NSW Court of Appeal Orders Security for Costs in Defamation Appeal

The Court of Appeal ordered the claimant to provide security for the respondent's costs of the appeal in the sum of $20,000 due to special circumstances, including the claimant's impecuniosity and the potential for stultification of the appeal process.

Court of Appeal Supreme Court New South Wales Medium Neutral Citation: [NAME] v [NAME] [2019] NSWCA 71 Hearing dates: 1 April 2019 Decision date: 15 April 2019 Before: Emmett AJA Decision:

1. The appeal be stayed until such time as security for the respondent's costs of the appeal in the sum of $20,000 is provided in a form satisfactory to the Registrar.

2. The respondent have leave to apply for dismissal of the appeal for want of despatch in the event that the security is not provided within 42 days. Catchwords: Notice of Motion – Security for Costs – Special Circumstances – Impecuniosity – Stultification Legislation Cited: Defamation Act 2005 (NSW) Uniform Civil Procedure Rules 2005 Cases Cited: Pi v Zhou [2016] NSWCA 148 Category: Procedural and other rulings Parties: [NAME] (Applicant) [NAME] (Respondent) Representation: Counsel: [redacted] [NAME] with B C Dean (Respondent)

Solicitors: [redacted] [NAME] (Respondent) File Number(s): 2018/334329 Decision under appeal Court or tribunal: Supreme Court of NSW Jurisdiction: Common Law Citation: [2018] NSWSC 1518 Date of Decision: 15 October 2018 Before: Payne JA File Number(s): 2015/366431

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

Judgment 1. The appellant, [NAME], appeals from orders made on 15 October 2018 by Payne JA in proceedings brought in the Common Law Division by the respondent, [NAME], against [NAME] and [NAME]. Relevantly for present purposes, [NAME] ordered [NAME] to pay to [NAME] damages of $100,000 for defamation of [NAME] by [NAME]. [NAME] also made orders restraining [NAME] from publishing or broadcasting various allegations about [NAME]. On 31 October 2018, [NAME] served notice of intention to appeal from the orders made by Payne JA and filed his notice of appeal on 7 January 2019, although he did not serve it until 29 January 2019. Having regard to the quantum of damages, he is entitled to appeal as of right.

2. By notice of motion filed on 26 February 2019, [NAME] seeks an order under r 51.50 of the Uniform Civil Procedure Rules (UCPR) that [NAME] provide security for [NAME]'s costs of the appeal. UCPR 51.50 specifically empowers the Court to order the provision of security for costs of an appeal, but only in special circumstances.

3. The damages and costs ordered by Payne JA against [NAME] have not been paid to [NAME] and the evidence demonstrates that [NAME] owns no property from which such orders might be satisfied. It would follow that [NAME] owns no property from which an order for costs could be satisfied if the appeal were to be dismissed with costs.

