Director of Public Prosecutions v Disorganized Developments Pty Ltd - [2020] SASC 202

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
DIRECTOR OF PUBLIC PROSECUTIONS v DISORGANIZED DEVELOPMENTS PTY LTD
[2020] SASC 202
Judgment of The Honourable Justice Blue
20 October 2020
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - OFFERS OF COMPROMISE, PAYMENTS INTO COURT AND SETTLEMENTS - OFFER OF COMPROMISE OR OFFER TO SETTLE OR CONSENT TO JUDGMENT PURSUANT TO RULES
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS
CRIMINAL LAW - PROCEDURE - CONFISCATION OF PROCEEDS OF CRIME AND RELATED MATTERS - FORFEITURE OR CONFISCATION - PROCEDURE
The Director of Public Prosecutions instituted an action seeking restraining and forfeiture orders under the Criminal Assets Confiscation Act 2005 (SA) in respect of a property owned by Disorganized Developments Pty Ltd. The Director ultimately decided not to proceed with the action and consented to an order dismissing the applications.
Disorganized Developments seeks costs on an indemnity basis in light of a formal offer filed not long after institution of the action or alternatively costs on the standard costs basis.
Held:
1. Section 227(1)(a) of the Act applies to the grant of an application by the owner of property under sections 34 to 36 or 58 to 60 to exclude the owner’s property from a restraining or forfeiture order that would otherwise be made or has been made. It does not apply merely to the dismissal of an application by the Director for a restraining or forfeiture order (at [79]).
2. Section 227 does not exclude the general power of the Court under section 40 of the Supreme Court Act to order costs (at [87]).
3. Disorganized Developments failed to prove that it was not involved in any way in the commission of the serious offence in respect of which the forfeiture and restraining orders were sought within the meaning of section 227(1)(c) (at [95]).
4. A costs order should be made in favour of Disorganized Developments (at [97]).
5. Rule 188F of the Supreme Court Civil Rules 2006 (SA) is not inconsistent with the Act in its application to actions for restraining or forfeiture orders (at [105]).
6. It is not appropriate to dispense with the requirement of a “complying offer” that it contain a term as to costs in accordance with rule 188F(1)(c) (at [114]).
7. The formal offer made by Disorganized Developments did not involve a genuine compromise within the meaning of rule 188F(1)(b) (at [125]).
8. Taking into account the formal offer made by Disorganized Developments under rule 188G, it is not appropriate to order that the Director pay Disorganized Developments’ costs of the action on other than a standard costs basis (at [135]).
9. Order that the Director pay Disorganized Developments’ costs of action on a standard costs basis (at [136]).
Criminal Assets Confiscation Act 2005 (SA) ss 24, 47, 56A, 58, 59, 60, 64, 67, 74, 75, 83, 86, 95, 111, 227; Criminal Assets Confiscation Regulations 2006 (SA); Supreme Court Civil Rules 2006 (SA) rr 188A, 188F, 188G, referred to.
Diez v Director of Public Prosecutions (2004) 62 NSWLR 1; Director of Public Prosecutions (SA) v Dobie (2010) 203 A Crim R 52 , discussed.

DIRECTOR OF PUBLIC PROSECUTIONS v DISORGANIZED DEVELOPMENTS PTY LTD
[2020] SASC 202
Civil
BLUE J:

The applicant, the Director of Public Prosecutions, instituted this action applying for restraining and forfeiture orders under the Criminal Assets Confiscation Act 2005 (SA) (the Act) in respect of a property owned by the second respondent, Disorganized Developments Pty Ltd (Disorganized Developments). The Director ultimately decided not to proceed with the action and consented to an order dismissing the applications.
Disorganized Developments seeks costs on an indemnity basis in light of a formal offer filed not long after institution of the action or alternatively costs on the standard costs basis. The Director opposes such orders.
Background
Disorganized Developments was incorporated in the 1990s. It became the registered proprietor of approximately 15 hectares of land situated at 591 Kenny Road Cowirra, known as Ponde (the Property). Between September 2013 and October 2019, its directors were Kenneth Pretty and Peter Stacy.
The Director’s case in the action was that on 30 January 2017 Mark Boyce was assaulted by three men. The Director’s case was that two of the men arrived at, and departed from, the vicinity in a blue Toyota Echo sedan; and the other man arrived at, and departed from, the vicinity in a silver Toyota RAV4 sport utility vehicle. The Director’s case was that A was the passenger in the Toyota Echo; B was the driver and owner of the Toyota Echo; and C was the driver of the RAV4. The Director’s case was that Mr Boyce subsequently died as a result of injuries sustained in the assault.
In September 2019 the police searched the Property and located the partial remains of a Toyota Echo sedan buried on the Property. Most of the body panels had been removed, leaving essentially the floor pan, engine bay and engine. The remains had been burnt and buried. The Director’s case was that this was the blue Toyota Echo sedan owned by B and allegedly driven by him on 30 January 2017. The Director’s case was that the last time that the blue Toyota Echo sedan owned by B was photographed by a Safe-T-Cam camera on a public road was on 26 February 2017.
On 10 December 2019 the Director instituted this action by Summons against A and Disorganized Developments. By the Summons, the Director sought a restraining order pursuant to paragraphs (a), (b) and (c) of subsection 24(1), and a forfeiture order pursuant to paragraph (a) of subsection 47(3), of the Act in respect of the Property. The Summons was supported by two affidavits by police detectives. The second affidavit in turn exhibited 19 affidavits by lay, specialist, police and expert witnesses.
I interpolate that the Supreme Court Civil Rules 2006 (SA) (the Former Rules) permitted (by rule 96) and, unless otherwise ordered, required (by rule 312) an action under the Act to proceed on affidavits rather than pleadings. However, the plaintiff was still required to give fair notice of its case when an action proceeded on affidavits. The affidavits filed by the Director merely identified evidentiary facts and did not identify the material facts relied on by the Director in seeking a restraining order under each of paragraphs (a), (b) and (c) of subsection 24(1) or in seeking a forfeiture order under paragraph (a) of subsection 47(3).
On 10 December 2019 the Director filed an interlocutory application seeking a restraining order in respect of the Property pursuant to paragraphs (a), (b) and (c) of subsection 24(1).
On 12 December 2019, on the return date of the interlocutory application, the application for a restraining order was listed for argument on 29 January 2020 and the parties were directed to file written submissions by 22 January 2020.
On 23 December 2019 the Director filed an Amended Summons in which the reference to a forfeiture order pursuant to “section 47(3)(a)” was amended to “section 47(3)”. This presumably expanded the case to reliance (potentially) on paragraph (b) and/or (c) of subsection 47(3), each of which would have been reliant, amongst other things, on a restraining order having been in force for at least six months.
On 13 January 2020 the Director provided written submissions on the interlocutory application for a restraining order. The submissions articulated a threefold case for a restraining order:
1A was guilty of a serious offence, namely murder, and there were reasonable grounds to suspect that the Property was an instrument of the murder because the Toyota Echo was buried at the Property to conceal evidence of the murder (section 24(1)(a)).
2B was suspected on reasonable grounds of having committed a serious offence, namely murder, and there were reasonable grounds to suspect that the Property was an instrument of the murder because the Toyota Echo was buried at the Property to conceal evidence of the murder (section 24(1)(b)).
3There were reasonable grounds to suspect that the Property was an instrument of a serious offence, namely murder (regardless of by whom it was committed) because the Toyota Echo was buried at the Property to conceal evidence of the murder (section 24(1)(c)).
