Practice and procedure - Costs - Security for costs - Practice matters.

Defamation - Privilege - Qualified privilege - Rebuttal of privilege by malice - Evidence of malice.

Roberts v Bass [2002] HCA 57; (2002) 194 ALR 161, considered.

Judgment Number: [2003] TASSC 72

ENVIRONMENTAL DEFENDERS OFFICE (TAS) INC v BARRY CHIPMAN,

TIMBER COMMUNITES AUSTRALIA LTD and IAN ROUTLEY

1 The Environmental Defenders Office (Tas) Inc ("the Association") has sued in defamation and the defendants have applied for security for costs and a stay pending the provision of any security ordered. The Association acknowledges that if unsuccessful in the action and ordered to pay costs it will not be able to do so. The Association does not dispute that if orders for security for costs are to be made the amount should be as claimed, namely, $75,000 for Barry Chipman and Timber Communities Australia Ltd ("Timber Communities), the first and second defendants, and $45,000 for Ian Routley, the third defendant. The Association does not dispute that if security is ordered the action should be stayed pending provision of the security.

2 The Association was established in 1995 and is incorporated under the Associations Incorporation Act 1964. In general terms its object is to protect the environment by providing legal advice; community education and input into law reform and policy formulation in the area of environmental law. Its funding comes principally from the Federal Government, but it also obtains funds from the State Government; the sale of publications such as the Environmental Law Handbook for Tasmania and a small amount from membership subscriptions and donations. Its profit and loss statement for the financial year ended 30 June 2002 includes the following:

The profit and loss statement discloses that expenses exceeded income in this financial year by $2,756.77, with much of the expense being for wages and salaries totalling $66,128.76. It employs a lawyer full-time and presumably some secretarial services. The balance sheet for the financial year shows that the Association has plant and equipment with a written down value for accounting purposes of about $16,000 and cash of about $21,000 subject to accrued or accruing liabilities of about $9,000. The affidavit of Mr Browne, the President of the Association, includes the following:

"8 The plaintiff has no ability to satisfy a costs order. Our funding could not be used for that purpose. The organisation has some assets that may amount to approximately $7,000-$10,000.

9 Special arrangements have been put into place for the conduct of this litigation. Those arrangements have been approved by the Commonwealth Attorney-General's Department and by the body responsible (on behalf of the Commonwealth) for administering the plaintiff's use of Commonwealth funds, the Legal Aid Commission of Tasmania. The State Attorney-General has also approved the arrangements that have been implemented for the conduct of this litigation. No Commonwealth or State funds are being used towards this litigation."

In fact, the use of Federal funds for this litigation would be in breach of the funding conditions. The Commonwealth Community Environmental Legal Program Guidelines specifically state:

"... services purchased by the Commonwealth under the Commonwealth Community and Environmental Legal Program (CCELP) cannot be provided for litigation ...".

3 The publications, the subject of the action, were made in March and August 2002. The March publications were considered by the Association's Management Committee at its meeting on 15 May 2002, with the minutes including the following:

"The Committee discussed the prospect of proceeding against Barry Chipman and Timber Communities Australia . The discussion focused on the lack of gain to the EDO in taking proceedings, in that the publication was not regarded as serious enough (by some). Concern was expressed as to the media coverage that such action would cause. It was also pointed out that the prospect of interlocutory costs orders against the EDO, security for costs orders and the time and energy spent preparing, running the case and accounting to the Commonwealth etc etc were clear disadvantages in proceeding. On the other hand it was pointed out that Timber Communities and Chipman were acting as bullies and that their comments in this instance were part of a wider campaign that the EDO ought not countenance. Before the issue was put to a vote it was proposed by RB that the issue be deferred. The vote was likely to lead to the chair of the meeting using his casting vote in the event of a tie. The Committee resolved to defer the issue to the next meeting."

The matter was again considered by the Management Committee at its meeting of 5 September 2002, by which time the August publications of Mr Routley had been made. The minutes of that meeting include the following:

"The Committee noted: i) the offer from Wallace Wilkinson & Webster to fund any action the Committee might pursue through them on a `no win no fee' basis; ii) That procedural expenses for any action will be financed by personal contributions from Committee members and incidental EDO incomes; and iii) The problem of a potentially devastating costs order. RB proposed and BR seconded `that the Management Committee instruct Wallace Wilkinson & Webster to give us advice on the merits of defamation action against Barry Chipman, Timber Communities Australia and LCC Cr Routley' - carried by consensus."

4 As early as 26 March 2002 the Association had written to the Commissioner for Police asking him to "investigate this criminal defamation". On 1 October 2002 the Director of Public Prosecutions wrote to the Association saying:

"I do not believe the machinery of the criminal law needs to be drawn into this."

