Gwe v Commissioner of the Australian Federal Police

Judgment

1. THE COURT: On 2 October 2020, this Court allowed an appeal by Mr Yoo Tak Gwe and Ms Tan Soi Hoang (the appellants) from a decision of Rothman J who had dismissed an application for orders pursuant to ss 29 and 31 of the Proceeds of Crime Act 2002 (Cth) (the Act) that certain property be excluded from freezing orders which had been made ex parte on 9 July 2015 following an application to the Supreme Court of New South Wales by the Commissioner of the Australian Federal Police (the Commissioner) pursuant to s 19 of the Act.
2. In addition to allowing the appeal, the Court set aside the orders of Rothman J and, in lieu thereof, ordered that: "(a) Pursuant to s 29 of the Proceeds of Crime Act 2002 (Cth), all of the Appellants' interests in the property restrained by schedule 2 of the order made on 9 July 2015 be and are hereby excluded from restraint. (b) Pursuant to s 39(1)(e)(i) of the Proceeds of Crime Act 2002 (Cth), the Official Trustee is directed forthwith to pay the funds held by him pursuant to the restraining order made on 9 July 2015 to the Appellants' solicitors, Lincolns Lawyers and Consultants, by electronic funds transfer to such account as may be specified in writing by that firm. (c) Pursuant to s 323 of the Proceeds of Crime Act 2002 (Cth), the Respondent pay costs incurred by the Appellants in connection with the proceeding in the Common Law Division and this appeal. (d) The proceeding is remitted to the Common Law Division for directions on the Appellants' application for damages on the Respondent's undertaking as to damages. (e) Direct that in the absence of agreement between the parties submissions as to costs not exceeding three pages to be filed by Friday 9 October 2020."
3. As the parties have not been able to agree between themselves as to the nature of costs to be awarded in the appellants' favour, submissions have been made by both sides on this question.
4. These reasons assume familiarity with the Court's earlier judgment in this matter: see Gwe v Commissioner of the Australian Federal Police [2020] NSWCA 247.

Section 323 of the Act

1. Section 323 of the Act provides that: "Costs (1) If: (a) a person brings, or appears at, proceedings under this Act before a court in order: (i) to prevent a * forfeiture order or * restraining order from being made against property of the person; or (ii) to have property of the person excluded from a forfeiture order or restraining order; and (b) the person is successful in those proceedings; and (c) the court is satisfied that the person was not involved in any way in the commission of the offence in respect of which the forfeiture order or restraining order was sought or made; the court may order the Commonwealth to pay all costs incurred by the person in connection with the proceedings or such part of those costs as is determined by the court. (2) The costs referred to in subsection (1) are not limited to costs of a kind that are normally recoverable by the successful party to civil proceedings."
2. There is no issue that the preconditions set out in ss 323(1)(a), (b) and (c) are satisfied in the present case. The satisfaction of those conditions opens up a discretion to the Court to order the Commonwealth to pay "all costs" incurred by the appellants in connection with the proceedings or such part of those costs as is determined by the Court.

