Ensor v Forrest

[2001] NSWSC 790

CITATION:	Ensor v Forrest [2001] NSWSC 790
CURRENT JURISDICTION:	Common law
FILE NUMBER(S):	SC 20510/98
HEARING DATE(S):	2 March 2001
JUDGMENT DATE:	7 September 2001
PARTIES :	Benjamin Kenneth Edmund ENSOR and Anor v John Andrew Henry FORRESTand Ors
JUDGMENT OF:	Simpson J

COUNSEL :	Mr T Molomby - Plaintiffs Ms K Traill - Defendants
SOLICITORS:	Michell Sillar Ronald J Curry & Co.
CATCHWORDS:	Defamation - application to strike out statement of claim - ulterior purpose - inactivity - application to be removed as a party to the proceedings - security of costs.
LEGISLATION CITED:	Defamation Act 1974
CASES CITED:	Rajski v Computer Manufacture and Design Pty Limited [1983] 2 NSWLR 122 Merribee Pastoral Industries Pty limited v ANZ Banking Group Limited (1998) 193 CLR 502 Pacific Acceptance Corporation Limited v Forsyth (No.2) [1967] 2 NSWLR 402 Harpur v Ariadne Australia Limited [1984] Australia Limited [1984]2 QDR 523 Southern Cross Eploration NL v Fire and All Risks Insurance Co Limited (1985) 1 NSWLR 114
DECISION:	Defendants' notice of motion dismissed.

THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

SIMPSON J

7 September 2001

Benjamin Kenneth Edmund ENSOR and Anor v John Andrew Henry FORREST & Ors

Judgment

HER HONOUR :

1    By statement of claim filed on 31 December 1998 the plaintiffs, Benjamin Kenneth Edmund Ensor and Garrymere Farms Australia Pty Limited, have sued the four named defendants in defamation. The foundation for the action lies in a letter dated 22 November 1996 published over the name of the third defendant (there identified as “Janie Hicks”) and also bearing the name of the fourth defendant, International Alpaca Management Pty Limited. The letter was directed to “Alpaca Breeders of Australia” and expresses concerns about certain issues in that industry.

2    By notice of motion filed on 3 March 1999, the defendants seek orders:

(i) that the statement of claim be struck out; alternatively

(ii) that the second plaintiff be removed as a party to the proceeding;

(iii) that the first plaintiff provide security for the defendant’s costs; alternatively

(iv) that the second plaintiff provide security for the defendant’s costs.

3    The first and broadest claim, the claim to have the statement of claim in its entirety struck out, invokes SCR Pt 13 r 5. That rule empowers the court to stay or dismiss any claim for relief where it appears to the court that:

(i) no reasonable cause of action is disclosed;

(ii) the proceedings are frivolous or vexatious; or

(iii) the proceedings are an abuse of the process of the court.

4    The defendants also referred to SCR Pt 32A, which empowers the court, of its own motion, but after having given the parties a reasonable opportunity to be heard, to dismiss proceedings in which no step has been taken by any party for more than one year, unless a party satisfies the court that special circumstances exist rendering it desirable that such an order should not be made. A notice under this Part was given to the parties on 10 July 2000. The court records indicate that this notice came before Levine J on 16 October 2000, on which date his Honour ordered that the matter (being the defamation claim) be restored to the list, and the defendant’s notice of motion (the subject of the present judgment) be stood over to 16 February 2001. Court records also indicate that on that date the notice of motion was further stood over, to 2 March 2001; and that on that day it was stood over yet again, this time to 15 June, when it was eventually heard.

5    This history suggests to me that Pt 32A is presently immaterial: obviously, Levine J did not dismiss the proceedings. Even if I took a different view to that taken by Levine J (which I do not) it would be inappropriate to take any course of action inconsistent with his orders. However, as Pt 32A was mentioned by the defendants in their written submissions, I record their reliance upon it.

6    The defendants have not suggested that no reasonable cause of action is disclosed by the statement of claim. They do assert that the proceedings are either frivolous or vexatious, or an abuse of the process of the court, or both. The second assertion appears to stem from the rather lethargic course the proceedings have, to date, taken. Both assertions are based upon a contention that the plaintiffs do not genuinely intend to pursue the defamation action, but have commenced it for a collateral purpose.

7    Evidence was put before the court in the form of three consecutive affidavits sworn by Mr Mark Webeck, the solicitor for the defendant, and one sworn by Mr Jonathan Yuill, the solicitor for the plaintiffs. From these affidavits a history of the proceedings, and of other proceedings involving certain of the parties, emerges. It is convenient now to outline that history.

