DALTON & ANOR v TCN CHANNEL NINE PTY LIMITED & ORS

Supreme Court of NSW|2009-06-03|Before: Hall J

CITATION : DALTON & ANOR v TCN CHANNEL NINE PTY LIMITED & ORS [2009] NSWSC 492

DECISION : Notice of motion filed on 22 December 2008 is dismissed. The plaintiffs are to pay the costs of the application.

CATCHWORDS : PROCEDURE - costs - security for costs

LEGISLATION CITED : Evidence Act 1995 Supreme Court Act 1970

Aopi v Rapke [2002] NSWCA 711 Chellaran v China Ocean Shipping (1991) 102 ALR 321 Comalco Aluminium Limited v Ohtsu Tyre & Rubber Co Aust Limited (1983) 8 ACLR 330 CASES CITED : Ezzo v Grille [2003] NSWSC 776 In the Will of Sheppard [1972] 2 NSWLR 714 Readymix Holdings International Pty Limited v Wyeland Process Equipment Pty Limited [2008] FCA 373 Tomko v Palasty (No 2) [2007] NSWCA 369

PARTIES : Allyson DALTON & ANOR v TCN CHANNEL NINE PTY LIMITED & ORS

COUNSEL : P: S M Littlemore QC/S T Chrysanthou D: B R McClintock SC/M Richardson

SOLICITORS : P: Kalantzis Lawyers D: Johnson, Winter, Slattery

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

ALLYSON DALTON & ANOR v TCN CHANNEL NINE PTY LIMITED & ORS

1 HIS HONOUR: The plaintiffs, Allyson Dalton and Richard Neely, commenced proceedings by way of statement of claim filed on 3 September 2008. The proceedings concern an allegedly defamatory broadcast of and concerning the plaintiffs published in an episode of the television programme "A Current Affair" on 9 July 2008. 2 The plaintiffs filed an amended statement of claim on 22 October 2008. Prior to doing so, on 15 October 2008, the defendants notified the plaintiffs they the sought an order for security for costs. Correspondence and directions subsequently took place. 3 On 24 November 2008, the defendants filed a notice of motion seeking an order for security for costs in the amount of $385,000 pursuant to UCPR 42.41. 4 The affidavit of evidence in relation to the notice of motion consisted of an affidavit of Vasilios Kalantzis, solicitor, sworn 1 December 2008 and an affidavit on behalf of the defendants of Paul Svilans, solicitor, sworn 24 November 2008. 5 The notice of motion was heard by Registrar Atkinson on 9 December 2008, and on 12 December 2008, the Registrar made the following orders as follows:- "1. The plaintiffs are to provide security for costs of $350,000 as follows:- (a) $25,000 is to be paid in to Court on or before 12 January 2009; (b) $35,000 is to be paid in to Court on or before 12 March 2009; (c) $90,000 is to be paid in to Court within 28 days of the allocation of a hearing date for trial of the proceedings; (d) $200,000 is to be paid in to Court no later than 28 days prior to the date fixed for commencement for trial of the proceedings. 2. If the plaintiffs fail to make any payments in accordance with the order for security for costs, the plaintiffs cannot take any further steps in the proceedings without leave of the Court. 3. The plaintiffs are to pay the defendants' costs of the motion as agreed or assessed." 6 On 22 December 2008, the plaintiffs filed a notice of motion in which, inter alia, an order was sought that the judgment and orders of Registrar Atkinson made on 12 December 2008 be reviewed and set aside. 7 On this application, the plaintiffs sought to rely upon additional evidence to that which was before the Registrar, namely, the affidavit of Vasilios Kalantzis sworn 15 May 2009 to which I will shortly refer. The plaintiffs also relied, on this application, on his affidavit sworn 1 December 2008. 8 An extract of transcript of proceedings before the Registrar was tendered and became Exhibit 1. In these proceedings, that exhibit became Exhibit A in these proceedings, being a letter from the Nine Network dated 18 June 2008.

