SMSF trustee ordered to give security for costs for defamation action

On 7 April 2020, the plaintiff lodged a writ seeking damages for a number of publications which he alleged were defamatory.

As the plaintiff is a self-funded retiree, who owns no land in his own name and no substantial asset within the State of Western Australia, the defendant lodged an application seeking security for costs.

In his decision, deputy registrar Richard Hewitt noted that money in superannuation is immune from execution.

“As a consequence, prima facie, although the plaintiff is no doubt able to support himself in a comfortable style, none of the assets which provide for that comfort could be attached by the defendant were it to succeed in a defence of the action,” Mr Hewitt stated.

The plaintiff identified some undrawn loan facilities in his own and his wife’s name to which he would be able to use in order to pay any amount which may be due to the defendant by way of costs.

He also mentioned a substantial sum held by his wife in a Westpac savings account which would likewise be available for use should the need arise.

Mr Hewitt stated that the problem with this proposition was that the loan facility was secured by mortgage from the wife over a property in her name and she could, if she wished to do so, simply withdraw from that arrangement with the bank.

It is also not possible to force a party to take out a loan to meet a costs order in the execution of a judgment, he added.

“The final position is, therefore, that although the plaintiff must have substantial assets from which he derives an income, as a retiree, none of those assets would be available to the defendant should he need to execute to obtain payment and whether or not the plaintiff paid the defendant would entirely be a matter of his own choice and that of his wife,” Mr Hewitt explained.

“If the plaintiff chose not to pay the defendant, I can see no practical or useful step which the defendant could take in order to recover funds from the plaintiff. It would be simply a matter of whether the plaintiff and his wife decided to pay the defendant or not.”

Bankrupting the plaintiff would also not be productive, he added, because once again the superannuation funds would be immune and the cost of bankrupting the plaintiff would be futile and wasted money.

“I therefore have a position where the plaintiff is pursuing an action in which if he were to fail, whether or not the defendant would be paid his costs would be purely a matter of the plaintiff’s discretion and there is no ability of the defendant to force his hand in any way,” he stated.

“That is to my mind an unusual circumstance where a party who has access to funds in order to support himself is nonetheless protected from any way in which a successful defendant could recover the costs of defending himself from the action brought by the plaintiff.”

Mr Hewitt stated that this was not a “desirable state of affairs” as it may impact on the enthusiasm with which the plaintiff might enter negotiations since he is largely protected from an adverse outcome save for his own solicitor’s costs.

“I am therefore resolved that the plaintiff should give security for costs,” he stated.

The court decided that the plaintiff should provide security in the sum of $100,000.