History

8    In 1992 the present fourth defendant (International Alpaca Management Pty Limited, to which I will refer as “IAM”) and others commenced proceedings in the Federal Court of Australia, naming the first plaintiff, (to whom, to avoid confusion, it will be convenient to refer by name) and Garrymere Farms Limited (not the second plaintiff) as respondents. Although at first instance the applicants failed in their claim, on appeal they succeeded. An application by the then respondents (Mr Ensor and Garrymere Farms Limited) for special leave to appeal to the High Court of Australia was refused on 5 August 1996. Put briefly, the proceedings concerned the legal ownership of one hundred alpacas.

9    Following the conclusion of this litigation, the letter of 22 November 1996 was published. For present purposes, it may be assumed that the four defendants participated in the publication. On 24 December solicitors acting for the plaintiffs wrote to IAM, stating the intention of the plaintiffs to commence defamation proceedings as a result of the letter.

10    Mr Ensor and Garrymere Farms Limited were ordered to pay costs which were assessed at about $7,500. The costs were not paid. On 13 October 1997, at the instance of IAM and others, a bankruptcy notice was served on Mr Ensor, requiring payment of that amount, or a satisfactory arrangement, within twenty-one days.

11    On 3 November 1997 a new firm of solicitors acting for the plaintiffs wrote to the defendants’ solicitors, reiterating the plaintiffs’ intention to commence proceedings in defamation. Also on 3 November 1997 (that is, about three weeks after service of the bankruptcy notice) solicitors acting for Mr Ensor wrote to the solicitors acting for the defendants. They wrote:

“We have previously advised of our intention to commence proceedings for defamation in the Supreme Court on behalf of Mr Ensor in relation to the letter of 22 November 1996 (copy enclosed) over the name of Mrs Hicks on behalf of International Alpaca Management Pty Limited. We are about to do so, but wish to proceed against all parties responsible for the letter. Would you please advise the names and addresses of the person or persons who:
1. wrote the letter
2.` approved the letter
3. published the letter.”

12    On the same date Mr Ensor filed an application in the Federal Court seeking an order setting aside the bankruptcy notice. In support of that application, he filed an affidavit stating his intention to commence defamation proceedings in this court.

13    Proceedings for preliminary discovery under SCR Pt 3 were then commenced on behalf of the plaintiffs, and, on 21 August 1998, Levine J made an order for examination of Ms Hicks, and perhaps others, for the purpose of ascertaining the identity of any person or persons responsible for the publication of the letter, and against whom proceedings might be commenced. That examination was originally scheduled for 2 November, and subsequently for 7 December 1998. In the meantime, on 6 August 1998, the defendants’ solicitors wrote to the plaintiffs’ solicitors offering to supply an affidavit containing the information sought. Quite what happened in relation to that offer does not clearly emerge from the documentary material tendered in evidence in this matter, but the statement of claim, in its present form, naming the four defendants, was filed on 31 December 1998.

14    Payment required by the bankruptcy notice not having been made by the due date, a creditors’ petition under the Bankruptcy Act was presented, claiming the sequestration of Mr Ensor’s estate. The petition for a sequestration order came before Katz J in the Federal Court on 9 November 1998. On 10 February 1999, after a contested hearing, his Honour made a sequestration order, and gave his reasons for doing so. The sequestration order had an additional consequence. Mr Ensor had, until then, been a director of the second plaintiff, but his bankruptcy rendered him ineligible to continue to occupy that position.

15    In recounting the factual matters relevant to his decision, Katz J referred to the evidence of the defamation claim that had been put before him. Although judgment was delivered, and the sequestration order made, on 10 February 1999 (post dating the filing of the defamation statement of claim) it appears, from the account of facts given by his Honour, that, at the time of hearing, the statement of claim had not been filed: or, at any rate, evidence that it had been does not appear to have been placed before his Honour. Evidence of the existence of the claim was put before Katz J as part of an argument that sufficient cause existed why a sequestration order ought not to be made.

16    Katz J expressed some scepticism about Mr Ensor’s bona fides in relation to the defamation claim. In part, this was because, although Mr Ensor had had his solicitors write the letter of 24 December 1996, he made no further contact in that regard until more than ten months later, and what he did he did the day before the expiration of the time for compliance with the bankruptcy notice. Katz J wrote:

“The inference which I draw from the matters to which I have referred above is that [Mr Ensor’s] conduct has been calculated to avoid commencing defamation proceedings with respect to the alleged defamatory letter …”

17    This appears to have been put before me as an invitation to share Katz J’s scepticism. I here observe that his Honour’s view as to the factual matters, and the inferences to be drawn, in the proceedings before him, have had, and can have, no bearing on my own assessment of the facts, or on the inferences I draw. His Honour had his own task to perform, as have I; his Honour made his assessment on the basis of the evidence before him, as I will do.

