Etnyre v Australian Broadcasting Corporation

Federal Court of Australia|2021-06-07|Before: Abraham J

Pursuant to s 56 of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act) and r 19.01(1) of the Federal Court Rules 2011 (Cth) (the Rules), the first and second applicants are to give security for the respondent's costs of the proceedings up to the hearing, on the following terms: a) The first and second applicants to pay security in the amount of $100,000 (Security Amount). b) The Security Amount to be paid within 28 days of the making of these Orders. c) The Security Amount to be paid into Court.
Pursuant to r 19.01(1)(b) of the Rules, the proceedings be stayed until the applicants have paid the Security Amount in accordance with Order 1 above.
If the applicants fail to comply with Order 1 above by 12 July 2021, an application may be made, returnable on 23 July 2021, for an order that the proceedings be dismissed pursuant to s 56(4) of the Federal Court Act and r 19.01(1)(c) of the Rules.
In the event the applicants give the security as required by Order 1 above, the respondent has liberty to apply for further security for costs in relation to the costs of the hearing.
The applicants pay the respondent's costs of this Interlocutory Application. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ABRAHAM J: 1 The respondent applies for an order pursuant to s 56 of the Federal Court of Australia Act 1976 (Cth) and r 19.01 of the Federal Court Rules 2011 (Cth), that the applicants give security for the respondent's costs of these proceedings. 2 The applicants bring an action against the respondent for defamation in respect of an episode of Foreign Correspondent and an associated article about that episode of the program. The applicants are husband and wife. The matters complained of were about commercial surrogacy services in Ukraine used by the applicants. The defamatory imputations alleged to arise from those publications relate to the abandonment of a child born by use of such services of whom the applicant, Mr Etnyre, is the biological father. 3 The respondent read the affidavits of Grant McAvaney affirmed 17 November 2020 and 17 December 2020 in support of its application. 4 The applicants read an affidavit of Irmgard Pagan affirmed 14 December 2020 in support of their opposition. I note that this affidavit was affirmed at San Juan, Puerto Rico. 5 For the reasons below, the first and second applicants are to pay security in the amount of $100,000 into the Court.

Legislative framework and relevant principles 6 Section 56 of the Federal Court Act relevantly provides: (1) The Court or a Judge may order an applicant in a proceeding in the Court, or an appellant in an appeal under Division 2 of Part III, to give security for the payment of costs that may be awarded against him or her. (2) The security shall be of such amount, and given at such time and in such manner and form, as the Court or Judge directs. 7 Rule 19.01 of the Rules relevantly provides: (1) A respondent may apply to the Court for an order: (a) that an applicant give security for costs and for the manner, time and terms for the giving of the security; and (b) that the applicant's proceeding be stayed until security is given; and (c) that if the applicant fails to comply with the order to provide security within the time specified in the order, the proceeding be stayed or dismissed. 8 The making of an order for security is discretionary, the power to order security has been described as a "broad power": James v Australian and New Zealand Banking Group Ltd (No. 1) (1985) 9 FCR 442 at 444; Madgwick v Kelly [2013] FCAFC 61; (2013) 212 FCR 1 (Madgwick v Kelly) at [6]; Stapleton v Fairfax Media Publications Pty Ltd [2019] FCA 1418 (Stapleton) at [6]-[7]. The discretion "is to be exercised in light of the facts and circumstances of the particular case": Botsman v Bolitho & Ors [2018] VSCA 111 at [36]; Stapleton at [6]. The issue is essentially one of risk management: East Grace Corporation v Xing (No 1) [2005] FCA 219 at [6]. 9 Against that background, a consideration of the authorities reflect the types of factors which have been considered as relevant on such applications, which have included the following. 10 First, whether the application for security for costs has been brought promptly: KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 at 197. 11 Second, whether the applicant is a natural person or a corporation. It has been recognised that, although courts are disinclined to order security against natural persons, as Lindgren J observed in Knight v Beyond Properties Pty Ltd [2005] FCA 764 at [32]-[33], being a natural person is no bar to an order for security for costs particularly when coupled with other factors. Lindgren J in [33] referred to circumstances (which are those addressed in the paragraphs below), which might lead to an order for a natural person to provide security, particularly when in combination with impecuniosity. 12 Third, whether the applicant is impecunious such that the applicant would not be able to satisfy a costs order against it: Bell Wholesale Co. Ltd v Gates Export Corporation (1984) 2 FCR 1 at 4; Australian Equity Investors v Colliers International (NSW) Pty Ltd [2012] FCAFC 57 at [25]-[30]. 