GEREA AOPI v HOWARD RAPKE

• 16 - djl:2 IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION defamation list

JUDGMENT (Application for security for costs) 1 At the conclusion of a trial conducted under s7A of the Defamation Act 1974 the jury, on 14 February 2002, found that the relevant publications (a media release and an alleged publication in a newspaper "The Post-Courier") carried the following defamatory imputations: (a) That while a senior officer in the Government of Papua New Guinea [the plaintiff] was one of a group of prominent people who perpetrated a multi-million dollar fraud against that Government; (b) That as Government Officer in the mid-1990s [the plaintiff] committed a number of serious breaches of the law. 2 By his Defence to Further Amended Statement of Claim filed on 29 April 2002 the defendant, inter alia, has pleaded a defence under s15 of the Defamation Act justifying the two imputations. Appended to that pleading are 76 particulars of truth. Shortly stated, the litigation of the defence of truth will relate to the plaintiff having been Chairman of the Public Officers Superannuation Fund and a member of the Public Officers Superannuation Fund Board at the same time as he was Secretary of the Department of Finance and Planning of the Independent State of Papua New Guinea and a transaction involving a purchase by the Fund of a building known as The Conservatory in Cairns. Essentially, issues relating to the purchase of the building at a gross over-valuation will be dealt with, the conflict of interests arising from the two positions held by the plaintiff and an inquiry conducted by the Ombudsman in Papua New Guinea into the transaction. 3 On 18 May 2001 by consent the plaintiff was ordered to provide security for costs in the sum of $24,000. 4 By Notice of Motion filed on 15 May 2002 the defendant seeks an order that the plaintiff provide security for costs in an amount to be determined by the Court. The basis for the application essentially is that the plaintiff (SCR Pt 52 r 2(a)) is ordinarily resident outside the State. It is not in dispute that the plaintiff is a resident of Papua New Guinea. 5 The defendant tendered evidence in support of the Motion as follows: 6 Affidavit of Alyson Wendy Ashe (sworn 25 June 2002): this is a model affidavit from an independent expert, a costs assessor, which is unchallenged and which will provide the raw material for the quantification of any security to be ordered. 7 Affidavit of Graham Hryce (sworn 7 August 2002): the deponent is the solicitor for the defendant. Annexed to Mr Hryce's affidavit is an article from the "The Sydney Morning Herald" of 6 August 2002 reporting a statement made by the newly-elected Prime Minister, Sir Michael Somare, that the reserves of Papua New Guinea have been so depleted that the nation is in dire financial straits. A document dated 31 July 2002 issued by the Bank of Papua New Guinea is annexure B. It is the "Semi-Annual Monetary Policy Statement by the Governor of the Bank of Papua New Guinea". The relevant part of that lengthy document is a statement that over the first half of 2002 the kina depreciated by 4.4% and 13.5% against the US and Australian dollars, respectively (affidavit page 15). The third document is what is described as "Travel Advice" issued by the Australian Department of Foreign Affairs in relation to Papua New Guinea. That document was "downloaded" on 7 August 2002. On its face it sadly portrays an unhappy picture of Papua New Guinea as a destination for Australian visitors. The relevance of all this material is to the issue raised by the plaintiff in response to the motion (to which I will come) that there is a mechanism under Papua New Guinea law for the registration of such a thing as a judgment for costs in the event of the defendant being successful in the defamation action. 8 Exhibit A is the text of the Final Report, dated November 1999, of the Ombudsman Commission of Papua New Guinea investigation into the purchase of The Conservatory at Cairns by the Public Officers Superannuation Fund Board and associated transactions and arrangements. On its face the document contains statements adverse to the interests of the plaintiff in terms of his discharge of the responsibilities he held by reason of the two offices he occupied and other cognate matters. There is no necessity to analyse in any detail at all this substantial piece of material. 