Ezzo v Grille

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

JUDGMENT 1 HER HONOUR: By notice of motion filed on 21 July 2003, the defendant to these proceedings, Robin Grille, seeks the following orders: "1. The plaintiff provide security for costs to the defendant in the sum of $40,000 within 21 days. 2. The plaintiff's claim be stayed until the provision of such security. 3. … 4. …" 2 The substantive proceeding is a claim in defamation made by the plaintiff against the defendant. The plaintiff alleges that, in or about August and September 2002, the defendant published of and concerning the plaintiff material that defamed him. The matter complained of is an article of some length, said to have been written by the defendant and published in two magazines and on the internet. The article was headed: "Fundamentalism: a war against children"

and ran to about three pages of small print. The plaintiff alleges that it was published on a number of occasions, but, in each case, the content was identical. 3 The statement of claim was filed on 30 May 2003. There is no evidence as to when it was served. The plaintiff pleads that the matter complained of conveyed 18 imputations, each of which defames him. It appears from the statement of claim (and it is not disputed) that the plaintiff resides in South Carolina, United States of America. 4 Service of the statement of claim sparked a round of correspondence between the solicitors for the parties, escalating in intensity, and, at times, astonishing in the absence of dispassion that may reasonably be expected of correspondence between legal practitioners. The tone of the correspondence will emerge from the extracts I set out below. To avoid unfairness, I should add that, in general, the correspondence generated by the defendant's solicitors is measured, and reads as an attempt to deal courteously, objectively and dispassionately with the issues raised on behalf of the plaintiff. The same cannot be said of the correspondence emanating from the plaintiff's solicitors. Both the language used and the assertions and contentions made are, at times, extravagant, highly coloured, emotional. The heat generated in the correspondence has not assisted in the resolution of the relatively narrow issue I have to determine. 5 Provision for an order for security of costs is made by SCR Pt 53 r2(1)(a). R2(1) is relevantly in the following terms: "Where, in any proceedings, it appears to the Court on the application of a defendant - (a) that a plaintiff is ordinarily resident outside the State; … the Court may order that plaintiff to give such security as the Court thinks fit for the costs of the defendant of and incidental to the proceedings and that the proceedings be stayed until the security is given." 6 Counsel for the defendant relied also upon the inherent jurisdiction of the court to make such an order: see King v Commercial Bank of Australia Ltd (1920) 28 CLR 289 at 292; Lucas v Yorke (1983) 50 ALR 228 at 229. 7 There being no jurisdictional contest, it is unnecessary to say any more about the source of power. 8 An order for security of costs is entirely discretionary. The discretion is a broad one. It will be necessary to return to the matters advanced on each side as relevant to the exercise to discretion. Before doing so, it is convenient to set out, as briefly as possible, a history of what has occurred since the publication complained of. That history emerges with some clarity from the affidavit of Ms Leanne Norman, the plaintiff's solicitor (who was not the author of the correspondence to which I have made, and will make further, reference, and who also gave oral evidence). From Ms Norman's evidence the following facts are drawn.

history 9 The plaintiff describes himself as an author and parent educator and executive director of "Growing Families International", and joint author of five books on parenting, some of which have had extensive and international sales and distribution. (As a postscript to the matter complained of, the defendant is identified as a Sydney-based psychologist, conducting a private practice and individual psychotherapy and relationship counselling.) 10 On 27 September 2002 the plaintiff's solicitors wrote to the defendant, describing the publication as containing: "numerous highly defamatory, false and pernicious imputations";

