Sands v State of South Australia - [2013] SASC 105

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
SANDS v STATE OF SOUTH AUSTRALIA
[2013] SASC 105
Judgment of The Honourable Justice White
2 July 2013
APPEAL AND NEW TRIAL - APPEAL - PRACTICE AND PROCEDURE - SOUTH AUSTRALIA - SECURITY FOR COSTS
PROCEDURE - COSTS - SECURITY FOR COSTS - POVERTY - BANKRUPTCY
PROCEDURE - COSTS - SECURITY FOR COSTS - OTHER REASONS FOR SECURITY
The appellant appeals against the dismissal of his defamation action. The State has applied for an order that the appellant give security for its costs in the appeal and that the appeal be stayed until he does so. The State submitted that special circumstances arose from the appellant's impecuniosity; the substantial nature of the appeal; the failure of the appellant's lengthy, related action against Channel 7 and the ABC; and the limited prospects of success of the appeal. The appellant submitted that the Court's decision should be deferred until after the hearing of its application for a search order under r 148 of the Supreme Court Civil Rules 2006.
Held:
1. The appellant's impecuniosity, the substantial nature of the appeal and the related, substantial action in which the appellant failed and did not meet the costs of those defendants constitute special circumstances.
2. There is no absolute prohibition on an award of security against an individual appellant resident in the jurisdiction.
3. Defamation appeals are not a special category of cases in which courts should be reluctant to order security.
4. The submission that the appellant's impecuniosity was caused by the State is contrary to an express finding of the Court below and is therefore not open on this application.
5. The appellant's contingency fee arrangement means that the appellant has not established that an award of security will stultify the appeal.
6. There is no basis on which to defer determination of the security application until after the search order application is determined.
7. The further prosecution of the appeal is stayed until the appellant has paid into Court the sum of $60,000 to secure the State's costs of the appeal.
Crown Proceedings Act 1992 (SA) s 5; Supreme Court Civil Rules 2006 r 148, r 194 and r 295, referred to.
McVicar v S & J White Pty Ltd [2006] SASC 233; (2006) 245 LSJS 177; Dagenham Nominees Pty Ltd v Shanks [2011] SASC 163; (2011) 110 SASR 577; Sands v Channel Seven Adelaide Pty Ltd [2009] SASC 215; (2009) 104 SASR 452; Sands v Channel Seven Adelaide Pty Ltd [2010] SASC 202; (2010) 270 LSJS 340; Knight v FP Special Assets Ltd (1992) 174 CLR 178; Min Kyu Kim v Byung Sun (Eric) Song [2012] NSWSC 103; Cowell v Taylor (1885) 31 Ch D 34; Citicorp Australia Ltd v Cirillo [2003] SASC 204; (2003) 228 LSJS 132; Foxgold Pty Ltd v Paterson [2005] SASC 376; Kennedy v McGuchan (1978) 1 NSWLR 314; Lall v 53-55 Hall St (1978) 1 NSWLR 310; Horton v Warranted Financial Solutions Pty Ltd (in liq) [2011] VSCA 256; Li v Herald & Weekly Times Pty Ltd (Unreported, Supreme Court of Victoria, Court of Appeal, Nettle and Redlich JJA, 25 July 2007); Toms v Fuller [2010] QCA 73; Griffiths v John Fairfax Publications Pty Ltd [2009] NSWSC 100; Hood Barrs v Heriot [1896] 2 QB 375; Bray v F Hoffman-La Roche Ltd [2003] FCAFC 153; (2003) 130 FCR 317; Del Bosco v Outtrim [2008] NSWSC 105, considered.

SANDS v STATE OF SOUTH AUSTRALIA
[2013] SASC 105
Interlocutory Application

WHITE J. On 5 April 2013, a Judge of this Court dismissed the appellant’s claim for damages.[1] The named defendant to the appellant’s action was, in accordance with s 5 of the Crown Proceedings Act 1992 (SA), the State of South Australia, but the appellant’s action related to alleged conduct of the South Australian Police and of certain members of the Crown Solicitor’s Office. It raised several causes of action including defamation, breach of statutory duty, breach of a duty of care, breach of a duty of confidence, and a claim of an infringement of his privacy.
