Byrnes v John Fairfax Publications Pty Ltd

Defamation Act 1974 s7A LEGISLATION CITED : Civil Procedure Act 2005 s67 Uniform Civil Procedure Rules 2005 r12.10, r42.21

Morris v Hanley [2000] NSWSC 957 CASES CITED : Morris v Hanley [2001] NSWCA 374 Philips Electronics v Matthews [2002] NSWCA 157 Rajski v Computer Manufacture and Design Ltd (1982) 2 NSWLR 443

PARTIES : Jim Byrnes - Plaintiff John Fairfax Publications Pty Ltd - Defendant

FILE NUMBER(S) : SC 20465/00; 20241/03; 20047/03

COUNSEL : BR McClintock SC - Plaintiff TD Blackburn SC - Defendant

SOLICITORS : Monte Gildea - Plaintiff Freehills - Defendant

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION DEFAMATION LIST

20465/00 20241/03 20047/03 Jim Byrnes v John Fairfax Publications Pty Ltd

APPLICATION FOR SECURITY FOR COSTS 1 HER HONOUR: The plaintiff has commenced three separate actions (Numbers 20465 of 2000, 20047 of 2003, and 20241 of 2003) in this Court against the defendant. In each he claims damages in respect of the publication by it, in various editions of a newspaper, The Sydney Morning Herald, of allegedly defamatory imputations concerning him. 2 In each of the proceedings numbered 20465 of 2000 and 20047 of 2003, a trial pursuant to s7A of the Defamation Act 1974 has taken place. In each case the jury found that certain imputations which were defamatory of the plaintiff had been conveyed by the publication the subject of the proceedings. In respect of the third publication, numbered 20241 of 2003, a trial pursuant to s7A is fixed to commence on 26 April 2006. 3 Those proceedings arise out of the publication of three separate items, in the Sydney Morning Herald, of the news section of the weekend edition of 10 - 11 August 2002, in the magazine section of the same edition, and in the weekend edition of 24 - 25 August 2002. Some interlocutory steps have been taken; one hearing resulted in an unsuccessful application by the defendant for leave to appeal, and one is currently part-heard. 4 The parties have agreed that the post s7A proceedings in all three matters should proceed concurrently. 5 The publication the subject of proceedings number 20241 of 2003 has already been the subject of unsuccessful proceedings brought by the plaintiff in another jurisdiction. In 2002, with respect to that publication, he sought the leave of the Supreme Court of the Australian Capital Territory ("ACT") to prosecute the defendant and an individual for criminal libel. Leave was refused and the plaintiff was ordered to pay the defendant's costs on an indemnity basis. He appealed, unsuccessfully, and was ordered to pay the costs of the appeal on a party-party basis. 6 The costs of the first instance proceedings were taxed on 9 November 2005 at $134,773.63. Under ACT rules interest accrues on that sum at 11% per annum from the date of the original costs order, representing approximately $40 per day. The amount owing as at 13 January 2006 (the date of an affidavit affirmed by the defendant's solicitor) is $167,470.05. 7 The costs of the appeal were taxed on 25 January 2006 at $59,790.84; with interest the amount owing as at 31 January 2006 was $67,485.02, with interest accruing at about $18 per day. 8 Thus, by 31 January 2006, the amount by which the plaintiff was indebted to the defendant was in excess of $234,875.07 and increasing daily. 9 By letter dated 12 December 2005 the solicitor acting for the defendant advised the solicitor who represented the plaintiff at the taxation in the ACT, and the solicitor who represents him in the present proceedings, of the result of the taxation of the first instance proceedings, and of her calculations of the accrued interest. She requested payment "forthwith", adding that, if the costs were not paid in full by 23 December, the defendant would take enforcement steps. She received no response to that communication. 10 By letter dated 27 January 2006 the defendant's solicitor advised the same solicitors of the taxation of the costs, and her calculation of the accrued interest, on the costs order made in respect of the appeal. The only response she received was from the solicitor acting for the plaintiff in the present proceedings, asking why the defendant's solicitors were notifying him of the costs of the ACT proceedings, and protesting that he did not act for the plaintiff in those proceedings. 11 No costs have been paid. 12 The solicitors for the defendant have provided an estimate of the costs already incurred and expected to be incurred in the preparation of the conduct of the three proceedings the subject of the present application. The estimate exceeds $640,000. 13 The plaintiff has adduced no evidence on the present application. 14 By notice of motion filed on 13 January 2006 the defendant seeks orders framed as follows: "1. The plaintiff provide security for the costs of the defendant: (a) in all three proceedings; or (b) alternatively, in 20241/2003; by way of bank guarantee in a form acceptable to the Registrar in the sum of $350,000 or such other amount as the Court thinks fit. 2. The proceedings be stayed until the plaintiff provides the security for costs under Order 1. 3. Alternatively, the proceedings be stayed until the plaintiff discharges in full his obligation to the defendant pursuant to costs orders made in ACT Supreme Court proceedings ... including interest at the ACT prescribed rate ..."