9 Exhibit B: the plaintiff swore an affidavit on 18 July 2002 (it was filed on 26 July 2002) in response to the Notice of Motion. This affidavit was not read by the plaintiff. The defendant however tendered a series of admissions in that affidavit and thus the document, only to the extent that it contains the tendered admissions, was marked as exhibit B. The plaintiff admits that he is a resident of Papua New Guinea. He lists in the relevant parts of paragraphs 3 and 4 his employment history and in particular that certain fees he receives as a member of companies' boards are AUD $80,000 per year. His current salary from Oil Search Ltd is AUD $300,000 per year. He has property interests in Port Moresby valued at AUD $400,000 and shareholdings for example in radio stations valued at AUD $300,000. He admits that at the time the subject of the action arose he was Chairman of the Board of the Public Officers Superannuation Fund and Secretary of Finance and Planning. He annexes certain extracts from exhibit A, the Ombudsman Report presumably on the basis that to some extent they are exculpatory. He admits the institution of proceedings in the Supreme Court of Queensland by the Public Officers Superannuation Fund Board and the Independent State of Papua New Guinea claiming damages against numerous people including himself in respect of the matters surrounding the purchase of The Conservatory. Annexed to the affidavit and part of the tender is the Statement of Claim in those proceedings. He also admits to having paid AUD $25,000 into court as security for costs and his willingness to leave this amount as security for costs for the next stage of the proceedings. 10 Exhibit C (formerly MFI 2) is a transcript of a record of interview with the plaintiff on Wednesday 14 October 1998 produced by the plaintiff in answer to a Notice to Produce. This document was marked as exhibit C only to the extent of the tender from it by the defendant of admissions made in the course of that interview relating to the plaintiff's involvement in The Conservatory enterprise. These admissions, amongst other things, at least acknowledge the acute conflict of interests in the plaintiff arising from the two positions he occupied in relation to the purchase of The Conservatory. 11 As I have remarked above, the affidavit of the plaintiff in answer to the Motion was not read. The evidence for the plaintiff in opposition to the motion is constituted by an affidavit sworn 26 July 2002 by Peter Allan Lowing. This affidavit proves the fact that there is part of the law of Papua New Guinea what is known as the Reciprocal Enforcement of Judgements Act (Chapter No. 50). Exhibit 1 tendered by the plaintiff is an extract from the National Gazette with the declaration of the reciprocal arrangements with Australia dated 3 March 1977. It is desirable at this point to set out some passages from the Papua New Guinea legislation. In s1(1) "judgement" is defined as: "…a judgement or order given or made by a court in any civil proceedings, or a judgement or order given or made by a court in any criminal proceedings for the payment of a sum of money in respect of compensation or damages to an injured party". 12 S3(6) states: "Where the sum payable under a judgement that is to be registered is expressed in a currency other than Papua New Guinea currency, the judgement shall be registered as if it were a judgement for such sum in Papua New Guinea currency as, on the basis of the rate of exchange prevailing at the date of judgement of the original court, is equivalent to the sum so payable". 13 S5(1)(a) states: "5(1) On an application duly made by any party against whom a registered judgement may be enforced, the registration of the judgement - (a) shall be set aside if the registering court is satisfied that - (i) the judgement is not a judgement to which this Part applies or was registered in contravention of this Part; or (ii) the courts of the country of the original court had no jurisdiction in the circumstances of the case; or (iii) the judgement debtor, being the defendant in the proceedings in the original court, did not (notwithstanding that process may have been duly served on him in accordance with the law of the country of the original court) receive notice of those proceedings in sufficient time to enable him to defend the proceedings and did not appear; or (iv) the judgement was obtained by fraud; or (v) the enforcement of the judgement would be contrary to public policy in the country of the registering court ; or (vi) the rights under the judgement are not vested in the person by whom the application for registration was made". (emphasis added) 14 That the court has jurisdiction under SCR Pt 53 r 2(1)(a) is not in issue between the parties nor is the width of the discretion available in determining whether an order for security for costs should be made (King v Commercial Bank of Australia Limited (1920) 28 CLR 289 at 292; Lucas v Yorke (1983) 50 ALR 228 at 229). 