Federal Court of Australia

Chawk v Callan [2024] FCA 92

ORDERS

THE COURT ORDERS THAT:

1.    The appellant’s interlocutory application dated 9 January 2024 be dismissed.

2.    Pursuant to s 56 of the Federal Court of Australia Act 1976 (Cth) and r 19.01 of the Federal Court Rules 2011 (Cth), the appellant is to provide security for the respondent’s costs in the amount of $50,000 within 42 days of these orders.

3.    The security referred to in order 2 is to be provided by payment into Court or by way of irrevocable bank guarantee(s) issued by an Australian bank and realisable on an order of the Court.

4.    Until security for costs is provided by the appellant in accordance with orders 2 and 3, this proceeding be stayed.

5.    If the appellant fails to comply with order 2, the appeal be dismissed pursuant to s 56(4) of the Act and r 19.01(c) of the Rules.

6.    Execution of the following orders are stayed for 42 days:

(a)    Order 1 of the orders made in Callan v Chawk [2023] FCA 898 on 3 August 2023; and

(b)    Orders 2 and 3 of the orders made in Callan v Chawk (Costs) [2023] FCA 1198 on 10 October 2023.

7.    The appellant pay the respondent’s costs of, and incidental to, this application.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

ROFE J:

1    On 3 August 2023, Halley J gave judgment for Dr Callan against Mr Chawk in the sum of $50,000 plus interest: Callan v Chawk [2023] FCA 898 (Primary Judgment). Dr Callan, a plastic surgeon, successfully argued that Mr Chawk defamed him by publishing a negative review on an internet ratings website for medical practitioners following Dr Callan performing a rhinoplasty procedure on Mr Chawk.

2    Halley J found that the review conveyed four defamatory imputations to the effect that Dr Callan had negligently performed the rhinoplasty surgery. His Honour also held that Mr Chawk could not rely upon the defence of honest opinion pursuant to s 31 of the Defamation Act 2005 (NSW) or qualified privilege pursuant to s 30 of the Act.

3    On 10 October 2023, his Honour ordered that Mr Chawk pay Dr Callan’s costs of the proceedings on the ordinary basis up to 6 October 2022 and on an indemnity basis thereafter: Callan v Chawk (Costs) [2023] FCA 1198 (Costs Judgment). His Honour also rejected (at [34]-[35]) an application by Mr Chawk for a stay of the costs order.

4    On 30 August 2023, Mr Chawk filed a notice of appeal, seeking to set aside both the Primary Judgment and the Costs Judgment. An amended notice of appeal was filed on 27 September 2023.

5    On 30 October 2023, Dr Callan filed an interlocutory application seeking security for the costs of the appeal under s 56 of the Federal Court of Australia Act 1976 (Cth) and r 36.09 of the Federal Court Rules 2011 (Cth) (Dr Callan’s application). Dr Callan relies upon the affidavit of Ms Rebekah Giles, his solicitor, made on 30 October 2023. Ms Giles was cross-examined.

6    Mr Chawk then filed an interlocutory application on 9 January 2024, again seeking to stay the orders in the Primary Judgment and the Costs Judgment (Mr Chawk’s application). Mr Chawk relies upon two affidavits made by him on 10 January and 12 February 2024. Dr Callan objected to exhibit ZC-2 to the second affidavit: a copy of the review with a partial response by Dr Callan’s practice. I will discuss this exhibit below.

7    Those two interlocutory applications are now before me in my capacity as duty judge. Mr Chawk’s capacity to pay any costs order is the central issue in both applications and therefore both applications were heard together on 15 February 2024. Both parties filed written submissions before the hearing.

8    For the reasons that follow, I will grant Dr Callan’s application and dismiss Mr Chawk’s application. I am satisfied pursuant to r 36.09(1) of the Rules that Mr Chawk should give security for the costs of the appeal and the appeal be stayed until security is given.

Security for Costs Principles

9    Section 56 of the Act relevantly provides:

(1) The Court or a Judge may order an applicant in a proceeding in the Court, or an appellant in an appeal under Division 2 of Part III, to give security for the payment of costs that may be awarded against him or her.

(2) The security shall be of such amount, and given at such time and in such manner and form, as the Court or Judge directs.

10    Rule 36.09(1) of the Rules provides:

(1)    A party may apply to the Court for an order that:

(a)    the appellant give security for the costs of the appeal, and for the manner, time and terms for giving the security; and

(b)    the appeal be stayed until security is given; and

(c)    if the appellant fails to comply with the order to provide security within the time specified in the order – the appeal be stayed or dismissed.