13 Fourth, whether the applicant is a foreign resident. In PS Chellaram & Co Ltd v China Ocean Shipping Co [1991] HCA 36; (1991) 102 ALR 321 (PS Chellaram), McHugh J stated at 323: To make or refuse to make an order for security for costs involves the exercise of a discretionary judgment. That means that the court exercising the discretion must weigh all the circumstances of the case. The weight to be given to any circumstance depends not only upon its own intrinsic persuasiveness but upon the impact of other circumstances which have to be weighed. A circumstance which may have very great weight when only two or three circumstances have to be weighed may be of minor significance when many circumstances have to be weighed. However, for over 200 years the fact that a party, bringing proceedings, is resident out of the jurisdiction and has no assets within the jurisdiction has been seen as a circumstance of great weight in determining whether an order for security for costs should be made. Indeed, for many years the practice has been to order such a party to provide security for costs unless that party can point to other circumstances which overcome the weight of the circumstance that that person is resident out of and has no assets within the jurisdiction. And see Stapleton at [7]. In Logue v Hansen Technologies Ltd [2003] FCA 81; (2003) 125 FCR 590 (Logue v Hansen Technologies Ltd) at [18], Weinberg J explained that the clear rationale of this principle is: … to create a fund within this country against which a successful respondent may enforce a judgment for costs thereby enabling the avoiding of the risks, uncertainties and delays of attempting to enforce such a judgment in the applicant's claimed country of residence. 14 Fifth, the prospects of success of that person's claim, or the merits of that claim. In Staff Development & Training Centre Pty Ltd v Commonwealth of Australia [2005] FCA 1643, Spender J said at [12] to [13]: [12] Pincus J observed in Appleglen Pty Ltd v Mainzeal Corporation Pty Ltd (1988) 79 ALR 634 that at the stage of hearing an application for security for costs there will usually be no information on which the Court can possibly assess the merits of the applicant's claim. Accordingly, at the hearing of such an application, detailed investigation by the parties into the likelihood or otherwise of the success of the action will not be the right course to adopt. However, Hill J in Jodast Pty Ltd & Ors v A & J Blattner Pty Ltd & Ors (1991) 104 ALR 248 suggested that the situation might be otherwise where the case for the applicant appeared on the face of the pleadings to be merely frivolous or vexatious. French J observed in Bryan E. Fencott & Associates Pty Ltd v Eretta Pty Ltd & Ors [1987] FCA 102; (1987) 16 FCR 497 at 514: 'It is consistent with authority and the existence of a broadly based discretion that the bona fides and merits of the claim be taken into account where there is material from which some assessment can be made.' [13] It is clear that an application for security for costs should be made promptly after proceedings have been initiated. Otherwise, a party exposed at a later stage to an order for security for costs will have been lulled into expending money on prosecuting its claim. Equally a consideration relevant in the circumstances of the present case, an application for security for costs is not an application for summary judgment or a variant of it. In particular, it is not the occasion for detailed argument as to the sufficiency of evidence, what conclusions might result from a detailed consideration of the evidence, or even for a determination of whether, on analysis of the proposed evidence, the applicant's case is unlikely to be successful. 15 In Mecrus Pty Ltd v Industrial Energy Pty Ltd [2015] FCA 103, recently cited in Frigger v Kitay [2019] FCA 624 at [27], Murphy J observed at [43]: Counsel for the respondents submits that the Court should not make any assessment of the strength of the claims at this preliminary stage. I do not accept this contention. Whether an attempt should be made may well depend upon the complexity of the case, but it is common for the court to undertake a preliminary assessment of the strength of the applicant's claim in considering a security for costs application. As Finkelstein J said in Bray v F Hoffman-La Roche Ltd and Others [2003] FCAFC 153; (2003) 130 FCR 317 at [252], "the court should not shy away from undertaking a preliminary evaluation of the merits. That task is not as difficult as it might seem." 16 Sixth, interrelated with impecuniosity is whether an order would stifle the litigation. It is generally observed, that poverty is no bar to a litigant: Cowell v Taylor (1885) 31 Ch D 34 at 38. This is particularly so where it is a primary proceeding and not an appeal: see for example: Thomas v STX Pan Ocean Co Ltd [2011] FCA 254 at [7]. It is for the party resisting the order to show that impecuniosity would stultify the proceedings. 17 The relevant factors cannot be exhaustively stated, with the only limitation being that the discretion is exercised judicially: Madgwick v Kelly at [6]. Ultimately, whether an order is made will depend on the facts of the particular case.