The affidavit evidence before the Registrar 9 The affidavit sworn by Mr Kalantzis on 8 December 2008 in paragraph 4 sets out his estimate of costs if the defendants pleaded the defence of truth/justification and for honest opinion as being in the vicinity $450,000 10 In paragraph 5, he stated that, if the defendants did not plead truth and honest opinion, then his estimate of costs at the conclusion of a three week hearing was in the vicinity of $180,000. 11 In his affidavit of 1 December 2008, Mr Kalantzis set out the assets of the plaintiffs. The assets included the ownership of a hotel/restaurant and other properties in Sacramento, California. I will say something more about those in a moment. 12 The defendants also relied upon the affidavit of Mr Paul Svilans, solicitor, sworn 24 December 2008. 13 The application was based primarily upon the fact that the plaintiffs ordinarily reside in Sacramento, California in the United States of America. There is no dispute that that was their ordinary place of residence. Additionally, the defendants relied upon the fact that the plaintiffs did not have any assets within the jurisdiction and indeed in Australia. 14 Before the Registrar, written submissions for the plaintiffs dated 5 December 2008 were relied upon and written submissions were also produced by the defendant and also relied upon, they being dated an unknown date in December 2008.

Applications for review of the Registrar's decision 15 The present application, as I have stated, seeks a review of the Registrar's decision and the setting aside orders made by the Registrar. 16 The present application is not an appeal and, accordingly, it is not essential that an error of law be demonstrated in the orders under review. See, in that respect, In the Will of Sheppard [1972] 2 NSWLR 714, 716. The power to review is not an appeal and is not subject to the restrictions that apply to appeals: see Comalco Aluminium Limited v Ohtsu Tyre & Rubber Co Aust Limited [1983] 8 ACLR 330. 17 In Tomko v Palasty (No 2) [2007] NSWCA 369, Basten JA (with whom Hodgson and Ipp JJA agreed) reviewed the relevant principles concerning the decision of the Registrar of the Court of Appeal in the approach to be taken to a challenge to the order made in that case dismissing an application seeking an extension of time to file a cross-appeal. Whilst the principles were enunciated in relation to the decision of the Registrar of the Court of Appeal, nonetheless, the principles stated by Basten JA appear to be apt to an application to a decision of a Registrar in the Common Law Division of this Court. Basten JA (at [52]), stated:- "It follows that the proper approach to an application in relation to a decision of the Registrar is as follows:- (1) The application should be treated as a 'review' pursuant to s.121(3) of the Supreme Court Act and UCPR Rule 49.19; (2) A review, unlike an appeal, does not require demonstration of error, nor is it restricted to a reconsideration of the material before the primary decision-maker; (3) Authorities with respect to the conduct of appeals against the exercise of discretionary powers such as House v The King do in terms not apply to a review.

…" 18 His Honour then dealt with policy considerations in relation to a review of an order involving considerations of a breach of time limits concerning steps in proceedings. His Honour then went on to state:- "(c) A court may be more inclined to intervene on a review based on fresh evidence, changed circumstances or where error is demonstrated in the decision under review." 19 His Honour also stated at 53:- "Although on review, this Court should exercise afresh the power to extend time, it does not follow that the reasoning of the Registrar should be ignored, or that variations in the material presented to him and the evidence adduced in this Court are irrelevant. However, because the matter now before this Court may be treated as an original application for extension of time within which to appeal, arguably those matters should be entirely put to one side ..." 20 I consider, with appropriate modifications to the nature of the application that I am dealing with, that is, an order made by the Registrar for security of costs, that his Honour's observations, with respect, are appropriate to the application I am dealing with.

Security for costs: principles 21 The purpose of the power to order security for costs is the protection of a defendant against incurring costs that might not be recovered. A security for costs order is not made, or not only made, because a party may be unable to meet a costs order, but also, because a cost order may be unenforceable. That is why the rule specifically applies to plaintiffs who are resident outside the jurisdiction. See Ezzo v Grille [2003] NSWSC 776 per Simpson J at 48. 22 The relevant principles are well-established. The Court is required to take into account all relevant circumstances including:-

(1) The identity of the plaintiffs - whether they are individuals or some other entity.

(2) Whether the plaintiffs' claim against the defendants is made in good faith and appears to be reasonably arguable.

(4) Whether the making of an order would stultify the plaintiffs' ability to pursue proceedings.