11    The principles in relation to security for costs are well-known and were not in dispute.

12    The provisions set out above create a broad and unfettered discretion: Lim v Comcare [2016] FCA 1346 at [18] (per Wigney J). The principles applicable to the exercise of this discretion were summarised by O’Bryan J in Mathews v All Options Pty Ltd [2019] FCA 1972 at [13], recently followed in Nugawela v Dudley (Trustee) [2023] FCA 1603 at [13]-[14] (per Jackson J). Relevant matters to be considered include:

(a)    the prospects of success of the appeal;

(b)    the likelihood that a costs order will not be satisfied;

(c)    whether the making of the order would be oppressive in that it would stifle a reasonably arguable appeal;

(d)    whether the appellant’s impecuniosity arises out of the respondent’s conduct; and

(e)    whether there are aspects of public interest which weigh against the making of the order.

13    The central rationale emerging from the cases was encapsulated by Emmett J at [27] in Dye v Commonwealth Securities Ltd [2012] FCA 992:

As a general rule, in relation to proceedings at first instance, impecuniosity, and even insolvency, does not mandate that an order for the provision of security for costs should be made. However, that principle does not necessarily apply in relation to an appeal, where the appellant has had the benefit of a decision of a court at first instance. An insolvent party will not be excluded from an appeal, but if he cannot find security, he may be prevented from taking his opponent from one court to another. The feature of an appeal that marks it out from a proceeding at first instance is that there has already been a decision given by the court that heard the matter at first instance. That is to say, the appellant has had his or her day in court and has had an opportunity to present his or her case, and has had a ruling that must be presumed to be correct. Security may not necessarily be ordered if an appeal is brought in good faith and raises substantial questions of law. However, the position will be different where the appeal turns largely on questions of fact and it does not give rise to any important question of law.

STAY PRINCPLES

14    Rule 36.08 of the Rules provides:

36.08 Stay of execution or proceedings under judgment appealed from

(1) An appeal does not:

(a) operate as a stay of execution or a stay of any proceedings under the judgment subject to the appeal; or

(b) invalidate any proceedings already taken.

(2) However, an appellant or interested person may apply to the Court for an order to stay the execution of the proceeding until the appeal is heard and determined.

(3) An application may be made under subrule (2) even though the court from which the appeal is brought has previously refused an application of a similar kind.

15    Once again, the principles regarding when a stay is appropriate were not in dispute.

16    The principles were summarised by Rangiah J in Flight Centre Ltd v Australian Competition and Consumer Commission [2014] FCA 658 at [9] as follows:

(a) There is an onus on the applicant to demonstrate a proper basis for a stay that will be fair to all parties.

(b) There is a prima facie assumption that the judgment appealed from is correct.

(c) There is a prima facie assumption that the court should not deprive a litigant of the benefit of a judgment in its favour.

(d) The court has a broad discretion as to whether to grant a stay, and it is not necessary for an applicant for a stay to demonstrate special or exceptional circumstances. It is sufficient that the applicant demonstrates a reason or an appropriate case to warrant the exercise of discretion in its favour.

(e) The mere filing of an appeal will not, of itself, provide a reason or demonstrate an appropriate case.

(f) A stay will usually be granted if there is a real risk that the applicant will suffer prejudice or damage, if a stay is not granted, which will not be redressed by a successful appeal.

(g) In the exercise of its discretion, the court will weigh considerations such as the balance of convenience and the competing rights of the parties before it.

[Alexander v Cambridge Credit Corp Ltd (1985) 2 NSWLR 685 at 694; Powerflex Services Pty Ltd v Data Access Corporation (1996) 67 FCR 65 at 66; McLean Technic Pty Ltd v Digi-Tech (Australia) Ltd (2002) 55 NSWLR 737 at [18]].

17    A similar summary of the relevant principles was set out by Derrington J in Redbubble Ltd v Hells Angels Motorcycle Corp (Australia) Pty Ltd (2022) 168 IPR 74 at [37].

Consideration

Impecuniosity

18    Mr Chawk has not paid either the judgment or costs liabilities arising from the Primary Judgment or Costs Judgment. There was no dispute that he currently has no capacity to pay these existing liabilities, let alone any costs which may be ordered against him in the appeal.

