FEDERAL COURT OF AUSTRALIA Hart v Commissioner, Australian Federal Police [2003] FCAFC 134 COSTS – ancillary orders – declarations as to validity of search warrants – trial judge found all parties successful in part and unsuccessful in part – "broad approach" to costs used – each party to bear own costs save those subject to express orders – on appeal trial costs orders altered – appeal resulted in substantial success for applicants at trial – joinder of non-appellant applicants to action for question of costs – certain undertakings concerning seized materials accepted by court – first to fourth respondents to pay half of first appellant's and fifth respondent's trial costs plus appeal costs of first appellant Crimes Act 1914 (Cth) s 3K, s 3L STEVEN IRVINE HART v COMMISSIONER, AUSTRALIAN FEDERAL POLICE & ORS Q 50 of 2002 FRENCH, SACKVILLE & RD NICHOLSON JJ 20 JUNE 2003 PERTH (Heard in Brisbane) IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY Q50 OF 2002 ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: STEVEN IRVINE HART FIRST APPELLANT HARTS PTY LTD (In Liquidation) (Receivers and Managers Appointed) SECOND APPELLANT AND: COMMISSIONER, AUSTRALIAN FEDERAL POLICE FIRST RESPONDENT MICHAEL JOHN MORRIS SECOND RESPONDENT WILLIAM JOSEPH McKAY THIRD RESPONDENT HENRY ALBIEZ, I. BARTLEY, DENICE BIRD, JOHN BROWN, MICHAEL BUTCHER, IVOR CHALMERS, RON C. CRAMP, PAUL DELANY, GEOFF P. EYLES, ARTHUR FADDEN, ALAN FARNELL, ANTHONY FITZSIMON, ROBERT G. GLOVER, JOHN HOPKINS, IAN HOUGHTON, MARK JAGER, STEVEN JAY, CAMERON JEFS, GEOFF JENSEN, MARIE McCARTHY, MALCOLM McKAY, JOE MANRICKS, MARK METCALF, ROBERT PENNICOTT, ALLAN PERRY, CRAIG PHILP, PETER ROBERTS, PAUL HANLEY, G. SWANSON, ALEX TEA, NEIL THOMPSON, WILLIAM VICKERS, G. WALSH, TREVOR WENZEL, BETH WILLIAMS, IAIN YOUNG FOURTH RESPONDENTS HARTS AUSTRALIA LTD (In Liquidation) FIFTH RESPONDENT JUDGES: FRENCH, SACKVILLE & RD NICHOLSON JJ DATE OF ORDER: 20 JUNE 2003 WHERE MADE: PERTH (Heard in Brisbane) THE COURT ORDERS THAT: 1. Harts Pty Ltd (In Liquidation) (Receivers and Managers Appointed) is joined as an appellant so that Steven Irvine Hart is First Appellant and Harts Pty Ltd (In Liquidation) (Receivers and Managers Appointed) is Second Appellant. 2. Harts Australia Ltd (In Liquidation) is joined as Fifth Respondent for the purpose of the orders relating to the costs of the proceedings at first instance. 3. The following undertakings offered to the Court by the First to Fourth Respondents are accepted: (i) To destroy, by deleting in its entirety, the material in electronic form downloaded onto Australian Federal Police storage devices at the second appellant's premises at 240 Margaret Street, Brisbane and 63 Neil Street, Toowoomba and at the premises of Bradley Fibreglass at Brendale. (ii) By a responsible officer to attest to the destruction of the downloaded material by affidavit filed in the Court. (iii) To deliver to John Lethbridge Greig and Robert John Duff, duly appointed liquidators of each of the second appellant and the fifth respondent, the tapes, cartridges and floppy disks removed from their said premises. (iv) To deliver to Grovehill Pty Ltd as trustee for the Gessner Family Trust, trading as Gessner Bros, the tapes and cartridges removed from the premises at 20 Malloy Street, Toowoomba. (v) To deliver to the occupiers of the respective premises from which they were removed, the other floppy disks the subject of the appeal. 4. The following undertaking offered to the Court by the First Respondent is accepted: That the Australian Federal Police have not either in electronic form or hard copy, copied any of the material in electronic form downloaded onto Australian Federal Police storage devices at the premises referred to in Order 3(i) above. 5. The First to Fourth Respondents are to pay the First Appellant's costs of the appeal. 6. The costs order made by the trial judge on 21 March 2002 is set aside and in lieu thereof it is ordered that the First to Fourth Respondents pay one half of the costs of the Appellants and the Fifth Respondent in the proceedings before his Honour. 7. There be prepared one bill of costs in relation to the proceedings before the trial judge separate from the bill of costs in relation to the appeal. 8. The costs of the proceedings before the trial judge be distributed among the First Appellant, the First Appellant's trustee in bankruptcy, the Second Appellant's liquidator and receiver and the Fifth Respondent's liquidator according to their rights. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY Q50 OF 2002 ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: STEVEN IRVINE HART APPELLANT HARTS PTY LTD (In Liquidation) (Receivers and Managers Appointed) SECOND APPELLANT AND: COMMISSIONER, AUSTRALIAN FEDERAL POLICE FIRST RESPONDENT MICHAEL JOHN MORRIS SECOND RESPONDENT WILLIAM JOSEPH McKAY THIRD RESPONDENT HENRY ALBIEZ, I. BARTLEY, DENICE BIRD, JOHN BROWN, MICHAEL BUTCHER, IVOR CHALMERS, RON C. CRAMP, PAUL DELANY, GEOFF P. EYLES, ARTHUR FADDEN, ALAN FARNELL, ANTHONY FITZSIMON, ROBERT G. GLOVER, JOHN HOPKINS, IAN HOUGHTON, MARK JAGER, STEVEN JAY, CAMERON JEFS, GEOFF JENSEN, MARIE McCARTHY, MALCOLM McKAY, JOE MANRICKS, MARK METCALF, ROBERT PENNICOTT, ALLAN PERRY, CRAIG PHILP, PETER ROBERTS, PAUL SHANLEY, G. SWANSON, ALEX TEA, NEIL THOMPSON, WILLIAM VICKERS, G. WALSH, TREVOR WENZEL, BETH WILLIAMS, IAIN YOUNG FOURTH RESPONDENTS HARTS AUSTRALIA LTD (In Liquidation) FIFTH RESPONDENT JUDGES: FRENCH, SACKVILLE & RD NICHOLSON JJ DATE: 20 JUNE 2003 PLACE: PERTH (Heard in Brisbane) REASONS FOR JUDGMENT ON QUESTION OF COSTS AND ANCILLARY ORDERS THE COURT: 1 On 21 March 2002, Drummond J made declarations and other orders relating to the validity of search warrants issued in September 1996 against the Harts group of companies, Steven Irvine Hart, the principal appellant, who was a director of Harts Australia Ltd in 1996, Robert Adcock and Astion Pty Ltd. 2 His Honour's orders were in the following terms: "1. Declares that the respondents were entitled to seize, pursuant to s 3F of the Crimes Act 1914 (Cth): (a) all documents in hard copy form found at any of the premises at which warrants were executed which contain any reference to the Hendon Unit Trust, or the Northbourne Holdings Unit Trust or the R D Moore Family Trust. (b) all documents in hard copy form that relate to documents containing a reference to any of these three trusts, though not mentioning that trust. 1A. Orders that the respondents shall within eight weeks of today file and serve a schedule, prepared on the basis of GAL-1 to Mr Leary's affidavit of 15 June 2001, identifying the documents agreed between the respondents and the applicants to be within the declaration in par 1, with sufficient precision to enable effect to be given to that declaration and, in default of agreement, liberty to apply in relation only to settling the schedule. 2. Declares that the respondents are entitled to retain for use in their investigation the documents the subject of the consent order made on 7 June 1999, in so far as any such documents are not covered by the declaration in par 1. 3. Declares that, save for the material the subject of the declarations in pars 1 and 2, the respondents were not entitled to seize or remove from the premises in question any of the other material taken in hard copy form. 4. Orders that in respect of each of the documents to which par 3 applies, (a) the first respondent deliver it up to the occupier at whose premises the document was seized unless that occupier otherwise approves or directs in writing; (b) in the case of premises occupied by the first applicants, delivery up to John Lethbridge Greig and Robert John Duff, duly appointed liquidators of each of the first applicants, shall be a sufficient performance of the order. 5. Declares that the respondents were entitled, pursuant to s 3K(2), to remove from the various premises the entirety of the material in electronic form: (a) downloaded at the first applicants' premises at 240 Margaret Street, Brisbane and 63 Neil Street, Toowoomba and at the premises of Bradley Fibreglass at Brendale on to Australian Federal Police storage devices; (b) contained on tapes and cartridges belonging to the occupiers of the premises of the first applicants at 63 Neil Street, Toowoomba and of Gessner Industries at Toowoomba; (c) contained on floppy disks (other than on the one disk taken from the office of Mr P H Willemse). 6. Declares that the first and second respondents still remain entitled to examine or process all the material in electronic form to which par 5 applies in order to determine whether any of it is information that can be seized under the relevant warrant provided they first comply with s 3K(3) in relation to each lot of that material. 7. Declares that the respondents are not entitled to retain: (a) material in electronic form downloaded from the personal computers taken from the residence of the second applicant, Mr Steven Irvine Hart, the residence of Ms M F Clark and the office of Queensland Mushrooms Pty Ltd; and (b) the floppy disk taken from the office of Mr P H Willemse. 8. Orders that: (a) in respect of the material in electronic form to which par 7(a) applies, the first respondent return to the occupier at whose premises the material was downloaded, any tapes or storage devices containing the downloaded material unless that occupier otherwise approves or directs in writing; and (b) in respect of the floppy disk to which par 7(b) applies, the first respondent return the same to Mr P H Willemse unless he otherwise approves or directs in writing. 