[1] Sands v State of South Australia [2013] SASC 44.
By notice of appeal filed on 24 April, the appellant appeals against the dismissal of his action. The State has applied for an order that the appellant give security for its costs in the appeal in the amount of $75,000 and that the appeal be stayed until he does so. In the event that a stay is not ordered, the State seeks other orders with respect to the conduct of the appeal.
By an application filed on 11 June, the appellant asks this Court to issue a search order under r 148 of the Supreme Court Civil Rules 2006 (the 2006 Rules) permitting an “independent computer expert” to conduct a search of “computer components” at the headquarters of the South Australian Police with a view to locating certain items. That application was listed for mention only on 14 June at the hearing of the State’s security for costs application. The appellant submitted that I should not rule on the security application until I had heard his search order application. I indicated that I would hear the parties’ submissions as to this proposed way of proceeding as part of the submissions on the State’s application but otherwise adjourned consideration of the appellant’s application.
Accordingly, this judgment concerns the application for security for costs, but in the context of the appellant’s filed application.
Special Circumstances
It was common ground that r 295(1)(g) of the 2006 Rules sets out the Court’s power to order security in appellate proceedings. That subrule provides (relevantly):
295(1)The Court may exercise any of the following powers in relation to an appeal or an application for permission to appeal:
...
(g)the Court may, in special circumstances, order that security be given for the costs of an appeal;
...
The power to order security is enlivened if “special circumstances” exist. By subrule (3), the power to order security in respect of appeals to the Full Court may be exercised by a single Judge.
The State submitted that special circumstances in the present case arose from a number of matters, including:
1.The appellant is impecunious;
2.The appellant has previously pursued claims for defamation against Channel Seven Adelaide Pty Ltd (Channel 7) and the Australian Broadcasting Corporation (the ABC). That action involved a lengthy trial. The appellant failed at first instance; an appeal was dismissed by the Full Court; and the High Court refused an application for special leave to appeal. This is significant in several respects. In particular the State’s defence of justification to the defamation cause of action was, in many respects, in the same terms as the defences of Channel 7 and the ABC, and the appellant has not met the substantial costs of those defendants in defending his action against them.
3.The trial of the action against the State was a substantial matter, extending over some 50 sitting days with substantial submissions (both written and oral). The matters raised by the grounds in the appellant’s notice of appeal and by the State’s own notice of alternative contention will require the re‑agitation on the appeal of many of the factual and legal issues addressed at trial. Counsel for the State estimate that the hearing of the appeal may occupy up to five days.
4.The appeal has limited prospects of succeeding.
The State also relied on these matters in its submissions concerning the exercise of the discretion.
It is convenient to address these matters in turn.
Impecuniosity
Counsel for the appellant acknowledged his client’s impecuniosity. That was a recognition of the inevitable. The appellant is an undischarged bankrupt with little by way of assets. Costs orders made against the appellant in his proceedings against Channel 7 and the ABC have given rise to liquidated debts exceeding $1m. The appellant has no apparent means with which to meet those orders; no apparent means of meeting the costs orders already made against him in the present action; and no apparent means of satisfying the costs orders which will be made in the event that his appeal is unsuccessful. He did not fund the trial in his present action as his solicitors and counsel acted for him on a contingency fee basis.
The question of whether impecuniosity by itself may amount to special circumstances for the purposes of r 295(1)(g) has not, so far as I am aware, been settled. I referred to many of the authorities bearing on the issue in McVicar v S & J White Pty Ltd.[2] The question has also been considered in the later decisions of Dagenham Nominees Pty Ltd v Shanks[3] and Morgan v WorkCover Corporation.[4]
[2] [2006] SASC 233; (2006) 245 LSJS 177.
[3] [2011] SASC 163; (2011) 110 SASR 577.
[4] [2012] SASC 190.
It is not necessary for present purposes to reach a concluded view on the issue because the State does not rely on the appellant’s impecuniosity alone to establish special circumstances. It is sufficient to say that I regard the appellant’s impecuniosity as a significant matter bearing on the existence of special circumstances.