19    On his own evidence, Mr Chawk:

(a)    has $5 in a personal bank account;

(b)    has not received any income from his construction company, Zacon Property Group Pty Ltd, since the relevant financial year ended on 30 June 2021;

(c)    does not have any other ongoing income and is supported financially by his parents;

(d)    owes his father $140,000 plus default interest which is continuing to accrue; and

(e)    is the sole director of a company called CamProperty Pty Ltd, which is the trustee for the CamProperty Management Trust, of which he, his parents and siblings are beneficiaries. A loan account held by CamProperty has a negative balance of $476,345 and CamProperty owes other amounts totalling nearly $15,000.

20    There was no suggestion that Mr Chawk’s impecuniosity was caused by the conduct of Dr Callan.

21    Ms Giles is a solicitor specialising in media and defamation law. She has over 20 years of experience in practice, 18 years as a principal. Ms Giles was Dr Callan’s solicitor at the trial. Ms Giles’ evidence is that Dr Callan is likely to incur legal costs of around $100,900 in defending the appeal. Ms Giles estimates that of those costs, she would expect Dr Callan to recover between $70,630 and $90,810 following taxation, if successful.

22    The only dispute was whether Mr Chawk may be able to provide security for costs for the appeal. Mr Chawk submits that in around six months he will be able to provide security for costs of the appeal in an amount determined by the Court, although he opposes the sum sought by Dr Callan as security, being $75,675, proposing the sum of $30,000 instead.

23    Mr Chawk challenged Ms Giles’ costs estimates for each of the tasks making up her estimate of Dr Callan’s likely appeal costs. Ms Giles was able to justify her estimates and noted that she had not included GST. Ms Giles’ evidence was that she expected that her firm would have to undertake some tasks ordinarily undertaken by the appellant’s solicitors, such as preparation of the appeal book, based on her experience of how the trial was conducted.

24    The only basis provided by Mr Chawk for the contention that he will have sufficient funds in six months to satisfy a security for costs order is that he is “in the process of building back up the business of Zacon Property Group”. Zacon Property Group has apparently not traded since 2021. Mr Chawk did not specify anything particular he is doing to achieve this, or provide any details as to what he has been doing to achieve this goal since 2021. There is no material before me on which to accept that there is any likelihood that Mr Chawk’s speculation as to the future profitability of his company might be met. I therefore do not consider it a realistic possibility that his company will be profitable within six months such that he can satisfy a security for costs order.

25    As such, I consider that there is almost no possibility that Mr Chawk can satisfy any of the damages and costs orders below, or any potential costs orders of the appeal. It is probable that if security is not ordered and Mr Chawk’s appeal fails, not only will Dr Callan be denied the fruits of the Primary Judgment and the Costs Judgment, but he will be unable to recover his costs of the appeal. There was no converse suggestion that Dr Callan would not be able to repay the judgment and costs liabilities, or Mr Chawk’s costs, both for the primary proceeding and any appeal.

26    Mr Chawk’s impecuniosity weighs heavily in favour of granting Dr Callan’s application.

Prospects of success on the appeal

27    Mr Chawk provided detailed submissions regarding the merits of his appeal. In my view, Mr Chawk has raised some potentially arguable points, and his appeal is not completely without merit, but I do not consider it to have substantial prospects of success. Mr Chawk has not raised any “substantial questions of law” and it seems that the “appeal turns largely on questions of fact”: Dye at [27] (per Emmett J).

28    Mr Chawk’s challenges to the primary judge’s findings on the defamatory imputations are, by his own admission, “a question of fact”. The same can be said for his challenges to the findings on the defence of honest opinion. Relevantly to that defence, Halley J determined that Dr Callan and his witnesses were credible, and that their evidence was consistent with contemporaneous records: Primary Judgment at [9]-[10]. In contrast, his Honour described aspects of Mr Chawk’s evidence as “inexplicable”, and “inconsistent with the apparent logic of events and contemporaneous documents”: at [12]. His Honour considered it necessary to approach the evidence given by Mr Chawk with “great caution”: at [15]. An appellate court would not lightly overturn the primary judge’s findings on credibility.