Submissions

1. The Commissioner submits that s 323 does not evince any particular predisposition either for or against an award of indemnity costs, that subsection (2) makes plain that the costs that are the subject of the exercise of discretion by the Court are not limited to party/party costs on the ordinary basis, and that nothing in s 323 suggests that there is any presumption of indemnity costs or that it will ordinarily be appropriate for the discretion to be exercised in any particular fashion.
2. The appellants, on the other hand, submit that a successful party who seeks "all costs" under s 323 is not required to point to an exceptional feature or egregious conduct by the opponent to justify an award of "all costs". The appellants also submit that s 323 must be given work to do and the section should not be construed as unnecessarily reciting the usual rules on costs. We do not consider that it does. Amongst other matters the section makes plain that, in a quasi-criminal context, costs may be awarded. Absent such an indication, there would have been room for debate as to the availability of an award of costs at all. This consideration alone identifies a purpose which is served by the statutory provision.
3. Whilst there is little authority on the meaning of s 323 of the Act, it is in virtually the same terms as s 101 of the Proceeds of Crime Act 1987 (Cth) (the 1987 Act).
4. Section 101 of the 1987 Act was the subject of judicial consideration by this Court in Diez v Director of Public Prosecutions (Cth) (2004) 62 NSWLR 1; [2004] NSWCA 452 (Diez). One of the issues in that case, which does not arise in the present case, related to the ability of the Court to award costs where the three conditions in s 101(1) (which correspond to ss 323(1)(a), (b) and (c) of the Act) were not satisfied.
5. In relation to the expression "all costs", however, Santow JA, with whom Beazley and Tobias JJA agreed, held at [38] that: "'All costs' are not literally every cost incurred, but rather what are equivalent to indemnity costs. Indemnity costs are only those costs as were not unreasonably incurred. However, that gloss may be justified by the expression 'all costs' being simply understood against long-settled legal background whereby indemnity costs are treated as the maximum costs recoverable, in that legal sense representing 'all' costs."
6. The use of the expression "all costs" does not mean that that will or must be the basis upon which an order for costs is awarded when the conditions set out in s 323(1) of the Act are satisfied. As Santow JA also indicated (at [34]), s 101 (and s 323) confers a discretion. Nothing in the text of s 323 creates a presumption or encourages a predisposition towards the grant of indemnity costs as opposed to costs awarded on any other basis.
7. The Court was also referred to Fowkes v Deputy Director of Public Prosecutions [1997] 2 VR 506 at 524 where the Victorian Court of Appeal said: "Section 101 should, we think, be regarded as beneficial legislation, designed in part to ensure that those whose property is put at risk by otherwise penal legislation ought not to suffer financially in establishing their property rights. Accordingly we think a liberal interpretation should be given to the provision and the court should hold that the power to award costs should extend to the costs of the appeal. We will award costs of the hearing below and of this proceeding to be taxed as between solicitor and client."
8. With due respect, we do not see why s 101 (and s 323 by extension) should be given a "liberal" interpretation. There is nothing ambiguous on the face of the provision if the conditions in sub-section (1) are satisfied: satisfaction of those provisions opens up a broad discretion to the Court, as was explained by Santow JA in Diez. It is antithetical to the existence of a broad discretion that there should be a predisposition, because of the character of the legislation, as to how that discretion ought be exercised. That the legislation might be "beneficial" does not mean that a presumption can or should be read into it. If no presumption is to be read into the legislation, the fact that the legislation may be beneficial is not to the point.
9. It follows that we favour the submissions of the Commissioner in relation to the interpretation of s 323 of the Act. The awarding of costs under s 323 of the Act is a question of discretion. The appellants' submission that "there is nothing the appellants have done that should disentitle them from receiving 'all costs'" proceeds on the incorrect basis that s 323 erects a presumption in favour of "all costs" or indemnity costs for a party that satisfies the preconditions of s 323(1) of the Act. For the reasons already given, we do not accept that submission.

