Recovering legal costs against the Australian Federal Police
The NSW Court of Appeal has provided guidance on the approach to costs orders made in favour of people who have successfully defended action under the Proceeds of Crime Act 2002 (Cth): Gwe v Commissioner of the Australian Federal Police (No 2)  NSWCA 350.
Litigation under the Proceeds of Crime Act is, despite its name and subject matter, civil and not criminal. 1 A consequence of that classification is that the loser in any case is typically ordered to pay some of the winner’s legal costs. Typically, the loser will pay something like 60-70% of the winner’s total costs. Occasionally the loser may be ordered to pay the winner’s costs on an ‘solicitor and client’ or even ‘indemnity’ basis. In those scenarios the loser may well end up paying 90-100% of the winner’s actual legal costs. 2
Earlier this year clients of mine were successful in the NSW Court of Appeal and had all their restrained (frozen) property returned to them (by way of an exclusion order). I have previously written about that judgment here:
Section 323 Proceeds of Crime Act 2002
Section 323 of the Act provides for the winner’s costs to be paid by the loser in such a case. The section says:
(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.
The term ‘all costs’ has previously been held to be a reference to ‘indemnity costs’. This was confirmed again in Gwe. 3
Application in Gwe
It was not controversial that each of the criteria in paragraphs (a) – (c) of s323(1) were satisfied.
The Court considered 2 older decisions in relation to previous similar legislation. 4 The Court in Gwe preferred, at  to , the view that there is no presumption in s323 in favour of an ‘all costs’ award. They concluded “The awarding of costs under s 323 of the Act is a question of discretion” and that the discretion is broad.
It was erroneous to approach the question of whether there was any reason that the successful appellants should not get an indemnity costs order in their favour. Rather the appropriate question was whether there was an appropriate reason to order indemnity costs. 5
Exercise of the discretion
In Gwe the Court held that the settlement offers made by the appellants to the Commissioner of the AFP were significant, and were a reason to order the AFP to pay costs on an indemnity basis from the date of the first offer that the AFP should have accepted. That is from the date of the first offer that was more favourable to the AFP than the ultimate decision following the hearing of the appeal.
The consequence of this is that the AFP will have to pay the appellants’ legal costs of the appeal hearing itself and the final preparation for that hearing on an indemnity basis. The AFP will have to pay:
- ordinary costs prior to the date of the relevant offer
- indemnity costs (what the appellants actually paid their own lawyers) from the date of the offer.
What the decision means for future cases
This decision will guide the approach to costs in similar situations in all states under the Proceeds of Crime Act.
I suggest that a person whose property has been restrained or frozen should consider making multiple offers to the AFP as the case progresses. For instance an offer at the outset that identifies the grounds and broad basis upon which exclusion will be sought, a further offer when all the applicant’s evidence has been filed, and potentially a final offer when written submissions have been filed.
- Section 315
- Regardless of the type of order made there is never a guarantee of recovering 100% of legal costs, because the Court can always disallow any particular costs as unreasonable.
- At  – , .
- Diez v Director of Public Prosecutions (Cth) (2004) 62 NSWLR 1;  NSWCA 452 at  and Fowkes v Deputy Director of Public Prosecutions  2 VR 506 at 524.
- At .