security for costs 15 Provision is made for an order for security of costs by UCPR r42.21. That rule is quite specific in its terms. It provides, in sub-rule (1), as follows: "42.21 Security for costs

(1) If, in any proceedings, it appears to the court on the application of a defendant: (a) that a plaintiff is ordinarily resident outside New South Wales, or

(b) that the address of a plaintiff is not stated or is mis-stated in his or her originating process, and there is reason to believe that the failure to state an address or the mis-statement of the address was made with intention to deceive, or

(c) that, after the commencement of the proceedings, a plaintiff has changed his or her address, and there is reason to believe that the change was made by the plaintiff with a view to avoiding the consequences of the proceedings, or

(d) that there is reason to believe that a plaintiff, being a corporation, will be unable to pay the costs of the defendant if ordered to do so, or

(e) that a plaintiff is suing, not for his or her own benefit, but for the benefit of some other person and there is reason to believe that the plaintiff will be unable to pay the costs of the defendant if ordered to do so,

the court may order the plaintiff to give such security as the court thinks fit, in such manner as the court directs, for the defendant's costs of the proceedings and that the proceedings be stayed until the security is given.

(2) Security for costs is to be given in such manner, at such time and on such terms (if any) as the court may by order direct.

(3) If the plaintiff fails to comply with an order under this rule, the court may order that the proceeding on the plaintiff's claim for relief in the proceedings be dismissed.