On 20 January 2020 Disorganized Developments filed an Offer of Settlement (the Formal Offer) pursuant to rule 187 of the Former Rules. By the Formal Offer, Disorganized Developments offered to resolve the action by entry by the parties into a contract in terms of a “Deed of Settlement and Release” (the Deed). It was a term of the Deed (clause 1) that Disorganized Developments pay to the Director $10,000 within seven days, upon receipt of which the Director would discontinue the action and neither party would seek any further orders, including orders as to costs. It was a term of the Deed (clause 2) that each party release the other party from all claims that it had, or at any time may have, against the other party in relation (directly or indirectly) to the matters set out in the recitals to the Deed.
On 22 January 2020 the Director filed a notice of discontinuance against A.
On 29 January 2020 the interlocutory application for a restraining order came on for argument. The argument did not proceed. Directions were made for the filing of any responding affidavits by Disorganized Developments by 26 February and a responding outline of submissions by 4 March 2020. The interlocutory application was listed for argument on 23 March 2020 (which was subsequently vacated).
On 31 January 2020 the Director filed a Response to Formal Offer in which he contended that he could not reasonably decide whether to accept the offer contained in the Formal Offer within 14 days and he required 14 days after receipt of the affidavits and outline of submissions ordered on 29 January 2020.
On 14 February 2020 the Director filed amended written submissions on the interlocutory application for a restraining order. The submissions articulated a fourth case in addition to the threefold case for a restraining order articulated on 13 January. The fourth case was that there were reasonable grounds to suspect that the Property was an instrument of a serious offence, namely concealing or destroying evidence with the intention of influencing a decision to institute, or the outcome of, judicial proceedings[1] (regardless of by whom it was committed), because the Toyota Echo was buried at the property to conceal evidence of the murder.
[1] Criminal Law Consolidation Act 1935 (SA) section 243.
On 26 May 2020 Disorganized Developments filed an outline of submissions on the interlocutory application for a restraining order.
On 29 May 2020 the action was listed for trial on 3 August 2020.
On 25 and 30 June 2020 respectively, Disorganized Developments filed affidavits by its solicitor, Jon Lister, and Mr Pretty.
On 8 July 2020 it was agreed that the matter would proceed to trial on the forfeiture application only (without the Director seeking a restraining order) and this was listed for trial on 19 October 2020.
On 18 August 2020 the Director filed an amended Originating Application.[2] The effect of the amendments was twofold. First, to join B as an additional respondent (without seeking relief against him). Secondly, effectively to reinstate a claim for a restraining order and a conditional claim for a forfeiture order pursuant to paragraphs (b) or (c) of subsection 47(3) reliant, amongst other things, on a restraining order having been in force for at least six months.
[2] The Uniform Civil Rules 2020 (SA) replaced the Supreme Court Civil Rules 2006 (SA) with effect on 18 May 2020. The Uniform Civil Rules 2020 provide for actions under the Act to be instituted by an Originating Application rather than a Summons.
Disorganized Developments took issue with the entitlement of the Director to so amend and in the alternative sought an order disallowing the amendments. These issues were listed for argument on 16 September 2020.
On 16 September 2020 the Director informed the Court that he had decided not to proceed with the action. Orders were made by consent dismissing the applications dated 10 December 2019, 23 December 2019 and 18 August 2020.[3] Disorganized Developments’ application for costs was listed for argument on 28 September 2020.
[3] The reference to the Summons, Amended Summons and Amended Originating Application was made out of an abundance of caution. It would have been sufficient simply to dismiss the action.
The legislative regime for confiscation
The Act contains complex provisions for the recovery by the Crown of benefits, or the value of benefits, derived or presumed to be derived from the commission of serious offences and of instruments, or the value of instruments, of serious offences. In broad terms, there are nine types of recovery under the Act.
Forfeiture order on proof
The first type of recovery is a forfeiture order under section 47(1)(a) or (3)(a). These provisions empower a court to make an order that property is forfeited to the Crown if the Director proves that:
1a person has been convicted of a “serious offence”; and
2the property is “proceeds” or an “instrument” of the offence respectively.
It is mandatory for the court to make a forfeiture order under section 47(1)(a) if the requisite matters are proved in respect of proceeds of a serious offence. By contrast, the court has a discretion whether to make a forfeiture order under section 47(3)(a) in respect of an instrument of a serious offence.
A “serious offence” is defined by section 3 to be an indictable offence or one of certain summary offences.[4] “Proceeds” of an offence is essentially[5] defined by section 7 to comprise property wholly or partly derived or realised, directly or indirectly, from the commission of the offence. “Instrument” of an offence is essentially[6] defined by section 7 to comprise property used, or intended to be used, in or in connection with the commission of the offence.
[4]    The definition of serious offence also includes a foreign offence declared by the regulations to be within the ambit of the definition.
[5]    There are extensions of the basic definition which need not be described here.
[6]    There are extensions of the basic definition which need not be described here.
The Director need not prove that the owner of or any person with an interest in the property was involved in the commission of the offence. However, if the owner applies for an exclusion order under section 58 or 59 (otherwise described below) and proves that they were not involved in the commission of the offence and that the property is not proceeds or an instrument of the offence, the court may exclude the property from forfeiture.
Confirmation of forfeiture after quashing of conviction
The second type of recovery is an order under section 67 confirming a forfeiture order made under section 47(1)(a) or (3)(a) after the conviction that resulted in the order has been quashed.
A forfeiture order can only be made under section 47(1)(a) or (3)(a) on the conviction of a person of a serious offence. Section 64 provides that prima facie, upon quashing of such a conviction, the property in question or, if it has been disposed of by the Crown, its value must be returned to the person. However, the return is to be deferred under section 64(1)(b) and (2) if the Director makes an application within 14 days that the forfeiture be confirmed under section 67.
Section 67 provides that, upon application by the Director, the court may confirm forfeiture if satisfied that it could instead have made a forfeiture order under section 47(1)(b) or (c) or (3)(b) or (c). An order confirming forfeiture is not a “forfeiture order” as defined by section 3 because it is not an order under section 47.
Pecuniary penalty
The third type of recovery is a pecuniary penalty order under subsections 95(1) and (2). These provisions empower a court to make an order that a person pay to the Crown the value[7] of the benefit derived or the instrument (as the case may be) (less deductions to avoid (potential) double counting)[8] if the Director proves that:
1a person has been convicted of or committed a serious offence; and
2the person derived a benefit from the commission of the offence or the person’s property includes an instrument of the offence.
[7] Sections 99 to 103 and 106 contain relatively complex provisions determining the value.
[8] Sections 104, 107 and 108. (Potential) double counting may arise by reason of a forfeiture, forfeiture order, another pecuniary penalty or a fine.
Like subsection 47(1), it is mandatory for the court to make a pecuniary penalty order under subsection 95(1) if the requisite matters are proved by the Director in respect of a benefit derived from the commission of a serious offence. By contrast, the court has a discretion whether to make a pecuniary penalty order under subsection 95(2) in respect of an instrument of a serious offence.
Literary proceeds order
The fourth type of recovery is a literary proceeds order under section 111. This provision empowers a court to make an order that a person pay to the Crown an amount not exceeding the net[9] value of the benefit derived (less deductions to avoid double counting)[10] if the Director proves that:
1a person has committed a serious offence; and
2the person derived literary proceeds in relation to the offence.
[9] Net of expenses incurred in deriving the benefit under section 114(a). Net of tax under section 121.
[10] Section 114(b) and (c). Double counting may arise by reason of a forfeiture, forfeiture order, pecuniary penalty or another literary proceeds order.