(6) The enforceability of any orders. 23 The plaintiffs' written submissions addressed each of these matters. I express my appreciation to both senior and junior counsel for the respective parties for their very helpful written submissions which succinctly set out the relevant facts, the issues and principles. 24 Before turning to the application of the principles to the present case, I record the following. The Court's power to order a plaintiff to give security is expressly provided for in Part 42 Rule 42.21(1)(a) of the UCPR which refers to the circumstances "that a plaintiff is ordinarily resident outside New South Wales". 25 The following matters in particular I note:-

(1) An order for security for costs is entirely discretionary in nature. The discretion, furthermore, is a broad one.

(2) In the exercise of the discretion, it is necessary to identify the specific matters that are relevant to the exercise and the factual issues raised in relation thereto by the parties.

(3) The fact of the plaintiffs' overseas residence is not only a circumstance which triggers jurisdiction to make an order for security for costs, but it is also plainly a relevant matter to be taken into account in the exercise of the discretion. See Ezzo v Grille (supra) at [37].

(4) The fact that a plaintiff is a foreign resident who does not have assets within the jurisdiction is also a relevant matter.

(5) The mere fact of overseas residency, even when coupled with the absence of assets within Australia, is not determinative of the application, but it is nevertheless a factor of some weight: Ezzo v Grille (surpa) at [39]).

(6) It has been the practice of the Federal Court and other superior courts to order a plaintiff who is ordinarily resident outside the jurisdiction to provide security unless that party can point to other factors which overcome the weight of the circumstances that the person is resident out of and has no assets within the jurisdiction. See Readymix Holdings International Pty Limited v Wyeland Process Equipment Pty Limited [2008] FCA 373 per Flick J at [12] and the authorities to which his Honour refers. 26 The fact that the plaintiffs are residents outside the jurisdiction is clearly a relevant issue and that has not been disputed. Similarly, there are no assets held by them in the jurisdiction, as I have stated. 27 The fact of difficulties of enforcement in a foreign jurisdiction is also a relevant matter to which I will shortly return. 28 Furthermore it is relevant, in particular in this case, to consider whether there is any financial hardship by the plaintiffs if the Registrar's orders or order for security were to remain, in particular, whether those orders would operate to stultify the proceedings. 29 I have, in particular, had regard to the evidence concerning the assets said to be held by the plaintiffs in California. 30 As Levine J observed, in Aopi v Rapke [2002] NSWCA 711 at 31, this issue, essentially, involves an argument on the balance of convenience. If there is no financial hardship which would be caused to a plaintiff if an order for security for costs were made, and there is a countervailing risk that the defendant would not be able to enforce an order for costs in the foreign jurisdiction, the balance of convenience suggests that an order should be made. That argument, of course, stands alone and does not have regard to other relevant factors. The question is whether the making of the order for security for costs would not cause, on the evidence before me, any financial hardship to the plaintiffs. Further, in relation to the next consideration, the question is whether the making of the order would have the stultifying effects contended for and the evidence in that respect is to be considered.

The submissions of the parties 31 The written submissions of both parties were supplemented by oral submissions. Mr S M Littlemore QC submitted that the Registrar had treated as sufficient in itself, the fact that the plaintiffs were resident outside Australia. 32 He additionally submitted that, whilst the application for security was made promptly by the defendants, it may be seen as reflecting an enthusiastic approach by the defendant built upon some form of assumption that foreign residents did not have the same rights as persons who reside within the jurisdiction. 33 Mr Littlemore placed considerable emphasis upon the contention that the orders made by the Registrar would, in effect, stultify the litigation. He said the position was that the plaintiff, Mr Neely, is not an owner of the assets referred to in the affidavit of Mr Kalantzis, but that those assets are assets of Ms Dalton and, through her solicitor, she has stated that she has no cash reserves in the bank or otherwise that would be sufficient to fund both her own costs and comply with the order for security for costs. The submission, in effect, was that it would be unrealistic to expect Ms Dalton to liquidate assets in order to comply with the order made. 34 Mr Littlemore's further submission was that, in the event that any order for costs were made on the present application, it would be limited and in the order of $5,000, being an amount, on the evidence, said to be sufficient to cover the costs of enforcing any judgment for costs entered in favour of the defendants. 35 I have not here purported to restate all the submissions made by Mr Littlemore, but I have had regard to all of the matters he has raised. 36 Mr B R McClintock SC, on behalf of the defendants, emphasised in his oral submissions the following matters:-

(1) The difficulties associated with the enforcement of any "judgment" in the State of California.