9. Orders that subject to the preceding declarations and orders, the applications be dismissed. 10. Orders that each party bear their own costs, save only such costs as have been the subject of express orders earlier made." 3 The orders followed reasons for judgment delivered on 13 March 2002 at the conclusion of which his Honour gave the parties an opportunity to agree orders in final form and to make submissions as to the costs of the proceedings. On the question of the costs of the proceedings before his Honour, he said in his reasons for judgment on 21 March 2002: "This is not in my opinion a case for any nice analysis of the extent to which identifiable issues can be said to be the subject of success by one side or the other. It is a case, in my opinion, in which a broad approach is to be taken. The view I take is that in the end result both sides have been successful in part and unsuccessful in part on what can be called the ultimate issues raised for determination as to whether particular classes of material were validly taken." His Honour said that in the circumstances the proper outcome so far as the costs of litigation was concerned was that each party should bear their own costs save only such costs as had been the subject of express orders earlier made. 4 On 5 December 2002, this Court, sitting on appeal from his Honour, made orders in the following terms: "1. The appeal be allowed. 2. Declarations 5 and 6 made by the primary Judge on 21 March 2002 be set aside. 3. In lieu thereof it be declared that: A. The respondents were not entitled to remove from the various premises any of the material in electronic form: (a) downloaded at the first applicant's premises at 240 Margaret Street, Brisbane and 63 Neil Street, Toowoomba and at the premises of Bradley Fibreglass at Brendale onto Australian Federal Police storage devices; (b) contained on tapes and cartridges belonging to the occupiers of the premises of the first applicants at 63 Neil Street, Toowoomba and of Gessner Industries at Toowoomba; or (c) contained on floppy disks. B. The respondents are not entitled to examine or process any of the material in electronic form to which the preceding Declaration applies in order to determine whether any of it is information that can be seized under the relevant warrant. 4. The cross-appeal be dismissed. 5. There be liberty to apply by written submission within 21 days as to costs and any further ancillary orders." Written submissions were subsequently filed in relation to: 1. The ancillary orders. 2. The costs of the appeal. 3. The costs of the proceedings before the learned primary judge. Ancillary Orders - Submissions made on behalf of the Commissioner of the Australian Federal Police 5 The following undertakings were offered to the Court by the respondents: "(i) To destroy by deleting in its entirety, the material in electronic form downloaded onto Australian Federal Police storage devices at the first applicants' premises at 240 Margaret Street, Brisbane and 63 Neil Street, Toowoomba and at the premises of Bradley Fibreglass at Brendale. (ii) By a responsible officer to attest to the destruction of the downloaded material by affidavit filed in the Court. (iii) To deliver to John Lethbridge Greig and Robert John Duff, duly appointed liquidators of each of the first applicants, the tapes, cartridges and floppy disks removed from the first applicants' said premises. (iv) To deliver to Grovehill Pty Ltd as trustee for the Gessner Family Trust, trading as Gessner Bros, the tapes and cartridges removed from the premises at 20 Malloy Street, Toowoomba. (v) To deliver to the occupiers of the respective premises from which they were removed, the other floppy disks the subject of the appeal." The respondents, being the Commissioner and the officers of the AFP, offered to perform the above undertakings within twenty-one days of being advised by the Court that the undertakings are accepted by it. The first respondent has also indicated that he is prepared to undertake that the Australian Federal Police have not either in electronic form or hard copy, copied any of the material in electronic form downloaded onto Australian Federal Police storage devices at the premises referred to in undertaking (i). The respondents also submit that if the above undertakings are accepted by the Court then no orders with respect to the destruction of the downloaded material or the return of removed property would be necessary. There has been no submission suggesting that the proposed undertakings should not be accepted. 