Offers of compromise

1. The appellants then placed reliance upon a number of offers made on their behalf from 12 February 2020, after the High Court's decision in Lordianto v Commissioner of the Australian Federal Police (2019) 266 CLR 273; [2019] HCA 39 (Lordianto).
2. In their solicitor's letter of 12 February 2020, the appellants offered to compromise the appeal on the basis that: "(a) the appeal be allowed; (b) all restrained property be excluded from restraint and returned to the appellants; (c) the appellants release the Commonwealth from its undertaking as to damages; and (d) all costs ordered be vacated and the parties bear their own costs both of the primary proceedings and the appeal proceedings."
3. The offer was stated to be open for 28 days and reliance upon the offer was foreshadowed in support of an application for indemnity costs in respect of both the appeal and the exclusion application before the primary judge.
4. The letter of 12 February contained a detailed exposition as to why the offer was said to be reasonable. This included reference to the decision of the High Court in Lordianto and its application to the reasoning of the primary judge whose decision had been given before the High Court gave its judgment in Lordianto. The letter also emphasised that the appellants were not the subject of any adverse critical findings by the primary judge and that his Honour's ultimate conclusion was not open in light of his description of aspects of Ms Hoang's evidence as "unchallenged and uncontroverted".
5. The Commissioner rejected this offer by a letter dated 18 March 2020.
6. On 30 March 2020, the solicitors for the appellants again wrote to the Commissioner in an endeavour to settle the matter. The letter was in the following terms: "1. We refer to the above and specifically to our letters dated 12 February 2020 and 10 March 2020, your reply of 18 March 2020 and your telephone call to Ignatius Suwanto of our office on 27 March 2020. 2. In the telephone call on 27 March 2020 you queried, in effect, whether our clients were seeking return of the property described in Schedule 1 to the restraining order (that is cash seized from others) (Schedule 1 property). 3. Our clients make no claim whatsoever to the Schedule 1 property. In our letters of 12 February 2020, we had overlooked the fact that in all likelihood this property remains restrained. 4. Our clients only claim an interest in the property restrained by Schedule 2 of the restraining order (Schedule 2 property). 5. This has been the expressed position of our clients since at least 11.05.2016: see [4] of our client's submissions in 2015/200790 (primary proceedings) dated 12.02.2017 {White folder, tab 14, page 344}. Anything we or our counsel have said at any time that suggests that our clients make a claim to Schedule 1 property was entirely inadvertent. 6. Our clients hereby offer to resolve this matter on the following basis: 7. First: a. the appeal be allowed, b. all Schedule 2 property be excluded from restraint and returned to them, c. they release the Commonwealth from its undertaking as to damages, and d. all costs orders be vacated, and the parties bear their own costs both of the primary proceedings and the appeal proceedings. 8. Second, our clients will not oppose a summary application (however described) by the Commissioner in the primary proceedings for forfeiture of the Schedule 1 property (provided that no order as to costs is sought against them). Our clients will cooperate in any way they can to assist the Commissioner to obtain forfeiture of the Schedule 1 property. Our clients cannot consent to the forfeiture of that property. It is not theirs. Our clients are happy to enter into a Deed, or I could provide an open letter that the Commissioner could place before the Court confirming my clients' position. 9. The offer remains open for 28 days. 10. This is a reasonable offer. If it is rejected and our clients succeed in their appeal they shall refer to this letter, the correspondence in [1] above, and s323, in support of an application for indemnity costs in respect of both the appeal and the exclusion application before Rothman J. All rights are otherwise reserved. 11. The rational for this offer is that set out in our 12 February 2020 letter, which we repeat mutatis mutandis as if it referred only to Schedule 2 property. 12. We note the Commissioner now also has the benefit of our clients' amended grounds and submissions, as settled by senior counsel. We trust the Commissioner will take the arguments set out therein in considering the above offer. Please read [3] of the 'orders sought' in our amended draft notice of appeal of 25.03.2020 as applying only to the Schedule 2 property. We are confirming this separately in open correspondence."
7. This further offer was rejected by the Commissioner by letter of 20 May 2020. A counter offer was made on behalf of the Commissioner in the following terms: "… In light of the above matters, the Commissioner makes the following offer to resolve the entirety of the proceedings: 1. The Appeal Proceedings be dismissed; 2. Pursuant to ss 316 and 49 of the PoCA, the Property be forfeited to the Commonwealth; 3. Pursuant to s 69(2) of the PoCA, the Commissioner and the Commonwealth have leave to deal with the forfeited property immediately; 4. The Commonwealth and the Commissioner are released from the undertaking to the Court as to costs and damages; 5. Each party bears their own costs of the first instance and appeal proceedings; 6. The proceedings are otherwise finalised; and 7. The settlement be reflected in a deed of settlement suitable to the Commissioner."