5 The Association received advice from a Hobart legal firm that the defamation claim had merit and the Committee members agreed to pay out of their own pockets $1,699.54 for this advice, albeit that they have designated this payment as a loan to the Association for which they expect to be repaid. On 29 November 2002 a writ was filed by the legal firm Wallace Wilkinson & Webster. The writ identified as the practitioner of that firm having carriage of the matter, the deputy chairperson of the Committee of Management, being one of several lawyers on the Committee.

6 The writ was served promptly and appearances were entered in December 2002. On 10 January the Sydney solicitors for Mr Chipman and Timber Communities wrote to Wallace Wilkinson & Webster expressing the opinion, amongst other things, that the statement of claim was defective. On 15 January 2003 Wallace Wilkinson and Webster wrote back rejecting the complaints about the statement of claim and requiring a defence within the time limit prescribed by the Supreme Court Rules. Defences were filed and served a few days later. The defences were quickly followed by the Association requesting further and better particulars and delivering replies alleging dishonesty and malice. In late February and early March 2003 requests were issued for further and better particulars of the statement of claim and the reply to the defence of the first and second defendants. Those particulars were supplied on about 21 March 2003 and on 27 March 2003 the current applications for security for costs were filed. On the same day the Association filed its affidavit verifying its list of documents. The application came before the Court for mention on 28 April 2003, and an order was made that the third defendant file his affidavits by 12 May 2003. In fact, no affidavit was filed on behalf of the third defendant until 26 May 2003 and so when the matter came back before the Court on 27 May 2003, the original timetable concerning the application for security for costs had to be varied. When the application came back before the Court for mention on 3 July 2003 it was set down for hearing. On 28 July 2003 the Association filed an application to amend its statement of claim and replies. Those applications remained outstanding at the time this application was heard, namely, 1 August 2003.

7 In general terms the claim against Mr Chipman and Timber Communities as set out in the statement of claim is as follows. On 13 March 2002, Mr Chipman on behalf of Timber Communities wrote and sent to the Federal Attorney-General, the State Attorney-General and the State Deputy Premier, correspondence imputing that the Association misuses its public funding by aiding, encouraging, advocating or condoning the sabotage of forestry equipment and the causing of injury to police officers. The statement of claim goes on to assert that the policy adviser for the State Attorney-General responded to the correspondence by asking the following questions:

(2) Do you concede that if the only charge that could be made against the EDO about any complicity in a campaign of sabotage and lawlessness against the forestry industry was the provision of website links; that this would be regarded as a rather tenuous and weak link?

(3) Do you concede that there is a level of passivity or inertness on the part of the EDO if the links were only placed on the website as an aid and nothing more?

(4) Have you anything further in `clear evidence' that the EDO is being used to `encourage illegal action'?

You claim the EDO has a strong association with `Lawyers for Forests', could you further expand on that claim for me?"

Thereafter it is alleged that Mr Chipman on behalf of Timber Communities wrote to the policy adviser a letter containing similar imputations to those the subject of the original complaint.

8 In general terms the allegations against Mr Routley are that he was a Launceston City Council Alderman. He caused to be published on Council's meeting agenda for 12 August 2002, an agenda item imputing that the Association misused its funds by promoting the sabotage of forestry equipment. It is further claimed that at the Council meeting held in public on 12 August 2002, Mr Routley spoke in support of his concerns expressed on the agenda item using words containing similar imputations and an imputation that the Association provides detailed instruction in relation to causing damage to forestry equipment.

9 There is no allegation that these publications were republished in the mass media.

10 The Corporations Act 2001, s1335, which confers a statutory jurisdiction to order security against corporate plaintiffs does not need to be considered as its operation is excluded by the Associations Incorporation Act 1964, s3. The defendants rely on the inherent jurisdiction of the Court and Supreme Court Rules 2000, r828(1)(b), which is as follows:

"The court or a judge, on the application of a party to proceedings, may order an opposite party to give security for the costs of the party applying for security and that the proceedings against the party applying for security be stayed subject to the provision of security if the opposite party from whom security is sought is a plaintiff, applicant, defendant pursuing a counterclaim or respondent pursuing a cross-application and if .. -

11 The discretion is not fettered by the terms of the rule. Kirby J in considering the inherent power of the High Court to order security in proceedings in its original jurisdiction set out a number of propositions which although lengthy warrant reproduction. I refer to Merribee Pastoral Industries Pty Ltd & Ors v Australia and New Zealand Banking Group Ltd [1998] HCA 41; (1998) 155 ALR 1 at 10 - 11 where he said:

"1 There is no absolute rule to control the exercise of the discretion to order security for costs where that jurisdiction derives from the inherent power of the Court. The jurisdiction, as one reposed in a court, is to be exercised judicially and for the purpose for which it exists. An analogous discretion has been described as "absolute". It would be wrong to attempt to hedge the jurisdiction about by rules or practices, even where derived from a number of instances. This is because what should be done in each case depends entirely on the circumstances of the case. The governing consideration is what is required by the justice of the matter.