15 The defendant submits that the following matters are relevant to the exercise of the discretion in the instant application. The plaintiff is resident outside the jurisdiction. That is not in dispute. The plaintiff has no assets within the jurisdiction; the plaintiff called no evidence on this issue; presumably had the plaintiff wished to prove that he had assets in the jurisdiction he would have done so. In Chellaram v China Ocean Shipping (1991) 102 ALR 321 at 323 McHugh J said: "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". (emphasis added) 16 I consider this statement by his Honour as persuasive and authoritative. The only "circumstance", as I understand it, to which the plaintiff would point is the availability of the Papua New Guinea legislation to which I will come. 17 The next factor to which the defendant points is the question of difficulties of enforcement in a foreign jurisdiction. That which would be sought to be enforced would be an order for costs made in this court in favour of the defendant upon a verdict and judgment being entered for that party in the defamation action. 18 In Energy Drilling Inc v Petroz NL (1989) ATPR 40-954 Gummow J (as a Judge of the Federal Court) said at 50,422: "The purpose of ordering security for costs against an applicant ordinarily resident outside the jurisdiction is to ensure that a successful respondent will have a fund available within the jurisdiction of this Court against which it can enforce the judgment for costs, so that the respondent does not bear the risk as to the certainty of enforcement in the foreign country and as to the time and complexity of the action there which might be necessary to effect enforcement". 19 As a statement of general principle, of course, this is unexceptionable. It is to be borne in mind, however, that his Honour was dealing with an application in the context of the respondent being a Liberian corporation and there being no reciprocal statutory arrangements with that country. It is to be noted that his Honour went on to say that: "…the mere circumstance that an applicant is resident outside the jurisdiction does not necessarily invite an exercise of discretion in favour of ordering security, the question being how justice will best be served in the particular case…" 20 Mr Reynolds SC for the defendant/applicant also referred me to the judgment of the Court of Appeal in Thune & Anor v London Properties & Anor [1990] 1 WLR 562. The appeal concerned an application for security for costs (refused at first instance) where the respondents were Norwegian lawyers and there was undisputed evidence that an order for costs made by an English court could be quickly and easily enforced in Norway. On the facts it appears that the defendant/applicant's costs in that litigation, if they were successful, would rank as a priority claim in Norway but there could be other competing priority claims of unknown amount. Bingham LJ said (at 574C): "Thus the defendants have been put to the very great cost of defending this very expensive litigation with the risk, however small , that if they are ultimately successful they will be unable to recover their taxed costs despite the ease of procedural enforcement in Norway … this is a risk to which the defendants should not be put … and security should be given". (emphasis added) 21 The defendant submits that contrary to the assertion of Mr Lowing in his affidavit there would be a "serious risk" that a judgment for costs would not be enforceable in Papua New Guinea. That risk is not "far fetched and fanciful" it is submitted and even if it was "small" (see Thune, above) it together with other factors would be sufficient to warrant the making of the order. 22 It is submitted that the definition of "judgement" in s1(1) of the Papua New Guinea legislation set out above gives rise to an arguable case that it only permits the registration of orders which are for the payment of a sum of money in respect of compensation or damages. This would not include an order for costs. To my mind, on reading s1(1) and the definition of "judgement" this is an arguable point. No authority was cited from Papua New Guinea one way or the other on the subject and little assistance is gained by considering cognate legislation in NSW Foreign Judgments Act 1973 and the Commonwealth Foreign Judgments Act 1991. Such decisions such as that of Bergin J in Schnabel v Lui [2002] NSWSC 15, Mariala Estates v Athanasi & Ors [2001] NSWSC 1013 (Master Harrison) and Yoon v Song [2000] NSWSC 1147 (Dunford J) do not assist in the determination of the issue. In Diakh v Hyundai Corporation (Rogers CJ Comm. D., unreported 17 October 1988) his Honour was concerned with a foreign arbitration award. No submissions were made in respect of s22 of the Papua New Guinea legislation which provides: "22 Where - (a) there is a judgement for the payment of money and for the payment of costs (whether the judgement is for any other matter or not); and (b) when the money (other than costs) becomes payable under the judgement - the costs have not become payable (because the costs have not been taxed or for any other reason), a person entitled to enforce the judgement may - (c) have execution to enforce payment of the money (other then costs); and (d) when the costs become payable - have execution separately to enforce payment of the costs". 