(4) This rule does not affect the provisions of any Act under which the court may require security for costs to be given." 16 As counsel for the defendant pointed out, it is not readily apparent that the plaintiff comes into any of the five categories set out in sub-rule (1). Confronted with this, senior counsel who appeared for the defendant argued that, nevertheless, the power ought to be interpreted as extending beyond the circumstances envisaged in the Rules and encompassing circumstances such as presently appertain. Subsequently, he provided written submissions arguing that the court has an inherent power to make such an order. 17 Counsel then invoked the inherent power of the court to order security for costs, relying upon the authority of Rajski v Computer Manufacture and Design Pty Ltd [1982] 2 NSWLR 443 and Morris v Hanley [2000] NSWSC 957 (reversed, but not on this point, by the Court of Appeal in Morris v Hanley [2001] NSWCA 374.) These cases provide ample authority that the court has the inherent power for which senior counsel contends. The interposition of the Uniform Civil Procedure Rules does not affect that conclusion. 18 In addition, Philips Electronics v Matthews [2002] NSWCA 157; 54 NSWLR 598 establishes that a stay of proceedings (there under s156(1) of the District Court Act 1973, which is in the same terms as s67 of the Civil Procedure Act 2005), may be granted unless and until security for costs is given. The District Court Rule is in the same terms as r 42.21. 19 Accordingly, I conclude that it is within the power of the court to make either of the orders sought on behalf of the defendant. In his further written submissions counsel for the plaintiff accepted that such a power exists. He, however, submits that the power is to be used only in exceptional circumstances, such as those which existed in Rajski. 20 On behalf of the plaintiff it was pointed out that there is no evidence that the plaintiff has refused to pay the ACT costs, and no evidence that he is unable to pay those costs. I am conscious of the relative recency of the quantifications of those costs, both of the first instance proceedings and the appeal, and particularly of the appeal which is less than two months ago. Counsel for the plaintiff also pointed out that in the earlier (December) letter, the solicitor for the defendant had notified the plaintiff of the rate at which interest is accruing, and had also advised of the defendant's intention to take enforcement proceedings in the event of non-payment by the given date. He suggested that it was open to the plaintiff to opt to allow the interest to accrue, or to allow the defendant to take the enforcement action postulated. 21 When counsel for the plaintiff came to make his submissions he referred to a number of factual matters which were not in evidence. As a result, he was permitted to file an affidavit. The plaintiff's solicitor then deposed that, in respect of the defendant's unsuccessful appeal to the Court of Appeal, referred to in [5] above, a costs order in the plaintiff's favour had been made but that the costs had not yet been paid, and that an application for assessment of costs had been filed to recover the costs of counsel. This affidavit was met by a further affidavit affirmed by the solicitor for the defendant. This affidavit contained some rather surprising material. The application for the assessment of costs was made by counsel for the plaintiff himself. His application prompted a protest from the defendant's solicitor, who questioned his entitlement to bring such an application, and asserted that only the client was entitled to apply for assessment of costs. The costs assessor to whom the application had been referred shared the solicitor's concerns. He also wrote to counsel querying his entitlement to make the application. Counsel replied, seeking to justify the application. Apparently he persuaded the costs assessor that he was able to bring the application because the costs assessor, after receiving further correspondence from the solicitor for the defendant, indicated that he intended to proceed to the assessment. However, counsel's letter to the costs assessor is of present significance because it includes the following: "I have successfully brought similar applications where my solicitor for one reason or another does not follow usual practice and make application himself claiming my fees as a disbursement. ... Under the circumstances I am entitled to bring the application. I do not have any choice if I want to recover my party and party costs from the other side as I do because my solicitor will not make the application himself." 22 The evidence leaves unanswered the obvious question as to why, being in receipt of a costs order in his favour, the plaintiff has not instructed his solicitor to proceed to attempt to recover the costs, in the first instance by submitting a bill of costs to the defendant's solicitor, and, in the event of a dispute about the quantum of the costs, by seeking an assessment of costs. The supplementary affidavit evidence omits any reference to the submission to the defendant's solicitor of a bill of costs; it is a reasonable inference, from the evidence (though it was hastily prepared) that no such request has ever been made. 23 It is not appropriate to speculate upon why this has occurred. However, the scenario does leave open legitimate questions about the plaintiff's bona fides. 24 In Morris v Hanley [2000] NSWSC 957 Young J (as the Chief Judge then was) distilled the principles derived from the authorities as indicating the factors relevant to an application to exercise the inherent power to order security for costs as including the following: "(a) whether the plaintiff's claim is bona fide and not a sham;

(b) whether the plaintiff has a reasonably good prospect of obtaining the orders he or she seeks;

(c) whether an order for security would bring the proceedings to an end;

(d) whether the plaintiff has a want of assets and how this was brought about;

(e) whether there is anyone standing behind the plaintiff who might benefit from the action but who is unwilling to contribute to the risk involved in the action; and