The court has a discretion whether to make a literary proceeds order.
“Literary proceeds” is defined by section 110 to comprise a benefit derived from the commercial exploitation of the notoriety of the person, or another person involved in the commission, resulting from the person committing a serious offence.
Automatic forfeiture after 6 months restraining order
The fifth type of recovery is a forfeiture effected automatically by section 74. This provides that property is automatically forfeited to the Crown if:
1a person has been convicted of a “serious offence”; and
2subject to section 75, at the end of six months after the conviction the property is covered by a restraining order.
Section 24 requires a court, on the application of the Director, to make a restraining order in respect of property:
·suspected on reasonable grounds to be proceeds or an instrument of a serious offence;[11]
·suspected on reasonable grounds to be owned by or under the effective control of a person suspected on reasonable grounds of having committed a serious offence or who is proposed to be charged or has been charged or convicted of a serious offence, except for “protected property”;[12] or
·owned by or under the effective control of a person suspected on reasonable grounds of having committed a serious offence and having derived literary proceeds in relation to the offence, except for “protected property”.[13]
[11] Section 24(1)(c).
[12] Section 24(1)(a) or (b) and (5)(a). These provisions also apply to property of any person suspected on reasonable grounds to be proceeds or an instrument of a serious offence committed by a person who is proposed to be charged or has been charged or convicted of a serious offence but this is redundant given the provisions of section 24(1)(c). Protected property is excluded by subsection 24(5a).
[13] Section 24(1)(d) and (5)(b). Protected property is excluded by subsection 24(5a).

“Protected property” is defined by section 3 to mean property owned by or under the effective control of the person that is of a class declared by regulation for the purposes of the definition. Regulation 5A of the Criminal Assets Confiscation Regulations 2006 (SA) declares what is effectively furniture,[14] personal effects, animals and plants to be protected property.
[14] The class is contents (other than fixtures) of a structure, building, vessel or place other than various excluded types of contents, such as motor vehicles, boats, cash, antique furniture and artwork.
The threshold for making a restraining order is low, being reasonable grounds to suspect both in respect of the commission of a serious offence and in respect of property comprising proceeds or an instrument of the offence. This is obviously lower than a prima facie case or proof on the balance of probabilities.
By the combined operation of sections 24 and 75, prima facie property of or under the effective control of a person, or property suspected on reasonable grounds of being owned by or under the effective control of a person, will be automatically forfeited upon the conviction of the person of a serious offence if the property is the subject of a restraining order six months after the conviction. Likewise, prima facie property suspected on reasonable grounds of being proceeds or an instrument of a serious offence will be automatically forfeited upon conviction of a person of the serious offence if the property is the subject of a restraining order six months after the conviction.
The Act contains several provisions to ameliorate what might otherwise be the harsh operation of the combined effect of sections 24 and 75. The overall effect of these provisions is generally to reverse the onus of proof that property is the proceeds or an instrument of a serious offence. These provisions are as follows.
1Sections 34 and 35 empower a court, on application by an owner, to exclude property from a restraining order that would otherwise be made if the person proves that:
a.the property is not proceeds or an instrument of any serious offence (whether or not the offence relied on by the Director);
b.a pecuniary penalty or literary proceeds order could not be made against the owner or, if the property is subject to the suspect’s effective control, the suspect;
c.the property could not be subject to an instrument substitution declaration if the suspect were convicted of the offence;
d.either the suspect is not and would not become a “prescribed drug offender” as a result of conviction of the offence relied on by the Director or the property is “protected property”;
e.the owner’s interest in the property was lawfully acquired; and
f.it would not be contrary to the public interest for the property to be excluded from the order.
2Section 43 empowers a court, on application by a person who was not notified of the application for the restraining order, to revoke a restraining order (with future effect) if there are no grounds to support the making of a restraining order.
3Sections 34 and 36 empower a court, on application by an owner who did not have notice of the application for the restraining order, to exclude property from a restraining order previously made if the person proves the matters summarised at 1(a) to (f) above. The court may grant permission to an owner who had notice of the application for the restraining order to make an application if the owner relies on fresh evidence or for good reason or on special grounds.
Confirmation of forfeiture after automatic forfeiture
The sixth type of recovery is an order under section 86 confirming a forfeiture effected automatically by section 74 after the conviction that resulted in the forfeiture has been quashed.
Automatic forfeiture under section 74 operates on the conviction of a person of a serious offence. Section 83(1)(a) and (b) provide that prima facie, upon quashing of such a conviction, the property in question or, if it has been disposed of by the Crown, its value must be returned to the person. However, the return is to be deferred under section 83(1)(c) and (2) if the Director makes an application within 14 days that the forfeiture be confirmed under section 86.
Section 86 provides that, upon application by the Director, a court may confirm forfeiture if satisfied that it could make a forfeiture order under section 47 in relation to the alleged serious offence if the Director were to apply for such an order. An order confirming forfeiture is not a “forfeiture order” as defined by section 3 because it is not an order under section 47.
Forfeiture order after 6 months restraining order
The seventh type of recovery is a forfeiture order under section 47(1)(b) or (c) or (3)(b) or (c).
It is mandatory for a court to make a forfeiture order under subsection 47(1) if the requisite matters are proved by the Director in respect of proceeds of a serious offence. By contrast, the court has a discretion whether to make a forfeiture order under subsection 47(3) in respect of an instrument of a serious offence.
Section 47(1)(b) and (3)(b) empower a court to make an order that property is forfeited to the Crown if:
1the property is covered by a restraining order under section 24(1)(b) that has been in force for at least 6 months; and
2the Director proves that the property is proceeds or an instrument of the offence respectively.
Although the Director is required to prove on the balance of probabilities that the property is proceeds or an instrument of a serious offence of which the suspect has being convicted, charged, proposed to be charged or is suspected on reasonable grounds, it appears that the Director is not required to prove on the balance of probabilities the commission of the offence. It appears that the threshold in this respect may merely be that a person is suspected on reasonable grounds of having committed the offence.
Section 47(1)(c) and (3)(c) empower a court to make an order that property is forfeited to the Crown if:
1the property is covered by a restraining order under section 24(1)(c) that has been in force for at least 6 months;
2the Director alleges in the application for the forfeiture that the property is proceeds or an instrument of the offence respectively;
3no application has been made under section 35 or 36 for the property to be excluded from the restraining order or any such application has been withdrawn; and
4the Director has taken reasonable steps to notify persons with an interest in the property.
When an application for forfeiture is made under section 47(1)(c) and (3)(c), the Director is not required to prove either the commission of a serious offence or that the property is proceeds or an instrument of the offence. When an application for forfeiture is made under section 47(1)(b) and (3)(b), the Director is required to prove that the property is proceeds or an instrument of the alleged offence but is not required to prove the commission of the serious offence.
The Act contains several provisions to ameliorate what might otherwise be the harsh operation of section 47(1)(b) and (c) and (3)(b) and (c). The effect of these provisions is to reverse the onus of proof that property is the proceeds or an instrument of a serious offence and the commission of the alleged serious offence. These provisions are as follows.
1Sections 58 and 60 empower a court, on application by an owner, to exclude property from a forfeiture order that would otherwise be made if the person proves that the property is not proceeds or an instrument of any serious offence (whether or not the offence relied on by the Director).