as making arrogant assertions, about the plaintiff's "methods" as statements of fact. They demanded confirmation, within seven days of the date of the letter, that an apology and retraction would be published as requested. 11 Further correspondence passed between the plaintiff's solicitors and solicitors (then, but not now) representing the defendant, not all of which was in evidence. 12 On 26 March 2003 the plaintiff's solicitors wrote again to the defendant's then solicitors. They claimed that the defendant had: "very severely aggravated and exacerbated the serious damage caused by the publication of the wrongful and malicious article … by the publication of a further scurrilous and highly defamatory letter, which oozes with malice …" 13 They made a series of demands for retraction and apology and an undertaking not to republish. On 27 March 2003 they again accused the defendant's solicitors of arrogance. This was in response to a letter of the previous day rejecting their demand for apology and the timeframes specified. They described the rejection as "peremptory" and "particularly remarkable". 14 On 1 July 2003 the defendant's then solicitors wrote to the plaintiff's solicitors. They advised that, having considered and taken specialist advice on the issues raised, they were of the view that the proceedings would, potentially, be very lengthy. They adverted to the possibility of an application for security for costs and estimated the costs of whole proceedings as possibly in excess of $200,000, and of the proceedings to the conclusion of a trial before a jury pursuant to s7A of the Defamation Act 1974, as approximately $50,000. 15 The plaintiff's solicitors' response to this letter was to advise the defendant's solicitors that it constituted a further ground for an award of aggravated damages. They then demanded that the defendant "comply with his obligations" under SCR Pt 67 r12A, if he intended to invoke that rule. At the same time they submitted that there was no basis for any notice under the rule. 16 Pt 67 of the Supreme Court Rules is concerned with procedures on a claim for defamation. R12A(1) is in the following terms: "A defendant, not less than seven days before the return date of the notice of motion filed under rule 11A, must file and serve on each other party who has an address for service in the proceedings a notice of the subject of any objection or other dispute in relation to any matter pleaded or particularised in the Statement of Claim, identifying with particularity the nature of the objection or other dispute and providing an outline of submissions in relation to it." 17 (Rule 11A has been repealed with effect from 1 November 2002. It previously required a plaintiff to file and serve, with the statement of claim, a notice of motion seeking directions. Its only significance, for present purposes, is the return dated allocated to the notice of motion.) 18 The defendant's solicitors wrote again to the plaintiff's then solicitors on 4 July 2003. They stated that the defendant's solicitors' letter of 1 July constituted: "… yet a further ground for aggravated damages …" 19 On the same day the defendant's then solicitors wrote to the plaintiff's solicitors. This letter was plainly intended as an attempt to foreshorten what was promising to be, as they had earlier said, a lengthy, protracted (and, one might add, acrimonious) dispute. They said (almost certainly irrelevantly) that their client was married with a young child and of limited means and that, although he had extensive knowledge in the relevant area, he had not conducted any campaign against the plaintiff, but had done nothing more than express his concerns based on the information available to him. They added: "Despite our view that the imputations pleaded do not arise, and despite the fact that our client has already published a general apology to your client in the format which your client agreed with the publisher, our client in (sic) anxious to resolve this matter and is prepared to publish a further apology in reasonable terms so as to bring this matter to an immediate conclusion."

They offered to pay costs to date and then added: "You would appreciate that our client is not a lawyer and had relied upon the publisher to undertake normal legal checking of the article which he had authored." 20 To this the plaintiff's solicitors replied by characterising many of the statements made in the letter as "patently incorrect" and the letter as "misleading". They denied knowledge of any general apology and requested, as a matter of urgency, information about that apology and a copy thereof. [I was told that no response had been received to this request.] 21 On 9 July 2003 the defendant's current solicitors wrote advising that they had assumed conduct of the matter on behalf of the defendant. They advised that they regarded the question of security as: "a bedrock issue which should be determined prior to any challenges we may wish to bring to the statement of claim."

They enclosed a draft notice pursuant to SCR Pt 67 r12A. The only matter of dispute dealt with in that draft notice concerned security for costs. 22 On 10 July 2003 the plaintiff's solicitors again wrote to the defendant's solicitors. They repeated the assertion that the 1 July letter of the defendant's former solicitors constituted grounds for an award of aggravated damages. They described the content of the publication as "despicable"; they asserted that the defendant: "appears to have no defence whatsoever to our client's claim",

described the opinion expressed in the 4 July letter (that the imputations pleaded do not arise) as "bizarre". They moved to the statement that the defendant had relied upon the publisher to undertake normal legal checking of the article and characterised this as: "… as perverse as it is cowardly …";

