Commonwealth Director of Public Prosecutions v Garcia & Ors [2005] QDC 55

DISTRICT COURT OF QUEENSLAND CITATION: Commonwealth Director of Public Prosecutions v Garcia & Ors [2005] QDC 055 PARTIES: COMMONWEALTH DIRECTOR OF PUBLIC PROSECUTIONS (Applicant) V JOSITA ANN GARCIA (First Respondent) AND CHRISTOPHER PAUL WOOLGROVE (Second Respondent) AND DAVID JOHN WOOLGROVE (Third Respondent) AND JEANNE MARIAN WOOLGROVE (Fourth Respondent) AND NOSRAC (SA) PTY LTD ACN 062 562 313 (Fifth Respondent) AND LORRAINE CARSON (Sixth Respondent) AND HANS JURGEN VIERTEL (Seventh Respondent) AND STEVEN JOHN WOOLGROVE (Eighth Respondent) AND -- 1 of 11 -- 2 2 ELIZABETH JEAN LOTOCKI (Ninth Respondent) AND ROSEMARY LENORE CARROLL (Tenth Respondent) AND GREGORY CARLTON MAY (Eleventh Respondent) FILE NO/S: 997/04 DIVISION: Civil PROCEEDING: Application ORIGINATING COURT: District Court DELIVERED ON: 18 th March 2005 DELIVERED AT: Brisbane HEARING DATE: 15 th March 2005 JUDGE: FORDE DCJ ORDER: 1. Save for the sum of AUD$20,401.26 in ANZ Bank Account number 015 310 3523 53336 held by the Fifth Respondent NOSRAC (SA) Pty Ltd (ACN 062 562 314), pursuant to section 42 of the Proceeds of Crime Act, 2002 the order made by His Honour Judge Rackemann on 16 March 2004 as against the fifth and sixth respondents is revoked. 2. It is ordered that the Commonwealth Director of Public Prosecutions do pay the costs including reserved costs of the Fifth and Sixth Respondents to be assessed on the standard basis. CATCHWORDS: COSTS – s323 Proceeds of Crime Act (Cth) 2002 – Discretion as to whether to award indemnity costs – Offers to settle Proceeds of Crime Act (Cth) 2002 , ss101, 323 Uniform Civil Procedure Rules (Qld) 1999 rules 667, 704, 743. Colgate Palmolive Co v. Cussons Pty Ltd (1993) 46 FCR 25. Commonwealth Director of Prosecutions v In the matter of Specified Property of Universal Lionshare Pty Ltd & Dante -- 2 of 11 -- 3 3 Tan [2005] NSWSC 91. Cretazzo v Lombardi [1975] 13 SASR 4. Diez v Director of Public Prosecutions [2004] NSWCA 452. Messiter v Hutchinson (1987) 10 NSWLR 525. COUNSEL: Mr M Abbott Q.C. for the Applicants/Fifth and Sixth Respondents Mr P Flanagan S.C. with Ms. Mellifont for the Respondent/Applicant SOLICITORS: Iles Selley Commonwealth Director of Public Prosecutions Introduction [1] The present application by the fifth and sixth respondents (the “Respondents”) relates to the costs of a three day hearing on an application to revoke a restraining order made on 16 March 2004. The restraining order was made pursuant to s 42 of the Proceeds of Crime Act 2002 (Cth) (the “Act”). There is also an application (pursuant to Rule 667 of the Uniform Civil Procedure Rules) which is consented to by the Commonwealth Director of Public Prosecutions (the”Director”) for a variation of the orders made. pursuant to Rule 667 of the Uniform Civil Procedure Rules. Variation of Order of 17 December 2004. [2] The order presently reads: “Save for the monies in ANZ Bank Account number 015 310 3523 53336 held by the Fifth Respondent NOSRAC (SA) Pty Ltd (ACN 062 562 314), pursuant to section 42 of the Proceeds of Crime Act, 2002 the order made by His Honour Judge Rackemann on 16 March 2004 as against the fifth and sixth respondents is revoked”. -- 3 of 11 -- 4 4 [3] An e-mail date 14 March 2005 was received from the Director’s office consenting to the variation of the order to limit the amount subject to the restraining order to AUD $20, 401.26. The Director was also content to have the question of costs determined on the written submissions. It was also indicated that the Director would not be seeking a further stay of the revocation order. [4] The order will be varied to delete the word “monies” and substitute “sum of AUD$20,401.26”. Basis of Costs Application [5] Given the limited extent of the revocation order, the Respondents seek an order that the Director pay their costs of and incidental to the application to revoke on a solicitor/client basis. Presumably this includes the reserve costs ordered in the course of the proceedings. Counsel for the Director in his written submissions submits that the appropriate order for costs is that the Director pay two-thirds of the Respondents’ costs of the revocation application to be assessed. Those costs, it is submitted should be assessed on a party/party basis and not on an indemnity basis. [6] Section 323 if the Act provides as follows: “323 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 -- 4 of 11 -- 5 5 (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.” [7] It has been held that s 323 conferred a discretion upon the court where the conditions in subsections (a),(b) and (c) are met.1 The Court was dealing with an equivalent section under the earlier legislation.2 In the present case, the Respondents have brought a successful application to exclude certain property from forfeiture. At the outset the Respondents conceded that the sum of $20,401.26 in so far as it concerned the fifth respondent should remain as part of the restraining order. The discretion of the court to order costs is not limited by s 323. 3 Arguments of the Director in opposing an order for all costs and indemnity costs [8] The Director argues that a great deal of time was taken in relation to material non- disclosure. Some six pages of the judgment was concerned with that issue. Although I was not satisfied that there was bad faith, I was satisfied that there was a lack of candour in the material provided by Mr. Fryer before Judge Rackemann who made the original order. The latter is something one can take into account in relation to whether the Director should pay two thirds or all of the costs and whether it be on an indemnity basis. 