The Queen v Connolly [2008] NZCA 548; (2009) 24 NZTC 23,305 (10 December 2008)

Court of Appeal of New Zealand

[Index] [Search] [Download] [Help]

---

The Queen v Connolly [2008] NZCA 548 (10 December 2008); (2009) 24 NZTC 23,305

Last Updated: 5 January 2012

IN THE COURT OF APPEAL OF NEW ZEALAND

CA215/2008CA216/2008CA217/2008CA218/2008

[2008] NZCA 548

THE QUEEN

v

PETER MICHAEL CONNOLLYJOHN DONALD CURRIEJOHN ANTHONY REIDPETER WILLIAM RUSSEL

Hearing: 30 September 2008

Court: O'Regan, Ellen France and Baragwanath JJ

Counsel: J C Pike for Appellant
H Fulton for Respondent Connolly
N C Z Khouri for Respondent Reid
No appearances for Respondents Currie and Russel

Judgment: 10 December 2008 at 4.00 pm

JUDGMENT OF THE COURT

A The appeal is allowed.

2. The order that interest be paid on the awards of costs in favour of the respondents is quashed.

100. We make no award of costs in this Court.
     

REASONS OF THE COURT

(Given by O’Regan J)

Issue

[1] The sole issue in this appeal is whether the High Court had jurisdiction to award interest on costs payable to the respondents under the Costs in Criminal Cases Act 1967.

Background

[2] The respondents were charged with conspiracy to defraud and (in the case of Messrs Reid and Russel) money laundering and faced trial before a Judge alone (Fogarty J) in the High Court. They were acquitted on all counts. They sought costs under s 5 of the Costs in Criminal Cases Act. Fogarty J accepted that they were entitled to a contribution to the costs they incurred in defending the charges, and that the costs should be calculated by reference to the rate at which Crown prosecutors are paid.
[3] In the case of Mr Connelly and Mr Currie, he found that they were entitled to recover for their solicitor and counsel costs for the whole proceedings (subject to a minor exception) at the Crown rate according to Crown standards for allowance and assessment of time engaged (including any Crown limit on preparation hours). In relation to Mr Russel and Mr Reid, he found that they were entitled to a contribution to their costs for half the proceedings and that they were also entitled to half of the amount so calculated in relation to the remainder of the proceedings (in essence, therefore, they were entitled to three-quarters of the solicitor and counsel costs for the proceedings): (2006) 22 NZTC 19,844.
[4] At [97] of that judgment, the Judge directed that the parties were to prepare costs claims calculated on the basis already outlined, and any disbursements allowed by the Crown rate. He said that if agreement was reached the agreed figures could be submitted within a draft judgment for sealing, and in the absence of agreement he would receive submissions in writing from the parties as to the disputed aspects of the calculation. He reserved leave to that extent. He also ruled at [99] that the respondents could recover reasonable travelling expenses, with a limited exception.
[5] The award of costs made by Fogarty J was reduced on appeal to this Court: R v Connolly (2007) 23 NZTC 21,172. It was reinstated on further appeal to the Supreme Court: R v Reid [2008] 1 NZLR 575.
[6] After Fogarty J awarded costs, none of the respondents submitted claims on the basis he had directed at [97] of his costs judgment. The process of appeal to this Court and further appeal to the Supreme Court took about two years, and by the time the outstanding issues relating to quantification of the costs awards came back before Fogarty J in April this year, a delay of nearly two and a half years from the date of the costs judgment had occurred. This led the respondents to seek an award of interest. Fogarty J decided that he had power to award interest and directed that interest at 7.5 per cent per annum calculated from the date of his costs judgment (1 December 2005) should be awarded: (2008) 23 NZTC 21,930. The Crown now seeks leave to appeal against the interest award.

Alternative bases for an interest award

[7] There is nothing in the Costs in Criminal Cases Act or the Costs in Criminal Cases Regulations 1987 dealing with interest. In argument before us, a number of alternative bases for an award of interest on the costs awards in favour of the respondents were canvassed. These were:

(a) An award under s 19(2) of the Crown Proceedings Act 1950;