they then repeated the epithet, saying that the statement was "perverse and cowardly": "…because it was your client who arrogantly and authoritatively published - as statements of fact - the grave allegations against our client …" (italics in original) 23 They stated their opinion that the defendant had no defence to the claim. 24 They claimed that an application for security for costs would be "misconceived". They then wrote: "Furthermore, and in any event, there is no basis for your client to be concerned that our client would not comply with a costs order made by the Supreme Court of New South Wales. We have been instructed to record that our client considers the suggestion that he would not comply with such a costs order to be insulting. However, for the avoidance of any doubt, we have been instructed by our client to proffer his undertaking to the Court that he will comply with all proper orders made by the Supreme Court of New South Wales (obviously this undertaking is given without prejudice to any of our client's rights in relation to such matters as appeals and applications for stays, all of which rights are obviously reserved)." 25 The solicitors then referred to SCR Pt 1, r3, which is directed to the "overriding purpose" of the Supreme Court Rules. That rule is in the following terms: " 1.3 Overriding purpose (1) The overriding purpose of these rules, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in such proceedings. (2) The Court must seek to give effect to the overriding purpose when it exercises any power given to it by the rules or when interpreting any rule.

(3) A party to civil proceedings is under a duty to assist the Court to further the overriding purpose and, to that effect, to participate in the processes of the Court and to comply with directions and orders of the Court.

(4) A solicitor or barrister shall not, by his or her conduct, cause his or her client to be put in breach of the duty identified in (3).

(5) The Court may take into account any failure to comply with (3) or (4) in exercising a discretion with respect to costs." 26 They referred again to SCR Pt 67, r12 A. 27 The matter was listed before Registrar Greenwood on 11 July. The transcript of those proceedings was in evidence in this application. The plaintiff's solicitor sought a direction that the defendant: "… file a proper 12A notice seeking to raise any capacity points which he foreshadowed in open court."

The registrar declined to make such an order. 28 On the same day the plaintiff's solicitors wrote again to the defendant's solicitors. Notwithstanding the ruling made by Registrar Greenwood they gave notice that they would be relying upon the approach adopted by the defendant's solicitors at the directions hearing in further support of the plaintiff's claim for aggravated damages. They also requested the defendant's solicitors, if they proceeded to make an application for security for costs, to provide evidence of the defendant's own financial position. By letter dated 14 July the defendant's solicitors declined to do so. They served a notice under Pt 67 r12A, in the same terms as the draft notice previously sent. 29 The matter was listed again before Registrar Greenwood on 25 July. The plaintiff's legal representative again sought to have the defendant directed to file and serve a s12A notice prior to the hearing of any application for security for costs. Notwithstanding that submission, the Registrar directed that the security for costs issue be listed for hearing in the week commencing 18 August. She gave not direction about the filing of a 12A notice on other issues. 30 On 29 July the plaintiff's solicitors wrote again. They made reference to the previous offer made on behalf of the plaintiff to comply with all proper orders made by the court, and described the defendant's solicitors' objection to the concurrent listing of the application for security of costs, and an application that the matter be placed into a call-over for a trial under s7A, as "remarkable". They stated: "… our client has made it abundantly clear that he would be ready, willing and able to provide security for costs if he was ordered to do so by the courts." 31 They insisted that the defendant should be prepared to proceed simultaneously with any issues concerning the form of the statement of claim, the capacity of the matter complained of to convey the imputations pleaded, and the application for security for costs. They characterised a suggestion made by the solicitor appearing for the defendant that the plaintiff may fail to provide security for costs notwithstanding a court order as "baseless and insulting". 32 They stated that the plaintiff would rely upon the approach adopted at the directions hearing on 25 July in further support of the claim for aggravated damages. 33 They then made the following offer: "Our client hereby offers to provide security for your client's costs to the sum of $AUD40,000, subject to the condition that your client first provides an affidavit setting forth a bona fide defence (if any) that he swears to or affirms in response to our client's claims. In other words, our client will provide security for $40,000 if your client's affidavit duly sets forth a bona fide defence on the part of your client against our client's claim, which, if it succeeds, would entitled your client to a costs order against our client in these proceedings." 34 By letter dated 30 July, the defendant's solicitors rejected that offer. 35 The correspondence concluded with a letter from the plaintiff's solicitors dated 5 August. There they drew attention to s198J of the Legal Profession Act 1987. That section is in the following terms: "(1) A solicitor or barrister must not provide legal services on a claim or defence of a claim for damages unless the solicitor or barrister reasonably believes on the basis of provable facts and a reasonably arguable view of the law that the claim or the defence (as appropriate) has reasonable prospects of success.