6 The Court, in determining whether the undertakings should be accepted, must be satisfied that they are appropriate and that their acceptance by the Court is within power. The Court is so satisfied and will accept the undertakings accordingly. The Parties to the Appeal 7 The applicants in the proceedings before the learned primary judge were the appellant, Steven Irvine Hart, together with Harts Australia Ltd, Harts Pty Ltd, Robert Thomas Adcock and Astion Pty Ltd. Steven Hart became a bankrupt on 24 April 2002. Harts Australia Pty Ltd is in liquidation and Harts Pty Ltd is in receivership. Robert Adcock became bankrupt prior to the commencement of the hearing. A receiver was appointed to Astion Pty Ltd in March 2002. The solicitors for the appellant, who acted for all the applicants in the original proceedings, advised the Court that when they sought instructions on the appeal the only person interested in appealing was Steven Hart. 8 As indicated in the reasons for judgment of the Court (at [122-124]) the Court, before delivering judgment on the substantive issues in the appeal, invited the solicitors for the appellant and for the respondents to make submissions on whether the non-appellant applicants should be joined as parties in respect of any of the issues other than the question of costs of the primary hearing. The respondents subsequently submitted that neither the declarations sought by the appellant, Mr Hart, in relation to downloaded material nor any order for erasure of downloaded material that might be sought, would affect the non-appellant applicants' legal rights or liabilities. Neither the AFP storage devices nor what was recorded on them was property of any of the applicants. The removal of items from their premises and their retention for examination would not affect the position of the non-appellant applicants. If they were found to have been wrongly removed and orders were made for their return, it would vindicate their original claimed entitlement but not alter their rights or liabilities in relation to it. So it was said the non-appellant applicants were not affected by the relief sought in respect of that equipment and need not be joined as parties to the appeal in relation to it. Counsel for the respondents did submit, however, that it might be necessary to join the non-appellant applicants if an order were to be made affecting the costs of the proceedings before the primary judge. We agreed with that submission and invited submissions from the non-appellant applicants on the costs of the primary application and on the basis that if any one of them were to accept that invitation it would be joined as an appellant if it so consented, for that purpose, or otherwise as a respondent. 9 The appellant, Steven Hart, advises that Harts Pty Ltd (Receiver Appointed) has agreed with the appellant to be joined in these proceedings (by consent) for the purpose of the making of costs orders. The consent was said to be subject to the execution of a Deed of Indemnity. A letter of consent on behalf of Harts Pty Ltd (Receiver Appointed) was forwarded to the Court on 20 January 2003. The Court accordingly orders that the company be joined as Second Appellant. Mr Hart will be designated First Appellant. 10 Harts Australia Ltd (In Liquidation) which was also an applicant in the original proceedings, has not made any application in respect of its costs at first instance. The first appellant, Mr Hart, seeks an order that it be joined as a respondent to the appeal so that it may obtain the benefit of a costs order. 11 The Court agrees that it is appropriate that Harts Australia Ltd (In Liquidation) be joined as Fifth Respondent to the appeal for that purpose. Costs of the Appeal 12 The first to fourth respondents in their submissions accepted the costs of the appeal should follow the event. It is not contested that in respect of the appeal the order will be that the first to fourth respondents pay the costs of the first appellant. The Costs of the Proceedings at First Instance 13 The first appellant, Steven Hart, submits that the two primary applicants at first instance were himself and Harts Pty Ltd. Harts Pty Ltd conducted an accountancy practice. The premises which were the subject of the relevant warrants were those of Harts Pty Ltd and its clients and the private residence of Mr Hart. 14 It was submitted by Mr Hart that all the applicants in the primary proceedings should get their costs of those proceedings including any reserved costs. It was further submitted that if the Full Court were to make the order requested, there be a direction that Mr Hart's solicitors prepare one bill of costs for all applicants, that they secure its taxation on behalf of all applicants and that they receive the proceeds for distribution according to the rights of the parties. 