The Commissioner of the Australian Federal Police v Cranston

Supreme Court of NSW|2021-11-23|Before: Wright J

Solicitors: Criminal Assets Litigation, Australian Federal Police (Plaintiff) ITC Law Pty Ltd (Eleventh Defendant) File Number(s): 2017/00146280

The proceedings and the relevant parties

The present proceedings and the application in the proceedings arise out of the application for restraining orders and other relief under the Proceeds of Crime Act 2002 (Cth) (POC Act) made by the plaintiff in respect of the suspected involvement of a large number of people in an organised taxation fraud involving Plutus Payroll Pty Ltd. There are presently 69 defendants named in these proceedings and the 11th defendant's interest is limited to one particular property and she has no relevant interest in any other aspects of the proceedings.
The plaintiff is a relevant proceeds of crime authority who may make applications under the POC Act for property to be restrained and for other relief under that Act. The 11th defendant is one of the persons who was identified as having an interest in property suspected of being proceeds, or an instrument, of a relevant offence. The relevant property became the subject of a restraining order made under the POC Act.

The amended notice of motion

The 11th defendant's amended notice of motion filed on 16 March 2021 included the following prayers for relief: "1. An order pursuant to s 24(1) of the Proceeds of Crime Act 2002 (Cth) to allow for [the 11th defendant], Westpac Banking Corporation … (Westpac) and/or any other person as necessary to give effect to this order, to apply funds in Westpac account [XXX] to the arrears and future payment obligations of the [11th defendant] with respect to the Westpac loan account [YYY]. 2. Further or in the alternative, that order 23 and 155 of the orders made by this Court on 17 May 2017 be amended to insert the words at the end of the order: except for the application of funds in Westpac account [XXX] to the arrears and future payment obligations of [the 11th defendant] with respect to the Westpac loan account [YYY]. 3. Costs 4. Any further order that the Court may see fit."
As noted above, on 3 November 2021, with the consent of the parties, I made orders as follows: "In respect of the Amended Notice of Motion filed by the 11th Defendant (Rachel Keary) on 16 March 2021, the Court makes the following orders: 1. The Amended Notice of Motion is withdrawn and dismissed. 2. Orders 2 to 6 made on 3 September 2021 are vacated. 3. The question of costs of the Amended Motion is stood over for hearing on 23 November 2021 at 10:00am. 4. The 11th Defendant is to file and serve any evidence on which she relies and written submissions on or before 12 November 2021. 5. The Plaintiff is to file and serve any evidence and written submissions on or before 19 November 2021. 6. Liberty to restore on 2 days' written notice."
Despite order 4 made on 3 November 2021, the 11th defendant did not file any evidence or written submissions by 12 November 2021. It appears that an affidavit and submissions were provided to the plaintiff on 15 November 2021.
On 19 November 2021, in accordance with order 4 made on 3 November 2021, the plaintiff filed the affidavit of Robert Bianchini of 19 November 2021 as well as written submissions. The evidence of Mr Bianchini was not effectively challenged and I accept it. Although the 11th defendant did not file her evidence and submissions in accordance with the Court's timetable, nonetheless the plaintiff did not object to the affidavit of James Clancy of 15 November being read.
By not pressing the amended notice of motion, the 11th defendant has in effect abandoned the claims for relief in the amended notice of motion. As I understand it, this has not been done because of any negotiated agreement to resolve the dispute the subject of that motion.