2 There is therefore no absolute rule (applicable statute apart) that the impecuniosity of a party will entitle its opponent to an order for security for its costs. Where the power to so provide exists in uncontrolled terms, it would be to fetter the jurisdiction impermissibly to adopt such a rule or even a prima facie entitlement. By the same token, the inability of a party to meet the costs of an unsuccessful proceeding is not irrelevant to the exercise of the jurisdiction. Litigation is inevitably expensive and burdensome. To add to the burdens of a party successful in the outcome, those of paying its costs with little or no prospect of recovery under an order for costs may, in particular circumstances, be a reason for offering a measure of protection to that party by way of security for costs.

3 Another consideration that has sometimes been judged to be relevant is the strength of the case of the party resisting an order that it provide security for costs and an evaluation (necessarily tentative) of its prospects of success. Thus, the fact that a party has secured special leave to argue its case on appeal has been thought a relevant consideration in some circumstances. Similarly, if a proceeding appeared hopeless and such as was bound to fail, the lack of apparent merit in a party's case might be a reason for ordering it to provide security for the costs to which, it appears, it is needlessly putting its opponent. Such a consideration would need to be exercised with care, given that the real merits of a case might not emerge until the final hearing or might not sufficiently emerge in the necessarily brief proceedings typically involved in an application for security for costs. Furthermore, if a party asserts that its opponent's proceedings are manifestly lacking in legal merit, other remedies are available to it to protect it from needless vexation. In appeals there is the barrier of leave or special leave.

4 Further considerations which, in the particular circumstances of the case, have been held relevant to the grant or refusal of an order for security for costs in relation to a proceeding in the Court have been:

(a) That the hearing of the proceeding is close at hand or that the moving party has delayed its application for such an order.

(b) That the parties or some of them are legally aided.

(c) That the proceeding raises matters of general public importance quite apart from the interests of the parties.

(d) That the nature of the proceeding is such that, even if unsuccessful, an order for costs in favour of the winning party might not be made or might be limited.

(e) That the costs orders made earlier in the proceedings have followed an unusual course or have involved countervailing orders which must be weighed against those liable to be made in the proceedings in question.

(f) That a party to the proceedings is, or will at judgment be, or be likely to be, absent from the jurisdiction and has no or few assets within the jurisdiction.

(g) That if an order were made it would effectively shut a party out of relief according to law in circumstances where that party's impecuniosity is itself a matter which the litigation may help to cure.

Doubtless there are as many further considerations as there are cases. The foregoing help to illustrate some of the matters which courts, including this Court, have felt to be relevant to the exercise of the discretion to order security for costs, where that discretion is invoked."

12 As to the process of reasoning to be employed Kirby P (as he then was) in Maritime Services Board of New South Wales & Anor v Citizens Airport Environment Association Inc (1992) 83 LGERA 107 said at 110:

"However, I would emphasise that an over analytical approach to decisions of this character can distort the real process of reasoning by which such a decision is made. In the end, it is usually a matter of impression which is derived at the close of hearing the evidence and listening to the argument. It is not always one susceptible to precise explanation."

13 As to embarking on an assessment of the merits of the plaintiff's claim it is important to recognise that an assessment will generally be subject to the limitation that not all of the evidence has been heard and the arguments might not be comprehensive. Pearlman J observed in Byron Shire Businesses for the Future Inc v Byron Shire Council and Holiday Villages (1994) 83 LGERA 59 at 65:

"The strength of the applicant's case is a relevant factor in the exercise of a court's discretion. The weaker the applicant's case, the more the court should be ready to consider ordering security for costs ...

It is somewhat difficult in interlocutory applications such as these to assess whether or not an applicant's case has arguable merit. The court does not have the full evidence upon which the case is to be based nor does it have the benefit of the full argument on the issues raised. The court's assessment can only be impressionistic."

14 In Porzelack v Porzelack(1987) 1 WRL 420 at 423, Sir Nicolas Browne-Wilkinson VC said at 423:

"First there have been attempts to go into the likelihood of the plaintiff winning the case or the defendant winning the case, presumably following the note in the Supreme Court Practice 1985 p384 under Rubric 23/1-3/2, which says: `A major matter for consideration is the likelihood of the plaintiff succeeding.' This is the second occasion recently on which I have had a major hearing on security for costs and in which the parties have sought to investigate in considerable detail the likelihood or otherwise of success in the action. I do not think it is a right course to adopt on an application for security for costs. The decision is necessarily made at an interlocutory stage on inadequate material and without any hearing of the evidence. A detailed examination of the possibilities of success or failure merely blows the case up into a large interlocutory hearing involving great expenditure of both money and time."

If a merits assessment would require a detailed factual investigation a court might, in its discretion, decline to embark on it and refuse to receive merits evidence, thus avoiding the possibility of lengthy cross-examination on matters which it is impracticable for the court to determine on an interlocutory application.