(2) A fact is 'provable' only if the solicitor or barrister reasonably believes that the material then available to him or her provides a proper basis for alleging that fact. (3) This Division applies despite any obligation that a solicitor or barrister may have to act in accordance with the instructions or wishes of his or her client.

(4) A claim has reasonable prospects of success if there are reasonable prospects of damages being recovered on the claim. A defence has reasonable prospects of success if there are reasonable prospects of the defence defeating the claim or leading to a reduction in the damages recovered on the claim.

(5) Provision of legal services in contravention oif this section constitutes for the purposes of this Division the provision of legal services 'without reasonable prospects of success'."

The solicitors stated that they: " … would be surprised if there is any serious challenge to the imputations - or to their defamatory nature."

36 In support of the application for security of costs, the solicitor acting for the defendant, Mr Graham Hryce, swore an affidavit and was cross-examined. His evidence went, essentially, to the anticipated costs of preparation and conduct of the proceedings, up to and including the conclusion of a s7A trial. There was no dispute as to his assessment either in cross-examination or in the oral evidence later given by Ms Norman. Indeed, Ms Norman largely accepted the quantification of the various costs components outlined by Mr Hryce. Mr Hryce set out the figures on which he based his assessment, which gave rise to a calculation in counsel's written submission of costs potentially amounting to $61,710. The claim for security in the sum of $40,000 is therefore a claim for about two thirds of what could be expected (possibly on a worst case scenario) to be the costs incurred by the defendant. This is material, because the costs outlined by Mr Hryce were the costs he expected to be incurred, and not necessarily those which would be allowed on an assessment of costs following the conclusion of litigation. Ms Norman considered that such an assessment might reduce the allowable costs by about or up to 25%; I was told (without evidence) that Mr Hryce gave a somewhat lesser estimate of the reduction. In any event, the amount sought does make some allowance, for whatever reason that might be. 37 The fact of the plaintiff's overseas residence is not only a circumstance with triggers jurisdiction to make an award of security for costs, but it is plainly a relevant matter to be taken into account in the exercise of the discretion. On behalf of the defendant it was also submitted that the evidence permits an inference that defendant has no assets in Australia against which execution could be levied in the event of a costs order against him. In her affidavit, Ms Norman deposed that she had been told by the plaintiff that he had business interests in Australia; that his books are imported and distributed in this country; that since about 1995 or 1996 the plaintiff has visited Australia on average about every eighteen months and has delivered lectures; and that he intends to return to Australia in 2005. 38 However, there was no evidence that he has any assets in Australia and I accept that it is reasonable to draw the inference sought, that is, that the plaintiff is without assets in Australia. This is a relevant factor. 39 I accept, as was put on behalf of the plaintiff, that the mere fact of overseas residency, even when coupled with the absence of assets in Australia, is not determinative of the application. It is, nevertheless, a factor of some weight. 40 Both parties relied upon such evidence as there was of the plaintiff's financial position. That included the evidence of his extensive publication, the extent of the sales of his books, and his visits to Australia. It also included evidence contained in his solicitors' letter of 29 July in which it was asserted that he would be ready, willing and able to provide security for costs if so ordered. On behalf of the plaintiff this evidence was relied upon as supporting a conclusion that he would, in the event of a costs order being made against him, be in a position to meet it. On behalf of the defendant, it was relied upon as negativing any hardship that might otherwise be caused by the making of an order. 