Footballer loses bid for legal costs

Essendon Football Club’s D&O insurer is not obliged to indemnify former captain and coach James Hird for legal costs from the ongoing player drugs saga.

As DLA Piper noted in a commentary on the case, Hird is now kicked “out of bounds on the full”.

Mr Hird sued Chubb Insurance Co for $641,000 — $573,000 for his failed Federal Court action against the Australian Sports Anti-Doping Authority (ASADA) last year and $68,000 in Full Federal Court appeal costs awarded against him.

In the Victorian Supreme Court, Mr Hird argued he was covered for both Federal Court actions under the club’s D&O policy because he was accused of “perpetrating a wrongful act”. He also argued the Federal Court case benefitted the club because it tried to stop ASADA’s investigation.

Chubb argued the policy covered only actions the club was forced to defend, not suits instigated by Essendon or its directors.

Victorian Supreme Court Justice Kim Hargrave’s May 3 judgement rejected Mr Hird’s arguments ASADA had accused him of a wrongful act and his legal action was to benefit Essendon.

Justice Hargrave said the Australian Football League (AFL) had formally accused Mr Hird of a wrongful act but he had not sought relief for that charge. Instead Mr Hird pursued ASADA’s investigation, arguing it was “more than a mere inquiry”.

But Justice Hargrave said there was no evidence ASADA, unlike the AFL, had levelled specific allegations against Mr Hird.

“ASADA was merely investigating whether Essendon players and support persons, including Mr Hird, may have engaged in wrongful acts,” he said.

“ASADA never moved from investigating Mr Hird’s conduct to alleging any wrongful act against him.”

Justice Hargrave said a notice to attend an interview with ASADA and the AFL was not formal advice of potential charges. “[ASADA’s] interview notice was clearly given for investigative purposes,” he said. “It was part of a formal investigation [but] not a formal proceeding such as the AFL’s charges against Mr Hird.”

Mr Hird contended the joint investigation was more than a ‘mere inquiry’ as to whether he, among others, had been involved in using prohibited substances contrary to the anti-doping codes.

Justice Hargrave said: “I do not accept this evidence establishes any wrongful act was alleged against Mr Hird [before] the AFL charged him with an offence against the AFL player rules on 13 August 2013. Until then, the AFL and ASADA were merely investigating whether Essendon players and support persons, including Mr Hird, may have engaged in wrongful acts.

“ASADA never moved from investigating Mr Hird’s conduct to alleging any wrongful act against him. That conclusion was reinforced by ASADA’s interim report in August 2013.

“The joint investigation was an inquiry into whether Mr Hird, other Essendon support staff or the players contravened the anti-doping codes. In contrast to Essendon players, the position was never reached that ASADA alleged a contravention against Mr Hird.”

He rejected Mr Hird’s contention various US cases supported a general proposition that, when used to define a claim in a D&O liability policy, the words “a written demand for ... non-pecuniary relief” had a settled meaning, which included compulsory notices to attend interviews or provide documents or information to formal investigative bodies, such as ASADA or the AFL.

Justice Hargrave said the interview notice did not fall within the definition of ‘executive claim’ for the purposes of insuring clause (A) because it was to gather information and determine future steps to be taken in light of that information, including the possible launch of a formal proceeding against Mr Hird and/or others.

He rejected Mr Hird’s contention the definition of legal representation expenses included reasonable defensive action to a formal investigation — such as Mr Hird’s Federal Court application and appeal.

There needed to be a causal link between an insured’s attendance at an interview, and/or his or her production of documents or information, and a decision to start court proceedings.

Justice Hargrave said Mr Hird gave no evidence as to:
(1) questions he was asked or what answers he gave to questions during the interview;
(2) what may otherwise have been said by him during the interview [about] the subject matter of the joint investigation;
(3) apart from three text messages referred to in the AFL’s statement of grounds, the content of 7,000 text messages or other information recovered from his mobile phone; or
(4) any other documents or information provided by him or on his behalf to the joint investigation.

He said nor did he tender in evidence the transcript of his interview or show cause notices referred to in his statement of claim. “Mr Hird’s statement of claim alleges those documents are subject to confidentiality orders in the Federal Court proceeding. There is no evidence of those orders in this proceeding.”

Chubb’s non-admission defence required Mr Hird to prove there were such documents if he wanted to rely on their contents, and no submission was made or explanation given as to why they could not be tendered in evidence.

Justice Hargrave said Mr Hird gave no direct evidence his information caused him to launch and maintain his Federal Court application and appeal and thus incur the challenge costs. “Mr Hird’s counsel made no submission that the court should infer the necessary causal link and, in any event, I would not draw such an inference in circumstances where Mr Hird was called as a witness but did not give evidence about the content of his information or the necessary causal link.”

He said Mr Hird’s own evidence established only that he decided to launch the Federal Court application and appeal to protect his reputation and position as coach of Essendon, to protect or advance his continued employment in the AFL, and thus protect his primary source of income then and in the future.

“In other words, Mr Hird’s motive was his fear of damage to his reputation and economic interests arising from the show cause notices served by ASADA on the players and the events consequent on those notices. That motive does not establish the necessary causal link. Moreover, Mr Hird did not adduce evidence that his information contributed to ASADA’s decision to issue the show cause notices to players, may lead to ASADA giving him a show cause notice, or may assist ASADA to prove anti-doping violations against any of the players.”

Justice Hargrave said Mr Hird’s Federal Court proceeding sought declaratory and injunctive relief on the basis all information obtained in the joint investigation was unlawfully obtained, but there was insufficient evidence before the Supreme Court about the content of his information to find the necessary causal link.

Read DLA Piper’s opinion piece here

Read Moray & Agnew’s commentary here

(Hird v Chubb Insurance Co of Australia Ltd [2016], VSC 174, 03/05/2016)