On 22 April 2016, a prosecution brought by Mr Darren Challis (the prosecutor) against DHR International Inc (DHR) for criminal contempt concluded with me returning a verdict of not guilty: see my judgment in DHR International Inc v Challis (No 3) [2016] NSWSC 492 of the same date.
On the first day of the hearing, 22 February 2016, a notice of motion dated 10 December 2015 founding the prosecution (to which I shall refer for convenience as "the indictment") was amended by the prosecutor, in that an allegation that Mr David Hoffman, the principal of DHR, was also guilty of criminal contempt was withdrawn and dismissed.
On each occasion, the question of costs was reserved.
On 18 May 2016, I received extensive written and oral submissions with regard to the question of costs, including with regard to costs of the costs hearing itself.
It is convenient to discuss the question of costs with regard to DHR and Mr Hoffman separately.
Costs of DHR
The parties were agreed that the unsuccessful prosecutor must pay the costs of DHR, because there was no basis for departure from the usual rule that costs should follow the event. They were also agreed that, in the circumstances, those costs should payable forthwith, rather than at the end of the substantive litigation.
Counsel for the prosecutor, however, submitted that those costs should be payable on a party/party basis. Counsel for DHR submitted that they should be payable on an indemnity basis, pursuant to s 98 of the Civil Procedure Act 2005 (NSW).
The latter submission was based upon the proposition that, in my judgment, I had made it clear that I considered that the evidence placed before me by the prosecutor fell well short of proving beyond reasonable doubt that DHR had committed a criminal contempt. It was said that I would now find that the evidence fell so far short of fulfilment of the criminal onus and standard of proof that the prosecution was not only virtually doomed to failure, but also not brought for "the bona fide purpose of protecting the administration of justice for the public benefit".
Further, it was said by counsel for DHR that criminal prosecutions for contempt brought by contending parties in civil litigation should be firmly discouraged, especially those that are devoid of merit. I was invited to what Kirby P said in Huntsman Chemical Co Australia Ltd v International Pools Australia Pty ltd (1995) 36 NSWLR 242 at 246, namely that:
The Court is entitled, in modern circumstances of enlarged attention to the efficient administration of justice, to keep in mind the consequence of an indemnity costs order not only for the particular parties before it but for the signal which it sends about the due administration of justice in like cases.
Determination
Turning to my determination, I think there is force in much of the submissions of counsel for DHR. Having said that, as can be seen from my judgment, determining whether communications made by a litigant to a third party pertaining to pending litigation are or are not improper is a question of evaluative judgment for a judge: see particularly at [62] of DHR International Inc v Challis (No 3), where I discuss the spectrum that exists. Whilst I maintain the position that the evidence placed before me fell well short of proof beyond reasonable doubt, I cannot affirmatively find that the prosecution against DHR was "totally frivolous and thoroughly unjustified", to use the phrase adopted by Ambrose J in Re SCA Properties Pty Ltd (in liq) [1999] QSC 180; (1999) 17 ACLC 1611 at 1622.
Nor do I believe that I can be satisfied on the civil standard (as explained in Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336) that the proceedings against DHR were brought for an ulterior purpose on the part of the prosecutor or any other person.
In those circumstances, I propose to order that the prosecutor must pay the costs of DHR of the contempt proceedings on a party/party basis, such costs to be payable forthwith upon agreement or assessment.
Costs of Mr Hoffman
The costs of Mr Hoffman with regard to the proceedings arise in different circumstances. They may be summarised as follows.
Analysis of the transcript of the proceedings of 22 February 2016 (in particular at T 2.28-4.37 and T 9.31-10.41), demonstrates that, up until the morning of the hearing, Mr Hoffman was indeed named as a defendant in the indictment. When I expressed my understanding of that position, counsel for the prosecutor informed me that I was mistaken. Further analysis demonstrated that it was in fact counsel for the prosecutor who was mistaken, and Mr Hoffman did indeed appear on the indictment, named as a criminal contemnor by way of the principles of accessorial liability. As the transcript shows, it was not until some little time had passed that the proceedings were withdrawn against Mr Hoffman, without contemporaneous explanation, and dismissed. The question of his costs was reserved by me on the prompt application of counsel for Mr Hoffman and DHR.
At the costs hearing, it was conceded by counsel for the prosecutor that counsel for Mr Hoffman had, in the months leading up to the substantive hearing before me, explicitly drawn attention to an asserted procedural defect in the prosecution against Mr Hoffman; namely, that it is not open for a prosecutor for criminal contempt to proceed against a third party (as Mr Hoffman was here) by way of a notice of motion in proceedings to which that putative defendant is not a party. Although it was the subject of controversy at the costs hearing before me, I am satisfied that the procedure adopted was indeed inherently defective: Abram v National Australia Bank [1997] NSWCA 7 at 24; Harkianakis v Skalkos (1997) 42 NSWLR 22 at 69, but not fatal to the proceedings against Mr Hoffman if properly constituted: see Harkianakis v Skalkos at 25.
Quite separately from that procedural defect in the proceedings against Mr Hoffman, it is surely the case that a private party who determines to lay a serious criminal charge against an individual, and maintains it for many weeks, should not simply withdraw it on the morning of the hearing, without sound reason. To the contrary, speaking generally, a private litigant should only take the exceptional step of accusing a person of committing a serious criminal offence by way of commencing a prosecution with great care and consideration.