41 It is convenient now to deal with the series of matters put on behalf of the plaintiff in opposition to orders sought. A predominant basis of opposition concerned the refusal of the defendant, through his solicitors, to provide any evidence of any defence to the plaintiff's claim. As the account of the correspondence and the submissions put to the registrar show, the plaintiff's solicitors were insistent that such evidence be provided before they would agree to the provision of security for costs. The solicitor who appeared for the plaintiff on this application argued that an inference should therefore be drawn that the defendant has no defence to the claim. I do not draw such an inference. It is well known to all who engage in the practice of defamation law that the issues that might be raised by way of defence can be complex and time consuming to explore. They require the consideration of complex matters by experienced legal practitioners, and the provision of careful and detailed advice. They may require a good deal of consideration of factual matters. This, indeed, was noted by the defendant's original solicitors at an early stage of the correspondence. The 1995 amendments to the Defamation Act (see Defamation (Amendment) Act 1994) make it plain that the issues that a jury is to determine pursuant to s7A are to be determined before the parties embark upon the preparation of matters by way of defence. Whether this was the intention of the legislature or not, one consequence of the division of functions brought about by reason of those amendments is that a defendant is not required to go to the very considerable expense of investigating and preparing defences prior to the ascertainment of whether the matter complained of conveys the imputations pleaded, and, to the extent that they are, whether they are defamatory of the plaintiff. To require the defendant to embark upon that process before any steps have been taken towards the resolution of the first question would be inconsistent with what has been done by the legislature. 42 Further, to do so in the context of an application for security for costs would be to undermine the purpose of the power to make such an order, which is designed to protect a defendant against incurring costs which might not be recovered. I reject the plaintiff's first argument. 43 The second matter put on behalf of the plaintiff concerned the refusal of the defendant's solicitors to identify any issue they wished to take with the statement of claim until the security for costs application had been determined. The solicitor for the plaintiff asserted that the solicitors for the defendant are in breach of their obligations pursuant to Pt 67 r12A. That rule, as has been set out above, requires such issues to be identified no later than seven days prior to the listing of a notice of motion for directions. 44 There was no direct evidence of the date on which the notice was required to be filed but, in the letter dated 4 July, the plaintiff's solicitors stated that that was the last day for compliance. 45 In the written submissions the solicitor for the plaintiff described r12A as "a peremptory rule of court". In Mortimer v Nationwide News Pty Ltd [2001] NSWSC 450; unreported, 28 May 2001, McClellan J described a failure to comply with the rule as: " … a serious breach of the obligations which parties and their legal advisers owe to the court and places an unnecessary burden on the administration of the court." 46 Although I agree, with respect, with what McClellan J wrote, and although I am not entirely clear as to what is meant by "a peremptory rule of court", I, nevertheless, would not so describe r12A. R12A is, like any other rule, a rule of court requiring certain action on the part of legal representatives. However, I do not read the rule as intended to nullify the right of a defendant to seek, by order of the court, to defer the incurring of substantial costs until after that application has been determined. If r12A were to be given absolute supremacy over Pt 53 r2(1), then the latter rule would be deprived of much of its value. In any event, pursuant to SCR Pt 1 r12, the court is empowered to dispense with compliance with any of the requirements of the rules, either before or after the occasion for compliance arises. In my opinion, the fact that an application for security for costs is to be made is sufficient reason for dispensing with compliance with the time constraints imposed by Pt 67 r12A. 47 I do not regard the refusal of the defendant's solicitors to identify their objections to the statement of claim prior to the resolution of this application as any reason that should operate against the order they seek. In doing so, they had the support of the registrar. 48 As earlier indicated, the plaintiff also relied upon the evidence of his financial position, and the fact that he would be able to meet an order for costs, as relevant to the exercise of discretion. This, in my opinion, misconceives the purpose of an order for security for costs. Such an order is not made, or not only made, because a party may be unable to meet a costs order, but, also, because a costs order may be unenforceable. That is why the rule specifically applies to plaintiffs resident outside the jurisdiction. Counsel for the defendant advised the court that there appears to be no enforcement agreement with the United States which would facilitate recovery against the plaintiff in the event that he was unsuccessful and required to pay costs, and declined to do so. No objection was taken to this information, and no contrary information was put before the court. 