(2) Certain practical issues he said arose as to the true asset position or entitlement of Ms Dalton.

(3) The principle stated by McHugh J in Chellaran v China Ocean Shipping (1991) 102 ALR 321 at 323 and other authorities.

(4) That to be counterbalanced against that principle and to outweigh it involved consideration of:- (a) The contention made as the stultifying effect of the Registrar's order. (b) The strength of the plaintiff's case. (c) The legal and practical difficulties of enforcing any judgment for costs made in favour of the defendants. 37 I raised, in the course of submissions, the onus that I consider the defendant has to establish that the code, to which I will shortly refer, would prevent the defendants from obtaining recognition of a cost judgment. 38 Mr McClintock acknowledged that both parties have proceeded upon the basis on this application that there was a reasonably arguable case "both ways" and that it was not possible, on a hearing of this kind before me, to assess the strength and merits of the case. I have proceeded on that basis. 39 Mr McClintock identified a number of issues concerning the true asset position of Ms Dalton in relation to the assets disclosed in paragraph 24 of Mr Kalantzis' affidavit sworn 1 December 2008. 40 I need not here repeat all of the matters raised. In effect, the submission was that, in respect of each of the assets, there was insufficient information disclosed as to the actual ownership or entitlement of Ms Dalton to particular assets and their value, together with the issue as to the ownership arrangement in respect of the hotel/restaurant in Sacramento and the terms of the Dalton Family Trust in respect of the property at 12 Ost Place, Sacramento. 41 Mr McClintock's submission was that, even if it were possible to have any judgment in favour the defendants recognised in California, his clients were still at risk by reason of those matters to which I have referred, namely, the lack of information on his contention as to the true asset position and ownership rights in the assets disclosed. 42 In reply, Mr Littlemore emphasised that there was no basis or evidence upon which a conclusion was open that recognition of any judgment for costs could not be obtained under the code, that the ownership of the hotel/restaurant in Sacramento was the subject of evidence both in Mr Kalantzis' abovementioned affidavit and in the transcript of his cross-examination on 9 December 2008 (Exhibit 1 at p.14, lines 10 to 15).