29    Ms Collaris, Mr Chawk’s counsel, submitted that none of his appeal points were reliant upon the appellant’s credibility. She gave as examples:

(a)    grounds 2-4, which concern the objective question of what the review would have conveyed to an ordinary reasonable reader and thus whether the imputations were, in fact, conveyed by the review;

(b)    ground 5, which contends the primary judge failed to properly consider the operation and application of s 31(6) of the Defamation Act; and

(c)    grounds 5C, 5D, 5E and 6, which all relate to whether the appellant made out the defence of qualified privilege under s 30 of the Defamation Act. In particular, Mr Chawk contends that the primary judge erred in finding that the respondent was not given an opportunity to respond to the review, which was relevant to whether the appellant’s conduct in posting the review unreasonable, because there was evidence that Dr Callan’s practice had commented on the review on the website.

30    Ms Collaris also noted that part of the appeal would involve the appeal court looking at before and after photographs of Mr Chawk’s nose, and that it was possible that the appeal court could reach a different conclusion as to the result of the surgery.

31    Dr Callan’s counsel, Mr Olson, highlighted that the trial judge had serious reservations about Mr Chawk’s evidence about his symptoms. Mr Olson also stressed the trial judge’s findings at [47] as to what Mr Chawk was told by Dr Callan during a consultation on 24 August 2020, in particular that he was told in clear terms that Dr Callan could not provide any guarantee as to the outcome of the rhinoplasty procedure and that it was “definitely possible” that Mr Chawk might have to undergo a further revision surgery.

32    With respect to the qualified privilege grounds of appeal and whether Dr Callan had an opportunity to respond to the review, Mr Olson submitted that by the time the review was published it was too late for Dr Callan to meaningfully respond. Patient confidentiality obligations prevented Dr Callan from providing a substantive response to the review that told his side of the story. The partial response in ZC-2 does not contradict that submission.

33    Further, Mr Chawk’s challenge to the award of damages does not raise a clear question of law but rather contends that the award was excessive. As the Full Court said in Nationwide News Pty Ltd v Rush (2020) 380 ALR 432 at [472] (per White, Gleeson and Wheelahan JJ), the “assessment by a judge of damages for non-economic loss in a defamation proceeding is an intuitive process … [that] does not admit of one correct answer” and therefore the appellant must show that the primary judge made some error in exercising their discretion such that the damages awarded are “manifestly excessive”. Mr Olson noted that the purpose of the judgment sum was not only to vindicate the person defamed, but also to compensate them for hurt feelings. Dr Callan’s evidence about the latter had been accepted by the trial judge. I do not consider that Mr Chawk has a reasonable prospect of establishing that the primary judge erred in his award of damages.

34    It is likely that if security for costs is ordered, Mr Chawk would not be able to pay it and therefore the appeal will be stultified. However, this consideration is not decisive. Mr Chawk has already had his “day in court” and his prospects of success on the appeal are limited given that it will largely turn on questions of fact and does not obviously raise any important questions of law. Those reasons also tend to suggest that there are limited aspects of public interest which weigh against the making of the security for costs order (noting that Mr Chawk did not raise any submissions in this respect).

Conclusion

35    I consider that the discretionary factors favour granting the security for costs order. I consider that an appropriate amount of security is the sum of $50,000.

36    I do not consider that there is a realistic possibility that Mr Chawk’s financial circumstances will change over the next six months such that he will be able to pay the security sum then but not now.

37    With respect to Mr Chawk’s stay application, I am not satisfied that he has discharged his onus “to demonstrate a proper basis for a stay that will be fair to all parties”: Flight Centre at [9] (per Rangiah J).

38    There is no evidence to suggest that Dr Callan could not repay any amounts paid by Mr Chawk in satisfaction of the costs orders if the appeal was successful. Rather, Mr Chawk seeks to make Dr Callan incur the costs of an appeal, with little likelihood that those costs would be recoverable, and with no certainty that, if successful, he would receive the amount ordered in the Primary Judgment. Of course, on the material before the Court, there seems little prospect that Dr Callan would be successful in recovering the amount ordered in the Primary Judgment (or the Costs Judgment), whether now or in the future.

39    Mr Chawk has therefore not shown that there is “a real risk that it will not be possible for the successful appellant to be substantially restored to its former position if judgment is executed against it”: Redbubble at [35] (per Derrington J).

40    For the reasons set out above, I consider that the balance of convenience does not favour granting Mr Chawk’s application to stay the execution of the orders in the proceeding below until the hearing and determination of the appeal. However, I am prepared to grant a short stay for the period during which security is to be provided.

41    Accordingly, Mr Chawk’s interlocutory application is dismissed, and I will make the orders sought by Dr Callan with the addition of a short stay.

Associate:

Dated:    16 February 2024