2Sections 59 and 60 empower a court, on application by an owner who did not have notice of the application for the forfeiture order, to exclude property from a forfeiture order previously made if the person proves that the property is not proceeds or an instrument of any serious offence (whether or not the offence relied on by the Director). The court may grant permission to an owner who had notice of the application for the forfeiture order to make an application if the owner relies on fresh evidence or for other good reason or on special grounds.[15]
[15] An application must be made within six months of the forfeiture order but a court is empowered to grant permission outside that period if the person's failure to apply earlier was not due to any neglect or on special grounds.
In addition, if an exclusion or revocation application has successfully been made in respect of property, as summarised at [42] above, before the forfeiture order would otherwise be made, a forfeiture order cannot be made in respect of that property because the prerequisite that the property is covered by a restraining order in force for at least six months will not be met.
Automatic forfeiture of property of prescribed drug offender
The eighth type of recovery is a forfeiture effected automatically by section 56A. This provides that property of or subject to the effective control of a person, other than “protected property” or property that has been excluded from a restraining order, is deemed to be the subject of a forfeiture order forfeiting the property to the Crown upon the person being convicted of a “prescribed drug offence” and thereby becoming a “prescribed drug offender”.
A “prescribed drug offence” is defined by section 6A to be an indictable offence against Part 5 Division 2 or 3 of the Controlled Substances Act 1984 (SA) or an offence prescribed by the regulations. Under section 6A, a person becomes a “prescribed drug offender” upon conviction of a prescribed drug offence if the offence is a commercial drug offence (as defined by section 6A) or the person has two prior convictions for prescribed drug offences and the three offences were committed on separate occasions within 10 years (excluding periods in custody).
Confirmation of forfeiture after automatic forfeiture of prescribed drug offender’s property
The ninth type of recovery is an order under section 67 confirming a deemed forfeiture order under section 56A after the conviction that resulted in the deemed order has been quashed.
Subsection 56A(3) provides that the Act generally applies to a deemed forfeiture order under section 56A as if it were a forfeiture order under section 47(3)(a). Section 64 provides that prima facie, upon quashing of a conviction upon which a forfeiture order under section 47(1)(a) or (3)(a) relies, the property in question or, if it has been disposed of by the Crown, its value must be returned to the person. However, the return is to be deferred under section 64(1)(c) and (2) if the Director makes an application within 14 days that the forfeiture be confirmed under section 67.
Section 67 provides that, upon application by the Director, a court may confirm forfeiture if satisfied that it could instead have made a forfeiture order under section 47(1)(b) or (c) or (3)(b) or (c). An order confirming forfeiture is not a “forfeiture order” as defined by section 3 because it is not an order under section 47.
Although the position may not be free of doubt, I assume that sections 64 and 67 apply to a deemed forfeiture order under section 56A in the same manner as they apply to an actual forfeiture order under section 47.
The parties’ contentions
Disorganized Developments seeks an order for costs in the general jurisdiction of the Court pursuant to section 40 of the Supreme Court Act 1935 (SA) (the Supreme Court Act) on the basis that costs should follow the event. It seeks an order for indemnity costs pursuant to rule 188F of the Former Rules on the ground that the Formal Offer was, subject to one exception, a “complying offer” and it obtained judgment on the claim to which the offer related. It accepts that the offer did not meet paragraph (c) of the definition of a “complying offer” but seeks dispensation with this requirement. Alternatively, it seeks an order for indemnity costs pursuant to rule 188G of the Former Rules on the ground that it has achieved a better result than the terms of its offer.
The Director contends that the subject matter of the costs sought by Disorganized Developments falls within section 227(1)(a) of the Act; the general jurisdiction of the Court to award costs pursuant to section 40 of the Supreme Court Act does not apply to costs falling within that provision; Disorganized Developments has not proved the prerequisite contained in section 227(1)(c) for an order for costs under that section; and accordingly the Court has no power to order that he pay the costs of Disorganized Developments. Disorganized Developments takes issue with each of the three premises of the Director’s contention.
The Director contends in the alternative that, if there is power to order payment of Disorganized Developments’ costs, the costs order should be on the standard costs basis and not an indemnity basis. First, the Director contends that the indemnity cost regime under rule 188F does not apply to proceedings under, and is inconsistent with, the Act. Secondly, the Formal Offer was not a “complying offer” within the meaning of rule 188F because it did not involve a “genuine compromise” and did not contain a term either that Disorganized Developments pay the Director’s costs on a party/party basis or that the parties submit to any order the Court may make in the exercise of its discretion. Thirdly, the Director could not reasonably decide whether to accept the offer within 14 days (within the meaning of subrule 188A(2)) because he had not received responding affidavits or an outline of submissions from Disorganized Developments. Fourthly, the Court ought not to exercise its discretion under rule 188G to order indemnity costs.
Application and effect of section 227
Scope of section 227(1)(a)
Section 227 of the Act provides:
227—Costs and exemplary or punitive damages
(1)     A court may, if—
(a)     a person brings, or appears at, proceedings under this Act—
(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 serious offence in respect of which the forfeiture order or restraining order was sought or made,
order the Crown to pay the person costs in connection with the proceedings or such part of those costs as is determined by the court.
(1a)   However, the court may not award exemplary or punitive damages to the person.
(2)To avoid doubt, 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.
Section 227(1)(a), and specifically subparagraph (i), is ambiguous. It might refer to:
·a person applying under section 58 or 35 to prevent a forfeiture or restraining order being made against property of the person by the property being excluded from any such order; or alternatively
·a person appearing at a hearing to oppose the making of a forfeiture or restraining order.
Disorganized Developments advances the former construction. The Director advances the latter construction.
Starting with the text of section 227(1)(a), first, it refers to bringing or appearing at proceedings to prevent a forfeiture or restraining order from being made against property of the person. If the suspect appears at the hearing in opposition to an application by the Director for a forfeiture order or restraining order, it is inapposite to describe the appearance as being to “prevent” the order being made. The person has no power to prevent the making of an order; the person only has power to seek to persuade the court not to make the order. Moreover, it is mandatory for the court to make a restraining order under section 24 if any one of the prerequisites in subsection 24(1) is established by the Director and it is mandatory for the court to make a forfeiture order under subsection 47(1) if any one of the prerequisites in subsection 47(1) is established by the Director, which renders it particularly inapposite to describe an appearance as being to prevent the order being made. By contrast, if the owner of property brings an application under section 35 or 58 for an order excluding property from a forfeiture or restraining order that would otherwise be made, it is apposite to describe the proceeding or appearance as being “to prevent” a forfeiture or restraining order from being made because that is the purpose and effect of the application.
Secondly, section 227(1)(a) refers to bringing or appearing at proceedings to prevent a forfeiture or restraining order from being made against property of the person. The paradigm case of a person appearing at a hearing to oppose the making of a forfeiture or restraining order will be an appearance by the suspect opposing the making of any forfeiture or restraining order, not just in relation to property of the suspect. The addition of the words “against property of the person” are inapposite to apply to this paradigm case. A restraining order can be made in respect of property that is not property of the suspect but merely subject to the effective control of the suspect. On the Director’s construction, section 227(1)(a) would not apply if the Director’s application were for a restraining order over property subject to the effective control of the suspect but there would be no rational reason for this differentiation. Similarly, a restraining order can be made under section 24(1)(c) or (3)(c) even if it is unknown who owns the property in question. On the Director’s construction, section 227(1)(a) would not apply if the suspect successfully opposed the making of a forfeiture or restraining order when the suspect was not the owner of the property. By contrast, if the owner of the property brings an application under section 35 or 58 for an order excluding property from a forfeiture or restraining order that would otherwise be made, it is apposite to describe the proceeding or appearance as being to prevent a forfeiture or restraining order from being made “against property of the person” because that is the purpose and effect of the application. Moreover, under sections 35 and 58, only the owner of the property in question can bring such an application.