The Appellant’s Claims against Channel 7 and the ABC
The appellant’s previous claims against Channel 7 and the ABC were a substantial matter involving, after significant interlocutory activity, a trial extending over almost three weeks and resulting in an extensive judgment.[5] The appellant’s appeal was also a substantial piece of litigation.[6] Some of the matters agitated in the Channel 7/ABC action were re‑agitated, unsuccessfully, by the appellant in the present action. Judges in both actions made adverse findings as to the appellant’s credibility on a number of issues.
[5] Sands v Channel Seven Adelaide Pty Ltd [2009] SASC 215; (2009) 104 SASR 452.
[6] Sands v Channel Seven Adelaide Pty Ltd [2010] SASC 202; (2010) 270 LSJS 340.
The appellant did not dispute that he has not met the costs orders made against him at the various stages in the Channel 7/ABC action and that he has no prospect of doing so.
I agree with counsel for the State that the circumstance that the appellant has had access to this Court in a related matter at great unrecompensed expense to the defendants in that action is a significant matter going to the establishment of special circumstances in the present case. There are limits to the extent to which the appellant should be permitted to pursue vindication of his position without defendants having any prospect of recovering their costs in the event that his claims fail.
The Extensive Trial at First Instance
As previously noted, the trial of the appellant’s present claims against the State extended over some 50 sitting days. Both the evidence and the submissions were extensive.
It is inevitable that the appeal will also be a substantial matter. That conclusion can be reached without the necessity of analysing in any detail the appellant’s grounds of appeal. It is sufficient to note that, although the appellant’s counsel disputed the State’s estimate that five days may be required for the hearing of the appeal, he accepted that some three days may be necessary. On any measure, that is a substantial hearing.
It is also pertinent to note that the appellant’s grounds of appeal indicate that he seeks to overturn numerous factual findings, many of which appear to be based on the Judge’s findings of credit.
The circumstance that the appeal which the appellant wishes to pursue is so substantial is, to my mind, a significant matter going to the establishment of special circumstances given the appellant’s acknowledged impecuniosity.
Prospects of Success of the Appeal
The State submitted that the appeal has limited prospects of success. It referred in this respect in particular to the failure of the appellant’s defamation action against Channel 7 and the ABC in which, as it contended, those defendants had raised a defence of justification similar to that relied upon by the State.
The appellant, on the other hand, drew attention to relevant differences between the respective actions and submitted that no inference as to his prospects of success in the present appeal could be drawn from his failure in the earlier action. He also referred to some aspects of the Judge’s reasons in which, he submitted, the existence of error was at least reasonably arguable.
In my opinion, given the length and detail of the Judge’s reasons it is unrealistic for the Court presently to attempt some evaluation of the appellant’s prospects of success. To do so would require consideration of reasons in a judgment extending over 150 pages as well as significant aspects of the evidence and pleadings. An exercise of that complexity is not appropriate for the purposes of determining the security for costs application.
Instead, I consider it appropriate to regard the appellant’s prospects of success on the appeal as a neutral matter. That is to say, I will proceed on the basis that it cannot be concluded that the appeal has no prospects of success but that, beyond that, it is not possible to make any meaningful assessment.
The State also submitted that success by the appellant on the appeal would be tantamount to an overturning of findings adverse to the appellant in the previous proceedings against Channel 7 and the ABC. Again, I consider it undesirable on an application of the present kind for the Court to attempt an assessment of the merit of that submission. It too would require the Court to engage in a detailed comparison of the pleadings and findings in the Channel 7/ABC action and the pleadings and findings in the present action.
Conclusion on Special Circumstances
I consider that the matters identified above do amount to special circumstances. As I have said, the appellant’s impecuniosity by itself is a significant matter. The fact that the appellant has failed in a related, substantial action and has not met the costs of the defendants to that action is also a material consideration. The substantial nature of the appeal is another matter, bearing in mind that the appellant has already had access to the courts in an endeavour to vindicate his position in two substantial trials.
I conclude that the discretion to award security has been enlivened.
