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[2017] VSC 502
General information, not legal advice.
Supreme Court of Victoria
2017-08-29
RIORDAN J
Original judgment source is linked above.
COSTS - Proceeds of crime - Applications for examination - Non-disclosure order - Relevance of evidence of negotiations - Relevance of form of proposed order - Whether costs should be taxed forthwith.
1 On 4 July 2017, I gave reasons on the Commissioner's applications for examination of the respondents pursuant to the Proceeds of Crime Act 2002 (Cth) (''). I ordered that the examinations occur, but that investigators and prosecutors of each suspect (that is, Phillip Wen, Jun Ji, Yu Xiao, Bei Xie, Xiao Yan-Ye and Wei Min Ye, together 'the Suspects') may not attend or have access to material arising out of those examinations so to protect against the risk of an unfair trial of the, as yet uncharged, suspects of criminal conduct. I further ordered that access to the compulsorily acquired material be restricted to members of the Criminal Assets Confiscation Taskforce of the Australian Federal Police, to be used only for the purposes of the . One of the respondents, Hongying Yuan, is not suspected of criminal conduct, so a non-disclosure order was not made with respect to her examination.
2 The Commissioner seeks costs of each application against each of the respondents, which is, in turn, opposed by each respondent. Broadly, the respondents seek their costs from the time when offers of compromise were rejected by the Commissioner.
3 The Commissioner obtained restraining orders with respect to certain property in September 2016. The Commissioner subsequently applied for forfeiture of that property, which has been adjourned for hearing in September this year. Applications for exclusion and/or compensation have been made by all of the respondents except Ye.
4 The Commissioner made applications for examinations of the suspects on 24 February 2017.
5 The extant applications with respect to each the respondents are as follows:
(i) Commissioner's application for forfeiture and pecuniary penalty orders dated 10 October 2016;
(ii) Commissioner's application for forfeiture orders dated 16 February 2017; and
(iii) Wen's application for exclusion from forfeiture and compensation dated 7 February 2017.
(i) Commissioner's application for forfeiture and pecuniary penalty orders dated 10 October 2016;
(ii) Commissioner's application for forfeiture orders dated 16 February 2017; and
(iii) Xiao's application for exclusion from forfeiture and compensation dated 7 February 2017.
(i) Commissioner's application for forfeiture and pecuniary penalty orders dated 10 October 2016;
(ii) Commissioner's application for forfeiture orders dated 16 February 2017; and
(iii) Ji's application for exclusion from forfeiture and compensation dated 1 March 2017.
(i) Commissioner's application for forfeiture and pecuniary penalty orders dated 10 October 2016;
(ii) Commissioner's application for forfeiture orders dated 16 February 2017;
(iii) Yan-Ye's application for exclusion from forfeiture and compensation dated 8 March 2017; and
(iv) Yan-Ye's application for exclusion from restraint dated 8 March 2017.
(i) Commissioner's application for forfeiture and pecuniary penalty orders dated 10 October 2016; and
(ii) Commissioner's application for forfeiture orders dated 16 February 2017.
(i) Commissioner's application for forfeiture and pecuniary penalty orders dated 10 October 2016;
(ii) Commissioner's application for forfeiture orders dated 16 February 2017; and
(iii) Yuan's application for exclusion from forfeiture and compensation dated 1 March 2017.
6 By letter dated 1 March 2017, lawyers for Yan-Ye did not oppose the proposed examination, but sought an order pursuant to s 266A(2)(b) of the PoC Act be made 'to prohibit disclosure of any information obtained at any examination(s) to any prosecuting authority'.
7 On 2 March 2017, a lawyer for the Commissioner replied and offered to consent to the making of orders pursuant to s 266A(2)(b) of the PoC Act in relation to the proposed examinations of Yan-Ye and Ye only, which would prohibit the Australian Federal Police from disclosing information obtained at any examination(s) of Yan-Ye and Ye respectively to any authority described in s 266A of the PoC Act, until further order of the court. Those offers were not accepted by Yan-Ye or Ye.
8 On 3 March 2017, lawyers for Xiao and Wen sent a proposed form of consent orders to the Commissioner, on behalf of each of the suspects, permitting the examinations of each of the suspects. At that stage, the application for the examination of Hongying Yuan had not yet been made. The proposed form of order further provided that:
9 On 6 March 2017, the parties appeared before J Forrest J, and the Commissioner's examination applications were adjourned.
