Ghosh v Miller

SACKVILLE AJA: On 19 June 2017, Rothman J delivered judgment on a series of motions filed in proceedings commenced by the appellant. [1] In those proceedings the appellant seeks damages for defamation against the respondents. The claim arises out of matters published on websites in 2013 concerning a rental property owned by the appellant.

The defamation proceedings were commenced as long ago as August 2013. There are seven defendants in the defamation proceedings and all are named as respondents to the appeal. However only the first and second respondents (Respondents) have pursued the application for security for costs on the appeal.

The lamentable history of the litigation is recounted in Rothman J’s judgment. His Honour made orders dismissing the proceedings against the respondents. His Honour also directed that the appellant not file any application, other than an appeal from the judgment itself, in relation to commencing further proceedings for defamation arising from the publications without the leave of the Court.

The appellant filed a summons on 20 September 2017 seeking leave to appeal from Rothman J’s decision. Leave was required because his Honour’s orders are interlocutory. [2]

On 3 April 2018, this Court (McColl and Leeming JJA) granted the appellant leave to appeal. The appellant was required to pay the respondents’ costs thrown away by the appellant’s amendment to the notice of appeal. The costs of the application for leave to appeal otherwise were to be costs in the appeal.

On 16 May 2018, the Respondents filed a notice of motion seeking an order that the appellant provide security for costs of the appeal in an amount to be determined by the Court. The motion seeks an order that the proceedings be stayed against the respondents pending payment into the Court of the amount to be provided as security. The motion does not specify the amount sought as security.

The motion is supported by an affidavit sworn by the solicitor for the Respondents. The text of the affidavit is 18 pages in length and it has over 300 pages of exhibits. The affidavit establishes that the appellant is an undischarged bankrupt, whose estate was sequestrated by an order made by the Federal Circuit Court of Australian on 30 September 2016. The sequestration order was made on the petition of the first respondent. The sequestration order does not prevent the appellant pursuing her defamation claim. [3]

The solicitor’s affidavit summarises an extremely long history of costs orders made in favour of the Respondents against the appellant. The affidavit states that the appellant has not paid any of the costs ordered against her. The affidavit also recounts a number of respects in which the appellant has failed to comply with orders of various courts.

Most of the costs orders identified in the affidavit concerns proceedings between the parties other than the defamation claim which is the subject of the appeal. According to the affidavit five costs orders have been made in the proceedings bearing the file number recorded in the Primary Judgment. None of these costs orders has yet been assessed notwithstanding that three of the orders were made more than three years ago.

The Respondents rely upon Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 51.50 which provides that in special circumstances the Court may order such security as the Court thinks fit to be given to the costs of an appeal. The Respondents submit that the appellant’s prospects of success in the appeal cannot be regarded as strong. They point out that the decision of the primary Judge was made after a careful examination of the history of the proceedings and a consideration of the potential damages available to the appellant compared to the likely costs to the Respondents of defending the proceedings. The Respondents also rely on the fact that the appellant is an undischarged bankrupt and that her trustee in bankruptcy has objected to her automatic discharge on the basis that she has failed to comply with a request that she provide information about her property and income. The Respondents also claim that actions have been taken by the appellant that might be regarded as attempts to dissipate her assets.

The considerations engaged by the concept of “special circumstances” in relation to an application for security for costs were summarised in Preston v Harbour Pacific Underwriting Management Pty Ltd [4] as follows:

Delay in making an application for security for costs is not an automatic bar to the making of an order for security for costs. [5] However delay may be a significant factor depending upon the length of the delay and the reasons for it. The reason is that a party:

In the present case, this Court has granted leave to appeal. In doing so, the Court must be taken to have decided that the appellant has reasonably arguable grounds for maintaining her appeal. It is not for a single judge of the Court on a subsequent application for security for costs to accept an invitation to second guess the basis on which leave to appeal has been granted.

The risk that an order for security for costs will stultify the proceedings is a powerful factor to be taken into account in deciding whether an order is appropriate. [7] The solicitor’s affidavit on a first reading suggested that there was such a risk because the appellant was an undischarged bankrupt and there was apparently nothing substantial to indicate that she had funds to obtain legal representation (although she has had legal representation in some matters post-dating her bankruptcy).

My attention was directed in argument to the trustee’s report to a creditor dated 26 September 2017. Rather surprisingly this shows a surplus of assets over liabilities of $1.6 million. The net position becomes somewhat less surprising when it is seen that the assets include an estimate of $750,000 for a defamation award and other assets are recorded on the basis of the appellant’s own valuation.

The onus is in the appellant to demonstrate that an order for security would stultify her appeal. [8] I am not satisfied that she has satisfied the onus having regard to the trustee’s report and the fact that she has apparently arranged legal representation in matters arising after the sequestration order was made (although she represented herself before the primary Judge).

Nonetheless, I do not consider that an order for security should be made in the present case. As I have noted, the appellant has reasonably arguable grounds for the appeal. Although the appeal is from an interlocutory judgment, the effect of the orders made by the primary Judge may be to prevent the appellant from pursing the defamation claim because the limitation period is likely to have expired by the time she institutes any fresh proceedings.

In my view delay is a significant factor in this case. The summons seeking leave to appeal was filed on 20 September 2017. The application for leave to appeal was heard on 3 April 2018. The Respondents did not file a motion seeking security for costs at any stage prior to the hearing of the application for leave to appeal. Had they done so the Court hearing that application could have made a determination as to whether the grant of leave should be conditioned on the appellant providing security for costs. A timely filing of the Respondents’ motion also would have avoided the need for two separate hearings which, to some extent, have covered the same ground. (The application for leave to appeal required the Court to consider the history of the litigation which is set out in the judgment of the primary Judge.)

One can readily understand the frustration that has been experienced by the Respondents and the concern they have about costs orders in their favour that may not be enforceable. But most of the matters about which they complain do not concern the defamation proceedings the subject of the appeal. Since none of the costs orders obtained by the Respondents in the defamation proceedings has yet been assessed (according to the affidavit), the quantum of these orders is not clear. Nor is it clear why the orders for costs dating from 2014 and earlier were not assessed prior to the making of the sequestration order.

The Respondents have alleged that the appellant has taken steps to remove assets from the reach of creditors. Whether she has done so has not yet been established in any legal proceedings. The trustee in bankruptcy has stated that he is exploring the possibility of clawing back assets into the bankrupt estate and he has powers that enable him to take that course. If and when the trustee institutes proceedings, the result may be that, the Respondents are able to recover some or all of the costs due to them.

For these reasons, the Respondents have not established special circumstances that justify the making of an order for security for costs. The Respondents’ motion filed on 16 May 2018 must be dismissed. The Respondents must pay the appellant’s costs of the motion.