Discretionary Considerations
As previously indicated, the matters bearing on the existence of special circumstances are also relevant to the exercise of the discretion. In addition to those matters, a number of other considerations are pertinent.
An Individual Resident in South Australia
The appellant’s submissions emphasised the traditional reluctance of courts to order natural persons to provide security. He submitted that this Court should give effect to the statement of Mason CJ and Deane J (with whom Gaudron J agreed) in Knight v FP Special Assets Ltd that:
Security cannot be ordered against a defendant or a plaintiff who is an individual and who resides in the jurisdiction.[7]
The appellant’s submissions tended to regard this statement as containing an absolute prohibition on an award of security in his circumstances given that he is an individual residing in South Australia. I decline to act on that submission.
[7] (1992) 174 CLR 178 at 190.
The issue in Knight v FP Special Assets Ltd was the jurisdiction of the Supreme Court of Queensland to make an award of costs against a non‑party following a first instance hearing. The statement of Mason CJ and Deane J on which the appellant relied was in the nature of dicta, made in the context of their rejection of a submission that the availability of an order for security for costs was a reason for denying the existence of jurisdiction to order costs against a non‑party.
The statement of Mason CJ and Deane J was, seemingly, a reference to the practice of the common law courts and the courts of equity. It is not readily to be supposed that Mason CJ and Deane J were intending to enunciate a principle of universal application when the power to award security is derived from statute or from a rule of court. In those cases the nature, scope and extent of such a power and any limitations on its exercise, are, of course, to be derived principally from the terms of the statute or rule of court in question.
In construing a statute or rule context will be important. That is so in the case of the 2006 Rules. The power of this Court to award security on appeal under r 295(1)(g) contrasts with the power under r 194 to award security in first instance proceedings.[8] Save for the requirement of special circumstances, the power under r 295(1)(g) is unfettered. There is no basis upon which one can read into r 295(1)(g) a limitation on the exercise of that power which is not contemplated by the rule itself.
[8]    Rule 194(1) provides:
The Court may order a plaintiff to provide security for costs if—
(a)     the action is brought in a representative capacity and the plaintiff is insolvent or would have insufficient resources to meet an order for costs if the action were to prove to be unsuccessful; or
(b)     the plaintiff is ordinarily resident outside Australia; or
(c)     there are reasonable grounds to suspect that the action may have been brought for an ulterior purpose; or
(d)     the order is authorised by statute; or
(e)     the order is necessary in the interests of justice.
Note—
If a defendant makes a counterclaim, the defendant is the plaintiff in the cross action—see definition of plaintiff.
In any event, it is to be observed that Mason CJ and Deane J referred to orders for security against “a defendant” or “a plaintiff”. That terminology makes it apparent that their Honours were not intending to enunciate a principle applicable to appeals. It is not necessary for present purposes to consider whether there is currently a rule of practice that security is not generally awarded against individuals resident in the jurisdiction in first instance hearings.[9]
[9] Cf Min Kyu Kim v Byung Sun (Eric) Song [2012] NSWSC 103 at [7]-[8].
The provision of security with respect to appeals has always been distinguished from the provision of security at the trial stage. So much is apparent from the well‑known statement of Bowen LJ in Cowell v Taylor:
The general rule is that poverty is no bar to a litigant; that, from time memorial, has been the rule, and also, I believe, in equity. There is an exception in the case of appeals, but there the appellant has had the benefit of a decision by one of Her Majesty’s Courts, and so an insolvent party is not excluded from the Courts, but only prevented, if he cannot find security, from dragging his opponent from one Court to another.[10]
There are several instances of individual appellants seemingly resident in the jurisdiction having been required to provide security.[11]
[10] (1885) 31 Ch D 34 at 38. Sulan J applied this reasoning in Citicorp Australia Ltd v Cirillo [2003] SASC 204 at [14]-[23]; (2003) 228 LSJS 132 at 134-7.
[11] See, for example, Foxgold Pty Ltd v Paterson [2005] SASC 376; Citicorp Australia Ltd v Cirillo (2003) 228 LSJS 132; Kennedy v McGuchan (1978) 1 NSWLR 314; Lall v 53-55 Hall Street Pty Ltd (1978) 1 NSWLR 310. See also Horton v Warranted Financial Solutions Pty Ltd (in liq) [2011] VSCA 256 at [23].
