suda. There is no mention of any issue in that letter of demand to do with either EMSSA or Star Medical;
(c)Further, on his own admission (see [51] above) Mr Sims attended the Berlin meeting of resolve as a representative of Berlin Pharma. He was not there in the capacity of either a director or employee of EMSSA or Star Medical; and
(d)Finally, on a plain reading of the email, it has no relationship to the affairs of either EMSSA or Star Medical, something with which Mr Sims agreed in cross‑examination (ts 182).
The third way in which Mr Sims sought to extend the operation of the indemnity was to contend that the costs of the Federal Court proceedings are recoverable from Suda pursuant to the indemnity because the email related to the business of Suda and occurred after the Berlin meeting of resolve. Mr Sims claimed that at the Berlin meeting of resolve there was an attempt to resolve the allegations that Suda had made against Mr Sims, inter alia, in the Supreme Court action CIV 3039 of 2009. Thus, he argued, the costs of defending the Federal Court proceedings are 'connected' with his time as a director and employee of Suda.
Mr Sims also asserted that had he not been an officer of Suda, then the Federal Court proceedings could never have eventuated, because it 'surrounded the business of Suda' and the matters the subject of the Supreme Court action CIV 3039 of 2009 and other actions.
Those other actions are set out in Mr Sims' submissions as CIV 3447 of 2009 and CIV 1737 of 2010. The evidence was that CIV 3447 of 2009 was an action taken by Mr Sims against Suda for payment of monies, which Suda paid. The action was commenced in the District Court and then transferred to the Supreme Court where it became action number CIV 1737 of 2010. I am not satisfied that this has any relevance to the issues in this trial.
I am not satisfied that the Berlin meeting of resolve was an attempt to resolve the allegations of breach of fiduciary duty made against Mr Sims personally in Supreme Court action CIV 3039 of 2009. As Mr Sims conceded in cross‑examination (see [31], [32], [43] and [51] above), the Berlin meeting of resolve was to address issues between Suda and Berlin Pharma.
Even if I were prepared to accept that during the Berlin meeting of resolve there was discussion about resolving Suda's allegations against Mr Sims, as he suggested during cross‑examination (as I have set out in [33] above), I do not accept that the terms of the indemnity extends as he has contended. This is because, based on all of the evidence, I find the following:
(a)Mr Sims attended the Berlin meeting of resolve in his capacity as a member of the supervisory Board of Berlin Pharma. He was not there in the capacity of an officer of Suda or any of its subsidiaries.
(b)When he wrote the email Mr Sims was not doing so in his role as a director or officer of Suda or its subsidiaries.
(c)As demonstrated by the passages in the email chain and Mr Sims' evidence as I have set out in [40] and [41], Mr Sims made the remarks in the email because he believed that Mr Jooste was accusing him of having breached the agreed protocol reached at the Berlin meeting of resolve by making his complaint to the Legal Practice Board.
(d)For the reasons I have already discussed, while I have not set out the remarks that Mr Sims made in the email, as I have found in [86] above they were entirely personal remarks about Mr Jooste.
(e)The remarks in the email:
(i)had no relationship to any role which Mr Sims held before he ceased office on 8 June 2009 with either Suda or its subsidiaries; and
(ii)had no relationship to the business of Suda or its subsidiaries.
(f)Mr Sims' defence of the Federal Court proceedings was not part of his duties as an officer or employee of Suda or as an officer or employee of any subsidiary of Suda.
(g)When he was defending the Federal Court proceedings he was not acting as an officer or employee of Suda or any of its subsidiaries.
In all of the circumstances I am not satisfied that Mr Sims' remarks in the email are pursuant to, arise from or are in any way connected with his former role as a director or the Executive of Suda, or that it was an act or omission by him, directly or indirectly, connected with his former role.
In my view, Suda's claim that Mr Sims breached his fiduciary duty as a director, the subject of Supreme Court action CIV 3039 of 2009, is no more than a background event which goes to explain why Mr Sims reacted as he did when he discovered, as set out in his email of 9 June 2010, that Mr Jooste had accused him of 'breaking protocol of the recent Berlin meetings of resolve'.
The basis of the connection as argued by Mr Sims is, in my view, too tenuous and remote. The Federal Court proceedings commenced by Mr Jooste in his personal capacity, against Mr Sims in his personal capacity, because of the personal remarks made by Mr Sims in the email, is not something which is 'bound up' with or involved in, or had to do with Mr Sims being a past officer of Suda. The background event of Suda's claim that Mr Sims breached his fiduciary duty as a director is insufficient to establish that the Federal Court proceedings had any connection, even an indirect connection, with Mr Sims being an officer or the Executive of Suda, as required under the terms of the indemnity.
Mr Sims' claim for indemnity must be dismissed.
