City Brokers Beasley Limited v Marsh Limited [2016] NZHC 282 (26 February 2016)

Last Updated: 7 March 2016

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2015-485-000625 [2016] NZHC 282

BETWEEN	CITY BROKERS BEASLEY LIMITED Plaintiff
AND	MARSH LIMITED Defendant

Hearing:	25 February 2016
Counsel:	C J Griggs for Applicant/Plaintiff A J Horne and N R Frith for Respondent/Defendant
Judgment:	26 February 2016

_{JUDGMENT OF COLLINS J}

Summary of judgment

[1] City Brokers Beasley Ltd (City Brokers) has sought an interim mandatory injunction against Marsh Ltd (Marsh). If issued, the interim mandatory injunction would compel Marsh to deliver to City Brokers files and information relating to 14 entities and an unknown number of individuals whom City Brokers claim are its clients.

[2] I am declining to issue an interim mandatory injunction for three principal reasons:

(1) City Brokers has failed to establish there is a serious question to be tried in relation to the three causes of action it has pleaded.

(2) The balance of convenience weighs heavily against making the order sought.

CITY BROKERS BEASLEY LIMITED v MARSH LIMITED [2016] NZHC 282 [26 February 2016]

(3) The interests of justice also weigh heavily against making the order.

Background

[3] In total, 15 substantive affidavits have been filed by City Brokers and Marsh in relation to the application for an interim mandatory injunction. Many of those affidavits contain extensive annexures.

[4] A consequence of my decision is that the substantive dispute between the parties will need to be heard and determined on another occasion. I am therefore adopting a cautious approach when setting out the background. I appreciate that further inquiries and analysis may cast a different light upon aspects of the facts as they have been presented to me at this interim stage of the litigation.

[5] Mr Noble-Beasley, who is now 70 years old, is the sole director of City Brokers. Mr Noble-Beasley has now reached a stage in his life where he wishes to sort out his business affairs. He has had a long career as an insurance adviser and agent. In 1990 Mr Noble-Beasley became a full-time agent for Westrays New Zealand Ltd (Westrays), an insurance brokerage firm. Mr Noble-Beasley’s agency agreement with Westrays was amended in 1997. At that time Westrays appears to

have agreed to the following clause:¹

All business introduced by [Mr Noble-Beasley was] owned by [him]. [Westrays] accepts that they have no ownership rights to the business, and that should this agreement cease for any reason, [Westrays] agrees to hand back this business with all future commissions and service commissions ... to [Mr Noble-Beasley].

[6] Mr Noble-Beasley has deposed that, pursuant to the 1997 agreement, he introduced to Westrays the group employee benefit business of five schools and nine companies and unions,² and individual life insurance business. Mr Noble-Beasley has referenced the individual life insurance business by identifying eight anonymised

_{life insurance agency numbers that relate to an unknown number of individuals.}³

¹ _{Affidavit of R Noble-Beasley, 2 September 2015 at [11] and [12].}

² _{These entities are referred to in paragraph [4] of the statement of claim.}

3. The eight life insurance agency numbers are referred to in paragraph [5] of the statement of claim.

[7] On 14 August 1998, Westrays was acquired by Lowndes Lambert (NZ) Ltd. The new enterprise became Lambert Westrays Ltd. On 1 May 2000

Lambert Westrays Ltd changed its name to Heath Lambert New Zealand Ltd (Heath

Lambert).

[8] Mr Young, who was managing director of Westrays/Heath Lambert from

1997 to 2004, has deposed:⁴

When Heath Lambert acquired Westrays in 1998, Mr Noble-Beasley was engaged by Heath Lambert via a written agreement on the same terms and conditions as outlined in the 1997 contract, except for a variation to the commission split which was altered to a 50/50 split on all business, ... [the

1998 agreement].

[9] On 20 July 2004, Marsh Pty Ltd purchased Heath Lambert, which changed its name to Marsh Insurance Services Ltd on 31 August 2004. There was a further name change on 21 August 2009 when Marsh Insurance Services Ltd became Marsh

& McLennan Agency Ltd. On a later occasion the respondent’s name was changed to Marsh Ltd.