15 It has been held in this jurisdiction that it is inappropriate on an application for security for costs to investigate merits in any extensive way. In Kodrum (No 5) Pty Ltd v Shandy Pty Ltd Tas U/R B6/1996, Zeeman J said at p2:

"Whilst it would be inappropriate to investigate in detail the merits of an action, apparently insuperable problems which arise on a plaintiff's own pleadings and which lead to the conclusion that the plaintiff's action is unlikely to succeed are relevant."

16 The defendants say that they should have security for costs because:

(1) If unsuccessful the Association will not be able to satisfy a costs order;

(2) the Association's prospects of succeeding are poor; and

(3) there are resourced people standing behind the Association but none are willing to satisfy a costs order.

The Association only disputes the defendants' second contention, but says:

(1) Incorporated associations lacking in funds and set up for non-profit activities should be treated in similar fashion to impecunious individuals so that impecuniosity alone is not a sufficient reason to order security for costs.

(2) The Association has been set up for public purposes and so there is a public interest in allowing the Association to pursue an action to vindicate its reputation.

(3) The likelihood is that an order for security for costs will put an end to the Association's claim.

(4) The action is already considerably progressed and the third defendant has delayed the hearing of the application by failing to comply with a court imposed timetable for the delivery of his affidavits.

(5) The fact that the Association is represented by legal practitioners acting on a contingency basis does not provide a good reason to order security for costs.

The assertion that the Association's prospects of success in the litigation are poor

17 Counsel for the defendants, Mr Connell, submitted:

"The plaintiff's prospects are poor. This is a classic comment case; a classic case of reporting a grievance and a classic case falling within the constitutional protection of political free speech (see Lange v ABC [1997] HCA 25; (1997) 189 CLR 520; Roberts v Bass [2002] HCA 57; (2002) 194 ALR 161). ... Further publications by the third defendant are protected by s341 of the Local Government Act 1993."

18 In addition to other matters each of the defendants have put on pleas of fair comment and qualified privilege. The third defendant, Mr Routley, also claims the immunity provided by the Local Government Act (1993) (Tas), s341, which in its relevant part is as follows:

"... a councillor ... of a council is not personally liable for an honest act or omission done or made in the exercise or purported exercise of a power or in the performance or purported performance of a function under this or any other Act."

The Association in its reply alleges a lack of honesty in the making of the publications. There is no detailed evidence on the point and I am simply not in a position to form any opinion, even impressionistic as to whether or not Mr Routley's publications were the result of an improper motive.

19 As to the plea of comment, a number of questions may conceivably arise. For example, whether the words complained of properly construed amount to an expression of opinion rather than an assertion of fact; whether the opinion related to one or more of the matters specified in the Defamation Act 1957, s14; whether there are sufficient facts contained in the publication or otherwise readily ascertainable to make the opinion open; whether the facts upon which the opinion is based, or sufficient of them are true; whether the defendants genuinely held the opinion expressed and whether or not the expression of the opinion was actuated by malice. As with the s341 defence, I simply do not have enough information at this stage to form any opinion, even impressionistic, as to how a number of these questions are likely to be answered if the action proceeds to trial.

20 The defence of qualified privilege or extended qualified privilege, however, does appear to me to be strong so far as Mr Chipman and Timber Communities are concerned and on the state of the pleadings alone it would appear to be inevitable that it will succeed. Their correspondence related to government funding and was confined to publication to government officials responsible for funding and forestry operations. No sufficient allegation of improper motive has been put in reply.

21 It is acknowledged in the Association's evidence that almost all of its funding comes from the Federal Government and the State Government. The uncontested evidence of the defendants is that by using a series of links starting on the Association's website one can arrive at the website of the Australian Direct Action Network (ADAN). Further links on the ADAN website take the person making enquiries to a document entitled "Sabotage Handbook". The publications complained of appear to have been made on an occasion which is encompassed by the Defamation Act, s16, or the extended defence of qualified privilege recognised in Lange v ABC (supra). In general terms the correspondence expresses concern that government funding "may be being misused". It specifies the series of links which result in the arrival at the ADAN website and asks the government to "investigate" and "review" its funding of the Association. The nature of the defence has recently been explained by the High Court in Roberts v Bass (supra). For the Lange defence to apply the communication must be concerning a matter of government and politics; the common law or statutory defence of qualified privilege (whichever applies to the jurisdiction) must burden the constitutional freedom of speech and the common law or statutory provision must not be compatible with the constitutionally prescribed system of government. I refer to the judgment of Gaudron, McHugh and Gummow JJ at pars64 - 67 which is as follows:

"In Lange, the Court unanimously held that freedom of communication on matters of government and politics is an indispensable incident of the system of representative government created by the Constitution. The Court emphasised that `[c]ommunications concerning political or government matters between the electors and the elected representatives, between the electors and the candidates for election and between the electors themselves were central to the system of representative government, as it was understood at federation'. Hence, this litigation is concerned with matters at the heart of the constitutional freedom of communication respecting political or government matters.