As well as that, the evidence placed before me at the substantive hearing demonstrates that Mr Hoffman is a businessman connected with a large international company. Conviction for a criminal offence in New South Wales could, one might infer, have had a devastating effect on his reputation. Such a conviction may well have limited his ability to travel internationally, and could perhaps have affected adversely his ability to play roles as a corporate officer in the United States and elsewhere.
Finally, in serious cases, there is no doubt but that a sentence of imprisonment can be imposed for the offence of criminal contempt: for a recent example, see R v Dent [2016] NSWSC 444, where an offender was sentenced to imprisonment for two years for contempt in the face of the court.
For all of those reasons, one might be prepared to infer that, in all the circumstances, the pending allegation against Mr Hoffman, withdrawn without contemporaneous explanation on the morning of the hearing, occasioned him substantial stress.
Quite apart from those circumstances that I have outlined, counsel for Mr Hoffman submitted that, in this context as well, I would find that the prosecution had been brought for an ulterior purpose; namely, to delay and frustrate the proceedings brought by DHR against the prosecutor.
The position of counsel for the prosecutor may be summarised as follows.
First, he submitted that the procedural defect relied upon by his opponent was not, in truth, fatal.
Secondly, he submitted that, even if I were against him on that point, it would be a rare step to order indemnity costs on the basis of a procedural defect alone.
Thirdly, I was told from the Bar table that the decision to withdraw proceedings against Mr Hoffman was not taken for any tactical reason, but rather in order to narrow appropriately the focus of the proceedings before me.
Fourthly, he submitted that merely because a prosecution is withdrawn against a private individual on the morning of a hearing can hardly lead one safely to infer that the prosecutor (whether a private individual or one undertaking a public function) has at any time been motivated by an ulterior purpose.
Fifthly, he noted that no evidence was placed before me by counsel for Mr Hoffman to show that he had suffered any adverse consequences personally, (whether logistical, financial or emotional) as a result of the proceedings being pending for the two months between the filing of the notice of motion on 10 December 2015 and the withdrawal of the allegation on 22 February 2016.
In short, he submitted that there was no occasion for me to take the exceptional step of ordering indemnity costs against his client in favour of Mr Hoffman.
Determination
Turning to my determination, I consider that this matter is on the cusp. By that I mean that I have given the question of whether indemnity costs should be ordered against the prosecutor, in all of the circumstances that I have outlined, very serious consideration. I repeat: I consider that proceedings for criminal contempt should not be brought by a private prosecutor without the most careful consideration; if that occurs, and the prosecution fails on whatever basis, a significantly adverse costs order must surely be a distinct possibility.
Having said that, I think there is force in the submission of counsel for the prosecutor that indemnity costs should only be ordered in exceptional circumstances: see Leichhardt Municipal Council v Green [2004] NSWCA 341 at [46]-[57]; and Colgate Palmolive Co v Cussons Pty Ltd [1993] FCA 801; (1993) 46 FCR 225 at 232-234; and that indemnity costs are intended to be compensatory in nature rather than punitive: Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at [44].
To my mind, the circumstances in which Mr Hoffman was prosecuted for criminal contempt and the proceedings abruptly withdrawn on the morning of the hearing are of serious concern.
On the other hand, I would be slow to order indemnity costs on the basis of a procedural defect alone; because of the withdrawal of the proceedings against Mr Hoffman, it is difficult for me to come to a firm view of the merits of the prosecution against him in a substantive sense.
As well as that, I am not satisfied to the requisite standard that the proceedings against Mr Hoffman were brought for an ulterior purpose by any person.
Ultimately, I have come to the view that the proceedings are not so extraordinary so as to call for the remedy of indemnity costs; I think that costs on the ordinary basis payable forthwith are sufficient.
Costs of the costs hearing
Regrettably, the question of the costs of the costs hearing was in dispute as well. Tendered before me was a letter of 2 May 2016 from the solicitors for the prosecutor to the solicitors for DHR, to the effect that the prosecutor would pay the costs of DHR and Mr Hoffman on the ordinary basis, upon agreement or assessment, forthwith.
Tendered in response was a letter from the solicitors for DHR and Mr Hoffman to the solicitors for the prosecutor, seeking to settle the dispute by way of a gross sum costs order in the sum of $20,000 all inclusive.
Turning to my determination of this discrete, ancillary question, in light of my determination about the primary costs it is impossible to say whether DHR and Mr Hoffman will (on the assumption that costs will not be agreed, and an assessment will be required) "do better" than the offer they made to settle the costs dispute in the sum of $20,000. I therefore cannot rely upon that offer, and its rejection, in any determinative way.
As for the offer made by the solicitors for the prosecutor, as things have transpired it encapsulates the order that I propose to make. But I cannot accept, in the context of these proceedings as a whole, that the prosecutor should have his costs of the hearing about costs of 18 May 2016. Rather, as a matter of discretion, I propose to order that each party pay its own costs of that final hearing before me.
Orders
I make the following orders:
1. The prosecutor, Mr Darren Challis, must pay the party/party costs of DHR International Inc of the proceedings before me, except for the effect of order 3. Such costs are to be payable forthwith.
2. The prosecutor, Mr Darren Challis, must pay the party/party costs of Mr David Hoffman of the proceedings before me, except for the effect of order 3. Such costs are to be payable forthwith.
3. Each of the three parties must pay his or its own costs of the proceedings before me of 18 May 2016.
[3]
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Decision last updated: 15 June 2016