18    On 24 February 1999 the defendants’ solicitors sought further and better particulars of the statement of claim. On 3 March 1999 they filed, and presumably, at about that time, served the present notice of motion. On 11 March 1999 they sought additional particulars, this time concerning the identification of the second plaintiff, who was not named in the letter that constitutes the matter complained of. On 15 March 1999 the solicitors for the plaintiffs replied, declining to furnish the requested particulars.

19    On 10 July 2000, the notice under Pt 32A was sent to the parties, and on 16 July 2000 Levine J made the orders previously mentioned, restoring the matter to the list, and fixing the notice of motion for hearing.

• • •

The orders sought in the notice of motion

(i) the application to strike out the statement of claim.

20    As noted above, the basis on which this application is pursued is that the proceedings are frivolous or vexatious or alternatively are an abuse of the process of the court. The principal basis on which this is put concerns the history recounted above. In short, it was argued that I should draw an inference similar to that drawn by Katz J, to the effect that the plaintiffs have used the proceedings for an ulterior purpose, and with no real intention of pursuing them to finality. The ulterior purpose suggested is the avoidance of a sequestration order. For example, in the defendants’ written submissions, it is asserted that:

“They commenced defamation proceedings over two years after the publication of the matter complained of.”

21    As a factual matter this is undoubtedly true. However, put so baldly, it presents a rather distorted picture of the reality. The fact is that the plaintiffs initially complained about the letter of 22 November 1996 only two days after its publication, and, although that letter is not in evidence before me, it seems plain that the letter at the very least, referred to the possibility of defamation proceedings. Thereafter, it is true that there was no activity until just after service of the bankruptcy notice. However, having regard to the Federal Court litigation in which Mr Ensor, at least, was enmeshed, and the subsequent bankruptcy action, I would not be prepared to draw the inference that he or the second plaintiff had no interest in pursuing the defamation claim. I would be prepared to assume that the Federal Court litigation was time - as well as energy - consuming, and also a drain on their financial resources.

22    Thereafter, despite the defendants’ letter of 26 August 1998, it seems that the plaintiffs had to pursue their claim for preliminary discovery in order to ascertain the identity of proper defendants to their action. If the examinations took place on 7 December 1998, as the evidence suggests was intended, the plaintiffs lost little time in filing the statement of claim after those examinations were conducted.

23    There were then requests for particulars made by the solicitors for the defendants, but these were interrupted by the filing of the present notice of motion. According to one letter written by the plaintiffs’ solicitors to the defendants’ solicitors which, (so far as the evidence goes, has not been contradicted), at a directions hearing some time before 15 March 1999 the defendants’ solicitors objected to the fixing of a time table for the progress of the litigation, informing the court that the defendants “wished to pursue certain other applications”. That, no doubt, was a reference to the present notice of motion.

24    The defendants also relied on inactivity, allegedly since 18 March 1999, but, again, it seems to me that this may well be attributable to the pending notice of motion.

25    I would not wish it to be thought that the observations I have made represent positive conclusions that the plaintiffs genuinely intend to pursue the claim. No witness gave oral evidence before me, and I was asked to draw inferences from the history. The absence of any direct evidence from Mr Ensor is not a matter to be overlooked, and may well be of some significance. The onus of establishing that the proceedings are frivolous or vexatious, or an abuse of the process of the court, however, rests upon the defendants. In the circumstances I am not prepared to draw the inferences they seek. I decline to strike out the statement of claim.

(ii) the application that the second plaintiff be removed as a party to the proceedings

26    SCR Pt 8 r 9 provides:

“Where a party -
(a) has been improperly or unnecessarily joined; or
(b) has ceased to be a proper or necessary party,
the Court, on application by any party or of its own motion, may order that he cease to be a party and make orders for the further conduct of the proceedings.”

27    In support of this application reliance was placed upon the absence of any reference by name, in the matter complained of, to the second plaintiff, and to the absence of a response to the request for further and better particulars of identification of the second plaintiff. There was also some correspondence, following Mr Ensor’s bankruptcy, to the effect that his resignation as a director of the second plaintiff, and his replacement, would be necessary, and to the omission of any information in relation to regularising that position since that correspondence.