In Lange, the Court pointed out that, although the constitutional freedom confers no rights on individuals, it invalidates any statutory rule that is inconsistent with the freedom. It also requires that the rules of the common law conform with the Constitution, for `the common law in Australia cannot run counter to constitutional imperatives'. It is necessary therefore to determine the extent to which, if at all, the common law rules concerning the traditional defence of qualified privilege applicable in this case are consistent with the constitutional freedom of communication.

In determining whether a rule of the common law is consistent with the constitutional freedom of communication, two questions have to be answered. First, does the rule effectively burden the freedom? Second, if so, is the rule reasonably appropriate and adapted to serve a legitimate end compatible with the constitutionally prescribed system of representative and responsible government? If the answer to the second question is `no', the common law rule must yield to the constitutional norm, for the common law's impact on the freedom cannot be greater than that permitted by the constitutional norm.

In Lange, the Court held that the law of defamation effectively burdened the constitutional freedom and that the law of qualified privilege, as traditionally understood, did not qualify that burden in a way that was consistent with the freedom in respect of governmental and political matters published to the general public. The publication complained of in Lange concerned a television programme broadcast across Australia. Under the common law as previously understood, the law of qualified privilege did not generally recognise an interest or duty to publish defamatory matter to the general public. Hence, without that privilege, the common law imposed an unreasonable restraint upon the constitutional freedom. That necessitated the development of the common law as expounded in the balance of the judgment of the Court."

22 The qualified privilege or extended qualified privilege can only be destroyed by malice and after considering a number of decisions Gaudron, McHugh and Gummow JJ in Roberts v Bass (supra), speaking of the common law and statutory defences of qualified privilege, said at pars103 and 104:

"Carelessness of expression or carelessness in making a defamatory statement never provides a ground for inferring malice. The law of qualified privilege requires the defendant to use the occasion honestly in the sense of using it for a proper purpose; but it imposes no requirement that the defendant use the occasion carefully. Even irrationality, stupidity or refusal to face facts concerning the plaintiff is not conclusive proof of malice although in "an extreme" case it may be evidence of it. And mere failure to make inquiries or apologise or correct the untruth when discovered is not evidence of malice.

Finally, in considering whether the plaintiff has proved malice it is necessary that the plaintiff not only prove that an improper motive existed but that it was the dominant reason for the publication."

23 Here the Association in its reply to the defence of Mr Chipman and Timber Communities commences by blandly alleging malice and that is not sufficient in light of Supreme Court Rules, r239(1) which is as follows:

"Notwithstanding rule 238, if a defendant in an action for defamation pleads any of the matters contained in section 13, 14, or 17 (sic)[1] of the Defamation Act 1957, a plaintiff who intends to allege that the defendant was actuated by express malice must deliver a reply giving particulars of the facts and matters from which the malice is to be inferred."

The Association next pleads that the publishers did not believe the statements to be true, but it is plain from Roberts v Bass (supra) at pars76 and 78, that the mere fact that the maker of the statement did not hold a belief either way as to its correctness is on its own not enough. There Gaudron, McHugh and Gummow JJ said:

"But, leaving aside the special case of knowledge of falsity, mere proof of the defendant's ill-will, prejudice, bias, recklessness, lack of belief in truth or improper motive is not sufficient to establish malice. The evidence or the publication must also show some ground for concluding that the ill-will, lack of belief in the truth of the publication, recklessness, bias, prejudice or other motive existed on the privileged occasion and actuated the publication.

The knowledge and experience of Justice Hunt in defamation matters is well recognised. But with great respect to his Honour and Clarke JA, they erred in asserting that lack of honest belief defeated a defence of qualified privilege. There is no basis in principle or authority for treating knowledge of falsity or lack of honest belief as a separate head of, or equivalent to, malice."

The Association then goes on in its reply to assert irrelevance and exceeding what was necessary for the occasion, but no enlightenment is provided by the plea as to why the publication is said to be irrelevant or excessive, so as to leave open a conclusion that the publication was motivated by a purpose foreign to the privileged occasion, and so the reply is again defective for failure to comply with r239. The Association's further and better particulars of its reply to the defence only adds that enquiries of the Association would have revealed that the Association does not condone the sabotage of forestry equipment. This assertion does not seem to advance matters much in light of the observations in Roberts v Bass (supra) referred to earlier. The facts and matters particularised, namely, that there was no belief either way as to whether the Association promoted sabotage and that enquiries of the Association were not made, are insufficient to be capable of supporting a conclusion that the dominant reason for the publications was something other than the purpose of expressing a concern to those responsible for funding that that the funds "may be being misused". Accordingly, in my view, on the state of the pleadings at the moment (which obviously limit the evidence which can be adduced at trial) Mr Chipman and Timber Communities are certain to succeed on their qualified privilege or extended qualified privilege plea. Of course pleadings can be amended, but as things stand at present, having regard to the undisputed web site links to the organisation ADAN which promotes forestry sabotage; the fact that the Association is dependant on government funding and the confinement of the publications to the relevant government officials, I have no basis for thinking that the Association will ever have any realistic prospect of getting around the defence.

