Category Archives: Injunctions

Security for Costs in a Defamation Action

Courts have long stood firm that poverty (alone) should not deprive a person of seeking appropriate relief through the Courts, even if they might not be able to pay costs should they lose. There are, however, exceptions to this rule and this is why Courts have developed security for costs provisions.

In Moran v Schwartz Publishing Pty Ltd & Virginia Peters, Kenneth Martin J was faced with a difficult decision. The evidence indicated that the Plaintiff was wholly unable to satisfy a costs order, but poverty alone is no bar to litigation. Was there any additional factor to justify an order for security.


The Plaintiff had commenced defamation proceedings arising out of the publishing of a book, titled “Have You Seen Simone?“. That book describes a private investigation into the death of Simone Strobel in Lismore, NSW.

Mr Moran (who was formerly known as Mr Suckfuell) commenced proceedings against the publisher and author of that book. Mr Moran alleges, broadly, that the book is defamatory of him as its words can be understood to mean that murdered Simone Strobel.

Prior to the book being published, Mr Moran sought an injunction which was ultimately refused.

The Application

The Defendants sought security for costs in the sum of $780,712.00 or such other sum as the court deemed fit.

In support of the application for security for costs, the defendants relied upon the following:

  1. that the trial would last around five weeks;
  2. that Mr Moran, allegedly:
    • was not an Australian citizen, permanent resident and that he failed to disclose his residential address in Australia;
    • had  previously refused to return to NSW to assist a Police Investigation;
    • had a drug-related conviction in Germany;
    • was not employed in Australia; and
    • did not own any property in Western Australia.

Mr Moran, in response, deposed that he was:

  1. married to an Australian citizen;
  2. held a permanent visa;
  3. lives in Perth;
  4. has been working full time.

Mr Moran did not wish to disclose his residential address in Perth for privacy reasons and also bluntly conceded that he owned no substantial assets, other than a car.

Mr Moran went on to depose that he had previously borrowed money from family and friends to fund the action, but that if security was ordered, he could not meet it from his own assets and would have to discontinue the action.

The Disposition

Mr Moran  did not indicate whether those family and friends, whom he had previously borrowed money from, would assist him in meeting the amount to be paid in to Court on account of the security for costs.

His Honour referred to the relevant principles in an application for security for costs:

1. Order 25 Rule 1 of the Rules of the Supreme Court provide that no order for security shall be made merely on account of the poverty of a plaintiff;

2. Order 25 Rule 2 set out a non-exhaustive list of grounds for ordering security

3. Order 25 Rule 3 confirms that the power to order security is discretionary, and that the Court must take into consideration factors including the prima facie merits of the claim and what property may be available, within the jurisdiction, to satisfy an order for costs.

Kenneth Martin J referred to the oft cited decision of Lindgren J in Knight v Beyond Properties Pty Ltd where his Honour summarised cases where poverty was, combined with other factors, sufficient to justify an order for security for costs.

During the hearing, it became common ground that Mr Moran would be unable to meet any adverse costs order, that Moran was ordinarily resident in Western Australia, despite not holding citizenship. The issues relating to the nondisclosure of Mr Moran’s residential address and his alleged drug addiction were also not pursued.

Instead, it was argued that an inference could be drawn that Mr Moran’s friends and family would likely continue providing financial support. They noted that this was demonstrated by his engagement of an expensive team of defamation lawyers who were not suggested to be acting pro bono.

This, it was argued, indicated that Mr Moran’s poverty was more convenient than actual. That his poverty had not, to date, stifled the continuing of the action. Mr Moran was said to have not discharged his obligation to show that an order for security of costs would actually stifle the proceedings.

In granting an order for security for costs, Kenneth Martin J observed that this application was unusual. His Honour further observed that the application does not appear to meet any of the nominated grounds for ordering security set out in Order 25 Rule 2 although noting that those grounds are non-exhaustive.

Ultimately, his Honour relied on the “rather deafening” silence in relation to whether Mr Moran’s family and friends, who had to date advanced funds for the purpose of the litigation (in the order of at least $40,000.00), would continue to provide such funding and ultimately provide any security ordered. This was the additional factor relied upon by Kenneth Martin J to support an order for security for costs.

Security was granted in the total sum of $500,000.00. It will be paid in stages as the proceedings advance. The first $100,000 is to be paid by 28 February 2015.

Comment: This is a very interesting development in applications for security for costs. Kenneth Martin J was bold in relying on Mr Moran’s outside assistance with funding the litigation to justify the making of an order for security.

The decision is, in my humble opinion, well reasoned and correct. The result could really have went either way and I would be very surprised if no appeal is lodged.

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Ignore an Arbitration Clause at Your Peril

Martin CJ has published reasons which should serve as a reminder of the potential consequences of ‘ignoring’ or commencing proceedings in breach of an arbitration clause contained in a contract.

In addition to having the offending proceedings stayed pursuant to the International Arbitration Act 1974 (Cth), the Plaintiff(s) in those proceedings also runs a serious risk of facing an indemnity costs order after a successful stay application.

This is exactly what occurred in KNM Process Systems v Mission Newenergy Ltd.

Paragraph 2 of the Chief Justice’s reasons indicate that whilst an indemnity costs order will not always follow a successful stay application, it does appear that save for any special circumstances an indemnity costs order will usually be made.

It always pays to be mindful whether an arbitration clause applies to any proceedings that you might be considering commencing. If you are unsure, you should seek the opinion of counsel.

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