1 Diez v Director of Public Prosecutions [2004] NSWCA 452. 2 s 101 of the Proceeds of Crime Act 1987. 3 Diez op.cit. para. 48. -- 5 of 11 -- 6 6 [9] On the latter issue, the Director referred to the case of Colgate Palmolive Co v. Cussons Pty Ltd.4 The principles were summarised in the written submissions as follows: “(a) the circumstances of the case must be such as to warrant the Court to depart from the settled practice of ordering costs on a party/party basis; (b) the circumstances that may warrant the granting of indemnity costs is the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud; evidence of particular misconduct that causes loss of time to the Court and to other parties; the fact that the proceedings were commenced or continued for some ulterior motive or in a wilful disregard of known facts or clearly established law; the making of allegations which ought never to have been made or be undue prolongation of a case by groundless contentions; and an imprudent refusal of an offer to compromise.” [10] As pointed out in submissions the revocation order was made on two basis: a. the Director was prevented from relying on new indictable offences to justify the original restraining order b. there were no grounds in any event to establish new indictable offences against the Respondents. [11] The arguments on both sides in relation to the first issue were persuasive. The decision to refuse to allow the Director to rely on new indictable offences was on the basis that as it was penal legislation it should be construed in favour of the Respondents. The question had not been determined previously as to whether the Director could rely on new indictable offences on an application to revoke. It is submitted that the Director should not be punished by way of an indemnity costs 4 (1993) 46 FCR 225 at 233 per Sheppard J. -- 6 of 11 -- 7 7 order for seeking to have the legislation apply in the manner contended for. The investigation was ongoing. The Director is entitled to adduce new material on an application to revoke. In the present case, it was determined that such new material has to be limited to the breaches of Australian Corporations law upon which the original restraining order was based. [12] The original restraining order could not be sustained given the evidence before me particularly the concession by Mr. Fryer that he had no reasonable suspicion of any fraud being committed in relation to the Phillips and Gray Clare transaction. In some ways, this was a bombshell for the Director’s case. It is not known when Mr. Fryer was of that view. However, it was acknowledged in the reasons for judgment that “Mr. Fryer could be forgiven for failing to appreciate the real source of funds”. [13] The Respondents have gone to extensive lengths by way of accounting evidence to prove to the Director that there was a limited potential breach of Australian law. The Director contends that it was not until late in the afternoon of the first day of trial that an amendment was made limiting the application to revoke and conceding the $20,401.26. Offers to settle [14] The Director contends that it was not “imprudent” on the part of the Director to refuse these offers to compromise.5 The Respondents’ solicitors in a letter of 20 May 2004 suggested that there were no grounds for suspecting that the source of funds were from the Unit Trusts. The alternative source was suggested to be the sale of shares. This of course turned out to be correct save for the $20,401.26. The offer was that the order be revoked and that each party bear its own costs. On -- 7 of 11 -- 8 8 10 June 2004, the Respondents filed an application for the revocation of the restraining order. [15] On or about 10 August 2004, the Director advised for the first time that the Director suspected that the proceeds of the sale of the shares in USSSIL were the proceeds of crime. The Director then proceeded to try to conduct examinations of various persons in order to obtain further information about possible offences. As at early October, the Director was still preparing further material. In affidavits served on the Respondents’ solicitors on 6 October 2004, the emphasis shifted away from the suggestion that assets which were the subject of the restraining order were obtained from investors in the Unit Trusts. The alternative basis of the sale of shares was referred to. By 13 October 2004, the Respondents retained the services of a forensic accountant. A report of Mr. Hall was provided to the Director on 10 November and it confirmed that the source of the funds used to acquire the assets which was the subject of the restraining order was from the sale of shares. This was the view expressed in May 2004. [16] Consequently, a further offer to settle was made on 8 December 2004. In monetary terms, the Respondents have obtained a more favourable judgment. The offer also sought to release the Respondents and others from all claims now or in the future in the Unit Trusts and also USSSIL. This offer, if accepted, would have prevented any future claim based on foreign indictable offences. The present judgment does not prevent a further application for a restraining order based on foreign indictable offences which was not the basis for the original order. The offer was rejected. Grounds relied upon by