24 Although I have found that the Association's prospects against Mr Chipman and Timber Communities appear as Mr Connell submitted to be "poor", I am not prepared at this preliminary stage to reach the same conclusion in respect of Mr Routley's qualified privilege or extended qualified privilege defence. He says that he made the publications "in the course of the public discussion of the forestry policy of the Launceston City Council". Precisely what the Association had to do with those discussions is not apparent on the information which I have. I am simply unable to form a view one way or the other on the merit of Mr Routley's qualified privilege or extended qualified privilege defence.

25 On the question of merits Mr Connell also submitted that even if the Association were to succeed no compensatory damages would be awarded as there is no evidence and no claim that the Association has been injured in its pocket. In fact, the evidence is that neither the Federal or State Governments acted on the publications to the financial detriment of the Association. On 15 April 2002 the State Attorney-General wrote to Mr Chipman and Timber Communities saying "I believe the EDO fulfils a worthwhile function, and I have seen no evidence to suggest that any State money has been misused in any way". On 3 June 2002 the Federal Attorney-General wrote to Mr Chipman and Timber Communities saying "The Commonwealth continues to support the work of EDOs to protect the environment in the public interest". There is a considerable body of authority to support the proposition that a company can only be injured in its pocket. See Lewis v Daily Telegraph Ltd (1964) 1 AC 234, Feo v Pioneer Concrete (Vic) Pty Ltd [1999] VSCA 180; (1999) 3 VR 417 and NSW Aboriginal Land Council v Jones (1998) 43 NSWLR 300.

26 It does not necessarily follow that if the Association only recovers nominal damages the defendants will be awarded costs. In such a situation it may well be that the appropriate course is simply to decline to award costs to the Association. However, the fact that the defendants are being subjected to an action where on the current state of the evidence the Association, if it wins, may recover only nominal damages is a matter which I will take into account in considering whether or not the justice of the case rests with ordering security for costs.

The position of those standing behind the Association

27 Mr Connell submitted that a reason for ordering security for costs is the fact that those standing behind the Association are apparently unwilling to provide any meaningful financial support. Earlier in these reasons I referred to the minutes of the meeting of the Management Committee of the Association held on 5 September 2002 (see par3). It is clear from those minutes that this litigation is only occurring at all because the legal firm Wallace Wilkinson & Webster agreed to act on a "no win no fee" basis. It is also clear from those minutes that the members of the Committee are not willing to dip into their own pockets for more than "procedural expenses", presumably disbursements. This is not surprising in light of the minutes of the meeting 15 May 2002 (also referred to in par3 of these reasons) where it is recorded that a number of Committee members did not consider that there was anything to be gained from the Association's point of view by the litigation and did not consider that the defamation was sufficiently serious to justify the proceedings. The major supplier of funds for the use of the Association, the Federal Government has no interest in the defamation claim. The evidence before me includes a letter from the Federal Attorney-General to Mr Chipman and Timber Communities dated 24 March 2003. In that letter Mr Williams says:

"I am advised that the Environmental Defenders Office wrote to my department in September 2002 to advise of its intention to take legal action over statements made about its activities. In providing this advice the Environmental Defenders Office also provided an assurance that it will not use any Commonwealth funding, including staff or volunteers engaged through the funds its receives from the Commonwealth, to support the action it is taking. My department has advised that it is satisfied with the procedures that the Environmental Defenders Office has put in place to ensure that it complies with the terms of its funding agreement. My department will continue to monitor this matter to ensure that Commonwealth funding received by the Environmental Defenders Office is used only for Commonwealth approved activities.

I appreciate that you have concerns over the activities of the Environmental Defenders Office, however I hope that my response addresses your concerns about the possibility that Commonwealth funds are being used by the Environmental Defenders Office to pursue its legal action."

28 Mr Connell referred to the case of Bell Wholesale Co Pty Ltd v Gates Export Corporation & Ors (No 2) (1983-4) 8 ACLR 588 and in particular to the judgment of Sheppard, Morling and Neaves JJ at 591 where they said:

"In our opinion a court is not justified in declining to order security on the ground that to do so will frustrate the litigation unless a company in the position of the appellant here establishes that those who stand behind it and who will benefit from the litigation if it is successful (whether they be shareholders or creditors or, as in this case, beneficiaries under a trust) are also without means. It is not for the party seeking security to raise the matter; it is an essential part of the case of a company seeking to resist an order for security on the ground that the granting of security will frustrate the litigation to raise the issue of the impecuniosity of those whom the litigation will benefit and to prove the necessary facts."