He expressly noted that this list is non-exhaustive, and that an additional question is whether the plaintiff's action is harassing and vexatious. (There is no suggestion in the present case that any of the plaintiff's defamation claims is harassing or vexatious; in relations to proceedings numbered 20465 and 20047, in the light of the jury verdicts, this could hardly be put.) 25 Nor, for the same reason, could it be said that any of his claims is other than bona fide and not a sham. Notwithstanding the submissions put on behalf of the plaintiff, it is impossible to assess the prospects of success; I was not advised of any defences proposed to be advanced on behalf of the defendant; the jury verdicts on the s7A proceedings are not relevant to the assessment of the prospects of the plaintiff's obtaining an award of damages, because all depends upon the defences presented. Nor am I able to tell, on the evidence, whether the plaintiff lacks assets (and, if so, how this was brought about) or whether an order for security would bring the proceedings to an end. There was no suggestion that anybody stands behind the plaintiff who might benefit from the actions but who is unwilling to contribute to the risk involved. It would have to be said that this appears to be unlikely. 26 That leaves only the question of delay. In the Court of Appeal, in Morris v Hanley [2001] NSWCA 374, the Court of Appeal appeared to consider that the question of delay was of some significance in that case, and it provided the basis on which that Court set aside the order made in the Equity Division. 27 In that case there was evidence of the expenditure already incurred by the plaintiff at the time the security of costs order was made. There is here no such evidence. 28 Here, there is a very obvious explanation why the defendant has not, at an earlier stage, sought security for costs. In the ordinary course of events such an order would not be made in defamation proceedings. The basis for the application arose only with the ACT costs orders. Since then the defendant has acted promptly. 29 The claim made on behalf of the defendant, so far as I can see, is one which rests on a foundation without precedent. That is not a reason to discount it or its merits. 30 In further written submissions filed on behalf of the plaintiff the following was argued: "2. The plaintiff agrees he has not rushed to pay the unpaid costs that form the basis of the defendant's application. But that is hardly surprising in view of the relationship between the parties. From the plaintiff's point of view, the defendant has mounted a relentless campaign of vilification of him that has caused him great trouble and expense in an effort to defend his name. In these circumstances, the defendant's submissions that he had 'refused' to pay the costs or 'thumbed his nose' at the orders are overblown." 31 This submission does little to advance the plaintiff's position. It contains a strong suggestion that the plaintiff will, so long as he is able, continue to fail (if not refuse) to pay the costs already outstanding; it leaves also the strong inference that he will take the same position in relation to any other costs he may subsequently be ordered to pay. 32 I have come to the view that the defendant is within its rights to seek to protect its position by seeking an order that will secure it against any unpaid costs orders. I propose to make such an order.

the stay application 33 As an alternative for the security for costs sought, the defendant sought a stay of proceedings pending payment of the ACT costs. In pursuing this alternative application, senior counsel for the defendant invoked UCPR r12.10. That rule is in the following terms: "12.10 Stay of further proceedings to secure costs of proceedings dismissed

(a) as a consequence of the dismissal of proceedings, a party is liable to pay the costs of another party in relation to those proceedings, and

(b) before payment of the costs, the party commences further proceedings against that other party on the same or substantially the same cause of action, or for the same or substantially the same relief, as that on or for which the former proceedings were commenced,

the court may stay the further proceedings until those costs are paid and make such consequential orders as it thinks fit." 34 There are at least two reasons why this rule is inapplicable. In my opinion, "proceedings" referred to in sub-para (a) must mean proceedings, if not in this court, at least in this jurisdiction. Secondly, the proceedings which were dismissed in the ACT were of a different kind, being an application for leave to commence a criminal prosecution. True it is that that application was based upon the publication which is the subject of proceedings numbered 20241 of 2003, but it can hardly be said that they were brought on "the same or substantially the same cause of action", or "for the same or substantially the same relief". 35 It is, however, open to the court to grant a stay under s67 of the Civil Procedure Act 2005 until those costs are paid: see Philips Electronics v Matthews. 36 It seems to me that fairness dictates that the alternative order sought by the defendant (in prayer 3) ought to be made. That is, the proceedings ought to be stayed until such time as the plaintiff discharges the obligations constituted by the ACT orders. That is because the amount involved is less than that sought by the defendant by way of security. 37 A question arises whether the order should apply only to the proceedings numbered 20241 of 2003, or should extend to all three proceedings. In my opinion the circumstances involve sufficient questions about the plaintiff's bona fides as to warrant the extension to all three proceedings. 38 I propose to order that:

Proceedings numbered 20465 of 2000, 20047 of 2003 and 20241 of 2003 be stayed until such time as the plaintiff pays to the defendant in full the costs ordered to be paid by the Supreme Court of the ACT.

It will be necessary for the parties to formulate the precise terms of the order. I do not have the details available to know the details of those orders.

The parties are to bring in short minutes of order.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.