23 It may be arguable that this does point to judgment for costs being possibly the subject of discrete registration and enforcement. The question however is by no means clear and there is a risk that the defendant may not have the ease of procedural enforcement in Papua New Guinea as the plaintiff asserts by reference to that country's legislation. 24 The defendant then advances some submissions further on the subject of the enforceability of any registered judgment which are of a peculiar kind. 25 By reference to s5(1)(a) of the Papua New Guinea legislation ("the judgement was obtained by fraud") it is contended that that provision would permit a collateral attack to be made on the finding of fact to be made by this Court for example on the basis that a portion of a witness' evidence in the New South Wales proceedings was false. This raised, it was said, a distinct possibility that there might be in effect a retrial of the case in Papua New Guinea. I gather this submission was made, inter alia, in the context of a perceived difficulty in obtaining witnesses in the defence case who, upon the success of the defence case here, would suddenly become available in an application to set aside the registered costs order in Papua New Guinea and thus to assert fraud. The second curious submission made for the defendant related to s5(1)(a) and "the enforcement of a judgement [being] contrary to public policy" in Papua New Guinea. I was reminded of the late Professor Nygh's reference in his text "Conflict of laws in Australia" (6th ed) at page 281 to the phrase "public policy" referring to "vaguely defined social, moral or political interests of the forum". The defendant submitted that the subject matter of the truth defence, if it succeeds, may well involve findings of misconduct against various Papua New Guinea politicians and public servants including Sir Julius Chan. It was argued that it certainly could not be said to be beyond the realms of possibility that a Papua New Guinea court could regard the enforcement of a decision by a New South Wales court on these issues as being contrary to public policy because it relates to Papua New Guinea political issues which are more appropriately decided in the courts of Papua New Guinea. 26 Further, s9 of the Papua New Guinea legislation enables the Minister to issue a notice saying that a foreign country does not have the benefit of the enforcement legislation if he formed the view that the Australian courts do not afford the judgments of Papua New Guinea courts the same status on enforcement as the Papua New Guinea courts apply to Australian judgments. The submission then goes on to state that given the possibility of political pressure, if there is a finding of truth in this case, it is not beyond the realms of possibility that the relevant Minister might make such an order, particularly as his discretion would appear to be unconfined and wholly unreviewable. For the same reason it is not impossible that the Minister would revoke any notice earlier granted in respect of the judgments of Australia courts. 27 Mr Littlemore QC for the plaintiff took profound objection to these submissions. They were perceived, and understandably so, notwithstanding Mr Reynolds' efforts to do otherwise, as really an undisguised attack on the political stability and integrity of Papua New Guinea and the administration of justice in that State. 28 I propose, in effect, in the end to ignore this last set of submissions. Although they are framed as "possibilities" and indeed as "risks", I do not see it as appropriate for me to accede to them in such a way as this court could be understood on an application of this kind as adversely commenting upon the conduct by an independent State of its political affairs and the administration of its justice system. 29 Of the submissions under this head the first one is of merit, namely whether a judgment of the kind which the defendant no doubt hopes to obtain in the litigation in New South Wales, namely for costs, could in fact or in law be registered in Papua New Guinea. 30 The next consideration is as to whether there would be any financial hardship to the plaintiff if security were ordered. In my view the evidence contained in the admissions as to the plaintiff's financial means is quite clear. It is to be noted that the evidence is that the plaintiff's income and assets are valued in Australia dollars (see Kent Heating v Cook On Gas (1984) 59 ILR 277 at 279 per Shepherd J). 