Submissions 18 The respondent's submission is based on the fact that the applicants are impecunious and reside overseas with no assets in Australia. It was submitted that if the respondent obtains a costs order in these proceedings, the enforcement of any costs order would involve an application to a court in Maryland, USA, or Puerto Rico (the location at which the second applicant's affidavit was signed). If it were the latter case, that process would at least involve the filing of a petition in a local court in Puerto Rico and may also involve the cost of the translation of the Australian judgment, and/or a hearing before a Puerto Rican Court. The respondent submitted that the applicants' evidence that, whilst not presently in a position to pay a large lump sum to the Court, if a costs order was made against them in the future they are "confident that [they] could pay it off relatively quickly", is speculative and given without explanation. It was submitted that the applicants' evidence establishes that there is a real danger that the applicants could not meet a costs order against them, and, at best would have to be paid over an extended period of time. 19 The respondent submitted that even if an assessment of the merits is not made, the order should be made for the reasons previously given. However, the respondent contended that there is information on which the Court could assess the merits on this present application, and on that information the applicants' claim has poor prospects of success. The respondent submitted that the imputations relate to the abandonment of the child, and if the imputations are established, it relies on the defence of truth and qualified privilege. The respondent pointed to admissions made by the applicants in these proceedings and to a sworn statement made by them (that has been produced in these proceedings) of which it is said that an ordinary reading of it confirms that the applicants abandoned the child. 20 The applicants oppose the orders. They accepted that they are impecunious and that they could not pay any costs order at the end of the proceedings. They submitted that they would obviously not be able to pay security for costs in any substantial amount, and not in the amount sought by the respondent and therefore an order for security would stifle the proceedings. The applicants submitted that somehow this case is different from others because it "raises, perhaps for the first time, a difficult issue in relation to security for costs. Enormous and radical changes in communication technology have created a completely different environment from that in which the rules for security for costs evolved". 21 The applicants attempted to distinguish or limit the significance of the observations of McHugh J in PS Chellaram, recited above at [13]. This included on the basis that the progressive introduction of treaties allowing for the international enforcement of judgments has changed that situation in many instances. It was submitted that has been recognised by the courts to the extent that ease of recovery in the foreign jurisdiction is now a factor taken into account. It was submitted that they presently reside in Maryland which has such a treaty and a relatively straightforward and inexpensive process for enforcing international judgments. Further, the applicants said they are prepared to undertake that they would not resist the making of such an enforcement order were they to be ultimately unsuccessful in their case. They also sought to distinguish this case from others on the basis that they have nothing to do with Australia, they are citizens of the USA who have been involved in events in Ukraine and that "[r]emarkable and radical developments in communication technology have allowed the respondent to make a program about the applicants' situation and make it available internationally and instantaneously". The applicants contended that results in an unfair situation and that they should be entitled to attempt to remedy it.

Consideration 22 The applicants do not challenge the estimate of costs as deposed to by the respondent, nor that the amount sought on this application, which is at least $100,000, was reasonable in the circumstances. That amount being said to be approximately one third of the estimated costs which may be recovered. 23 There was no issue between the parties that the applicants are impecunious, reside overseas and have no assets in Australia. Senior counsel for the applicant accepted that the optimism expressed by Ms Pagan that if a costs order was made she was confident that they could pay it relatively quickly was speculative, and that in reality they would not be in a position to do so. 24 The observations of McHugh J in PS Chellaram reflect that circumstances may carry great weight, depending on the facts of the matter. The applicants' bases for attempting to limit the consideration of that authority are misplaced. Once it appreciated that, as Weinberg J explained in Logue v Hansen Technologies Ltd recited above at [13], the rationale of the approach is that there be funds in this country against which a successful respondent may enforce a judgment for costs which avoids the risks, uncertainties and delays of enforcing a judgment in the applicant's claimed country of residence. The bases for distinguishing it, such a proliferation of communication by use of the internet, misses the point. 25 PS Chellaram was decided in 1991, and has been repeatedly and recently cited with approval. There is no novelty with the concept there may be treaties in place with various countries that may assist with the recovery of debts. However, that is fact specific and would not, in any event, avoid the need to invoke such processes in the relevant jurisdiction (which would be costly and potentially time consuming). I note the evidence before the Court is there is no bilateral agreements in place for enforcing Australian judgments in Puerto Rico, although it is possible to enforce a judgment in the local court in accordance with the local rules. 26 Ultimately, what is clear from the observations of McHugh J, is that each case is fact specific. 