[10] In the meantime, in June 2004, Marsh and Mr Noble-Beasley began negotiating an agreement which led to Mr Noble-Beasley providing brokerage services to Marsh (the 2004 agreement).

[11] An insight into Marsh’s strategy in negotiating the 2004 agreement can be found in an internal Marsh email dated 3 June 2004. That email records the advantages to both Marsh and Mr Noble-Beasley of Marsh imposing its “day-to-day administration” over clients managed by Mr Noble-Beasley thereby “diluting” his “centre of influence” leading to the business becoming “Marsh centric over a

relatively short period”.⁵

[12] The 3 June 2004 email records how Mr Noble-Beasley had “serviced to death” the group business clients managed by Mr Noble-Beasley and that Marsh would struggle to retain some clients if Mr Noble-Beasley left Marsh. The author of

_{this email also records that the proposed arrangements involving Marsh engaging}

⁴ _{Affidavit of G C Young, 20 March 2015 at [10].}

⁵ Affidavit of R Noble-Beasley, 15 October 2015, Exhibit D.

Mr Noble-Beasley would enable Mr Noble-Beasley to focus on new business, which would be very good financially for both Marsh and Mr Noble-Beasley.

[13] Mr Griggs, counsel for City Brokers, described this email as a “smoking

gun”. I explain in paragraph [46] why, at this stage, I cannot agree the email of

3 June 2004 is as decisive as Mr Griggs suggests. [14] The 2004 agreement comprised two emails:

_{(1) In the first email sent at 9.10 am on 23 June 2004, Marsh explained:}⁶

[The Heath Lambert] business is now in effect owned by Marsh by virtue of the takeover and this raises a number of issues mainly through ownership and practical application.

We value the connection and relationships [Mr Nobel- Beasley] will have developed with these clients and certainly wish to optimise this situation. But there needs to be a trade off between us to establish/maintain equilibrium going forward.

The balance of that email dealt with various formulae for determining

Mr Noble-Beasley’s ongoing remuneration.

(2) In the second email sent at 4.03 pm on 23 June 2004, Mr Noble- Beasley substantially agreed with the terms of Marsh’s earlier email but suggested modifications to the formulae governing his ongoing remuneration.

[15] The 2004 agreement makes no reference to Mr Noble-Beasley retaining ownership of the clients he had previously introduced to Westrays/Heath Lambert.

[16] City Brokers was incorporated on 23 March 2007 and on 2 April 2007 Marsh and City Brokers entered into a written agency agreement (the 2007 agreement).

[17] The following provisions of the 2007 agreement were referred to during the hearing of the application for an interim mandatory injunction:

⁶ Affidavit of R Noble-Beasley, 2 September 2015, Exhibit C.

(1) Under cl 8.1 of the 2007 agreement, Marsh agreed it would “have no proprietary rights over” City Brokers’ clients.⁷

(2) City Brokers’ clients were defined in cl 16 of the 2007 agreement to

mean:

any person, firm, company, body corporate, or government body who is introduced to [Marsh] by [City Brokers] and who is a client of [City Brokers] identified in item 5 of the schedule to this agreement and includes such secondary contacts as defined under cl 1.5 ...⁸

Schedule 5 of the 2007 agreement reads:

“Refer attached in force listing of [City Brokers’] clients”.

I was informed no list of clients was agreed to at the time the 2007 agreement came into force.

(3) Under cl 9.1 of the 2007 agreement, City Brokers agreed not to “act as an agent for, solicit, sell, divest, serve, accept, receive or conduct any life or general insurance business for those clients with whom [City Brokers was] involved, either directly or indirectly ...” for a period of 15 months. City Brokers and Marsh also entered into a separate “deed of restraint of trade and confidentiality” on 2 April

2007.