(b) An award under s 87 of the Judicature Act 1908;
(c) An award of an amount equivalent to interest under s 5 of the Costs in Criminal Cases Act.
[8] Fogarty J found that an award could be made under s 19(2) of the Crown Proceedings Act, and made the award under that section. He said he was also satisfied that it would be appropriate to make an award under s 5 of the Costs in Criminal Cases Act on the basis that it was just and reasonable to do so. He did not consider the application of s 87 of the Judicature Act.
[9] In this Court, Mr Pike for the Crown argued that the Judge did not have power to make an award of interest under s 19(2) of the Crown Proceedings Act or an award of an amount equivalent to interest under s 5 of the Costs in Criminal Cases Act.
[10] Counsel for Mr Connelly, Mr Fulton, argued that the Judge was entitled to make the awards under either provision, but concentrated his submission on s 87 of the Judicature Act which he said also provided jurisdiction for an interest award in the circumstances of this case.
[11] On behalf of Mr Reid, Ms Khouri supported the Judge’s decision by reference to s 19(2) of the Crown Proceedings Act. She also argued that the Judge had been correct to find that an award under s 5 of the Costs in Criminal Cases Act was also available. She did not rely on s 87 of the Judicature Act.
[12] Both Mr Currie and Mr Russel abided the decision of the Court.

Statutory framework

[13] Before turning to consider each of the three suggested bases for interest awards outlined above, we will briefly outline the statutory framework for awards of costs in criminal cases.
[14] The award of costs in this case was made under s 5 of the Costs in Criminal Cases Act. Section 5(1) provides:

Where any defendant is acquitted of any offence or where the information charging him with an offence is dismissed or withdrawn, whether upon the merits or otherwise, or where he is discharged under section 167 of the Summary Proceedings Act 1957 the Court may, subject to any regulations made under this Act, order that he be paid such sum as it thinks just and reasonable towards the costs of his defence.

[15] Section 5(2) sets out a list of factors to which the Court must have regard in exercising its discretion under s 5(1). As Fogarty J noted in his costs judgment, two important questions in the context of the exercise of the discretion are whether the prosecution was reasonably and properly brought and pursued and whether the accused person brought the charge on his (or her) own head.
[16] If an award of costs is made, s 7 of the Costs in Criminal Cases Act provides that, in the case of a prosecution conducted by or on behalf of the Crown, the costs are paid by the Chief Executive of the Ministry of Justice out of money appropriated by Parliament for the purpose and may be recovered as a debt due by the Crown. As noted in the decision of the Supreme Court reinstating Fogarty J’s costs judgment, this provision is designed to ensure that any award of costs is met by the Crown through a neutral source so as to avoid any concern that a costs award would inhibit a prosecution agency from bringing prosecutions. This reflects the intention that costs are a payment to the defendant, not against the prosecuting agency. This is subject to a power provided in s 7(2) to the Court to order that the prosecuting agency pay costs in certain cases where it is seen to have been at fault.
[17] The mechanism for payment of costs awards is provided for in reg 8 of the Costs in Criminal Cases Regulations. Where the costs are payable by the Chief Executive of the Ministry of Justice, the Registrar of the relevant court is required to prepare and certify a voucher for the amount of the costs payable and to send it to the Chief Executive. The Chief Executive then pays the amount set out in the voucher.

Time value of money

[18] There is no doubt that, if no interest is awarded to the respondents, the value of the costs award to them will have been diminished by the delay between the date on which Fogarty J decided they were entitled to an award (1 December 2005) and the date of payment some two and a half years later. As we noted earlier, the respondents did not appear to take up the invitation of Fogarty J to crystallise their claims to costs. If they had done so it is possible that arrangements could have been made to pay them earlier. It seems that this did not happen because the Crown wished to appeal against the awards and was initially (but not ultimately) successful in its appeal. The time value of money is well recognised in other contexts, as exemplified by the power to award interest under s 87 of the Judicature Act and r 528 of the High Court Rules, and equivalent provisions in relation to District Court awards. Those powers relate, of course, to the Court’s civil jurisdiction and, in particular, to debts or damages payable under judgments of the Court. But they also allow for the Court to order that interest be paid on the amount of costs awarded to a party in civil proceedings.

Section 19(2) of the Crown Proceedings Act

[19] As noted earlier, Fogarty J found that s 19(2) gave jurisdiction to make an award of interest on the costs payable to the respondents.
[20] Section 19 provides:

19 Interest on debts, costs, etc

(1) Any judgment debt due from or to the Crown shall carry interest if it would carry interest if it were due from or to a subject, and any interest so payable shall be at the rate at which it would be payable if the judgment debt were due from or to a subject.

(2) Any costs awarded to or against the Crown shall carry interest if the costs would carry interest if they were awarded to or against a subject, and any interest so payable shall be at the rate at which it would be payable by a subject.

(3) Any judgment in any civil proceedings by or against the Crown may award interest to any party to whom interest could be awarded if the proceedings were between subjects at the rate at which interest could be so awarded.

(4) This section shall apply both in relation to proceedings pending at the commencement of this Act and in relation to proceedings instituted thereafter.