4. While no order for security may be made in the absence of special circumstances, consideration of what may constitute special circumstances is not to be fettered by any general rule of practice. Further, impecuniosity, without more, will usually be insufficient. However, impecuniosity, coupled with an appeal that is shown to be hopeless, unreasonable or of a harassing nature, may justify an order for security. On the other hand, the possibility that an order for security would result in stultification of the appeal is an important consideration to be weighed. Thus, where a bona fide and reasonably arguable appeal would be stifled by an order for security, such an order should ordinarily not be made. Further, the subject matter of the appeal, such as a question as to the liberty of an individual, or the public interest, may provide a reason for not ordering security if the order would stifle the continuation of the appeal. On the other hand, stultification does not necessarily follow from a finding of impecuniosity if, for example, it is shown that the appellant is likely to have access to funds other than the appellant's own property [1] . 5. [NAME] resists the making of the order for the provision of security sought by [NAME] on the basis that he could not comply with it and his appeal would thereupon be stultified and that special circumstances have not been established. [NAME], on the other hand, asserts that there are special circumstances in that, while [NAME] has so organised his affairs that no property is actually owned by him, from which an order could be satisfied, he has an indirect interest in property that would enable him to obtain access funds to satisfy an order for security. [NAME] relies on statements made by [NAME] to the effect that he was never again going to own anything in his own name and that, if [NAME] bankrupts him, it would not make the slightest difference to him. 6. [NAME] relies principally on evidence concerning land at Bellata, which is the site of the former Nandewar Inn, which burned down in 2006. On 17 November 2012, [NAME] sent to [NAME] text messages concerning the possibility of the development of that land. [NAME] is a solicitor who practises in Narrabri, who now acts for [NAME]. The messages were relevantly as follows: "[NAME] , something to think about , bellata pub , ive spoken to OLGR , would not be too hard to get approval to put 5 pokies back in, if it was it would be a gold mine. [NAME] and I still don't have resources to do it on our own. We own the land lic unencumbered , …. . Needs a bit of financial muscel [sic] and building planning skill. Smart way to do it is we should split freehold and business, we have a 50% partner in the freehold all run on normal commercial terms, release and run the pub on normal commercial terms, we have all the risks headaches and potential return running it on our own , for the 50% partner, its just a straight real estate investment, no diff to a block of flats , just bigger return. …. In a nutshell we bewd [sic] a partner in the freehold with a bit of financial muscel [sic], but more importantly …. Skill. I wont embarrass u by raising this again , if u think its wirth [sic] investigating , tell me. As u would know from the sheds, im pretty good at building / financing things on the smell of an oily rag, u would be surprised how little money / gaurantee [sic] would be needed to create a valuable asset at Belata , like i said before , u have erpertise [sic] in building / licensing that will be invaluable. [NAME] and i currently own the project 50/50 in a company and the shares in that company are held in our private family companies , im not personally involved .… On paper. If u were to be involved, would not matter who your nominee was, could be joshs super fund for all i care. Im want to build my stake for my kids , im never going to own anything in my name ever again after the sheds."

1. As will become apparent, the reference to "[NAME]" is a reference to [NAME]. The messages indicate that [NAME] has an interest of some kind in the Bellata development, which is unencumbered. Thus, the message says "we own the land" and "[NAME] and I currently own the project 50/50 in a company and the shares in that company are held in our private family companies". On the other hand, [NAME] says "I'm not personally involved". The statement that [NAME] is not "personally involved" is made in the context of the assertion "I am never going to own anything in my name ever again after the sheds". The assertion gives rise to an inference that [NAME] has been a party to the establishment of a structure under which he personally owns nothing but exerts a degree of influence. That inference is strengthened by examination of the ownership of the Bellata development. 2. [COMPANY] ([NAME]) owns the land in question. Searches of records maintained by the Australian Securities and Investment Commission (ASIC) show that [NAME] is the only director of [NAME] and that [NAME] is its secretary. The issued capital of [NAME] is held as to one half by [COMPANY] ([COMPANY]) and as to one half by [COMPANY] ([NAME]). [NAME] is the only director and is the secretary of [NAME]. All of the issued shares in [NAME] are beneficially owned by [NAME], who is [NAME]'s son. [NAME] is [NAME]'s common law wife.

3. A report of 9 August 2018 in "The Courier", a newspaper published in the Narrabri Shire, stated that Narrabri Shire Council had recently approved a development application for the building of hotel accommodation on the land in question. The report described [NAME] as being "headed by [NAME]", who was formerly the chief executive of the old Narrabri Municipal Council. In light of the 2012 text messages, [NAME] contends that an inference is open that [NAME] has an indirect interest in the Bellata development.

4. According to ASIC records, [NAME] is presently the director and secretary of [COMPANY] ([COMPANY]), all of the shares in which are owned by [NAME]'s brother. [COMPANY] owns a property in Boggabri consisting of two lots which were purchased in June and October 2014 for $69,000 and $70,000 (the [NAME]). No mortgages are recorded on the title of the [NAME]. [NAME] have lodged development applications in respect of the [NAME]. That gives rise to an inference that [NAME] has a degree of influence over the [NAME].