Respondents for an indemnity costs order 5 Messiter v Hutchinson (1987) 10 NSWLR 525. -- 8 of 11 -- 9 9 [17] Even though the Counsel for the respondent seeks costs on a solicitor and client basis, that equates to indemnity costs under rules 704 and 743. [18] The grounds relied upon are: a. The restraining orders were sought on an ex parte basis. This in itself could not be grounds as often ex parte orders are necessary. The Respondents contend that no urgency was shown for such an application. b. There was a finding of lack of candour. c. There was sufficient notice as early as 20 May 2004 that the Respondents would be contending that the assets concerned represented the proceeds of the sale of shares not monies subscribed to the Unit Trusts. d. That Mr. Fryer knew in respect of (c) that the Respondents’ view was correct save for the $20,401.26. e. Two offers were put and declined and that the Respondents have at least bettered the second offer at trial. f. The Director changed the nature of the case throughout the proceeding causing additional significant costs to the Respondents. g. There was a vast amount of material prepared by the Director of which most was irrelevant on the hearing. h. That the concession that the sum of $20,401.26 was left as part of the restraining order did not prolong the hearing but in fact did abbreviate it. The Respondents say that it was not until the affidavit of Mr. Fryer served on 27 October was available that they became aware of the point relied upon by the Director and that they promptly made a concession. -- 9 of 11 -- 10 10 i. That there were problems of disclosure faced by the Respondents from March 2004 up to the time of the trial. [19] The points made by the Respondents are generally accepted. There is a question as to whether the second offer was bettered at trial given the requirement of the release from further claims. The figure of $20,401.26 seemed to crystallise by the first day of trial. The question is whether accepting the general thrust of the submissions summarised in (a) to (i) above, that the Respondents are entitled to indemnity costs. [20] In a belated submission received on 15 March, counsel for the Director referred to the recent decision of Greg James J.6 James J. held that s 323 is applicable in revocation proceedings and confers a “power to order up to all or full costs on an indemnity basis in discretion” (ibid. para.19). In that case it was readily apparent that the jewellery could not be the proceeds of crime and yet the Director persisted in resisting the application. The present case is to be contrasted, it is submitted, as the basis for resisting the application to revoke was that the property was proceeds of a foreign indictable offence in relation to the share sale. It was submitted that it cannot be said that the Director had no grounds for resisting the revocation. In fact, it was held that the Director could not rely on the new ground of foreign indictable offences and even if he did, the grounds had not been established on the evidence. [21] I do not accept that the Director acted imprudently in not accepting the offers made. Further, it had not been determined by a court that the Director had no basis for trying to oppose an application for revocation based on new foreign indictable offences. That was one reason why a stay was granted to allow the Director to consider an appeal. Also, there was a specific finding that given the complexity of 6 Commonwealth Director of Prosecutions v In the matter of Specified Property of Universal Lionshare Pty Ltd & Dante Tan [2005] NSWSC 91 a decision given on 24 February 2005. -- 10 of 11 -- 11 11 the matters, that Mr. Fryer could be excused for not fully understanding the factual matrix. I find that the grounds to justify an order for costs on an indemnity basis have not been established. [22] The Respondents may not have established bad faith on the part of the prosecution, but there is a finding of lack of candour on that issue. However, the Respondents, I find, have been substantially successful in their case. Even though they were not successful on every issue they should not be deprived of their costs.7 In some ways, the bad faith allegation became a non issue once the Director accepted the Respondents’ accounting evidence which then allowed the concession to be made limiting the amount which remained the subject of the restraining order. Once that concession was made at trial, the evidence before Judge Rackemann became less relevant. The delay in preparing the accounting evidence was due in part to the failure of the Director to provide full disclosure in a timely manner. The order for costs which it is intended to make has been a balancing exercise of the discretion after considering the competing factors. It is for that reason that the costs on a standard basis will be awarded in favour of the Respondents and not be limited to any proportion. Orders 1. Save for the sum of AUD$20,401.26 in ANZ Bank Account number 015 310 3523 53336 held by the Fifth Respondent NOSRAC (SA) Pty Ltd (ACN 062 562 314), pursuant to section 42 of the Proceeds of Crime Act, 2002 the order made by His Honour Judge Rackemann on 16 March 2004 as against the fifth and sixth respondents is revoked 2. It is ordered that the Commonwealth Director of Public Prosecutions do pay the costs including reserved costs of the Fifth and Sixth Respondents to be assessed on the standard basis. 7 Cretazzo v Lombardi [1975] 13 SASR 4 at 16. -- 11 of 11 --