8. This counter offer was rejected by letter of 9 June 2020. The appellants then made a further offer in the following terms: "… 8. First: a. the appeal be dismissed, b. my clients will consent to forfeiture of the sum of $ 250,000.00 from and comprising part of the property in item 2 of schedule 2 of the restraining order (ie from and comprising part of the funds that stood to the credit of bank account 032167-298247), c. the Commissioner's application for forfeiture of the Schedule 2 property (ie paragraph 11 of the originating Summons filed 9 July 2015) otherwise be dismissed, d. the Rental Income accrued for the property known as Unit 846/2C Defried Avenue, Zetland, NSW 2017, which Rental Income is held by the Official Trustee be released to my clients. We understand the sum to be $81,151.62, e. the Rental Income accrued for the property known as Unit 746/2C Defried Avenue, Zetland, NSW 2017, which Rental Income is held by the Official Trustee be released to my clients. We understand the sum to be $85,521.50, f. my clients release the Commonwealth from its undertaking as to damages, and g. all costs orders (both in the primary proceeding and the appeal) be vacated, and the parties bear their own costs both of the primary proceedings and the appeal proceedings. 9. Second, my clients will not oppose a summary application (however described) by the Commissioner in the primary proceedings for forfeiture of the Schedule 1 property (provided that no order as to costs is sought against them). My clients will cooperate in any way they can to assist the Commissioner to obtain forfeiture of the Schedule 1 property. My clients cannot consent to the forfeiture of that property. It is not theirs. My clients are happy to enter into a Deed, or I could provide an open letter that the Commissioner could place before the Court confirming my clients' position …"
9. This further counter offer was rejected by the Commissioner on 16 July 2020.
10. A further offer was made by the appellants which was a variation of their offer of 9 June 2020, the principal variation being an offer of consent to forfeiture of the sum of $551,738.47 from and comprising part of the property in Item 2 of Schedule 2 of the restraining order. That further offer was rejected by the Commissioner on 19 August 2020.
11. The appellants should, in our opinion, be entitled to their costs in the appeal proceedings on an indemnity basis on and from 30 March 2020 when the solicitors on behalf of the appellants confirmed in writing that their clients made no claim whatsoever to the Schedule 1 property. Had the offer made and clarified on that date been accepted, all parties would have been spared the expense of the hearing of the appeal and preparation associated with it between 30 March 2020 and 25 August 2020 when the appeal was heard. By 30 March 2020, the Commissioner also had the benefit of the appellants' submissions in chief which set out arguments which were ultimately accepted by the Court.
12. The appellants' offer of 30 March 2020 contained two elements of compromise which were material and meaningful, namely release of the Commonwealth from its undertaking as to damages and an offer that the parties bear their own costs both of the primary proceedings and the appeal proceedings, thus removing the risk to the Commonwealth of the potential costs exposure in the event that it failed on appeal (which it did) and an avoidance of any obligation to pay the appellants' costs of the appeal proceedings and, in this event, at first instance, noting, as has been mentioned above, that by the time of the 30 March 2020 offer, the appellants had incurred the cost of preparing written submissions in support of the appeal.
13. It is also to be noted that in the period following 30 March 2020, the Commissioner rejected further offers made on behalf of the appellants which were considerably more favourable to the Commissioner than the offer of 30 March 2020.
14. For these reasons, we would vary Order 3(c) made on 2 October 2020 by adding after "this appeal" ", such costs to be paid on an indemnity basis after 30 March 2020".

Further matter

1. One further matter should be noted. The appellants submitted that the power in s 323 to award costs "in connection with the proceedings" extended to the costs of the appellants' participation in the s 180 hearings which predated the making of the freezing orders and the filing of the Notice of Motion by the appellants.
2. In our opinion, the costs, if any, incurred by the appellants in relation to the s 180 hearings could not be described as costs "in connection with the proceedings". Those costs were incurred well prior to the commencement of the proceedings and without any knowledge that the proceedings would ultimately be brought.
3. Even if such costs were in connection with the proceedings, we would not in our discretion order that they be paid. Examinations of the kind that occur under s 180 of the Act and other regulatory statutes are of a quite different nature to court proceedings; they are investigative and a necessary and regular part of state and federal agencies' work in the public interest.

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