5. ASIC records also disclose that [COMPANY] ([COMPANY]) own land in [ADDRESS], Boggabri on which the Royal Hotel stands. [NAME] operated the Royal Hotel for many years. [NAME] is currently the director and secretary of [COMPANY]. [COMPANY] owns 80% of the issued shares and [COMPANY] ([NAME]) owns the other 20%.

6. ASIC records also disclose that [NAME] owns a property situated in [ADDRESS], Boggabri. [NAME] is a former secretary of [NAME]. The sole shareholder of [NAME] is [NAME]'s brother. In 2015, [NAME] applied for development approval in respect of the [ADDRESS] property.

7. Until September 2018, [NAME] was the secretary of [COMPANY] ([NAME]). [NAME] is currently the only director and shareholder of [NAME] and is the secretary of [NAME]. [NAME] owns land in Boggabri that is subject to a mortgage in favour of [COMPANY]. [NAME] is presently the only shareholder of [NAME]. [COMPANY] were previously shareholders of [NAME]. [NAME] has held roles as director or secretary in some 33 companies. He also formerly held shares in a number of those 33 companies, some of which have been deregistered. Thus, a considerable degree of commercial sophistication can be attributed to him. Against that background, it is significant that [NAME] ended the text message sent to [NAME] on 17 November 2012 by saying: "Im want to build my stake for my kids , im never going to own anything in my name ever again after the sheds." On 21 June 2017, prior to a mediation of the proceedings fixed for 3 July 2017, to which all parties had consented, [NAME] published the following: "The mediation is a total waste of time, but it's compulsory, nothing will come of it, it will then be on to the April 2018 trial that will be [NAME]'s Waterloo, if he turns up, he may yet fold on the steps of the Court." On 8 April 2018, the day before the commencement of the trial of the proceedings, [NAME] published the following: "If [NAME] somehow manages to beat me in this case and bankrupt me, he wont [sic] make the slightest difference to me". Thus, an inference should be drawn that [NAME] has been mindful of the possibility of the loss of assets by reason of commercial adversity but nevertheless retains a degree of control or influence in relation to property owned by members of his family.

1. In support of his application for security, [NAME] relied on an affidavit sworn by [NAME] on 1 March 2019 deposing to the facts summarised above. In response to [NAME]'s affidavit, [NAME] relied on an affidavit sworn by [NAME], an experienced defamation solicitor. [NAME] said that he had been instructed by [NAME] and believed that: * [NAME] had been a secretary of a number of the [COMPANY] for a period of over 10 years; and * [NAME] assisted [NAME] in company compliances and administration by being company secretary for several of his companies. * However, he gave no details about the arrangements concerning [NAME]. [NAME] also gave some evidence concerning the properties owned by [NAME], explaining that the properties owned by [NAME] have been given as security for the obligations of a country galloper bookmaker's licence issued to [NAME]. 1. [NAME] also said that the only income that [NAME] and [NAME] have is [NAME]'s income of approximately $30,000 per annum from her bookmaker's licence. [NAME] said that [NAME] is unable to work because of serious health issues and that he had surgery in Sydney in February 2019.

2. It is significant that, while [NAME] explained the circumstances of [NAME]'s interest in [NAME], no attempt was made to explain the text messages sent by [NAME] to [NAME] in 2012 concerning the Bellata Development. It is, of course, some years since the text messages were sent. However, the ASIC searches indicate that the structure described by [NAME] in the messages is still in place at the present time, in so far as [NAME], the owner of the Bellata Development, is owned 50% by [COMPANY] and 50% by [NAME], which is owned as to 100% by [NAME]'s son. 3. [NAME] has not offered any explanation for the text messages of 2012 from which an inference is clearly open that he regards himself as having considerable influence in relation to the issued share capital of [NAME] which is owned by a company, the only shareholder of which is his son. That is perfectly consistent with the statement in the 2012 text messages that "[NAME] and I" own the project in a company, the shares in which are held 50/50 "in our private family companies". [NAME] did not refer to his son the owner. 4. [NAME] has been represented by experienced counsel and solicitors. However, [NAME] gave evidence that the legal team are acting on the basis that they will not be paid except from any order for costs that may be made in [NAME]'s favour.