Defamation Appeals are not a Special Category
In McVicar v S & J White Pty Ltd,[12] I referred to the reluctance of courts to order security for costs in personal injury claims and held that it was appropriate to have regard to that reluctance in relation to security at the appellate stage. The authorities do not suggest that there is any similar reluctance in relation to defamation appeals, although the issue does not seem to have been adverted to specifically.[13]
[12] (2006) 245 LSJS 177.
[13] See, for example, Li v Herald & Weekly Times Pty Ltd (Unreported, Supreme Court of Victoria, Court of Appeal, Nettle and Redlich JJA, 25 July 2007); Toms v Fuller [2010] QCA 73; Griffiths v John Fairfax Publications Pty Ltd [2009] NSWSC 100.

The appellant submitted that a claim of loss of reputation, which was the subject of his action, could be likened to a personal injury, so that the Court should be similarly reluctant to order security in this case. An alternative submission was that cases concerning the destruction of, or damage to, a person’s reputation are analogous to cases involving the liberty of the subject.[14] In my opinion, neither of these analogies is inappropriate.
[14] Hood Barrs v Heriot [1896] 2 QB 375.
The Cause of the Impecuniosity
The appellant submitted that his impecuniosity had less significance in the present case because it had been caused by the conduct of the South Australian Police and Crown Law Officers of which he complained. The submission was that the State should not be able to rely upon impecuniosity of which it was the author. In considering this submission, the appellant’s impecuniosity arising from his inability to pay the cost of the proceedings at first instance can be disregarded.
The submission confronts an express finding of the Judge that the appellant had not proved any causal connection between the conduct of the police or others on 3 March 2004, which he impugned, and the publications by Channel 7 and the ABC.[15] The appellant wishes to challenge that finding on the appeal but, while it stands, it is not open on the present application to proceed on the basis that the State was, or may have been, the cause of the appellant’s impecuniosity.
[15] Sands v State of South Australia [2013] SASC 44 at [123]-[124].
Stultification of the Appeal
The State submitted that the Court could be satisfied that an order that security be provided would not have the effect of stultifying the appeal. It drew attention to evidence indicating that the plaintiff’s solicitors and counsel were acting on a contingency basis. The evidence did not disclose the precise arrangements under the contingency agreement but the costs which must have been incurred in conducting the lengthy trial makes it apparent that the appellant’s solicitors will benefit substantially in the event of success in the appeal.
The State’s submission was that the financial interests of the appellant’s solicitors provided an incentive for them to allow the appeal to proceed, including by providing security if necessary. The State also drew attention to the fact that the appellant’s solicitors had not asserted that stultification would be the consequence of an award of security. Given that the appellant’s solicitor had sworn a detailed affidavit in answer to the application for security, the omission of a statement to this effect is significant.
The fact that a litigant is prosecuting proceedings under a contingency fee arrangement with his or her solicitors has been regarded as a relevant consideration in the resolution of an application for security. In Bray v F Hoffman‑La Roche Ltd,[16] Finkelstein J (with whom Branson J agreed)[17] said:
It is also appropriate to bear in mind that it is commonly the case in a class action that a person will stand behind (I mean fund) the applicant. Usually this will be the applicant’s solicitor, who will sometimes charge what is referred to as a “contingency fee” for the privilege. When a proceeding is brought by a “nominal plaintiff” that is a plaintiff who will not himself benefit from the action but is making the claim for the benefit of someone else, an order for security is usually made. A party who is being funded by his solicitor is not really a “nominal plaintiff”. Nevertheless, the solicitor does stand to benefit from the action (especially as regards the additional fee) if the action is ultimately successful, as the solicitor would then be able to recover his costs. That is a relevant, though not a decisive, consideration when deciding whether security should be ordered.[18]
Similarly, Barrett J in Del Bosco v Outtrim[19] considered that evidence that the plaintiff’s solicitors were acting for her on a contingency basis precluded an order for the provision of security from having the effect of stultifying the prosecution of her claim.[20]
[16] [2003] FCAFC 153; (2003) 130 FCR 317.