10 A further application for examination was made with respect to Hongying Yuan on 22 March 2017.
11 On 30 March 2017, lawyers for Wen and Xiao filed proposed orders with their submissions for the hearing of the examination application, which included proposed orders for the examination of each of the Suspects on the following terms:
12 By letters dated 5 April 2017 to each of the respondents, the Commissioner offered that if each respondent consented to the making of the examination order against them, then in exchange, the Commissioner would undertake to give each respondent not less than 14 days' written notice before any intended disclosure of the transcript of the examination of that respondent to the Commonwealth Director of Public Prosecutions ('CDPP') or the Australian Securities and Investments Commission ('ASIC').
13 The examination applications were then heard by me on 6 April 2017.
14 After additional written submissions were provided by the parties in June, following the decision of the Court of Appeal in Director of Public Prosecutions (Cth) v Galloway,[4] I published my reasons on 4 July 2017.
15 In summary, it can be observed that the respondents:
(a) sought tighter control of the examination process and the information sought to be obtained than that to which the Commissioner was willing to submit; and
(b) were not willing to accept that the undertaking proffered by the Commissioner would be sufficient in the circumstances.[5]
16 Orally, counsel for the Commissioner submitted that the respondents should pay the Commissioner's costs. The Commissioner submitted that the Court ordered the examinations that were sought; and therefore the application was successful. On the day of the hearing, counsel for the Commissioner contended that each respondent had opposed the examination order in the event that a non-disclosure order was not also made.
17 It was submitted that the offer made on 3 March 2017 by the respondents was for an order prohibiting the disclosure of material obtained in any one of the examinations to authorities investigating or prosecuting any one of the Suspects ('a circular prohibition'). However, the effect of the order, as made, was to only prohibit the disclosure of material obtained in each of the examinations to authorities investigating or prosecuting that examinee ('a non-circular prohibition').
18 In subsequent written submissions, the Commissioner affirmed that costs ought to follow the event and that the Commissioner should obtain costs of the applications, taxed on a standard basis with respect to Wen, Xiao, Ji, Xie and Yuan.
19 It was further submitted that as no prohibition order was made with respect to Yuan, costs ought to follow the event.
20 Counsel for the Commissioner also drew attention to the fact that due to the offers of 2 March 2017 made to Yan-Ye and Ye in relation to an order prohibiting disclosure, the Commissioner was entitled to seek indemnity costs, but did not do so.
21 In advance of the hearing on costs, Wen and Xiao filed written submissions. They submitted that they should be awarded costs on an indemnity basis. Orally, however, it was submitted that, in the alternative, standard costs should be awarded.
22 Relying on Colgate Palmolive v Cussons,[6] it was further submitted that different considerations apply to costs in litigation involving government agencies. The Commissioner, it was said, is a model litigant with superior resources. Additionally, it was contended that the dispute in relation to the examination application is independent from, and thus runs parallel to, the main forfeiture proceedings.
23 It was further submitted that the respondents had made an offer on 3 March 2017 that ultimately resembled the position arrived at by the Court. It was submitted that the offer of an undertaking by the Commissioner on 5 April 2017 demonstrated that the Commissioner's position was 'stark', and indicated that any order prohibiting disclosure would be opposed. Furthermore, it was contended that the Commissioner could have taken the opportunity after the 3 March 2017 offer to negotiate the terms of the proposed order if there were issues with the circularity of the draft. However, the Commissioner refrained from such negotiation.
24 Wen and Xiao also sought that costs in favour of them were to be taxed and payable immediately, on the basis that the examination application was a distinct part of the proceeding. No submission was made or material filed indicating hardship on the part of Wen and Xiao in the absence of such an order.
Orally, counsel for Yan-Ye submitted that Yan-Ye had achieved the outcome contended for at the substantive hearing. In submissions dated 30 March 2017, Yan-Ye submitted as follows:
She will not oppose an order for her examination provided that the Court orders that the Commissioner is prohibited from disclosing any information arising out of the examination of any Proposed Examinee under section 180, 180A and/or 180B to any State or Commonwealth authority that has a function of investigation or prosecuting offences against a law of the Commonwealth, State or Territory.[7]
25 However, the Commissioner opposed the non-disclosure order. Accordingly, it is submitted that Yan-Ye's position in submissions was what the Court ultimately ordered with respect to her, and therefore costs should be awarded on this basis.
26 In subsequent written submissions, it was contended that there was little practical difference between the 'circular' orders sought in the negotiation period and the orders actually made.