Relevant statutory provisions and principles

Section 98(1)(a) of the Civil Procedure Act 2005 (NSW) provides generally that costs are in the discretion of the Court. The Court has full power to determine by whom, to whom and to what extent costs are to be paid under s 98(1)(b).
It is important to bear in mind that costs are not awarded by way of punishment of the unsuccessful party but, rather, "are compensatory in the sense that they are awarded to indemnify the successful party against the expense to which he or she has been put by reason of the legal proceedings": Latoudis v Casey (1990) 170 CLR 534 at 543 (Mason CJ); [1990] HCA 59; Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [67]; Mahenthirarasa v State Rail Authority of New South Wales and Others (No 2) (2008) 72 NSWLR 273; [2008] NSWCA 201 at [8] (Basten JA; Giles and Bell JJA agreeing).
Unless the Court orders otherwise, the costs of any application or other step in the proceedings, such as the present amended notice of motion, are to be paid and otherwise dealt with in the same way as the general costs of the proceedings: r 42.7 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR). In addition, unless the Court orders otherwise, costs referred to in r 42.7(1) do not become payable until the conclusion of the proceedings: UCPR, r 42.7(2).
In relation to general costs of the proceedings, r 42.1 of the UCPR provides: "Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs."
In the present case, however, because of the abandonment of the amended notice of motion, there has been no hearing on the merits. Consequently, there has been no "event" in the sense of an outcome after a contested hearing: Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84 at [2] (Basten JA). Further, it can be accepted that the Court should not conduct a hypothetical hearing between the parties to determine the question of costs in such a case: Re the Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin (1997) 186 CLR 622 at 624; [1997] HCA 6; McNamara v Bao San & Ors [2010] NSWSC 809 at [12(f)].
Nonetheless, depending on the nature of the litigation, the "event" may be characterised in more than one way and may be understood as referring to the practical result of a particular claim: Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219 at [15] (Ward, Emmett and Gleeson JJA).
In the present case: 1. the 11th defendant claimed certain relief in her original notice of motion and in the amended notice of motion; 2. the plaintiff opposed that relief being granted; and 3. eventually, the 11th defendant did not seek to press her claim for relief and was content for the amended notice of motion to be withdrawn and dismissed.
Thus, the practical result of the 11th defendant's application was that she was unsuccessful, and the plaintiff was successful in its opposition, even though there has been no hearing of the application. It is therefore appropriate, in my view, to characterise the "event" in this case as the plaintiff being successful in relation to the 11th defendant's amended notice of motion.
The 11th defendant's position can also be seen as analogous to that of a plaintiff which discontinues proceedings. Although r 42.19(2) of the UCPR establishes default costs orders against a discontinuing party when proceedings are discontinued, there is no presumption that costs will be ordered against the discontinuing party: Fordyce v Fordham and Another (2006) 67 NSWLR 497; [2006] NSWCA 274 at [84]. There is, however, an onus on the discontinuing party to make an application in respect of costs if it does not propose to pay the costs of the other parties and there must be "some sound positive ground or good reason for departing from the ordinary course" as envisaged by the default orders: Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32 at [54] (Hodgson JA). This approach to the question of costs when proceedings are discontinued provides some guidance as to what orders may be made when an application made by notice of motion is not pressed.
Accordingly, where an application made by notice of motion is in effect discontinued and abandoned and the respondent to the motion has been successful in substance, it will usually be appropriate that the applicant pay the respondent's costs of the motion unless there is some positive ground or good reason not to make such an order. This was, in effect, the conclusion reached by Johnson J in Burbank Montague Pty Limited and Anor v The Owners - Strata Plan 85312 and Anor [2020] NSWSC 1365 at [38] for the reasons set out at [30]-[37].

Submissions

The 11th defendant submitted that she should not be ordered to pay the plaintiff's costs because: 1. the plaintiff unreasonably failed to engage in dialogue to narrow the issues and seek a resolution; 2. the plaintiff unreasonably delayed in providing information to the 11th defendant; and 3. the plaintiff made unreasonable demands of the 11th defendant during the proceedings including seeking an undertaking that was not pressed and estimating his costs at approximately $150,000.
The 11th defendant accepted that there were delays on her part but said that this caused no prejudice or cost to the plaintiff.
The plaintiff submitted in substance, and very much in summary, that: 1. None of the 11th defendant's complaints concerning the plaintiff's conduct was supported by the evidence. 2. Even if the facts did support the 11th defendant's contentions, these matters would not amount to a good reason for denying the plaintiff costs in the circumstances of the present case.