Damages
Ordinarily, having found against Mr Sims on the issue of liability, I would make a provisional assessment of damages to cover the situation where, if my decision on liability is varied on appeal, the matter need not be remitted back to the District Court for assessment of damages: Kerr v Minister for Health [2009] WASCA 32 at [10].
However, the state of the evidence led by Mr Sims on the issue of quantum is such that I find myself unable to do so.
After the settlement of the Federal Court proceedings, when Mr Sims issued his statutory notice of demand against Suda the amount he was seeking for costs was the sum of $41,882.14.
The amount now claimed by Mr Sims is the sum of $169,293.81. At trial he produced a schedule claiming that amount and a bundle of invoices (exhibit 10).
The schedule includes a claimed amount of $21,266.38 which were Suda's costs, as taxed, and ordered to be paid by Mr Sims when his statutory demand was set aside. I would not allow Mr Sims to recover those costs. To do so would be contrary to the orders made in the Supreme Court and is an attempt to go behind the judgment of Master Sanderson.
One of the invoices listed in Mr Sims' schedule of legal costs has a note against it in the Schedule stating 'invoice not available'. This is invoice dated 31 May 2012, number 51077 in the sum of $8,219.65. In the absence of that invoice and other evidence relating to the fact that it related to the defence of the Federal Court proceedings, I would not allow that claimed invoice.
There is an invoice dated 28 February 2012 from another firm of lawyers, Coulson Legal, for an amount of $5,115.88. From the description of the work set out in the invoice, and other documents attached as part of exhibit 10, this relates to the defence of Magistrates Court proceedings commenced by HHG Legal Group to recover its costs from Mr Sims. Mr Sims claimed that Coulson Legal was engaged to tax HHG Legal Group's costs (ts 133). I do not accept that; the invoice is plain on its face. However, in either case, I would not allow recovery of that amount as part of the damages in this action as these costs do not relate to the defence of the Federal Court proceedings.
There are two invoices, one dated 30 November 2012 Invoice Number 0055895, and the other dated 20 December 2012, invoice number 0056377, which bear a matter number 101554 and the description 'Enforcement of company directors and officers indemnity'. I would not allow any of the amounts set out in those invoices, as I am not satisfied that they relate to the Federal Court proceedings.
The remaining invoices in Mr Sims' claim, bear a different matter number, 99757, which appears to relate to the defence of the Federal Court proceedings. However, a number of these invoices contain itemisations or timesheet details for costs involved in advising Mr Sims in relation to his claim for indemnity, making demand to Suda (EMS) for the indemnity, and the preparation and issue of the statutory demand which was set aside. Invoices with these costs included in their itemisation include the following:
Date
Invoice Number
30 November 2011
0047671
22 December 2011
0048121
31 January 2012
0048720
30 March 2012
0049952
16 April 2012
0050146
30 April 2012
0050410
15 May 2012
0050823
16 July 2012
0053073
The fact that some of the work carried out by Mr Sims' lawyers did not specifically relate to the defence of the Federal Court proceedings, but related to advice given to him in relation to his claim the subject of this action is confirmed in a letter from Mr Sims' lawyers, HHG Legal Group, to Suda's lawyers dated 17 April 2012 (exhibit 18) in which it was stated (pages 3 ‑ 4):
…the fees incurred relate to legal advice and representation provided to our client concerning the Proceedings.
Part of that advice extends to dealing with the important matter of whether EMS should, pursuant its obligations under the Deed, be paying our client's legal fees.
I pause here to note that the reference to the Deed is reference to a different document said to contain an indemnity from Suda to Mr Sims, and not the indemnity in the employment contract the subject of this action.
While HHG Legal Group went on in that letter to argue that 'such advice is not separate to or distinct from that legal advice relating to the manner in which our client responds to' the Federal Court proceedings, that is not an argument which I accept. The costs of giving advice on whether Suda is obliged to indemnify Mr Sims, which is ultimately the subject matter of this action, is not part of the costs incurred in defending the Federal Court proceedings and I would not allow recovery of those costs as part of the damages in this action.
I would also not allow any costs incurred which relate to the preparation and issue of the statutory demand which was set aside.
Two invoices, invoice dated 16 March 2012, number 0049563 and invoice dated 30 March, number 49952, contain entries for work in relation to the preparation of a Trade Practices Act counterclaim, while the invoice of 13 January 2012, invoice number 0048375, includes an itemised cost in relation to 'amending your Wills'. These costs would not, in my view be recoverable from Suda.
In the circumstances, I am not able to assess what proportion of the costs as claimed relate to the defence of the Federal Court proceedings. Further evidence (and possibly proceedings in the nature of a taxation of costs) would be necessary in order to determine, by way of a provisional assessment of damages, what costs would be recoverable pursuant to the terms of the indemnity.
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