31 I agree that this is essentially an argument on the balance of convenience. If there is no financial hardship which would be caused to a plaintiff if an order for security for costs were made and there is a countervailing risk that the defendant would not be able to enforce an order for costs in the foreign jurisdiction, the balance of convenience suggests that an order should be made. This argument, I agree, stands alone without regard to the other relevant factors. I find that the making of an order would not cause, on the evidence before me, any financial hardship to the plaintiff. Further, in relation to the next consideration, whether the making of an order would have a stultifying effect, none of the evidence before me points to that at all. 32 The merits of the defendant's case or the strengths of it is a fact that it can be taken into account (Bryan E Fencott Pty Ltd v Eretta (1987) 16 FCR 497 at 513 per French J). 33 By its Defence the defendant will be seeking to prove two imputations which can only be characterised as grave. The first alleges fraud and the second, breaches of the law. It was to the second that the submissions for the defendant were principally directed in terms of the merits of his case. The particulars appended to the Defence by reference to such evidence as was tendered before me in the present application point to a strongly arguable case of, at the very least, a breach of trust by the plaintiff. It is contended that the breaches of trust were "gross". It seems indisputable that it will be proved that the plaintiff was a member of a board which was responsible for the administration of the relevant legislation in Papua New Guinea and "in the best interests of the contributors" and that members of the board were "trustees" of the fund administered by that board. The principles, it is submitted and I agree, are clear when the standard test is applied as to whether a trustee was in breach of trust: did the trustee exercise in the management of the trust business the same care and diligence as any ordinary prudent person of business would have exercised in conducting that person's business (see Jacobs, "The Law of Trusts in Australia" (6th ed) paragraph [1718]; Re Speight; Speight v Gaunt (1883) 22 Ch D 727 at 739 and Fouche v The Superannuation Fund Board (1952) 88 CLR 609 at 641). 34 The material tendered in evidence before me on this application is of substance and points to an arguably strong case which if established would prove the plaintiff's breaches of trust. Indeed in the light of the tendered admissions from the plaintiff's affidavit and the contents of the Ombudsman report (exhibit A) it could hardly be argued that the foundational facts are in dispute. As I pointed out, the emphasis of the defendant's submissions on this application related to the second imputation, breaches of the law - that is breaches of trust and, it is to be anticipated, breaches of the statutory duties imposed upon the plaintiff by the relevant Papua New Guinea legislation. In accordance with counsel's duty Mr Reynolds did not prosecute those submissions in relation to the fraud component of the first imputation; he did not resile from the fact that the defendant proposes to justify it, but candidly anticipated that the substantial evidence thereof could well be forthcoming in the discovery and interrogatory processes yet to be embarked upon. Nonetheless, the strength of the defendant's case on the second imputation he submitted was profound. It does seem that the defendant has a strong case. It has to be remarked however that on the pleadings as they presently stand, the defendant has not sought to plead a defence under s16 of the Defamation Act (contextual justification) which, theoretically, could bring it about that in the event of the defendant failing on the issue of fraud but succeeding on the issue of breach of trust, to put it simply, the plaintiff would be disentitled to a verdict in any event. 35 Thus I am persuaded that the strength of the defendant's case can be said to exist and can be taken into account in the disposition of this application. 