27 Further, Yan-Ye seeks that the costs of the application be taxed and paid forthwith. Her lawyer, Mr Tsapepas, affirms on affidavit that she has three accounts in Australia. Two are restrained by order of the court and an unrestrained third account has a credit balance of $881.46, as at 23 July 2017.
28 Pursuant to s 24(2)(ca) of the PoC Act, legal costs are not permitted to be taken out of restrained assets, which, it is submitted, is particularly draconian and unique to proceeds of crime legislation.
29 Yan-Ye submits that the Commissioner does not allege that the funds that were in the accounts before the alleged criminal activity were derived from unlawful activity, yet those funds remain restrained. It is submitted that the examination application was a discrete issue and that the final determination of the proceeding may be pending for quite some time.
30 In oral submissions, counsel contended that, although Mr Ye opposed the examination, the hearing was substantially focussed upon the question of whether an order prohibiting disclosure should be granted, as opposed to whether an examination should occur. He submitted that the purpose of the special fixture was because there was dispute between the parties as to the appropriateness of the s 266A(2)(b) order. He submitted that the parties' offer on 3 March 2017 was more advantageous to the Commissioner than what was ultimately ordered and, on that basis, Mr Ye should have his costs.
31 In subsequently filed written submissions, it was pointed out that the Commissioner's offer of 2 March 2017 to Mr Ye (and Yan-Ye) offered inferior protection to the order actually made because it only constrained the 'Australian Federal Police', rather than limiting those who may attend the examination; or what they may disclose to other parties.[8]
32 It further put that the Commissioner could have offered some form of non-disclosure order, but rather only offered the undertaking, which the Court has held was insufficient.
33 Mr Ye also sought an order that the costs be taxable forthwith on the basis that there was a prospect of considerable delay before the completion of the proceeding and that this involved a discrete issue from that to be finally determined. In further support, it was submitted that Mr Ye will not contest the forfeiture application and that the pecuniary penalty application is not yet listed for hearing, and will not likely occur until far into the future.
34 Orally, counsel adopted the submissions made on behalf of Ye, and submitted that Ji and Xie made the same offer that the other parties had made on 3 March 2017.
35 In subsequently filed written submissions, it was emphasised that the key issue at the hearing was the non-disclosure order. The 'battleground' was not the examinations themselves, but the protection of the information thereby obtained. It was pointed out that the offer of the Commissioner on 5 April 2017 was for a significantly lower level of protection than that ultimately ordered by the Court.
36 In written submissions, counsel for Yuan conceded that Yuan's objections to the examination and non-disclosure orders were unsuccessful. However, it was submitted that the Commissioner's submissions did not appreciate Yuan's distinct position outlined in the substantive reasons of the Court. Further, it was contended that there was no additional time spent by the Commissioner in preparing for the hearing in the face of Yuan's opposition (the application for the examination of her being made later than the other applications). On this basis, it was submitted that the Commissioner incurred no additional costs in this respect and therefore should not be compensated by an award of costs.
37 The determination of costs of the application is in the discretion of the court.[9]
38 During the hearing, the real controversy between the parties was whether the examinations sought by the Commissioner should be subject to non-disclosure orders. On that question, the Suspects were substantially successful. They did not succeed in obtaining what has been referred to as 'circular orders', but the order currently restricts access to the compulsorily acquired material to the Criminal Assets Confiscation Taskforce. This order substantially protects the Suspects in the way contended for in their submissions. If or when appropriate, that restriction may be discharged on the application of the Commissioner.
39 The Commissioner offered a level of protection to both Ye and Yan-Ye individually on 2 March 2017, but, as submitted by counsel for Ye, that proposed order placed no restriction on who may be present at the examination or how the Australian Federal Police may use the information. I do not consider that the Commissioner's offer to Ye and Yan Ye of 2 March 2017 was equivalent to or better than the result ultimately achieved by the Suspects.
40 The Suspects' offer of 3 March 2017 was, except for the issue of circularity, substantially similar to the orders made by me. The issue of circularity was not the subject of argument before me; and may not be an issue in the future.
41 In the circumstances, I consider that the Commissioner should pay 80% of the costs of each of the Suspects of the applications on a standard basis from 3 March 2017. I will order that the costs incurred up to that date be reserved to the Judge who determines the extant applications,[10] in relation to each respondent respectively.
42 With respect to Yuan, I consider that the following matters are relevant:
(a) Yuan only objected to the examinations proceeding in the absence of a condition restricting its use.
(b) Yuan was unsuccessful in obtaining an order restricting its use.