[21] Fogarty J rejected the Crown’s argument that this provision applied only to civil proceedings. The Crown did, however, concede that if the amount of costs payable to the respondent had been actually quantified after the costs judgment, but not paid pending the outcome of the appeals, interest would run from the date of quantification because, once quantified, the costs awards would be a judgment debt due from the Crown and so caught by s 19(1).
[22] Fogarty J accepted the argument on behalf of the respondents that s 19(2) applied and that the interest award should run from the date of the costs judgment rather than the time at which the amount of costs was actually quantified. He relied on the decision of the House of Lords in Hunt v R M Douglas (Roofing) Ltd [1990] 1 AC 398, in which the House of Lords held that a litigant who had been awarded costs subject to taxation was entitled to interest from the date of the award, rather than the date of the completion of the taxation. Fogarty J applied that decision by analogy to the present case.
[23] In this Court, Mr Pike said the concession made on the Crown’s behalf in the High Court (set out at [21]) above should not have been made. He argued that s 19 of the Crown Proceedings Act could not apply to the present situation because:

(a) The Crown Proceedings Act applies only to civil proceedings, and the award of costs in this case is clearly a criminal proceeding;

(b) There was no award of costs “against the Crown” in this case, but rather an order that costs be paid to the respondents;
(c) Even if s 19(2) were applicable, the reciprocity needed for that sub-section to apply to the present case did not exist.
[24] We will consider these in turn.

Crown Proceedings Act limited to civil proceedings?

[25] Mr Pike argued that s 19 could not apply in this case because the Crown Proceedings Act dealt only with civil liabilities. He relied on the long title which is:

An Act to consolidate and amend the law relating to the civil liabilities and rights of the Crown and officers of the Crown, and to civil proceedings by and against the Crown.

[26] We accept that the present proceedings are not civil proceedings. That is clear from the decision of this Court in R v Geiringer [1977] 1 NZLR 7, recently cited with approval by the Supreme Court in Mafart v Television New Zealand Ltd [2006] 3 NZLR 18 at [30] per Elias CJ. However, it is not clear to us that the long title of the Crown Proceedings Act rules out any application of the provisions of the Act to proceedings which are criminal in nature. For example, s 20, which deals with the recovery of fines imposed otherwise than by a judgment or conviction, is inherently criminal in nature. And it is at least arguable that, if an award of costs is made under the Costs in Criminal Cases Act in favour of a defendant, and payment is not made, a civil liability then exists from the Crown to the defendant. While the long title refers to civil proceedings, it also refers to civil liabilities, which may arise independently of civil proceedings. We return to this aspect of the case later.
[27] It is notable that s 19(2) refers simply to “costs awarded to or against the Crown”, without any qualifier relating to civil proceedings. That contrasts with s 19(3) which refers to a “judgment in any civil proceedings”. This supports the argument that s 19(2) deals with any costs awards, whether they arise in civil or criminal proceedings.
[28] These points provide some support for the respondents’ argument that s 19 could apply in the present case. However, Mr Pike pointed to s 35(2)(a) of the Crown Proceedings Act, which supports the contrary argument. Section 35(2)(a) says that, except as expressly provided, nothing in the Crown Proceedings Act affects “any criminal proceedings”.
[29] Ultimately, it is not necessary for us to reach a concluded view on this aspect of the case, given our conclusion on the reciprocity issue (see [34] – [43] below). We therefore leave the point open.

No award of costs against the Crown?

[30] Mr Pike argued that the payment mechanism for awards of costs to which s 7(1) applies, involving the issue of a voucher by the Court Registrar to the Chief Executive of the Ministry of Justice, was not analogous with a normal order against the Crown to make a payment of money. He said an order under s 5 was an order that costs be paid to the accused person, but was not an order against the Crown (unless there is an order that costs be paid by the prosecuting agency under s 7(2), which was not the case here).
[31] It seems to us that that introduces an element of unnecessary subtlety. While it is true that the mechanism for payment involves the issuing of a voucher to the Chief Executive of the Ministry of Justice, rather than an order being made against the prosecuting authority (unless s 7(2) applies), that does not mean that the Crown (in its broadest sense) is not being ordered by the Court to make a payment. There is no element of choice about it.
[32] Section 7(1) of the Costs in Criminal Cases Act provides that an amount ordered to be paid to a defendant under s 5, which is to be paid by the Chief Executive of the Ministry of Justice, “may be recovered as a debt due by the Crown”. Mr Pike argued that this could be so only once the Registrar had issued the necessary voucher to the Chief Executive, because before then there would be no authority to make a payment out of the fund set aside for meeting awards under the Costs in Criminal Cases Act. He suggested that, if there was any delay in the issue of a voucher, the remedy would be an order in the nature of mandamus, and would only be once that order had been made that the defendant could enforce the award as a debt.
[33] We consider that this confuses the internal mechanism within the institutions of the Crown with the obligation of the Crown to pay which arises once an order is made under s 5 of the Costs in Criminal Cases Act. While we accept that there are some special characteristics of awards under the Costs in Criminal Cases Act and special processes which must be observed, we do not think that detracts from the overall proposition that an award under s 5 is, in a practical sense, an award of costs against the Crown.

