(2001) 104 IR 84
Li v State of New South Wales (2013) NSWCA 165
P S Chellaram & Co v China Ocean Shipping Company [1991] HCA 36
Source
Original judgment source is linked above.
Catchwords
(2001) 104 IR 84
Li v State of New South Wales (2013) NSWCA 165
P S Chellaram & Co v China Ocean Shipping Company [1991] HCA 36
Judgment (2 paragraphs)
[1]
EX TEMPORE JUDGMENT - REVISED
The applicant/defendant applies for security for costs under r 42.21 of the Uniform Civil Procedure Rules 2005 (NSW) in this defamation case.
The plaintiff/respondent, Mr David Hoffman, is a resident of the State of Illinois in the United States of America and is suing the defendant, Mr Darren Challis, for defamation originally occasioned by the publication of a matter on what is referred to as a blog on the internet. Under r 42.21 that a plaintiff is ordinarily resident outside Australia is a matter which may enliven the discretion "to give such security as the court thinks fit, in such manner as the court directs, to the defendant's costs of the proceedings and the proceedings be stayed until the security is given."
Both parties anticipate that some order is appropriate in this case. The issue is as to the amount and conditions that should imposed.
Of the plethora of relevant matters set in r 42.21(A1) the argument focused on the question of: "The ease and convenience or otherwise of enforcing a New South Wales tort judgment or order in the county of a non-resident."
However, Mr Sibtain, who appears with Mr Horobin for the defendant, and Mr Gration, who appears for the plaintiff/respondent, accept that the exercise of the discretion requires regard to all the circumstances of the particular case Counsel referred to the decision of the Court of Appeal in Li v State of New South Wales (2013) NSWCA 165 (Ward JA, with Macfarlan and Gleeson JJA agreeing.) Ward JA said, by reference to the decision of Wright J, the President of the Industrial Relations Commission of New South Wales in Court Session in Knott v Signature Security Group Pty Ltd [2001] NSWIRComm 12; (2001) 104 IR 84:
"… [T]he ease and convenience of enforcement procedures in the plaintiff's country of residence will ordinarily be a primary consideration and that, conversely, the fact that a judgment would be simple to enforce is a powerful factor against [an order for security] … "
Mr Sibtain however, emphasised the statement of principle by McHugh J in P S Chellaram & Co v China Ocean Shipping Company [1991] HCA 36; 65 ALJR 642 at 643 where his Honour said:
"...for over 200 years ... 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 the person is resident out of and has no assets within the jurisdiction."
As I have said, the way the argument has developed before me, Mr Gration, relying upon the analysis of Ward JA, accepts the circumstance that his client resides out of the jurisdiction and has no assets in the jurisdiction would ordinarily lead to an order for security.
In terms of McHugh J's principle, Mr Gration points to another circumstance which "overcomes the weight of the circumstance that the plaintiff is outside of and has no assets within the jurisdiction": the ease and convenience of the enforcement of a New South Wales judgment in the State of Illinois, United States of America. To make good that point, he relies upon the opinion of John W Rotunno, Attorney at Law, in his affidavit sworn 24 February and filed the 26th in Court. Mr Rotunno points out that the State of Illinois has enacted the Foreign-Country Money Judgments Recognition Act 735 ILCS 5/12-650. He sets out the relevant provisions of the legislation in an annexure to his report.
As I commented in my earlier interlocutory judgment concerning its admissibility of Mr Roturno's affidavit, it is a scholarly work. He fully sets out the reasons why he is of the opinion that the Cook County Circuit Court, Illinois would enforce the costs order, I infer crystallised in a judgment following an assessment pursuant to an order of this Court. He states that the process involves a straight-forward procedure of enforcement which he estimates should not exceed $US15, 000 "at the hourly rate prevailing in Cook County".
Mr Sibtain argues that it is one thing to be satisfied about the ease with which a judgment of this Court, giving effect to an assessment of costs in favour of the defendant could be recognised in the State of Illinois. It is quite another thing to demonstrate that enforcing the judgment in terms of the process of obtaining actual satisfaction is easy and convenient. He submits that Mr Rotunno's affidavit is short on the practical details in that regard.
Mr Michael John Sophocles, in his affidavit sworn 19 February 2015, sets out in again appropriate detail the costs he says are likely to be incurred by the defendant in bringing the case to the position where it is ready for trial excluding the costs of the hearing itself. I did not understand Mr Gration to take issue with Mr Sophocles's assessment. He sets out the estimated costs on the differing assumptions as to the necessary procedural steps that might be taken depending upon what directions or orders might be made by the Defamation List judge during case management. The range is between $69,000 and $240,000 on a solicitor and client basis.