Thirdly, section 227(1)(a) refers to a person who “brings or appears at” proceedings to prevent a forfeiture or restraining order from being made against property of the person. When the owner appears at a hearing to oppose an application by the Director for a restraining or forfeiture order, there is no sense in which it can be said that the owner “brings proceedings”. It is clear that section 227(1)(a), insofar as it refers to a person who “brings or appears at” proceedings, is not to be read distributively as between subparagraphs (i) and (ii) because, on the Director’s construction, the verb “bring” could not apply to subparagraph (i) and both verbs “bring” and “appear” could apply to subparagraph (ii). Accordingly, section 227(1)(a) contemplates that both verbs could apply to either subparagraph. By contrast, if the owner of property brings an application under section 35 or 58 for an order excluding property from a forfeiture or restraining order that would otherwise be made, it is apposite to describe the application as a proceeding brought to prevent a forfeiture or restraining order from being made against property of the person.
Each of these considerations points in favour of the construction advanced by Disorganized Developments and against the construction advanced by the Director. On the other hand, on the construction advanced by Disorganized Developments, subparagraph (i) might be regarded as otiose because, if it were omitted, subparagraph (ii) might be regarded as applying, not only to an application made after the making of a restraining or forfeiture order to exclude property from that order, but also to an application before the making of a restraining or forfeiture order. However, although sections 35 and 58 describe applications under those provisions as being for an order excluding property from a restraining or forfeiture order, the wording of subparagraph (ii) in the context of subsection 227(1) naturally suggests that that subparagraph is addressing an application for exclusion of property from a restraining or forfeiture order that has already been made. The legislature may have included subparagraph (i) specifically to address an application under section 35 or 58 which has the effect of preventing a restraining or forfeiture order applying to property the subject of the application. This dichotomy between a restraining or forfeiture order that has been sought but not made and an order that has been made is consistent with the approach in section 227(1)(c) which distinguishes in like fashion between a forfeiture or restraining order that is “sought” and one that is “made”.

Turning to the context of section 227(1)(a), the effect of section 227 is to empower the court to award costs to a successful party against the Director on a broader basis than normally would be recoverable by the successful party in civil proceedings but to limit the circumstances in which a costs order can be made under the section. One limit is imposed by section 227(1)(a), the breadth of which is currently being considered. The other limit is imposed by section 227(1)(c), which requires the successful party to prove that they were not involved in the commission of the serious offence in question.
In relation to the expanded breadth of costs under section 227, subsection 227(2) expressly provides (to avoid doubt) that the costs that may be awarded under the section are not limited to costs of a kind normally recoverable by the successful party to civil proceedings. One example of the expanded breadth of costs under section 227 relates to a successful party who is a lawyer. Under general costs principles, such a party cannot recover as costs the value of legal work done by that party, either when the party is self-represented or when the party is represented by another lawyer but undertakes legal work for the purpose of the action.[16] However, such a party could recover such costs under section 227. Another example relates to costs incurred in obtaining litigation funding for an action. Under general costs principles, the amount payable to the litigation funder as the price of the funding of costs is not ordinarily recoverable.[17] However, such amount could potentially be recovered as costs under section 227. Another example relates to costs incurred by a party in excess of costs shown to be reasonably incurred on the relevant costs scale.[18] Although costs are in the discretion of the court, in practice costs in excess of such costs are ordinarily not awarded unless the party recovering costs demonstrates that the case falls within a recognised category justifying the award of indemnity or solicitor/client costs. However, indemnity costs might be awarded under section 227 without such a limitation applying.
[16] Bell Lawyers Pty Ltd v Pentelow [2019] HCA 29; (2019) 93 ALJR 1007 at [3] per Kiefel CJ, Bell, Keane and Gordon JJ, [67] per Gageler J and [99] per Edelman J.
[17] Burford v Allen (Unreported, Supreme Court of South Australia, Full Court 26/5/1998) per Doyle CJ (with whom Millhouse and Nyland JJ agreed).
[18] See the definition of “standard costs basis” in rule 191.1 of the Uniform Civil Rules 2020 (SA).
For ease of reference, because section 227 empowers a court to make a costs order more favourable to the successful party than under the general jurisdiction of the court in special circumstances, I refer to such a costs order as a special costs order.
In relation to the limit imposed by section 227(1)(a), on any construction of that provision, it does not apply to all cases in which a party is successful in proceedings under the Act. On any view, it does not apply to:
·an unsuccessful application by the Director under section 67 for confirmation of a forfeiture order (the second type of recovery at [29] above);
·an unsuccessful application by the Director under section 95 for a pecuniary penalty (the third type of recovery at [32] above);
·an unsuccessful application by the Director under section 111 for a literary proceeds order (the fourth type of recovery at [34] above);
·an unsuccessful application by the Director under section 86 to confirm a forfeiture effected automatically by section 74 after the conviction has been quashed (the sixth type of recovery at [43] above);
·an unsuccessful application by the Director under section 67 to confirm a deemed forfeiture order under section 56A after the conviction has been quashed (the ninth type of recovery at [56] above); or
·a successful application by a person under section 43 to revoke a restraining order (relevant to the fifth type of recovery at [37] above).
Thus, in general, section 227(1)(a) does not apply to the dismissal of an application for recovery by the Director in almost all cases. On Disorganized Development’s construction, there is no exception to this. On the Director’s construction, there is a single exception, namely an application by the Director for a restraining or forfeiture order.
The question arises as to the rationale for the legislature distinguishing between those categories in which a special costs order under section 227 is available and those in which it is not. On the Director’s construction, it is difficult to identify any rational reason why a special costs order should be available on the dismissal of an application for a restraining or forfeiture order but not on the dismissal of the other types of applications by the Director referred to at [73] above.
On Disorganized Development’s construction, a special costs order under section 227 is not available on the dismissal of any application by the Director and is only available on the grant of an application by the owner of property under sections 34 to 36 or 58 to 60 to exclude the owner’s property from a restraining or forfeiture order that would otherwise be made or has been made. In order to justify such an order, the owner of the property bears the onus of proving the prerequisites to making the order, which include proof that the property is not proceeds or an instrument of any serious offence (whether or not the offence relied on by the Director). This is capable of comprising a rational criterion for a special costs order, albeit on any view the policy distinction between cases falling within and outside section 227(1)(a) is somewhat obscure.
Turning to the evident purpose of section 227, at a basic level its evident purpose is to empower the court to make a special costs order in favour of a successful party in relation to proceedings under the Act in circumstances falling within section 227(1)(a) if the successful party also proves that they were not involved in any way in the commission of the serious offence in question. This begs the question of the evident purpose of confining the power to make a special costs order to circumstances falling within section 227(1)(a). Although this is somewhat obscure for the reasons explained in the previous paragraphs, for those reasons it is more likely that the evident purpose does not apply to unsuccessful applications under the Act by the Director and is confined to applications by the owner of property under sections 34 to 36 or 58 to 60 to exclude property from a restraining or forfeiture order that would otherwise be made or has been made.
The parties do not cite any authority in which this issue of construction has been considered or decided. In Director of Public Prosecutions (SA) v Dobie[19] the Full Court proceeded on the assumption of the Director’s construction of section 227(1)(a). However, the issue did not arise because on any view the Director’s application in that case for a pecuniary penalty order fell outside the scope of section 227 and Dobie’s application for an exclusion order fell within the scope of section 227.