28    In my opinion, reliance on Pt 8 r 9 is misconceived. The rule was not intended to operate as a stay of proceedings against a party who fails to provide proper particulars. However, that may be a mere quibble. It is necessary for a plaintiff, unnamed in the matter complained of, to provide to the defendant(s) particulars to establish the manner in which that plaintiff proposes to prove that he, she or it was identified as the subject of the publication. If the second plaintiff fails to provide such particulars, then it would be proper to stay the proceedings so far as that plaintiff is concerned. Counsel for the plaintiffs agreed to supply the particulars sought. I would give the second plaintiff the benefit of the doubt, for the same reason as I have given both plaintiffs the benefit of the doubt in relation to the tardiness of the progress of claim, and would treat the default to date as one which still may be rectified. However, it will be necessary for the second plaintiff to move with expedition to provide those particulars. I decline, at this stage, to make the order sought, or any order which would have a similar effect, or prevent the second plaintiff from pursuing its claim.

(iii) that the first or the second plaintiff provide security for costs

29 The court has both an inherent power to order a plaintiff to provide security for a defendant’s costs of the proceedings, as well as a statutory power provided by SCR Pt 53. Further, in relation to a corporation, the court has a power provided by s 1335 of the Corporations Law. The full extent of the inherent power to take such a course cannot be precisely defined beyond saying that the power is to be exercised consistently with the court’s general inherent power to regulate its own practice and procedure to procure proper and effective administration of justice and to prevent abuse of process: see Rajski v Computer Manufacture and Design Pty Limited [1983] 2 NSWLR 122; Merribee Pastoral Industries Pty Limited v ANZ Banking Group Limited (1998) 193 CLR 502. It is, in my view, to be recognised that an order that a plaintiff pay security for costs may have the practical effect of terminating the litigation. It is, accordingly, a power not to be exercised lightly. On the other hand, a plaintiff’s prospects of success in the litigation are a relevant circumstance to be taken into account. The smaller the prospects of success, the greater the prejudice to the defendant(s) who may ultimately be successful. Obviously, another relevant factor in this consideration is the plaintiffs’ financial position. In this case, the evidence establishes that Mr Ensor is bankrupt. There is no evidence as to his income, or the anticipated date of his discharge from bankruptcy. There is no real evidence of the second plaintiff’s financial position. No evidence was produced to suggest that, if Mr Ensor, or the second plaintiff, are unsuccessful in the litigation, either will be in a position to meet the costs order that would ordinarily ensue.

30    In these circumstances, the court has a very difficult balancing process to undertake. One party faces considerable prejudice. I am prepared to assume, in the absence of contrary evidence, that neither plaintiff would be able to meet a costs order if they are unsuccessful. I am also prepared to assume, although there is no direct evidence to this effect, that neither plaintiff would be in a position to provide any substantial sum by way of security for costs, and that an order for security would bring their rights, in practical terms, to an end.

31    Mr Webeck, in his affidavit of 3 March 1999, estimated the defendants’ costs and disbursements of preparation and a three day hearing, at $46,280. This is, undoubtedly, a substantial sum to incur if the defendants successfully defend the claim, but are unsuccessful in recovering costs.

32    There is no indication in the evidence as to the defences upon which the defendants would go to trial. That leaves me in a position of having to assess, on extremely limited material, the plaintiffs’ prospects of success.

33    Again, it seems to me, that this question turns upon the onus of proof. It is for the defendants to establish that this is a proper case for an order to be made. Other factors (that is, impecuniosity on the part of the plaintiffs, and the unlikelihood of recovery if the defendants are successful, and the plaintiffs’ entitlement to pursue their litigation) being, in my view, equally balanced, the determination of this issue must depend upon an assessment of the plaintiffs’ prospects of success. To the extent that I can make that assessment, I perceive the letter as conveying defamatory imputations. There being no evidence of proposed defences, I cannot make any assessment thereafter.

34 I appreciate that there are additional factors to be considered so far as the second plaintiff, the corporation, is concerned. I was referred to authorities such as Pacific Acceptance Corporation Limited v Forsayth (No.2) [1967] 2 NSWR 402 at 407, Harpur v Ariadne Australia Limited [1984] 2 QDR 523 and Southern Cross Exploration NL v Fire and All Risks Insurance Co Limited (1985) 1 NSWLR 114. However, where, as here, Mr Ensor is bankrupt, the position is essentially the same as that which applies to a company. It may be accepted that, if the plaintiffs are unsuccessful, the defendants will have little prospect of recovering the costs order that would inevitably follow. I have borne these principle in mind in reaching the conclusion I have. However, for the reasons I have given above, I have concluded that an order for security for costs should not, at least at this stage, be made. I decline to do so.

35    Accordingly, the defendants’ notice of motion is dismissed. The defendants must pay the plaintiffs’ costs.

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Last Modified: 09/11/2001