29 The facts of that case are not on all fours with the facts of this case. There the Federal Court was dealing with litigation commenced by a corporate plaintiff having an issued capital of two shares of $1 each and assets of only $2 cash. It was the trustee of a family trust. There was no evidence that the persons who stood to gain financially by the litigation, namely, the family members for whose benefit the trust had been established, lacked resources. The present case is different in that the fruits of this defamation action if it is successful will have to be applied to the public interest objects of the Association and cannot go into the pockets of individuals. Having noted that distinction, however, it can still be said that this litigation is being conducted, presumably, for somebody's benefit. A windfall by way of defamation damages may save the public purse so far as the extent of the need for government funding is concerned or, alternatively, may allow the Association to better fulfil the public functions which the Federal Government pays it to perform. I regard it as relevant that the potential principal beneficiary of the litigation, being, the Federal Government, does not wish to have anything at all to do with the litigation. In this country there could be no better resourced backer than the Federal Government and even though it would be the primary financial beneficiary it wants to stay well out of it.

30 In ABC v Comalco Ltd (1986) 12 FCR 510, Pincus J said at 602:

"Where, as undoubtedly occurred in this case, those associated with the company have been impliedly attacked it would seem unjust to let the defamer escape if no financial loss to the company, direct or indirect can be shown. But, if the defamation reflects on, for example, the board, they must themselves sue."

31 Mr Connell submitted that "it is really the committee members who are running this to vindicate their own reputations". The Management Committee of the Association contains amongst others several lawyers. The imputation alleged is that the Association promotes criminal damage to forestry equipment. The imputation reflects on them, but they are unwilling to sue, or put up security for costs. As Mr Connell says they seem to be "hiding behind the corporation's skirts". Although I have been given no reason to think that the Association might recover exemplary damages that is what has been claimed from the moment the statement of claim was delivered. The inference, from the lack of evidence and the lack of pleading of damage to the Association's trading reputation (if it trades at all) is that the primary motivation for the commencement of this action was not the advancement or protection of the Association's trading or financial interests, but simply a desire to punish the defendants. The first reaction of the Management Committee was not to sue, but instead to refer the matter to the police. The proceedings it seems to me are likely to have been commenced predominantly for the satisfaction of the members of the Committee. There is no need for the members of the Committee to use the Association for this purpose. They could sue themselves. If they want to use the Association for their own ends the Committee should back the Association financially and protect it from the risk of insolvency by putting up security for costs. It is reasonable to infer that they want to use the Association, as presumably their dispensable champion, in fighting the "bullies" referred to in the minutes of the meeting of 15 May 2002, as they are unwilling to put their names to the action or to support the Association in any material financial way.

32 Counsel for the Association, Ms Wall, submitted that non-profit associations should be treated in similar fashion to impecunious individuals. She referred to Caldera Environment Centre Inc v Tweed Shire Council & Anor (1992) NSLEC 82, where Stein J of the Environment Court of New South Wales after noting that an incorporated association was "a different creature from a proprietary company" said:

"Notwithstanding limited liability, I do not think that incorporated associations should be equated with corporations. They are non-profit bodies whereas the profits of a corporation (except one limited by guarantee) are distributed to its members, the shareholders. Clearly there should be no predisposition to order security against an incorporated association."

She also referred to Friends of Hinchinbrook Society v Minister for Environment (1996) 69 FCR 11 at 21 - 22 where Branson J said:

"The applicant is an incorporated association of persons concerned with the environment. In one sense, every association is a front for its members: they stand behind it and may be assumed themselves to support the objectives of the association and, generally speaking, the association's actions in intended advancement of those objectives. There is, however, in my view, a very real difference between the relationship of a member of a non-profit association formed to advance a public interest to the association of which he or she is a member, and the relationship of a shareholder to the company in which he or she holds shares. The benefit which a shareholder might expect to obtain from litigation conducted by a company will ordinarily be, whether directly or indirectly, financial. Members of a non-profit association will not ordinarily benefit financially from litigation initiated by the association. The benefit which they might obtain from such litigation is likely to be constituted by intellectual or emotional satisfaction. The fact that the applicant has had discussions with other groups, apparently of a like mind to it with respect to the proposed development, does not mean, in my view, that the applicant is to be regarded, for the purposes of the present application, as suing for the benefit of such groups."

33 I accept the submission that different considerations apply to incorporated associations, but I do not accept that the Association should be treated as if it were an impecunious individual. It is not impecunious. It receives a large amount of government funding. Its problem is not that it does not have funds, but instead that the provider of the funds will not permit them to be used for this litigation. The committee members who have been impliedly defamed do not wish to pay. That is a choice which has been made whereas in the case of an impecunious individual the situation is simply that there are no funds. The situation here can be likened to a case where a trustee company sues, but the beneficiary wants nothing to do with the litigation and specifically does not want trust funds applied to the action, but the aggrieved directors of the company notwithstanding no financial loss want to sue anyway, as a matter of principle, without risk to their own funds.