[19] [2010] SASCFC 7, (2010) 203 A Crim R 52.
Having regard to the text, context and (insofar as it can be discerned) evident purpose of section 227(1)(a), it applies to the grant of an application by the owner of property under sections 34 to 36 or 58 to 60 to exclude the owner’s property from a restraining or forfeiture order that would otherwise be made or has been made. It does not apply merely to the dismissal of an application by the Director for a restraining or forfeiture order.
In the present case, Disorganized Developments did not make any application under sections 34 to 36 or 58 to 60 to exclude the Property from a restraining or forfeiture order that would otherwise be made. Section 227 therefore has no application to the costs of this action.
The Director concedes that section 227 is not a code exclusively addressing the power of the court to order costs against the Director in respect of proceedings under the Act outside the scope of section 227(1)(a). This concession is rightly made.
Exclusion of general costs power for cases within section 227(1)(a)
The Director contends that the general jurisdiction of the Court to award costs pursuant to section 40 of the Supreme Court Act does not apply to costs falling within section 227(1)(a).
Starting with the text of section 227, there is nothing in the text that excludes, or suggests that the section excludes, the general jurisdiction of the Court under section 40 of the Supreme Court Act to order costs. Section 227 empowers the court to make a special costs order when it would not do so in the exercise of the general discretion to award costs. Insofar as it does so, it expands the power of the court. Unsurprisingly, this expanded power is subject to limitations and specifically section 227(1)(b) and (c) limit the expanded power to cases in which the applicant for costs was successful and was not involved in any way in the commission of the serious offence in question. There is nothing in the text that provides that, unless the prerequisites in subsection 227(1) are satisfied, the ordinary jurisdiction of the court to award costs is excluded. If that had been the intent, it may be expected that the legislature would have expressly so provided.
Turning to the context of section 227, on any view, as summarised above, section 227(1)(a) does not cover the field of proceedings under the Act. Even on the Director’s construction of that provision (which I have rejected), section 227(1)(a) does not apply to the dismissal of most applications by the Director under the Act. This renders it very unlikely that the legislature intended that, in cases falling within section 227(1)(a), the court has power to make a special costs order in favour of a successful party but in cases falling outside section 227(1)(a) it has no power to make any costs order in favour of a successful party. For example, on the Director’s contention, the court would have power to make a costs order on a successful application to exclude property from a restraining order but not on a successful application to revoke a restraining order. Likewise, the court would have power to make a costs order on an application for forfeiture under section 47 but not on an application to confirm a forfeiture under section 67 or 86, nor on an application for a pecuniary penalty or literary proceeds order. There is no evident rationale for such discrimination.
The evident purpose of section 227 is to expand the court’s power to order special costs in limited circumstances. The evident purpose is not to exclude the court’s power under the general jurisdiction to order costs in cases to which section 227(1)(a) applies.
In Diez v Director of Public Prosecutions[20] the New South Wales Court of Appeal considered whether section 101 of the Proceeds of Crime Act 1987 (Cth) excluded the general jurisdiction of the Supreme Court under section 76 of the Supreme Court Act 1970 (NSW) (as applied by the Judiciary Act 1903 (Cth)). Section 101 of the Commonwealth Act was in largely identical terms to section 227 of the Act, except that it did not contain subsection (1a). The New South Wales Court of Appeal held that the general jurisdiction of the Supreme Court was not excluded by section 101.[21]
[20] (2004) 62 NSWLR 1; [2004] NSWCA 452.
[21] At [43]-[48], [54] and [62] per Santow JA (with whom Beazley and Tobias JJA agreed).
Having regard to the text, context and evident purpose of section 227, it does not exclude the general power of the Court under section 40 of the Supreme Court Act to order costs.
Application of section 227(1)(c)
Disorganized Developments contends that it has in any event proved the prerequisite in section 227(1)(c) for an order for costs under section 227. The Director takes issue with that contention.
Given my conclusion that section 227 does not in any event apply and that it does not preclude the exercise of the general cost discretion pursuant to section 40 of the Supreme Court Act, it is not strictly necessary to decide this question. However, I do so for the sake of completeness.
Section 227(1)(c) requires the court to be satisfied that the person seeking costs was not involved in any way in the commission of the serious offence in respect of which the forfeiture or restraining order was sought or made.
Mr Pretty in his affidavit deposed that he knew nothing about anybody burying a vehicle on the Property which the police apparently discovered in September 2019. He said that no one ever sought the permission of himself or the directors of the company to bury that vehicle, nor did anyone ever communicate with him or the directors about burying a vehicle at the property. He said that, if anyone had suggested that they wanted to bury a vehicle to keep it away from police, the directors would have refused permission. He said that he believed that somebody had taken the opportunity to bury the car there without anyone from the company knowing.
Mr Pretty did not say that he knew the facts deposed to in his affidavit of his own knowledge, nor did he identify a source other than his own knowledge of the statements contained in his affidavit. He did not say that he had spoken to Mr Stacy concerning any of the matters deposed to in his affidavit, including the matters summarised in the previous paragraph. Disorganized Developments did not adduce any evidence from Mr Stacy concerning these matters.
The serious offences in respect of which the restraining order was sought included the concealing or destruction of evidence with the intention of influencing a decision to institute, or the outcome of, judicial proceedings. If section 227 applied, Disorganized Developments would bear the onus of proving that it was not involved in any way in the commission of that offence.
In the circumstances, I cannot be satisfied that Disorganized Developments was not involved in any way in the concealing or destruction of evidence. Under the principles of attribution of responsibility to a company, the highest level for attribution is the board of directors. However, it is not uncommon for one director, particularly in a company that has only two directors, to have authority to act on behalf of the company. It is also not uncommon for a company to authorise employees or agents to act on its behalf. No evidence was adduced by Disorganized Developments, and there is no evidence in Mr Pretty’s affidavit, concerning how decisions were made and activities were undertaken by or on behalf the company. No evidence was adduced to negate that any person, whether Mr Stacy or otherwise, acted on behalf of the company to assist in the concealing or destruction of evidence. I stress that there is no affirmative evidence that any such person did so and I make no affirmative finding to that effect. However, the onus of proof lies on Disorganized Developments to negate this, and it has not done so. The fact that the Director has not proved the affirmative does not affect this conclusion.[22]
[22] The principle in Apollo Shower Screens Pty Ltd v Building and Construction Industry Long Service Leave Payments Corporation (1985) 1 NSWLR 561 cited by Disorganized Developments has no application in the present case.
Disorganized Developments failed to prove that it was not involved in any way in the commission of the serious offence in respect of which the forfeiture and restraining orders were sought within the meaning of section 227(1)(c).
Order for costs
The Director does not oppose an order that he pay Disorganized Development’s costs of action on the standard costs basis if the Court has power to make an order for costs in the general jurisdiction under section 40 of the Supreme Court Act.
There is no reason not to make a costs order in favour of Disorganized Developments. It has been wholly successful in the action.
Rule 188F
Application of formal offer costs regime to proceedings under the Act
The Director contends that the indemnity costs regime under rule 188F of the Former Rules[23] does not apply to proceedings under the Act because it is inconsistent with the nature of proceedings for a restraining or forfeiture order under the Act.
[23] The Director would make the same submission about the indemnity costs regime under rule 132.10 of the Uniform Civil Rules 2020 (SA).