49 It is not the plaintiff's expressed willingness to pay any costs ordered against him, but the extent to which that expressed willingness might, in the event that he has a change of heart, be enforced, that is the issue. The defendant should not be put in the position of being dependent upon the continued goodwill of the plaintiff and nor should the defendant be required to rely upon the hearsay assertions of that willingness. I disregard this as a relevant factor. 50 Finally, the solicitor for the plaintiff contended that the offer to pay security for costs, conditional upon the defendant's filing affidavit evidence of his defences, was a "generous offer" that ought to be taken into account on the exercise of discretion. For the reasons I have given, a defendant in a defamation proceeding is not to be required to incur expenses going to the defence prior to the resolution of the s7A matters. I do not, therefore, regard the plaintiff's offer as "generous", and it does not operate to persuade me that the discretion should be exercised in favour of the plaintiff and against the defendant. 51 On behalf of the plaintiff I was referred to a number of authorities which establish that mere overseas residency will not necessarily result in an order for security for costs: CBS Australia Ltd v Telmark Teleproducts (Aust) Pty Ltd (1987) 72 ALR 270 at 285; Swain Investments Ltd v Danumet Pty Ltd & G R Walker (unreported, 5 May 1989, per Cole J); Caruso Australia Pty Ltd v Portec (Australia) Pty Ltd (1984) 1 FCR 311, per Toohey J; Energy Drilling Inc v Petroz NL (1989) ATPR 40-954; Chellaran & Co Ltd v China Ocean Shipping Company (1991) 182 ALR 321, per McHugh J. I accept this principle, as did counsel for the defendant. 52 In Swain, Cole J held that something more than residence outside the state alone is required to justify the making of an order. In Chellaran, Mc Hugh J (sitting as a single judge in the High Court) described residence outside the jurisdiction and having no assets within the jurisdiction as: "… a circumstance of great weight in determining whether an order for security of costs should be made." 53 The solicitor for the plaintiff also put great weight upon the merits of his case, as a relevant consideration. I was, accordingly, taken to the statement of claim, and the matter complained of. In this respect it is relevant that the order for security for costs is sought only to encompass the preparation for and conduct of a trial under s7A. Whilst the matter complained of is quite lengthy, there is only a very brief reference directly to the plaintiff. Counsel for the defendant did not challenge the proposition that the article was critical of the plaintiff, or even that it could be held to have conveyed some defamatory imputations. That does not mean that it will be held to have conveyed the imputations as pleaded. Not having heard detailed argument from either party upon the form of the imputations or the capacity of the matter complained of to convey the imputations pleaded, it would not be right to reach any conclusion on those issues. However, it is legitimate to consider whether there would be open to the defendant any reasonably arguable challenges on either of those issues. I am satisfied that some, if not all, of the imputations are susceptible of such challenge. 54 On balance I have concluded that the order sought should be made. I have given consideration to whether it should be in the sum sought, or in some other sum, particularly having regard to Ms Norman's evidence about the relativities between actual costs and assessed costs. In his written submissions the solicitor for the plaintiff argued that there was no proper evidence "(as opposed to unsubstantiated assertion)"

as to the makeup of the sum. That submission cannot survive the oral evidence of the two witnesses. Indeed, Ms Norman, generally speaking, accepted that the defendant's figures were within the expected ranges. 55 Further, the figure claimed contains an inbuilt deduction that could be attributable to a reduction by reason of assessment, or for other factors. I therefore propose to make an order substantially in the terms claimed. In the hearing counsel for the defendant suggested that the order sought in the notice of motion should be slightly modified and proposed adoption of a precedent from an order of a similar kind made in Aopi v Rapke [2002] NSWSC 711, unreported, 15 August 2002, per Levine J. That I propose to do. 56 I order:

(i) within twenty-eight days from the date of this order the plaintiff is to provide security for the defendant's costs in these proceedings in the sum of $AUD40,000 in a form acceptable to the Registrar and that the plaintiff's action be stayed until provision of such security;

(ii) the plaintiff is to pay the defendant's costs of this application;

(iii) the matter is to be re-listed in the Registrar's defamation directions list as directed by the Registrar by arrangement with the parties.

Last Modified: 08/28/2003 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.