[17] Ibid at [214]; 361-2.
[18] Ibid at [252]; 375.
[19] [2008] NSWSC 105.
[20] Ibid at [22]-[24].
Some care may be necessary when relying upon a contingency fee arrangement in relation to applications for the provision of security for costs. One of the rationales for the recognition of contingency fee arrangements was the expected enhancement of access to justice for persons who could not otherwise engage in litigation. An over‑ready willingness to award security in such circumstances may have the effect of frustrating the achievement of that purpose. However, when a matter reaches the appellate stage, the need for caution is less apparent. Appellants will already have had access, under the contingency fee arrangement, to the courts in a first instance trial.
I conclude that the contingency fee arrangement means that the appellant has not established that an award of security will have the effect of stultifying his appeal. This makes it unnecessary to consider a related submission of the State concerning assets of the appellant which are held overseas.
Matter of Public Interest
The appellant submitted that it was in the public interest that no fetter be placed on the ability of the appeal to proceed. He contended that his case raised for judicial consideration the interrelationship between a defence of justification to a defamatory imputation, on the one hand, and public interest immunity in respect of documents and communication relevant to that defence, on the other.
I agree that this may well be an issue of significant interest. However, litigation between two parties often raises issues of significance or of public importance but, nevertheless, retains its private character. I see no reason why the fact that the appeal may involve a question of public interest should militate against an order for security, if that is otherwise appropriate.
The Appellant’s Application for a Search Order
I referred earlier to the appellant’s application under r 148 of the 2006 Rules for a search order directed to the Commissioner of Police. As previously noted, the appellant submitted that I should defer a decision on the State’s security for costs application until his application for that order has been determined.
It is not necessary to outline in detail the appellant’s application. It is sufficient to say that the appellant seeks, at the appellate stage, to garner some evidence bearing upon the reliability of certain evidence led by the State at trial. The proper place for the gathering of such evidence was at the trial.
The appellant acknowledged that no application to the effect now sought had been made to the trial Judge. Counsel proffered the explanation that he and the appellant’s solicitors had assumed that evidence on the relevant topic would be led by the State without the appellant having to seek some form of coercive order. When it was pointed out that the appellant must have been aware, at the conclusion of the defence case, that the evidence was not being led and that he could then have sought the order if it was thought necessary, counsel said that it had been assumed that the trial Judge would deal with the issue, adversely to the State, in her reasons. The submission seemed to be that the Judge had been in error in failing to do so. If that be so, there is no reason to suppose that the alleged error cannot be agitated before the Full Court, without the Court making the intrusive search order now sought.
These circumstances do not seem to provide a promising basis for the appellant’s present application. However, it is not necessary to express a concluded view about that.
I see no reason to regard the appellant’s application for a search order any differently from any other interlocutory application bearing upon the conduct of the appeal. In particular, there is no reason why a decision on the State’s security for costs application should be deferred pending the resolution of this particular interlocutory application. On the contrary, the unusual nature of the orders sought and the circumstances in which the application is made tend to suggest that if it is to be pursued, it should be after security has been provided, if an order to that effect is appropriate.
Accordingly, I decline to accede to the appellant’s application that the determination of the security for costs application be deferred until his interlocutory application has been resolved.
Conclusion on Exercise of Discretion
In my opinion, the circumstances of this case point strongly in favour of an order for security.
The State sought security in the sum of $75,000. That amount was calculated by reference to the State’s estimate of five days for the hearing of the appeal. Given the present uncertainty as to the length of the appeal, I think it preferable to work on the basis of a three day hearing. Adjusting the figures provided by the State on that account and on account of some other minor matters, I consider that the appellant should provide security in the sum of $60,000.
Should it become apparent that a hearing longer than three days will be required, or for any other reason that the sum of $60,000 is inadequate, the State has liberty to apply for a greater sum.
Conclusion
For the reasons given above I order that the further prosecution of the appeal be stayed until the appellant has paid into Court the sum of $60,000 to secure the State’s costs of the appeal. I will hear from the parties as to any further orders.