The Director contends that an application for a restraining or forfeiture order is not the same as an ordinary inter partes action. The Director contends that the objective of such an application is not simply monetary compensation but the Act provides for the restraint or forfeiture of property used as an instrument in the commission of a serious offence to deprive criminals of the instruments to commit offences where it is in the public interest to do so. The Director contends that an offer of monetary compensation does not adequately address the objectives of an application in those circumstances. The Director concedes that the Court retains a discretion to award indemnity costs in the exercise of its general discretion but contends that rule 188F provides for an entitlement to indemnity costs which is inconsistent with the Act.
I reject the Director’s contention that the provisions of rule 188F are inconsistent with the Act. First, the Act contains provisions for the recovery by the Director of purely monetary relief, such as pecuniary penalties and literary proceeds orders. There is no reason to consider that the Act impliedly excludes the operation of rule 188F in respect of such proceedings. This renders it less likely that the Act impliedly excludes the operation of rule 188F in respect of some, but not other, proceedings under the Act.
Secondly, in cases in which a court makes a forfeiture order, section 54 requires the court to specify the value of the forfeited property and section 55 empowers the court to declare that a person’s interest in forfeited property may be excluded under section 72 from the operation of the forfeiture order. Section 72 in turn provides that, when such an order has been made, that person has a right to buy back from the Crown their interest in the forfeited property upon payment of the declared value of their interest. Section 55 provides that the court may make a declaration if it would not be contrary to the public interest and there is no other reason why the person’s interest should not be transferred to the person on payment of the value of the interest.
Similarly, section 38 empowers the court to exclude property of the suspect from a restraining order, and section 44 empowers the court to revoke a restraining order, if the suspect gives satisfactory security to meet any liability that may be imposed under the Act. Subsection 74(5) provides that, if subsection 74(1) operates to provide for automatic forfeiture on conviction, it operates in respect of the security instead of the original property.
Accordingly, there are various circumstances in which the Act contemplates that property that would otherwise be forfeited is retained by the owner and instead the Crown receives the monetary value of that property. This demonstrates that resolution of an action by a monetary payment is not necessarily inconsistent with the Act.
Thirdly, rule 188F does not give to an offeror an absolute entitlement to indemnity costs if the offeree does not achieve a better result on the final determination of proceeding. Subrule 188F(2) provides that the “provisions of this rule are subject to the overriding discretion of the Court”. Ultimately the decision is discretionary.
Rule 188F is not inconsistent with the Act in its application to actions for restraining or forfeiture orders. However, the nature of the particular application for a restraining or forfeiture order will need to be considered in comparing the result with the offer under subrules 188F(4) and (6); when determining whether the offer involves a genuine compromise under rule 188F(1)(b); and when determining whether the court should exercise its discretion under subrule 188F(2) not to order indemnity costs.
Application of rule 188F

It is common ground that, under the transitional provisions of the Uniform Civil Rules 2020 (SA), the Former Rules govern the question whether indemnity costs should be ordered as result of the making of the Formal Offer.[24]
[24] Rule 132.10 of the Uniform Civil Rules 2020 (SA) is in similar terms to rule 188F.
Rule 188F of the Former Rules provided:
188F—Costs where complying offer not accepted
(1)     In this Part
complying offer means a formal offer that—
(a)     complies with rule 187;
(b)     involves a genuine compromise;
(c)     contains a term either that the defendant on the relevant claim is to pay the costs of the plaintiff on the relevant claim on a party and party basis or that the parties will submit to any order the Court may make in the exercise of its discretion;
(d)     if a contract offer—
(i)    is a monetary offer; and
(ii)if made by the party who is to pay the money, the money is payable under the terms of the offer within not more than 28 days after acceptance of the offer and the party is ready, willing and able to pay the money in accordance with the terms of the offer; and
(e)     was filed at least 21 clear calendar days before the commencement of the trial of the claim to which it relates or such later date as may be specified by the Court on application for an extension of time made before the formal offer is made.
Note—
If the trial is vacated or adjourned without being part heard, the original trial date the subject of the vacation or adjournment order is to be ignored for the purpose of paragraph (e).
monetary offer means a formal offer under which the principal consideration payable by one party to the other (disregarding costs) is the payment of money.
(2)     The provisions of this rule are subject to the overriding discretion of the Court.
(3)When a complying offer is made by a plaintiff and not accepted by a defendant and the plaintiff obtains judgment on the claim to which the offer relates no less favourable to the plaintiff than the terms of the offer—
(a)     the costs incurred in respect of the claim up to 14 days after service of the formal offer are unaffected by the making of the formal offer;
(b)     the plaintiff is entitled to an order against the defendant for the plaintiff's costs of action in respect of the claim to which the complying offer relates thereafter on an indemnity basis.
(4)When a complying offer is made by a defendant and not accepted by a plaintiff and the defendant obtains judgment on the claim to which the offer relates—
(a)     the costs incurred in respect of the claim up to 14 days after service of the formal offer are unaffected by the making of the formal offer;
(b)     the defendant is entitled to an order against the plaintiff for the defendant's costs of action in respect of the claim to which the complying offer relates thereafter on an indemnity basis.
(5)When a complying offer is made by a defendant and not accepted by a plaintiff and the plaintiff obtains judgment in respect of the claim to which the offer relates less favourable to the plaintiff than the terms of the offer—
(a)     the costs incurred in the action up to 14 days after service of the formal offer are unaffected by the making of the formal offer;
(b)     the defendant is entitled to an order against the plaintiff for the defendant's costs of action in respect of the claim to which the complying offer relates thereafter on a party and party basis.
(6)When a party makes a complying offer for a proportion of damages to be assessed, the provisions of this rule do not apply to costs incurred in relation to the quantum of damages unless the Court specifically orders.
Complying offer
There are five prerequisites for an offer to comprise a “complying offer” as defined in subrule 188F(1). It must comprise a “formal offer” in compliance with rule 187, which is conceded by the Director in respect of the Formal Offer. It must involve a genuine compromise, which is disputed by the Director. It must contain a term as to costs in accordance with paragraph (c); it is conceded by Disorganized Developments that the Formal Offer does not contain such a term but it seeks dispensation in this respect. It must also meet the requirements of paragraphs (d) and (e), which is conceded by the Director in respect of the Formal Offer.
Requisite term as to costs
The third requirement for an offer to comprise a “complying offer” is that it contain one of two alternative terms as to costs, being either a term:
1that the defendant pay the costs of the plaintiff on a party and party basis; or
2that the parties will submit to any order the Court may make in the exercise of its discretion.
The rationale for the introduction of this requirement is that it was previously common for a party to include a term in a formal offer that each party bear their own costs and this rendered it difficult to compare the result with the offer or to determine whether the offer involved a genuine compromise.
Rule 117(2)(a) empowered the Court to dispense with compliance with a rule and subrule 117(1) more generally empowered the Court to make any order it considers necessary in the interests of justice.
Although there is no doubt that the Court has power to do so, it will be relatively rare for the Court to dispense with an element of a defined term (such as a “complying offer”) with the result that something falls within the definition when it would not otherwise do so.
If a settlement offer falls within the definition of a “complying offer”, it has very substantial consequences because, subject to the Court’s overriding discretion, it may result in a costs order being on an indemnity basis rather than a standard costs basis (formerly party/party basis under the Former Rules). If a party making a settlement offer wishes to obtain this advantage, it is incumbent on the party to ensure that the offer meets the prerequisites to amount to a “complying offer”.
In this case, the Formal Offer manifestly does not meet the prerequisite contained in paragraph (c) of subrule 188F(1). The fact that it did not do so renders it more difficult to determine whether the offer involves genuine compromise. No reason is advanced by Disorganized Developments why the Formal Offer did not contain a term as to costs required in order to amount to a “complying offer”. Taking into account all of the circumstances, this is not a case in which there should be dispensation from this requirement.