(4) Under cl 10.3 of the 2007 agreement, City Brokers agreed Marsh could end the agreement immediately, and at it sole discretion, in the

_{event of any one of eight specified circumstances arising. The}

⁷ Clause 8.1 of the 2007 agreement was subject to cl 10.5 of that agreement which provided that City Brokers agreed it “... must return to [Marsh] any equipment or other property belonging to [Marsh] (including client files of the client base made pursuant to this agreement or any other information regarding Marsh clients) in a satisfactory condition on termination of this agreement and [Marsh] retain an ongoing right to access [City Brokers’] files of your clients should issues such as errors and omissions arise”.

⁸ Clause 1.5 of the 2007 agreement provided “where [City Brokers] obtained a referral through [its] clients, that secondary contact will be treated as [City Brokers’] client for the purposes of this agreement, except where [City Brokers has] breached the terms and conditions of this agreement”.

specified circumstances included Marsh deciding that City Brokers had “... become incapable of performing the services [expected under the agreement] to the required standard or in a manner acceptable to [Marsh] ...”.

(5) Clause 12.1 of the 2007 agreement set out a three-step process to resolve any disputes under the agreement. The first step required the parties to meet and conduct discussions in good faith to amicably resolve their dispute. The second step required Marsh to refer the dispute to an agreed mediator. The third step required the parties to refer their dispute to arbitration.

[18] On 29 August 2014, Marsh wrote to City Brokers giving notice that the 2007 agreement was terminated. Marsh explained in its letter that it had formed the view City Brokers was no longer able to perform the services required under the agreement to the expected standard. In its letter Marsh invited City Brokers to agree to terms of termination. In doing so, Marsh said:⁹

With regard to your clients, can you please provide [us] with a list of what you consider to be your clients within the next seven days.

[We] remind you of your obligations under the deed of restraint of trade and confidentiality and annexed to [the 2007 agreement].

[19] By letter dated 9 September 2014, City Brokers requested information it said was necessary for Mr Noble-Beasley to continue servicing “his clients”.

[20] On 12 September 2014, Marsh terminated “any and all other arrangements between Marsh and City Brokers ... and/or [Mr] Noble-Beasley not previously terminated to the extent that any such agreements exist[ed] ...”.

[21] On 25 November 2014, City Brokers’ lawyers gave Marsh notice of their clients’ claim to ongoing commission entitlements under the 2004 and 2007

_{agreements. On 28 November 2014, Marsh rejected these claims.}

⁹ Affidavit of R Noble-Beasley, 2 September 2015, Exhibit G.

[22] On 16 December 2014, City Brokers’ lawyers provided Marsh with information about the identity of individuals and entities described as being clients of City Brokers. On 29 May 2015, the lawyers for Marsh wrote to the lawyers for City Brokers refuting City Brokers’ claim that it owned the clients in issue.

[23] On 3 August 2015, the lawyers for Marsh provided counsel for City Brokers with a schedule which identified clients with which Mr Noble-Beasley had had an association.

[24] On 17 August 2015, City Brokers commenced its proceeding. In its prayer for relief in its statement of claim City Brokers seeks:

a permanent injunction directing [Marsh] to return to [City Brokers] all files and other information in whatever form which relate to the group employee benefit clients referred to in paragraph [4] [of the statement of the claim] and individual clients referred to in paragraph [5] [of the statement of claim].

This prayer for relief relates to the “clients” which Mr Noble-Beasley has deposed that he introduced to Westrays pursuant to the 1997 agreement and to which I have referred to in paragraph [6] of this judgment.

[25] Contemporaneously, City Brokers applied for an interim mandatory injunction requiring Marsh to return to City Brokers the files and information relating to the same entities and individuals referred to in paragraphs [4] and [5] of the statement of claim.

[26] On 25 August 2015, Marsh filed a “notice of appearance under protest to jurisdiction”. Marsh objected to the Court exercising its jurisdiction because, it says, the claims made by City Brokers are subject to the arbitration provisions of the 2007 agreement. My conclusions concerning the merits of the application for an interim mandatory injunction render it unnecessary to consider this aspect of Marsh’s case.