15 The first to fourth respondents contended that the Court should not disturb the trial judge's order that each party bear its own costs. They argued that the electronic material in respect of which the appeal succeeded played only a relatively minor role in both the pre-trial and trial phases of the case. The bulk of the pre-trial work, it was said, involved the cataloguing of hard copy documents seized and the preparation of voluminous schedules setting out the contentions of the parties in respect of them. The first occasion upon which any significant attention was given by the applicants to the electronic material as part of their case was said to be at a hearing before the primary judge on 23 and 24 March. Reference was made to a statement by senior counsel for the applicants at trial that, while the amount of the electronic material was vast, the factual inquiry relevant to that aspect of the application was "very limited". 16 Over three quarters of the applicants' Statement of Facts and Contentions filed in April 2001 went to matters other than the electronic material. Of ninety-seven affidavits filed in the proceedings, twenty-six contained references to the electronic material. Only two of the fifty-one witnesses at the hearing were computer technicians. Their evidence was exclusively concerned with the electronic material. 17 By reference to the number of pages of transcript in which downloaded material, computer tapes and cartridges and s 3K and s 3L of the Crimes Act 1914were mentioned, the respondents said that the electronic material and associated argument occupied considerably less than twenty per cent of the hearing time before the primary judge. The respondents submitted, in the alternative, that if the Court is inclined to disturb the orders made by the learned primary judge then the award to the applicants at trial should not exceed fifty per cent of their costs. 18 In reply, the appellants said that they succeeded on the electronic material and maintained their success on the hard copy documents. Drummond J had accepted that, in respect of the hard copy material, the applicants before him were successful save for material related to the Hendon, Northbourne and Moore Trusts. He also observed that the applicants ran substantial arguments supported by much evidence on sub-issues on which they failed. These qualifications, it was submitted, were not of sufficient substance to deprive the applicants of their costs of the hearing. The Hendon and Northbourne point was never a substantial issue. The sub-issues related to detailed matters of evidence. The Appropriate Award 19 His Honour observed, in his reasons for the orders made on 21 March 2002, that the applicants' attack on the seizure of the hardcopy material was successful "… save only in respect of material touching on the Hendon, Northbourne and RD Moore Family Trusts". His Honour also appears, in [2] of those reasons, to have accepted an analysis of the extent of the respondents' success indicating that a minuscule proportion of the hard copy documents represented documents whose seizure was authorised by law. At the end of the day however his Honour took a "broad approach" and formed the view that both sides had been successful in part and unsuccessful in part. 20 In our opinion, the outcome of the appeal has resulted overall in substantial success for the applicants at trial in terms of the relief granted. That success was not complete as to outcome nor as to some of the issues that were raised. The outcome was a mixed result in the sense that orders in favour of the respondent affecting some documents stand and because the applicants did not succeed in all the arguments which were advanced. It is also relevant to note that the legal issue upon which the appeal ultimately succeeded was not canvassed at trial nor at appeal until drawn to the attention of the parties by the Court after argument had concluded. It was a legal issue, namely the limited time for which the warrants were in force, which might almost have been raised as a threshold question for separate determination at trial. It was, in the event, conceded by the respondents on the appeal. 21 In the circumstances, the Court is of the opinion that the costs order made at trial should be varied so that the respondents pay fifty per cent of the costs of the appellants and the fifth respondent. 22 Directions for the taxation of costs and the receipt and distribution of the proceeds thereof will be made in accordance with the proposals advanced on behalf of the first appellant. I certify that the preceding twenty two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Court. Associate: Dated: 20 June 2003 Counsel for the First Appellant: Mr P McMurdo QC with Mr L Bowden Solicitor for the First Appellant: Hawthorn Cuppaidge & Badgery Counsel for the First to Fourth Respondents: Mr R Gotterson QC with Mr D Boddice SC Solicitor for the First to Fourth Respondents: Australian Government Solicitor Date of last written submissions: 4 February 2003 Date of Judgment: 20 June 2003