Stewart Financial Group to pay $2k over abandoned ERA bid

Stewart Financial Group has been ordered to pay a former employee $2,000 in costs for Employment Relations Authority proceedings it subsequently withdrew.

Thursday, September 17th 2020, 6:08AM

Nick Stewart

The company originally brought proceedings against Brad MacDonald, alleging he had breached the non-solicitation provisions of his employment contract, after he resigned.

An investigation meeting was scheduled for March 26. Four briefs of evidence were filed by Stewart Financial and six for MacDonald.

But on March 5, Stewart Group gave notice it was withdrawing proceedings.

MacDonald did not oppose that but asked that costs be determined. His lawyer argued that an award of indemnity costs was appropriate and sought $10,386.49.

He said that MacDonald's legal team had originally responded on a “without prejudice save as to costs” basis to correspondence from Stewart Financial Group.

It was put on notice that, if he was required to take any further steps in relation to the matter, MacDonald would seek full indemnity costs.

For that reason, MacDonald's counsel argued that it was not appropriate for costs to be calculated on the notional daily tariff the authority normally applies, of $4,500 per day.

If that basis for calculation of costs was rejected, MacDonald sought $8,308.50.

His lawyer argued the withdrawal of the matter three weeks before the scheduled meeting was an act of bad faith that was designed to land MacDonald with substantial costs.

He was required to file substantive amounts of evidence in his defence and his preparations for the investigation meeting were “particularly advanced”.

For its part, Stewart Financial said each party should bear its own costs – or at most the appropriate level would be $500.

The company’s advocate said it defended its proceedings against MacDonald and it did not file for an injunction or file proceedings under urgency, which could have stopped MacDonald from operating.

It said it sought mediation which was rejected and MacDonald could have engaged about the clients and provided the information requested.

It said the fact that one of MacDonald’s witnesses was the son of a long-term Stewart family friend and previous board member was a reason for the withdrawal of the matter. It says this created “a new and complex dynamic” for Stewart Financial which had not been known about until February 21.

This led to Stewart Financial reviewing its application and taking into account the effect continuing with the proceedings would have on personal relationships.

Nick Stewart deposed that the company foresaw a negative impact on its workplace culture and relationships because of the respective parties’ list of witnesses and the content of their briefs of evidence.

It said MacDonald could not have fully prepared for the March 26 investigation meeting as the company had not yet filed its reply witness statements, which were due the day after proceedings were withdrawn.

But authority member Trish MacKinnon said a “reasonable volume” of work had been undertaken by MacDonald’s counsel and that should be recognised.

“Having found costs to be appropriate, I do not accept MacDonald’s submission that full solicitor/client costs are warranted. To impose indemnity costs on Stewart Financial would be unnecessarily punitive … I do not accept Stewart Financial had an ulterior motive in bringing proceedings against MacDonald or that it showed bad faith in the matter. It was reasonable for the company to raise with MacDonald concerns over what it perceived to be a breach of the surviving obligations of his employment agreement after it became aware of former clients who had migrated to MacDonald’s newly-established business.”

She said a starting point was $1,500 – a third of the daily tariff.

“Factors meriting an uplift to the starting point include MacDonald’s notice to Stewart Financial, through counsel, at an early, pre-lodging of proceedings, stage that he would be seeking indemnity costs if he was required to take any further steps in the matter. This was reiterated in all subsequent correspondence.

“I do not find Stewart Financial’s submissions compelling concerning Mr MacDonald’s late disclosure, on February 21, of particulars regarding the six clients at the heart of the company’s allegations.”

She said Stewart Financial had not resiled from its view that MacDonald breached the non-solicitation provisions of his employment agreement.

“It says it withdrew proceedings due to the impact continuing litigation would have on other people, including its current employees and family friends. The company was entitled to withdraw proceedings, but must contribute to the costs MacDonald incurred. In arriving at the amount of that contribution, I have not included any consideration of costs for attendance at the authority-directed mediation, sought by MacDonald.”

She said Stewart Financial Group should pay MacDonald $2,000 as a contribution to the legal costs he incurred in defending the matter before the company withdrew the proceedings.

Tags: Stewart Group