(c) The Commissioner did not contend for the proposition that Yuan was in a different position than the Suspects.
(d) No additional hearing time was expended because of the different position of Yuan.
(e) The question of whether material obtained from an examination could be used against others was the subject of conflicting authorities.[11]
(f) The application was heard within about 2 weeks of notice to Yuan.
43 In the circumstances, I will order that the costs of the application with respect to the examination of Yuan be reserved to the Judge who will determine the extant applications with respect to Yuan.
44 With respect to the application by Yan-Ye, Ye, Wen and Xiao for an order that their costs be taxed immediately, r 63.20.1 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) ('the Rules') provides as follows:
Taxation of costs on interlocutory application or hearing
If an order for costs is made on an interlocutory application or hearing, the party in whose favour the order is made shall not tax those costs until the proceeding in which the order is made is completed, unless the Court orders that the costs may be taxed immediately.
45 In Setka v Abbott [No 2],[12] the Court of Appeal considered whether the court should order that the default position established by r 63.20.1 as to the taxation of costs on an interlocutory application should apply. The Court held that the discretion had to be exercised judicially depending on the circumstances, but observed that the default position had been upset in circumstances where:
(a) there is prospect of considerable delay in completion of the proceeding;
(b) the issue the subject of the interlocutory order was discrete from what will finally require determinations;
(c) the party against whom the substantive order was made was guilty of unsatisfactory conduct - described variously as 'unreasonable' or 'reprehensible', or as involving a want of 'competence and diligence.'[13]
46 In the present case, in support of the submission that the default position should not apply, it was contended by Yan-Ye, Ye, Wen and Xiao that the issue of the examination was a discrete issue. Further, the solicitor for Yan-Ye deposed on information and belief, that Yan-Ye has only three bank accounts in her name in Australia, two of which are frozen and the other which has a credit of only $881.46.
47 I am not satisfied that I should depart from the default order for the following reasons:
(a) The examinations are conditional on the existence of the extant proceedings and are closely connected to it. Accordingly, I do not consider the determination of the conditions of the examination to be sufficiently discrete from the extant proceedings to justify such a departure.
(b) In relation to Yan-Ye, the evidence on behalf of Yan-Ye does not descend to identifying what assets she has in Australia or what bank accounts she has outside Australia. Nor is it said that she is in necessitous circumstances. Her evidence does not justify such a departure.
48 With respect to the submissions that the costs should be paid on an indemnity basis, I note that the principles were discussed by Harper J in the much cited decision of Ugly Tribe Co Pty Ltd v Sikola.[14] Although his Honour noted that the categories were not closed,[15] he emphasised that special circumstances were required to justify an indemnity costs order and set out that such special circumstances could include the following:
(i) The making of an allegation, known to be false, that the opposite party is guilty of fraud.
(ii) The making of an irrelevant allegation of fraud.
(iii) Conduct which causes loss of time to the Court and to other parties.
(iv) The commencement or continuation of proceedings for an ulterior motive.
(v) Conduct which amounts to a contempt of court.
(vi) The commencement or continuation of proceedings in wilful disregard of known facts or clearly established law.
(vii) The failure until after the commencement of the trial, and without explanation, to discover documents the timely discovery of which would have considerably shortened, and very possibly avoided, the trial.
49 I do not consider that special circumstances have been established nor has any party has acted unreasonably, or engaged in unmeritorious, deliberate or other improper conduct or otherwise so as to make an indemnity costs order appropriate.
(a) The applicant pay 80% of the costs of the applications for the examination of each of the respondents (other than Hongying Yuan) incurred from 3 March 2017 to be taxed on a standard basis. The costs of the applications up to and including 3 March 2017 are reserved.
(b) With respect to the application for the examination of Hongying Yuan, the costs are reserved.
[1] Commissioner of the Australian Federal Police v Wen [2017] VSC 391.
[5] Cf Commissioner of the Australian Federal Police v Wen [2017] VSC 391 [132].
[6] [1993] FCA 536; (1993) 46 FCR 225, 232.
[7] Yan-Ye would also be content to receive an undertaking in these terms from the Commissioner. (This footnote appeared in the original written submission.)
[8] See further, Commissioner of the Australian Federal Police v Wen [2017] VSC 391 [131]-[132].
[11] Commissioner of the Australian Federal Police v Wen [2017] VSC 391 [133].
[12] [2013] VSCA 376 (Warren CJ, Ashley and Whelan JJA).
Commissioner of the Australian Federal Police
Wen & Ors
(1993) 46 FCR 225