Adopting a two-thirds rule of thumb for costs on the ordinary basis, he estimates the range to be between $112,000 to $160,000 (in rough terms). On that basis the defendant suggests security in the sum of $100,000 as appropriate for this tranche of the litigation, whichever of Mr Sophocles's differing assumptions are accepted.
This is not a case where security is sought as a tactical stumbling block to stultify the litigation. There is no suggestion here that the plaintiff is a man of straw, indeed to the contrary. The evidence before me in the form of exhibit A suggests that the plaintiff is a very wealthy man indeed and would have no difficulty in coping financially with an order for security.
The question really then boils down to what the interests of justice between the parties requires in terms of the amount of security and how it should be provided. It seems to me that there is some force in Mr Sibtain's argument that, impressive as Mr Rotunno's is, he does not sufficiently deal with the nuts and bolts of the process of obtaining actual satisfaction through a process of enforcement.
Perhaps a rule that has endured for 200 years may have somewhat less significance when one considers the global nature of the 21st Century economy. Multilateral free trade agreements between persons and companies across the seas necessitates the taking of action in foreign lands, such as debt enforcement, and it is therefore understandable that more recent cases have emphasised this question of the ease and convenience or otherwise of enforcing a New South Wales judgment overseas.
It seems to me that Mr Rotunno's assessment of the costs usually involved in enforcing a foreign judgment do not sufficiently take into account the difficulty of an individual resident in Australia actually enforcing across the Pacific in the United States, a money judgment, as opposed to a commercial entity, which might trade across the seas on a routine basis. Obviously the tyranny of distance makes the conduct of litigation more difficult, notwithstanding the advent of the age of instantaneous communication. The retention of an appropriately qualified Illinois attorney would not of itself guarantee the process would smoothly to fruition. I am not satisfied that Mr Rotunno's estimated range sufficiently covers the potential difficulties involved in an individual enforcing a judgment to the point of actual satisfaction. So it seems to me that the assessment of $US15,000, which is the high end of the range which, as Mr Gration has demonstrated, converts into slightly less than $22,000, is in fact an inadequate assessment of the amount of security appropriate to put the defendant in the position in which he would have been as to costs were this litigation conducted between two residents of New South Wales.
I also have the impression that Mr Sophocles, with great respect, has approached the assessment of the amount of work that might have to be done from a pessimistic point of view. It may well be that in the ordinary course of events things go smoothly. Much less work may well be necessary to get this case ready.
That being so, I think that the $100,000 errs on the side of pessimism and the $22,000 on the side of optimism. Another figure is more appropriate.
Doing the best I can, and relying on my knowledge of the conduct of litigation in the Supreme Court of New South Wales, which it is not cheap, I think a figure of $75,000 is the appropriate figure to impose for security of costs.
Before I pronounce orders, the defendant seeks an order under r 42.7 that costs of this application are payable forthwith. He relies upon a purported Calderbank offer dated 19 February 2016. That letter proposes security in an amount less than that which I am about to order. To enliven the special order as to costs, the respondent also has to show that the failure of the offeree to accept the offer was unreasonable.
It is necessary to bear in mind the consideration that Calderbank offers are different from formal offers of compromise. The question whether such an offer has enlivened a special order as to costs is determined by principles which are more flexible than those governing the effect of failing to accept a formal offer of compromise. I am not persuaded that the behaviour of the plaintiff was relevantly unreasonable. I do acknowledge that an order for security was appropriate. The argument about what was appropriate and the position the plaintiff adopted, which failed to find favour with me, was well supported by the authorities to which he referred. I decline to make the special order as to costs sought.
So far as costs generally are concerned, Mr Gration has drawn my attention to the statement of principle contained in Gino Dal Pont, Law of Costs (3rd ed 2013, LexisNexis Butterworths) that in respect of the costs of applications for security the usual order should be that the costs of the successful defendant are his costs in the cause. The theory being that if the plaintiff wins, the successful interlocutory application will not have been relevant to the outcome of the trial.
It seems to me that the general rule established by the Uniform Civil Procedure Rules is that costs follow the event. I accept the force of the argument advanced on the part of Mr Sibtain that it was a discrete issue. That issue has been resolved in favour of the defendant and I am not persuaded that I should order otherwise than the defendant should have his costs of this application in accordance with rr 42.1 and 42.7.
My orders are:
1. The plaintiff is to provide initial security for the costs of the defendant in the sum of $75,000 by way of payment of that amount into a controlled money account operated by the plaintiff's solicitors K & L Gates within seven days.
2. The proceedings are stayed until Messrs K & L Gates inform Messrs Atanaskovic & Hartnell that the plaintiff has complied with the order.
3. The parties have liberty to apply in relation to this order or any additional security upon five days' notice.
4. The plaintiff pay the defendant's costs of and incidental to the motion.
[2]
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Decision last updated: 17 March 2016