27 The applicants also relied on an undertaking made in the affidavit of Ms Pagan in the following terms, in the context of any judgment being filed in Maryland Circuit Court, "I undertake that I would not oppose the filing of such a judgment or resist the enforcement of it. This undertaking is on understanding that the judgment will be converted into American dollars and will not increase in any way from the judgment ordered in Australia". From there Ms Pagan says "if such a judgment were made, then I would make an agreement through the Maryland Circuit Court to pay the amount off in instalments". The affidavit contained no reference to Puerto Rico. There is no evidence from Mr Etnyre and, unlike another aspect of the affidavit, Ms Pagan does not refer to her and Mr Etnyre. It does not take into account costs incurred in the process of recovery. The suggestion as to making payments by instalments, Ms Pagan's ability to do so, and if so, in what amounts, is unsupported by the evidence. At the highest, Ms Pagan undertakes that she would not oppose the procedure being undertaken. Moreover, the problem with enforcing an undertaking is self-evident. Breach of such an undertaking could only be by way of civil contempt of court: PS Chellaram at 324. That said, senior counsel for the applicants submitted that "what Ms Pagan says in her affidavit about hoping that she would be able to pay by instalments if the day came is something said in optimism, genuinely, but very unlikely to be borne out in the circumstances". 28 Despite the submission by senior counsel for the applicants that the proceedings would be stifled if a security for costs order were made, the affidavit evidence does not say as much. True it is that the affidavit states the applicants' present income, and that they are not presently in a position "to pay a large sum to the court", it does not go the next step and say what the consequence would be on the proceedings. 29 Ms Pagan had worked as a film producer but that work has evaporated since Covid-19, and Mr Etnyre is a stay at home father looking after their twins. What is plain from the affidavit is that the applicants are currently being assisted financially by family. The affidavit is silent on the ability of the applicants to obtain money from elsewhere, or what other support might (or might not) be provided by others, including family. Senior counsel for the applicants submitted that "[w]hether they have the prospect of borrowing was raised. It's true the affidavit doesn't address that directly, but their very limited resources would show that any borrowing they did would be without security, and there is really no basis other than speculation to wonder whether somebody might support them to the extent requested". In that context, a submission by senior counsel from the bar table of the applicants' solicitor's instructions (which is not based on the evidence), as to the effect of an order, does not assist. The affidavit is silent on the consequence of an order. It is curious that the issue was not expressly addressed, in a context where they made such a submission and were aware that the respondent had submitted that the evidence was deficient in this regard. There was no request by the applicants to adduce further evidence. Senior counsel for the applicants ultimately submitted, based on the affidavit evidence, that an inference could be drawn that it is very unlikely that the applicants would be able to proceed. Noting also, Ms Pagan's evidence is that in the USA the general rule is each party pays its own costs, and that is what she was expecting. In that context there is no evidence to suggest that, despite the financial circumstances as outlined in Ms Pagan's affidavit, they are not able to proceed with the matter. The affidavit is silent as to that matter. The applicants were represented by a solicitor and senior counsel at the hearing. The onus is on the applicants to establish this would be the effect. 30 As to the issue of merit of the substantive proceedings, on the limited material at this stage in the proceedings, there may well be issues in establishing at least some of the alleged imputations, in particular the first imputation which the applicants principally addressed. There will also be an issue about the meaning of "abandonment" in this case. There may be some merit in the respondent's submission that there are admissions made by the applicants in these proceedings and a sworn written statement by them dated 22 June 2016 to the persons in Ukraine about the child, which may provide support for the defence of truth, if the imputations are established. Although senior counsel for the applicants attempted to elevate this case into one involving broad moral issues, it will ultimately turn on the evidence in this particular case. The applicants did not contend it was a strong case or that there were strong prospects of success and nor was any similar description used. On the material currently before the Court it does not appear that it could not be characterised as such. Rather, the applicants' submissions on this aspect focused primarily on the respondent's ability to meet its pleaded defences. Whether, as the respondent contended, the applicants have a low chance of success may be debatable. In effect, the most the applicants put is that a "brief survey of key elements of the case shows that this view is extremely dubious". It is probably sufficient to say that on the material currently before the Court the applicants' case is far from clear cut, and there may be real issues with establishing the claim. 31 I am satisfied that the applicants are impecunious and, on their own admission would be unlikely to be able to pay any costs order. They are resident outside the jurisdiction. The applicants have no assets in Australia. Those matters in themselves provide a basis to make the order sought. Further, for the reasons above, on the current material there may be real issues with the applicants' case. Although it is possible that an order will stifle the proceedings, for the reasons given above, the applicants have not established that is necessarily so. 32 Having weighed the relevant considerations, the respondents have satisfied me that an order ought to be made. As noted above, the respondents do not seek security in relation to the total amount of costs it estimates it would incur, or would likely be able to be recovered if it succeeds in these proceeding. 33 The applicants did not address any submission to the terms of the proposed order sought by the respondent, should an order for security be made. That is, no submission was addressed to the possibility of the amount of the order being paid in stages, or over a longer period. As noted above, the applicants did not challenge the estimate of costs or the reasonableness of the amount sought. 34 In that context, I propose to make an order in the amount of $100,000 be paid as security, with the terms sought by the respondent. I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Abraham.

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