5. I accept that [NAME] has instructed [NAME] that he would not be able to pay any amount ordered for security. In the absence of such evidence, I am not persuaded that that is necessarily so. I draw the inference that [NAME] is in a position of influence in relation to [NAME], the owner of the Bellata Development, which appears to be of some value. I also draw the inference that [NAME] is in a position of influence in relation to [COMPANY], the owner of the [NAME]. In the absence of any evidence from [NAME] indicating that he would be unable to raise funds from those sources to provide security if an order were made, I am not persuaded that an order for security would stultify [NAME]'s appeal.

6. The reasons for judgment of Payne JA run to some 273 paragraphs over nearly 60 pages. The notice of appeal contains 25 numbered paragraphs of grounds of a total of proximity 53 issues if sub-paragraphs are separately counted. The grounds of appeal cover some five pages. [NAME]'s summary of argument filed on 22 March 2019 in support of the appeal asserts that the appeal concerns the following five questions of substance: * Grounds 1 to 11: the significance in a defamation action based on Internet content, in a non-mass context, of particulars or lack of particulars of the readers of a publication, proof of publication and extent of publication in those circumstances; * Ground 12: the assessment of defamatory meaning when the matter complained of is predominantly not about the plaintiff; * Grounds 13 to 14: the principles that apply to identification where a plaintiff is not named in the matters complained of and the relevance of proper particularisation of that identification; * Grounds 15 to 24: the principles that apply to the common law defence of qualified privilege whether the matters complained of are uploaded on a special interest website available to the public to download and the inter-relationship between identification, publication and the common law defence of qualified privilege where the plaintiff is not named in an online publication; and * Ground 25: the defence of qualified privilege under s 30 of the Defamation Act 2005 (NSW) as applies to social media publications by private individuals about politicians.

1. The summary of argument asserts that nearly all of the appeal grounds ultimately turn on the question of publication, namely, what was in fact pleaded, and particularised, and ultimately what was proved. [NAME] will contend that Payne JA fell into error in relation to those matters and that subsequent errors arose thereafter by reason of the findings relating to publication and extent of publication. In the circumstances, I will not conclude that the appeal is manifestly groundless. I will assume, without expressing a view on the matter, that, for the purposes of the present application, the grounds of appeal have reasonable prospects of success.

2. I am persuaded that, on balance, special circumstances have been made out. That is to say, [NAME] has evinced an intention to denude himself of assets that might be available to satisfy obligations incurred by him. In circumstances where he owns no assets and has already incurred significant liabilities for costs and damages that have not been satisfied, albeit they are the subject of the appeal, I consider that an order should be made for the provision of security. I am not persuaded that a modest order would stultify the appeal.

3. In his affidavit, [NAME] estimated the costs likely to be incurred by [NAME] in the appeal would be $62,696, on the assumption that the hearing would last for one and a half days. [NAME] did not challenge that estimate in his affidavit. However, counsel for [NAME] contended on the hearing of this application that the hearing of the appeal would not exceed one day. I consider that it is likely that, in the circumstances, only one day would be allocated for the appeal.

4. Security for costs is not intended to provide a full indemnity against costs that might be incurred. In the ordinary course, an order for costs will not fully compensate the successful party unless it is made on a special basis, such as solicitor and client or indemnity. [NAME]'s estimate, as I understand it, is an estimate of solicitor and client costs that are likely to be incurred for a hearing of one and a half days.

5. I consider that in the circumstances, the appropriate order is to require [NAME] to provide security in the sum of $20,000. The appeal should be stayed until such time as security in that sum is provided in a form satisfactory to the Registrar. In the event that the security is not provided within 42 days, [NAME] should have leave to apply for dismissal of the appeal for want of despatch.

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Endnote 1. See generally Pi v Zhou [2016] NSWCA 148 at [38], [52] and [55].

Amendments 29 April 2019 - Correction on cover sheet 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. Decision last updated: 29 April 2019