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Limelight 02/24

When are the costs of separate legal representation ‘reasonable’? – the case of Lisa Wilkinson

The recent high-profile decision in Lehrmann v Network Ten Pty Limited (Cross-claims) [2024] FCA 102  provides guidance on when costs incurred by an employee, who has obtained separate legal representation to defend a third-party claim that is brought against both the employee and employer, are likely to be considered ‘reasonable’.  While this case concerns the scope of an employer’s indemnity to an employee for loss occasioned by acts carried out in the course of employment, the reasoning in relation to whether it is ‘reasonable’ for the employee to engage separate legal representation has potential application in other forms of indemnity, including insurance contracts.  We consider the background of the case and its potential broader application below.

Background

The matter arises from the well-publicised case of Brittany Higgins and her alleged rape by Bruce Lehrmann at Parliament House in Canberra.

In February 2021, Network Ten Pty Limited (Network Ten) broadcast an interview conducted by Lisa Wilkinson with Brittany Higgins on “The Project” regarding her alleged rape (Interview).

In June 2022, Ms Wilkinson attended the Logies Awards and gave an acceptance speech that referred to the Interview and Ms Higgins. Prior to the Logies Awards, Ms Wilkinson sent her draft acceptance speech to Network Ten’s lawyers and executives for approval, which was granted.

At the time of the acceptance speech , Mr Lehrmann was the subject of a criminal prosecution for the alleged rape of Ms Higgins (Criminal Proceeding). Following the acceptance speech, Mr Lehrmann successfully obtained an order staying his criminal trial. Network Ten’s lawyer then gave an interview on Network Seven’s “Sunrise” programme, which commented on Ms Wilkinson’s acceptance speech and the impact on the Criminal Proceeding.

In December 2022, prosecutors discontinued the Criminal Proceeding.

In February 2023, Mr Lehrmann commenced defamation proceedings against Network Ten and Ms Wilkinson in the Federal Court of Australia regarding the Interview (Defamation Proceeding). Initially, Network Ten and Ms Wilkinson had the same legal representation for the Defamation Proceeding. Subsequently, Network Ten proposed that Ms Wilkinson obtain legal advice as to whether she should obtain separate legal representation.  On advice from Bret Walker SC and experienced defamation solicitor, Patrick George (Legal Opinion), Ms Wilkinson retained separate legal representation. Ms Wilkinson also sought indemnity from Network Ten for her legal costs in defending the claims made against her by Mr Lehrmann in the Defamation Proceeding, including the costs associated with her separate representation (Defence Costs).

Network Ten did not dispute that, as Ms Wilkinson’s employer, it was obliged to indemnify her for loss occasioned by acts carried out by her in the course of her employment and also for costs reasonably incurred in defending proceedings against her arising from those acts by reference to section 3(1)(b) of the Employees Liability Act 1991 (NSW) (Indemnity) [i]. However, Network Ten disputed the reasonableness of the Defence Costs incurred by Ms Wilkinson in retaining separate legal representation, arguing that those costs were beyond the scope of the Indemnity. Ms Wilkinson and Network Ten then filed cross-claims against each other in the Defamation Proceeding, seeking declarations as to the scope of the Indemnity[ii].

Issues

In deciding on the cross-claims, the Court considered the following issues:

  • Whether it was reasonable for Ms Wilkinson to retain separate legal representation; and
  • If so, whether Ms Wilkinson’s Defence Costs were within the scope of the Indemnity.

 Decision

On the first issue, the Court held that it was reasonable for Ms Wilkinson to engage separate legal representation because there were differences in the interests that were sought to be protected in the Defamation Proceeding. This was evident from the nature of the allegations made by Mr Lehrmann and the defences sought to be deployed by the parties in the Defamation Proceeding. Specifically:

  • Mr Lehrmann sought aggravated damages against Network Ten and Ms Wilkinson based on the acceptance speech. On the basis of this allegation, the Court held that the underlying conduct of Ms Wilkinson and the conduct of others that could be attributed to Network Ten in relation to the acceptance speech was not identical. Further, Ms Wilkinson contended that she acted properly because she obtained approval to give the acceptance speech from Network Ten’s in-house lawyer and executives;
  • The parties relied on defences under section 30 of the Defamation Act 2005 (NSW) regarding substantial truth and statutory qualified privilege. To the extent that it became necessary to deal with these defences, the Court held that it would need to focus on the conduct of Ms Wilkinson and Network Ten separately;
  • The Court agreed with the Legal Opinion in support of Ms Wilkinson obtaining separate legal representation; and
  • The Court held that Ms Wilkinson should not have reasonably been expected to retain the same lawyers as Network Ten in circumstances where those lawyers had publicly criticised her conduct and previously advised The Australian newspaper in relation to various articles, including articles concerning Ms Wilkinson.

On the second issue, the Court raised with the parties whether the appropriate course after the final extent of Ms Wilkinson’s liability in the Defamation Proceeding had been ascertained was to appoint a referee to inquire into and prepare a report as to whether specified costs were reasonably incurred and therefore subject to the Indemnity. Neither party opposed this course.

For the above reasons, the Court ordered that Network Ten pay Ms Wilkinson’s Defence Costs, with such costs to be assessed following judgment in the Defamation Proceeding, which is expected in March or April 2024.

Key takeaways

 It remains to be seen to what extent Ms Wilkinson’s legal fees incurred in the Defamation Proceeding will be assessed as reasonable and subject of the Indemnity from Network Ten.

However, the judgment provides guidance on the nature of the issues that are to be considered when assessing whether it is ‘reasonable’ for a party to have separate representation from other defendants where the costs incurred are the subject of an indemnity.  The judgment supports the view that a number of factors may be relevant in deciding whether separate representation is ‘reasonable’, namely whether:

  • there is any difference in the interests of the defendants;
  • any particular forms of relief sought against the defendants warrant responses that create a difference in interests;
  • any defences are advanced that create a difference in the interests of the defendants;
  • any defendant has a legitimate concern with respect to being represented by the lawyers for the other defendant(s); and
  • the objectives of the parties are aligned, including in relation to the reputational concerns of the defendants, and how this might impact the conduct of the litigation.

Interestingly, in this case, the finding of ‘reasonableness’ of separate representation was supported by the Legal Opinion. Many financial lines insurance policies contain dispute resolution provisions that require an opinion to be obtained from senior counsel in certain circumstances. The decision arguably supports the view that opinions of senior counsel can be relevant to the Court’s assessment of whether separate representation is ‘reasonable’ in the circumstances of any particular case.

[i] Provides that if an employee commits a tort for which his or her employer is also liable, the employer is liable to indemnify the employee in respect of liability incurred by the employee for the tort, unless the employee is otherwise entitled to an indemnity in respect of that liability.
[ii] The cross-claims were initially commenced in separate proceedings in the Supreme Court of New South Wales but transferred to the Federal Court of Australia as part of the Defamation Proceeding.

 

This publication constitutes a summary of the information of the subject matter covered. This information is not intended to be nor should it be relied upon as legal or any other type of professional advice. For further information in relation to this subject matter please contact the author.