[27] The application for an interim mandatory injunction was originally scheduled to be heard on 9 December 2015. Unfortunately, pressures on judicial resources at that time necessitated the Court adjourning the application to 25 February 2016.

The causes of action

[28] City Brokers has pleaded three causes of action, namely: (1) breach of contract;

(2) conversion; and

(3) breach of trust.

All three causes of action are relied upon in support of the application for an interim mandatory injunction.

Breach of contract

[29] City Brokers pleads that Marsh’s failure to return City Brokers’ client files and information is a breach of Marsh’s “contractual obligations under the 2004 agreement and, if applicable, the 2007 agreement”.¹⁰

[30] In advancing this submission, Mr Griggs acknowledged the 2004 agreement “did not contain an express term governing the ownership of any business introduced to Marsh by Mr Noble-Beasley”.¹¹ Nevertheless, Mr Griggs submitted that the 2004 agreement contained an implied term that:

(1) the clients introduced to Marsh by Mr Noble-Beasley as a result of the 2004 agreement were the property of Mr Noble-Beasley; and

(2) if the 2004 agreement was terminated, Mr Noble-Beasley had the right to assert his ownership of those clients and/or sell them at his discretion.

_{[31] Five grounds were advanced in support of this aspect of City Brokers’ claim.}

¹⁰ _{Applicant’s synopsis of argument, 30 November 2015 at [6].}

¹¹ At [7].

[32] First, it was submitted the 2004 agreement was a continuation of the 1997 and 1998 agreements, under which it was expressly provided that Mr Noble-Beasley would retain “ownership” of clients he introduced to Westwrays/Heath Lambert.

[33] Second, Mr Noble-Beasley understood a term concerning his ownership of the clients was implied in the 2004 agreement and he would not have entered into the

2004 agreement if this understanding was not correct.

[34] Third, Marsh always appreciated Mr Noble-Beasley regarded the clients he

introduced were “his” property.

[35] Fourth, Ms Hemare (who was the administrative and quality assurance manager for Marsh from December 2011 to December 2013) has said in an affidavit that she:¹²

... understood the clients under the 2004 agreement were owned by Mr Noble-Beasley and if the 2004 agreement was terminated the clients would remain in his ownership. This meant that Mr Noble-Beasley could either take these clients and continue to operate as an insurance broker under the umbrella of another brokering house ... or he could choose to sell these clients.

[36] Ms Hemare’s evidence was corroborated to some extent by Mr Young, who explained that he had told Marsh at the time Marsh acquired Heath Lambert that the group clients referred to in paragraph [4] of the statement of claim and the individual clients referred to in paragraph [5] of the statement of claim were Mr Noble- Beasley’s clients.¹³

[37] Fifth, “when the parties entered into a more comprehensive written form of agreement in 2007, [the] implied term was express”.¹⁴

¹² _{Affidavit of D V Hemare, 5 May 2015 at [6].}

¹³ _{See paragraph [6] of this judgment.}

¹⁴ Applicant’s synopsis of argument, 30 November 2015 at [9.5].

Is there a serious question to be tried?

[38] The onus is on City Brokers to establish there is a serious question to be tried. Mr Griggs accepted that the onus placed upon City Brokers involved a threshold higher than the balance of probabilities hurdle.

[39] There is authority for the proposition that those who seek an interim mandatory injunction are required to establish a “powerfully arguable” or “strong case”.¹⁵ The rationale for this approach is that an interim mandatory injunction normally entails more than preservation of the status quo. An interim mandatory injunction usually requires the defendant to take steps to undo what has been done. Furthermore, an interim mandatory injunction usually gives the applicant the relief he or she is seeking in their substantive proceeding.¹⁶

[40] Regardless of whether there is a higher threshold for obtaining an interim mandatory injunction compared to the test for obtaining an interim prohibitory injunction, I am satisfied City Brokers has not passed the minimum threshold required to establish there is a serious question to be tried. There are two key reasons for this conclusion. These reasons apply to all three causes of action advanced by City Brokers.