Requisite genuine compromise
The second requirement for an offer to comprise a “complying offer” is that it involve a genuine compromise.
In a case (such as the present) governed by subrule 188F(4), the offer must involve genuine compromise compared to the position if judgment had been entered in favour of the defendant on the date of the offer.
The Formal Offer included a term that Disorganized Developments pay to the Director $10,000. This was a relatively small amount compared to the value of the Property, which had been valued by the Valuer-General at $138,000. The offer did not include any payment of or towards the costs of action of the Director. If the Director had obtained judgment for $10,000 on the date of the offer, it is likely that the judgement would have included some award of costs.
When the Formal Offer was made on 20 January 2020, the Director must have incurred substantial costs, including drawing the summons, taking instructions for and drawing the affidavits filed in support, filing and serving the proceeding and attendance at the directions hearing on 12 December 2019. By contrast, as at 20 January 2020 Disorganized Developments would have incurred relatively few legal costs, involving principally perusing the documents issued by the Director and attendance at the directions hearing on 12 December 2019.
The Formal Offer included a provision (clause 2 of the Deed) whereby the Director released Disorganized Developments not only in respect of the claim the subject of the action but also any future claim within the scope of the release. There is considerable doubt about the scope of the release.
The release was expressed in terms of any claim “in relation to (directly or indirectly) the matters set out in the recitals hereto”. Recital A recited filing of an application by the Director seeking restraining and forfeiture orders in respect of the Property and recital B recited that Disorganized Developments disputed the factual and legal basis for the application in all respects.
On the one hand, the release might be construed as broadly as applying to any application by the Director for a restraining or forfeiture order in respect of the Property, regardless of the factual basis. On the other hand, it might be construed as narrowly as only applying to the application by the Director based on the affidavits filed in support of the Summons. In view of the fact that the Summons did not identify the bases for the restraining or forfeiture orders sought, I am disposed to consider that the release would be construed broadly. In any event, if the Director had accepted the Formal Offer, he would have been exposed to the risk that the release would be construed broadly.
If the Director’s application for a forfeiture order had been the subject of an order of dismissal on the merits made on 20 January 2020, the doctrine of res judicata (assuming that it applies to proceedings under the Act) would have precluded a future application by the Director on the same factual basis as the affidavits filed in support of the Summons but would not have precluded a future application on some other factual basis. In addition, section 49 of the Act dilutes the doctrine of res judicata by empowering a court to give permission to the Director to bring a fresh application for forfeiture after a previous application has been finally determined on the merits if necessary evidence becomes available only after the first application was determined or it is in the interests of justice to grant permission.
If the Director’s application for a restraining order had been the subject of an order of dismissal on the merits on 20 January 2020, the doctrine of res judicata would not have precluded a subsequent application for a restraining order on the same or different facts (although an application on the same facts may have been considered to be an abuse of process).
Accordingly, the release contained in clause 2 of the Deed provided a more favourable result to Disorganized Developments in respect of both any future restraining order application and any future forfeiture application than if the Director’s application for restraining and forfeiture orders had been dismissed on the merits on the date of the Formal Offer.
Weighing the comparative advantage to Disorganized Developments by reason of the release against the relatively small monetary offer of $10,000 and the term of the offer that each party bear their own costs, the Formal Offer did not involve a genuine compromise within the meaning of rule 188F(1)(b).
Response under rule 188A
The Director contends that he could not reasonably decide whether to accept the offer within 14 days because he had not received responding affidavits or an outline of submissions from Disorganized Developments.
Subrule 188A(1) required an offeror to respond to the offer within 14 days.[25] Ordinarily this required the offeree to accept or not accept the offer or contend that the offer did not comply with rule 187. However, in special circumstances, the offeree could instead file a response contending that the offeree could not reasonably decide whether to accept the offer within 14 days, identifying how long was reasonably needed and explaining why.
[25] Rule 132.6 of Uniform Civil Rules 2020 (SA) is in similar but not identical terms.
The rationale for rule 188A was to avoid arguments on costs after the final determination of an action as to whether an offer complied with rule 187 or gave adequate time to the offeree to decide whether to accept it. Such arguments were relatively common and gave rise to a number of authorities. By way of generalisation, it was generally held that 14 days was an adequate time for an offeree to decide whether to accept an offer. Accordingly, it may be expected that it will be a comparatively rare case in which an offeree needs more than 14 days in which to decide whether to accept an offer.
Circumstances in which extra time might be required would normally be expected to be circumstances impeding or delaying the obtaining of instructions by solicitors acting for a client or the need for multiple parties to agree whether to accept an offer. The formal offer regime proceeds on the basis that parties are expected to make decisions on making and responding to offers on the information in their possession at the time and this information will necessarily be limited and incomplete compared to the information obtained by the time of trial. Accordingly, it will only be in special circumstances that a party will be justified in contending that they need extra time to decide whether to accept an offer because they are awaiting information from their opponent.
On the other hand, ordinarily it may be expected that formal offers will be made and the response to them will be made after the close of pleadings in an action proceeding on pleadings or after affidavits have been exchanged in an action proceeding on affidavits. In the present case, when the Director filed the response on 31 January 2020, no responding affidavit identifying Disorganised Development’s case had been filed. This case is very unusual in that the responding affidavits were not filed until June 2020.
Given my conclusion above that the Formal Offer did not comprise a “complying offer”, it is not necessary to reach a conclusion on this issue.
Conclusion on rule 188F
The Formal Offer did not comprise a “complying offer” within the meaning of subrule 188F(1). Rule 188F does not apply.
Application of rule 188G
Disorganized Developments relies in the alternative on rule 188G of the Former Rules,[26] which provided:
[26] Rule 132.11 of Uniform Civil Rules 2020 (SA) is in similar but not identical terms.
188G—Costs in other cases
(1)     This rule applies in cases to which rule 188F does not apply.
(2)     When—
(a)     a party has made a formal offer;
(b)     the offer was not accepted; and
(c)     judgment is granted in respect of the claim the subject of the offer on terms no less favourable to the offeror than the terms of the offer—
the Court is to take those matters into account in determining what order for costs to make.
(3)Without affecting the generality of the discretion of the Court, in exercising its discretion as to costs in accordance with subrule (2), if the Court considers that a party unreasonably rejected a formal offer, the Court may—
(a)     order that the offeree pay the costs of the offeror in respect of the claim the subject of the offer after 14 days after service of the formal offer on an party and party basis or some other basis; or
(b)     order that the offeree bear its own costs in respect of the claim the subject of the offer after 14 days after service of the formal offer; or
(c)     make such other order as to costs as it thinks appropriate.
Commencing with subrule 188G(3), I do not consider that the Director unreasonably rejected the Formal Offer. The release contained in clause 2 of the Deed arguably would have precluded the Director from bringing a future application for a restraining order or forfeiture order in respect of the Property connected with the death of Mr Boyce in a manner that would not have been precluded if the action had been dismissed on the merits. The payment of $10,000, with each party bearing their own costs, was inadequate to offset this substantial detriment.
Turning to subrule 188G(2), it is mandatory for me to take into account the Formal Offer, and its non-acceptance by the Director, in determining what order for costs should be made. Largely for the same reasons as are given in the previous paragraph, despite taking those matters into account, it is not appropriate to order that the Director pay Disorganized Developments’ costs of the action on any basis other than a standard costs basis.
Conclusion
I will order that the Director pay Disorganized Developments’ costs of action on a standard costs basis.