36 The final matter on which the defendant relies is what is described as "the risk of the decline in value of the judgment". It is in this regard that reference is made to s3(6) of the enforcement legislation in Papua New Guinea. The effect of this provision is that (assuming a costs order was otherwise registrable, in regard to which I agree that there is a question) a costs order in Australian dollars would become registrable at the rate of exchange prevailing at the date the court's order is made. Thus the example is given that if there was an exchange rate of 1.5 and a costs order for (say) $100,000 was made, that would be registrable as a judgment for 150,000 kina. Thus it is said that from the defendant's point of view the defendant becomes "a hostage" to any downturn in the value of the kina between the date the original costs order is made and the date when he recoups his costs in kina. It is to this issue that the material appended to Mr Hryce's affidavit was relevant and it is of some, but not overwhelming, weight. It constitutes not a far fetched and fanciful risk but a risk nonetheless in my view. 37 In the course of submissions Mr Littlemore QC referred me to the decision of Cole J in Swain Investments Ltd v Danumet Pty Ltd and GR Walker, unreported, 5 May 1989. This decision was, of course, before that of McHugh J in Chellaram (and before the Court of Appeal in England in Thune). Cole J was concerned with the question of enforcement of costs judgments in New Zealand. The effect of the reciprocal legislation permitting enforcement of judgments of the Supreme Court of New South Wales in New Zealand his Honour said (at page 6) has been to remove substantially the basis for ordering security for costs against a company registered in New Zealand with its major assets there. This was so because "Nothing was put to me to suggest any difficulty or relevant delay in obtaining such registration". Here, I am persuaded that something has been put to me in that regard, namely the question of whether such a judgment would be registrable under the legislation of Papua New Guinea and the question of the decline in the value of that judgment by reference to that nation's currency. Little comfort can be gained by what his Honour said in Swain Investments in the light of subsequent authority to which I have referred and the facts in the present application. 38 The plaintiff is a foreign resident; he has no assets in Australia; he is a person of means (measured in Australian dollars); an order for security would not stultify the action nor cause the plaintiff financial hardship. Any question of the "ease" of the registration of any costs judgment in Papua New Guinea is affected by questions of construction of that country's legislation and the value of any such registration is affected by, I am satisfied, the question as to the stability of that country's currency on the evidence before me in terms of the risk of the diminution in value of any judgment for costs registered for the defendant. Further, the defendant does have, as on the present material, a meritorious case. 39 It is therefore appropriate that security be ordered. 40 I return to the affidavit of Ms Ashe. Ms Ashe quantifies for the reasons stated by her in her affidavit a claim for security on the basis of a five-week trial allowing 80 percent recovery on a party-party assessment at $332,000 (figure rounded down) and $272,000 (rounded down) for a three-week trial. 41 It is submitted for the defendant that the trial, even on a brief review of the Ombudsman Commission Report, is likely to go "for some weeks". It is clear from the nature of the issues (as presently framed) that a number of witnesses are likely to be called to give evidence in relation to the plaintiff's involvement in various matters (though there does not appear to be dispute as to foundational matters as I have remarked); and the plaintiff's knowledge of various matters. It is also clear, it is said, and I agree, that there will be a huge volume of documentary material that will need to be placed in evidence and considered. Valuation of the property clearly was and will be an issue and expert evidence in that regard will be tendered. Although not touched upon during the course of oral submissions, the defence of qualified privilege will involve, it is said, an extensive examination of whether the defendant's statements are reasonable given the material in his possession. The defendant suggests that a five-week estimate is conservative. 42 Any estimate is notoriously unreliable, however, on present indications a range of between three to five weeks is not unreasonable. 43 The defendant is not precluded in the event of the structure of the case "blowing out" as it were, or for any other good reason from making any further application. However the view to which I have come is that on the material available to me and in the light of Ms Ashe's affidavit, is that an appropriate sum by way of security be $300,000. 44 The orders are:

1. Within 28 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 AUD $300,000 in a form acceptable to the Registrar and that the plaintiff's action be stayed until provision of such security.
2. The plaintiff is to pay the defendant's costs of this application.
3. The matter is stood over for mention in the Registrar's Defamation Directions List on 20 September 2002.

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