[41] First, City Brokers claim that it owned the clients in issue is entirely based upon the 2004 agreement.

[42] According to Mr Noble-Beasley, by the time the 2004 agreement was negotiated, he had brought to Westrays/Heath Lambert the group employee benefit business and individual life insurance business referred to at [6] of this judgment.

[43] The emails exchanged between Mr Noble-Beasley and Marsh in 2004 included the acknowledgement by Mr Noble-Beasley that the business was in effect owned by Marsh by virtue of the takeover.¹⁷ Against that background Marsh and

_{Mr Noble-Beasley reached agreement on the terms Mr Noble-Beasley would work}

¹⁵ _{Acernus Aero Ltd v Vincent Aviation Ltd [2012] NZHC 295 at [9].}

¹⁶ Films Rover International Ltd v Cannon Film Sales Ltd [1987] 1 WLR 670 at 681, citing

_{Shepherd Homes Ltd v Sandham [1971] Ch 340.}

¹⁷ At [14(1)] of this judgment.

for Marsh, including the basis of Mr Noble-Beasley’s ongoing remuneration. The emails exchanged at this time made no reference to Mr Noble-Beasley retaining “ownership” of the clients he had previously introduced to Westrays/Heath Lambert.

[44] The email sent by Marsh to Mr Noble-Beasley on 23 June 2007, does not necessarily suggest Mr Noble-Beasley would continue to own the clients that are the subject of City Brokers’ application. That email is capable of being interpreted to mean Mr Noble-Beasley would simply continue to have some ongoing role in managing the clients in question.

[45] If in June 2004 it was intended Mr Noble-Beasley was to retain as his separate property the clients he had previously introduced to Westrays/Heath Lambert, then it is very surprising that nothing to that effect was recorded in writing at the relevant time. If Mr Noble-Beasley expected to retain ownership of the clients he had previously introduced to Westrays/Heath Lambert I would have expected him to say so unequivocally at the time he negotiated his agreement with Marsh.

[46] The so-called “smoking gun” statement in the internal Marsh email of 3 June

2004 I have referred to in paragraph [12] of this judgment does not advance City Brokers’ claim at this stage of the litigation. The comments made by the author of that email are capable of being read to mean that Marsh would acquire ownership of Mr Noble-Beasley’s former clients and put in place systems to ensure Mr Noble- Beasley was well remunerated for his services.

[47] I am not precluding the possibility that further evidence and/or analysis might lead to a term being implied into the 2004 agreement along the lines suggested by City Brokers. At the substantive hearing, City Brokers will need to establish the term it seeks to have implied into the 2004 agreement, solely on the balance of probabilities. The equivocal nature of the evidence presented to me is, however, a significant impediment to City Brokers establishing at this juncture that it has demonstrated there is a serious question to be tried.

[48] Second, Mr Broomhead, a managing principal of Marsh, has deposed in his

second affidavit that Marsh’s inquiries suggest there is real doubt whether City

Brokers and/or Mr Noble-Beasley introduced all of the individual clients to Marsh, whose details are referred to by the agency numbers set out in paragraph [5] of the statement of claim.¹⁸ This factual dispute cannot be resolved at this stage. The existence of this factual dispute creates an insurmountable obstacle to City Brokers establishing at this stage that it has a serious question to be tried in relation to its claim of ownership of the individual clients in question.

Balance of convenience

[49] I am satisfied City Brokers has failed by a significant margin to demonstrate the balance of convenience favours the issuing of an interim mandatory injunction. There are two key reasons why I have reached this conclusion.

[50] First, Marsh has advised that City Brokers can approach those clients whose names have been identified and invite those clients to instruct Marsh to deliver their files to City Brokers. In making this offer, Marsh has expressly waived any claim it might otherwise have to enforce the restraint of trade provisions in the 2007 agreement and/or the separate deed of restraint of trade and confidentiality. As it transpired, this offer was not necessary as during the hearing City Brokers modified its case and now anchors its claim solely upon the 2004 agreement.