34 Ms Wall submitted that as the Association is set up for public purposes there is a public interest in allowing the litigation to proceed. In my view, this is quite different to the situation which might have applied were the Association involved in litigation directly designed to protect the environment or further a particular environmental interest. It seems to me that the public interest which the Association is there to fulfil will not be much affected by this action except, of course, to say, that if the Association loses the case a costs order, as foreshadowed by the Committee at its meeting of 5 September 2002, might well render the Association insolvent and unable to continue.

35 Next it was submitted that there is a likelihood that security for costs will put an end to the Association's claim. I accept that that is so, but the reason for it is not that those behind the Association are without funds, but because those behind the Association including lawyers who presumably have financial resources do not see the litigation as being sufficiently meritorious to justify any significant expenditure, at least from their own pockets.

36 I accept the submission that delay in applying for security is relevant, but I do not think that the delay here is of any great significance. It is plain from the minutes of the Association's Management Committee for its meeting of 15 May 2002, that well before the action was commenced the Association took into account the possibility of an application for security for costs. The application was filed within about two months of the delivery of the defences. Although there has been discovery of documents and some other pre-trial steps taken, the action is far from being ready for trial. As indicated earlier in these reasons, as recently as 28 July 2003, the Association filed an application to amend its statement of claim and its replies to the defences. Defamation litigation notoriously has a potential to attract significant pre-trial activity and the consideration of complex issues at trial. In the scheme of the progress of this litigation, in my opinion, the application was lodged at a relatively early stage. It cannot be said that the Association has expended significant funds that it otherwise would not have spent had the application for security been lodged earlier. It appears that the Association has in fact spent little. It has a "no win no fee" solicitor and what the Association calls "procedural expenses" are being paid, at least in part, from the pockets of others. I have no reason to think that those procedural expenses are significant to this stage. Certainly there was no evidence adduced to that effect.

37 I do, however, accept Ms Wall's submission that I ought not regard the fact that this litigation is being backed by a "no win no fee" solicitor as counting against the Association. I respectfully adopt the observation of Byrne J in Shackles v The Broken Hill Proprietary Company Ltd [1996] VicRp 76; (1996) 2 VR 427 at 430 where he said:

"Solicitors who undertake to act for an impecunious client at risk to themselves are in principle in no different position. Indeed, it has been said that by so acting they are performing a commendable public service, consistent with the best traditions of the legal profession: Clyne v NSW Bar Association [1960] HCA 40; (1960) 104 CLR 186 at 203-4. The fact that, on one interpretation of the fee agreement, it may be possible for a rapacious solicitor to recoup a substantial and unearned benefit does not in my view require me to conclude that such a result will be or is likely to occur in this case."

38 Here the Association has acknowledged that if unsuccessful in the action and ordered to pay costs it will not be able to do so. I have found that the qualified privilege or extended qualified privilege defence of Mr Chipman and Timber Communities appears at the moment to be highly likely if not certain to succeed. The evidence is that the Association has not suffered financial loss. This is not a case where the Association is impecunious. It has funds, but the major supplier of the funds, the Federal Government, wants them spent on the public interest purposes for which they were provided and not on this litigation. The proceedings appear to have been taken predominantly for the emotional satisfaction of the members of the Management Committee. Those members, however, are not willing to stand by the Association in the event of an adverse costs order to protect it from the risk of insolvency. Although the application for security for costs was not made immediately the delay was relatively short and the Association does not appear to have spent any significant funds on the litigation in the meantime in any event. Against all of this I am left only with the proposition that an order for security for costs will be likely to put an end to the litigation. I see no injustice at all in an order having this effect in the circumstances which I have set out in these reasons.

(1) The plaintiff is to give security for the costs of the first and second defendants in the amount of $75,000, with the action against them stayed in the meantime;

(2) The plaintiff is to give security for the costs of the third defendant in the amount of $45,000, with the action against him stayed in the meantime;

[1] Under the Defamation Act 1895 (Tas), the defences which could be defeated by malice being fair report, fair comment, and qualified privilege were contained in ss13, 14 and 17 respectively. The equivalent of r239 was introduced on 20 November 1950 and referred correctly to ss13, 14 and 17. When the Defamation Act 1957 (Tas) became law the change in numbering for the qualified privilege defence from s17 of the old Act to s16 of the new Act was not picked up in the Rules and the error has been repeated in both the Rules of the Supreme Court 1965 and the Supreme Court Rules 2000. Section 17 of the Defamation Act 1957 concerns unintentional defamation and the defence of offer of amends, and provides no occasion for a plaintiff to allege malice, it being for the defendant to prove that the publication was innocent, and if the publisher was not the author, that the author wrote the words without malice. The reference to s17 is a nonsense and must be disregarded. The omission of s16 was plainly unintended and the correct reference can be supplied as a matter of interpretation: Lyde v Barnard I [1836] EngR 146; (1836) 1 M&W 101 and Everett v Wells (1841) 2 M&G 269.