Consideration 43 The question as to the financial position or standing of the plaintiffs including, in particular, the position concerning their asset holdings, is, of course, an important issue on the question as to whether any order for security for costs should be made, and, if so, the quantum of any such order and upon what I consider to be a very important issue, namely, whether the Registrar's order would frustrate the plaintiffs' ability to prosecute the proceedings. 44 Annexed to the defendants' written submissions is a schedule which sets out a table of assets in respect of the real property holdings of Ms Dalton and a table of assets, cash and securities, based upon the evidence of Mr Kalantzis. 45 The values attached to the assets, cash and securities, though based on the affidavit evidence in paragraph 24 of Mr Kalantzis, is not the only evidence. Mr Littlemore, in response to Mr McClintock's submissions, emphasised that the suggested value of certain assets was not based upon mere assertion, but that annexures including Annexures O, Q, S and U to Mr Kalantzis' affidavit of 1 December, provides confirmatory evidence as to value. In that affidavit, paragraph 33, Mr Kalantzis stated:- "As can be seen from the above documents, most of the plaintiffs' wealth lies in assets and not cash on hand. I am instructed by the plaintiffs and verily believe that if they are ordered to pay the security of $385,000 sought by the defendants, they will not be able to proceed to prosecute this action." 46 The plaintiffs rely also upon Mr Kalantzis' affidavit sworn 15 May 2009 on this matter. Objections were taken to paragraphs 3 to 8. My ruling on the objections was that the plaintiffs were entitled to rely upon paragraphs 3 to 6, and therefore those paragraphs were admitted. But paragraph 7 was in the nature of a submission only and would be treated as such. 47 In paragraph 3 of that affidavit, Mr Kalantzis states:- "I am informed by the plaintiffs and verily believe that if the Court does not overturn the earlier decision by Registrar Atkinson, the plaintiffs will not be in a position to provide the security as ordered and the proceedings will therefore be stultified." 48 It is important to observe in relation to these paragraphs, in particular, the last paragraph to which I have referred, that Mr Kalantzis did not identify the primary source or data upon which his belief was "informed" by the plaintiffs. 49 Section 172 of the Evidence Act 1995 provides as follows:- "(1) Despite Chapter 3, the evidence may include evidence based upon the knowledge and belief of the person who gives it or on information that the person has. (2) An affidavit or statement that includes evidence based on knowledge, information or belief must set out the source of the knowledge or information or the basis of the belief." 50 Accordingly, whilst the evidence of Mr Kalantzis as set out in the above two paragraphs is admissible, such evidence may not carry a great deal of weight if the basis for the contention, in particular, in relation to financial standing or financial hardship is not properly identified. This is particularly so if a plaintiff is seeking to make out that a particular order made by an officer of the Court does, in fact, have a stultifying effect. 51 In the present case, the position is that the plaintiffs have had, since the date upon which the Registrar's order was made, namely, 12 December 2008, the opportunity to have their financial position established by evidence by way of fact and opinion. Such evidence need not, of course, on an application of this nature, have been given by the plaintiffs personally. It is apparent from the evidence that Ms Dalton is involved in the conduct of a business and an appraisal of her financial position and strength would no doubt be capable of being established, for example, by her accountant based upon relevant financial information, particularly in the period from the date of the making of the orders sought to be set aside through to the present time. 52 There has not been any evidence of that kind, whether given directly or indirectly, whether by the solicitor or an accountant, that establishes that the Registrar's order would have the stultifying effect contended for or that it would impose relevant financial hardship. 53 In relation to the question of enforcement, attention has been given in the course of argument to Annexure L to the affidavit of Mr Kalantzis of 1 December which is a letter from a Californian attorney, Mr Sperling, and to relevant provisions of the Code of Civil Procedure to which Mr Sperling refers in his letter. 54 Mr McClintock submitted that a cost order would not be a "judgment" of a Court of a foreign country within the meaning of the relevant provision of the Code, and furthermore, it would be open to the plaintiffs, he contended, to raise a defence or a response to any application for recognition of a judgment or cost order made in this Court. In that regard, he identified the provisions of s1716(c)(iii) of the Code which refers to a ground for non-recognition or not giving recognition to a foreign judgment where it is "repugnant to the public policy of this State or the United States". Just what that phrase means and how it has been understood and applied in California is something about which I do not have any evidence. 55 I am prepared to proceed upon the basis that the matters raised by Mr McClintock by way of argument are conceivably arguable, but that is as far as I can take it. 56 I note that not dissimilar issues were raised before Justice Levine in a Aopi v Rapke (supra) where his Honour there, too, considered the points raised and noted that they were arguable. But again, without evidence from a lawyer in the jurisdiction, it is hard for any firm views to be expressed. And on this application, there was no evidence before me as to how the relevant provisions of the Code of Civil Procedures have been applied. 57 I have concluded, accordingly, that the potential difficulties which Mr McClintock has raised in obtaining recognition, though possibly arguable, cannot be regarded as a determinative matter in resolving the present application. 58 I have concluded that I do not consider that the factors relied upon by the plaintiffs as discretionary matters do outweigh or override the fact that the plaintiffs do not reside in the jurisdiction and do not have any assets within the jurisdiction. In particular, I do not consider the plaintiffs have established that their financial position is such that that Registrar's order will have the stultifying effect argued on this application. Nor do I consider it has been established that the order would impose such financial hardship as would warrant the making of some other order than that made by the Registrar. 59 Finally, I do not consider that it has been established as a basis for this Court to intervene on a review application under the UCPR, that there has either been fresh evidence, changed circumstances or error demonstrated in the decision under review. 60 Whilst I have not had the benefit of the written reason of the Registrar, the evidence before the Registrar and on this application does not, in my opinion, provide grounds for setting aside the Registrar's order and I decline to do so. 61 Accordingly, the orders I propose to make are:-

(1) The notice of motion filed on 22 December 2008 is dismissed.

(2) The plaintiffs are to pay the costs of the application. **********

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