Consideration

Having regard to all of the correspondence between the parties which was in evidence, I am not satisfied that the plaintiff unreasonably refused to engage in negotiations to attempt to resolve the issues raised by the amended notice of motion. From the beginning questions were raised by the plaintiff as to the power to grant the relief sought and there were requests for further information including in relation to the 11th defendant's other financial resources which was a relevant issue in relation to the application. In mid June, a suggestion was made by the plaintiff that discussions would be better informed if they took place after the plaintiff had served his evidence. The 11th defendant then decided to file further evidence, in response to the plaintiff's evidence, and the matter of negotiations appears to have, in effect, lapsed after the plaintiff outlined his ongoing issues relating to the 11th defendant's application. COVID-19 may have made things difficult for both the 11th defendant and the plaintiff at this time.
I do not accept that there was conduct on the plaintiff's part in relation to discussions with the 11th defendant to which the 11th defendant could point which established unreasonable or other inappropriate conduct on the part of the plaintiff. There was no evidence that the 11th defendant had made any offer that was unreasonable for the plaintiff to reject. Mere failure to make an arrangement for an in-person meeting should not, in this case, be found to amount to unreasonable conduct such as to justify refusal to make a costs order in the plaintiff's favour. There was nothing in regard to settlement discussions that amounted to a good reason to refuse to order costs in his favour in the circumstances of the present case.
I do not find that there was any delay on the plaintiff's part in providing information to the 11th defendant. The 11th defendant had already been served with the evidence she sought and it was reasonable for the plaintiff to point this out. The plaintiff complied with timetables and provided detailed responses to the 11th defendant's position and queries in his letter of 4 May 2021. In short, the plaintiff has behaved reasonably in relation to the provision of information to the other side.
The letters of 9 June 2021 and 16 June 2021 include an indication of the plaintiff's willingness to consider offers or proposals which the 11th defendant may wish to make. Repeated unanswered requests by the 11th defendant for a face-to-face conference over a relatively short period without the 11th defendant addressing the substance of the issues raised by the plaintiff do not establish relevant unreasonableness on the part of the plaintiff. My conclusion is that there was no relevant aspect of the plaintiff's conduct which amounted to delay so as to be a proper basis for refusing a costs order in his favour.
Further, I do not accept that the plaintiff has made unreasonable demands of the 11th defendant. The plaintiff in his letter of 8 October 2021, which was marked without prejudice except as to costs, put forward a proposal for consent orders to give effect to the 11th defendant's stated decision not to press her application. The proposal included that the plaintiff's costs should be paid and an undertaking by the 11th defendant not to bring further similar applications. On a fair reading of the correspondence related to that proposal, in particular the email of 1 November 2021, it does not appear to me that the plaintiff made any "demands". Rather, the plaintiff responded to the 11th defendant's proposal that she would no longer press the motion on the basis that each party pay its own costs. The plaintiff's email merely contained an estimate of the plaintiff's costs as requested by the 11th defendant and sought reasons for the 11th defendant not consenting to the undertaking in the consent orders previously proposed by the plaintiff.
The plaintiff was within his rights to oppose the relief sought in the amended notice of motion and not to agree that each party pay its own costs if the application was abandoned. He did not "demand" payment of those costs in the amount estimated; he merely pointed out that costs had been incurred, estimated the amount and indicated that this was a reason why he would not agree to the 11th defendant's proposal.
It can be accepted that the amount of the costs estimated seems extraordinarily high for what should have been a relatively short and simple application. Nonetheless, it is not the Court's function on this application for a costs order to determine whether the amount of costs estimated by the plaintiff's solicitor in the email of 1 November 2021 was correct or reasonable. If costs are awarded, the amount of costs is a matter to be determined in a costs assessment if agreement cannot be reached between the parties. The plaintiff's estimate is not a figure which the 11th defendant must accept without challenge. It can be the subject of a costs assessment where the 11th defendant will be able to contend that the sums claimed should not be allowed.
As to the undertaking sought by the plaintiff if the amended notice of motion was to be withdrawn and dismissed, the plaintiff did not, as it turned out, press the issue, and orders were made on 3 November 2021, as set out above, without the undertaking.
Taking all these matters into account, in my view, there were no demands and there was nothing unreasonable in the plaintiff's conduct in this regard. The plaintiff's conduct in relation to the proposed orders does not amount to a sound basis for refusing to order the 11th defendant to pay the plaintiff's costs of the amended notice of motion.
Finally, I note that the factual contentions set out in the plaintiff's letter of 8 October 2021 in pars (a) to (j) were not in substance disputed by the 11th defendant and I accept that they are a relatively fair summary of what occurred. In addition, there was no explanation from the 11th defendant of why she chose not to press her application.

Conclusion and orders

In all the circumstances, in my view, the 11th defendant has not established any positive ground or good reason why she should not be ordered to pay the costs of the plaintiff in relation to the amended notice of motion which has been withdrawn and dismissed.
In addition, since the proceedings also relate to 68 other defendants and a number of other respondents to various notices of motion and other interested persons, it does not appear to me to be appropriate that the costs in relation to the 11th defendant's abandoned application should not become payable until the conclusion of the proceedings, as provided by r 42.7(2) of the UCPR. It is unlikely that the proceedings will be concluded as against all defendants at any time in the reasonably near future. Accordingly, I propose to order otherwise for the purposes of r 42.7(2) of the UCPR.
For these reasons, the orders of the Court are: 1. The 11th defendant is to pay the plaintiff's costs of and incidental to the 11th defendant's amended notice of motion filed on 16 March 2021 and withdrawn and dismissed on 3 November 2021. 2. The costs referred to in order (1) are payable forthwith.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 23 November 2021

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