[51] To assist City Brokers in contacting those whom it believes are its clients, Marsh has provided City Brokers with the names of all individuals Mr Noble- Beasley has had any association with.

[52] In my assessment, it is striking that none of the entities and individuals that City Brokers claims to be its clients have in fact instructed Marsh to deliver their files to City Brokers.

[53] City Brokers says that there are challenges in having the clients in question

instruct Marsh to deliver the clients’ files to City Brokers. The challenges were

_{explained in the following way by Mr Griggs:}¹⁹

¹⁸ _{Affidavit of P J J Broomhead, 26 August 2015 at [7].}

¹⁹ Applicant’s synopsis of argument, 20 November 2015 at [21].

Mr Broomhead’s affidavit overlooks the fact that the maintenance of an ongoing relationship with clients and the collection and use of information provided by those clients to develop and maintain suitable product offerings is a fundamental part of the success of any insurance brokerage. That is something which the [City Brokers] was careful to take care of up until it was hamstrung by being divested of its clients. If [City Brokers] is required to “re-pitch” to the clients whose files already belong to it, it suffers a real risk of losing some of that business; a risk which increases each day that [Marsh] retains those files.

[54] In my assessment, those “challenges” are overstated and do not undermine the force of Marsh’s argument that City Brokers really does not need the orders it is seeking from the Court.

[55] Second, City Brokers has quantified its alleged losses at $960,000. In addition, Mr Noble-Beasley has said the “sale value” of the relevant clients was

$1.2 million as at 31 December 2014.

[56] Marsh has confirmed it can pay an award of damages if damages are quantified at $1.2 million.

[57] An injunction will not normally be issued where damages are an adequate remedy for the plaintiff.²⁰ The fact damages are able to be quantified and paid weighs heavily against the issuing of an interim mandatory injunction in this case.

Overall interests of justice

[58] There are two reasons why I believe the overall interests of justice weigh against issuing an interim mandatory injunction.

[59] First, City Brokers gave notice of its claim 11 months before bringing this application. Marsh does not assert that it has been materially disadvantaged by City Brokers’ delay. I am also satisfied that part of the delay was due to the parties making efforts to settle their differences. In my assessment, however, the delay by City Brokers in seeking an interim mandatory injunction was significant and this

_{factor weighs against granting City Brokers’ application.}

²⁰ Charles Begg & Co (Ltd) v Naujoks (1903) 23 NZLR 194 (SC) at 196; Menzies v Omanu Holdings Ltd [2015] NZHC 441 at [14]; Peter Blanchard Civil Remedies in New Zealand (2^nd ed, Brookers, Wellington, 2011) at [6.3.1].

[60] Second, issuing an interim mandatory injunction would go a long way towards determining the substantive dispute. The terms of the interim mandatory injunction sought by City Brokers are substantially the same as the terms of the permanent injunction it seeks in the prayer for relief in its statement of claim. Mr Griggs was conscious of this point and suggested a term could be incorporated into any order I might make which would have the effect of preventing City Brokers from onselling the clients to whom any order relates. This suggestion does create a minor distinction between the terms of the application for a permanent injunction and the terms of the order sought in the interim mandatory application. However, even taking that minor distinction into account does not address the concern that issuing an interim mandatory injunction would effectively determine the substantive litigation in circumstances where neither I nor the parties have had the opportunity to fully explore the factual issues which are in dispute. In this respect, the label “interim” is a misnomer in this case.

[61] In these circumstances, the interests of justice weigh heavily against issuing an interim mandatory injunction.

Costs

[62] Marsh has succeeded on all grounds relied upon by City Brokers in support of its claim for an interim mandatory injunction.

_{[63] Marsh is entitled to costs on a scale 2B basis.}

Solicitors:

Quigg Partners, Wellington for Applicant/Plaintiff

Minter Ellison Rudd Watts, Auckland for Respondent/Defendant

D B Collins J