Is there reciprocity as required under s 19(2)?

[34] The question of reciprocity is complex. What s 19(2) provides is that costs awarded against the Crown carry interest if costs awarded to the Crown carry interest. Mr Pike argued that, in the present case, the award of costs to the respondents could carry interest only if an award of costs to the Crown under the Costs in Criminal Cases Act would carry interest. The provision dealing with awards of costs to the Crown in the criminal context is s 4 of the Costs in Criminal Cases Act, which provides that the Court may order a defendant who has been convicted of an offence to pay a sum towards the costs of the prosecution. Section 4(4) says that costs allowed under s 4 “may be recovered in the same manner as a fine”.
[35] However, s 11 provides that any order made by the High Court or Court of Appeal for the payment of costs by any person other than the Crown “shall upon being filed in the High Court have the effect of a judgment”.
[36] Counsel for Mr Reid, Ms Khouri argued that the reciprocity required by s 19(2) was present in this case because the Crown could seek interest on costs awarded against a convicted person under s 4 of the Costs in Criminal Cases Act. She said that the Crown could arrange for the costs order to be filed in the High Court under s 11, and once that was done the order would have the effect of a judgment of the High Court with the consequence that the High Court’s enforcement procedures would be available to the Crown.
[37] More importantly, r 538 of the High Court Rules would apply. That rule says that every judgment debt shall carry interest from the time of judgment being given until the judgment is satisfied. She argued that interest would run under r 538 from the date of the costs award, whether or not it was sufficiently quantified, relying on Hunt v R M Douglas (Roofing) Ltd.
[38] We do not accept that argument. Section 4(4) contemplates that the primary enforcement mechanism would be recovery as for a fine, and it is clear that fines do not carry interest (Part 3 of the Summary Proceedings Act 1957, which deals with the enforcement of the payment of fines, does not provide for interest to be charged on unpaid fines). Thus, the possibility of recovery of interest by the Crown against a defendant would arise only if s 11 provides an alternative mechanism for recovery of awards made under s 4, and then only if the Crown did, in fact, invoke that mechanism.
[39] It is not clear to us that s 11 of the Costs in Criminal Cases Act is intended to apply in cases of an award of costs in favour of the Crown made in a trial context. We say that because s 4 appears to deal with that topic comprehensively, and provides for the enforcement mechanism (costs being treated as if they were a fine). Section 11 is inconsistent with that regime, and puzzlingly applies only to awards by the High Court and Court of Appeal, not the District Court.
[40] It seems to us to be more likely that s 11 is intended only to apply in relation to the appellate jurisdiction of the High Court and the Court of Appeal. We say that because it is notable that it appears immediately after s 10 which deals with costs which are payable on an appeal under Part 4 of the Summary Proceedings Act, and it deals with cases other than appeals under Part 4 of the Summary Proceedings Act. On the face of it, therefore, it seems to be intended to apply to awards of costs made in criminal appeals other than those under the Summary Proceedings Act.
[41] The structure and order of the sections in the Costs in Criminal Cases Act support that view. Section 8 deals with costs awarded in relation to appeals under both the Summary Proceedings Act and the Crimes Act 1961, s 9 deals with costs in relation to appeals under both Acts where the appeal is not pursued, s 10(a) deals with costs against non-Crown parties in Summary Proceedings Act appeals and s 11 deals with costs against non-Crown parties in Crimes Act appeals. The position in relation to costs against the Crown in either Summary Proceedings Act or Crimes Act appeals is dealt with in s 10(b).
[42] All of that leads us to conclude that s 11 does not apply in relation to awards of costs in favour of the Crown which are made in the trial context. Those are dealt with exclusively by s 4 and the mode of enforcement is exclusively provided for in s 4(4). It is clear that no interest is payable on costs awarded in favour of the Crown under s 4 because such costs are recovered as if they were a fine and there is no provision for the recovery of interest on an unpaid fine.
[43] That means that there is no ability for the Crown to recover interest on costs awarded in its favour in criminal matters under s 4 of the Costs in Criminal Cases Act. Since the basis of the argument made on the part of the respondents supporting their claim for costs under s 19(2) is that there is reciprocity, and since we have found that no such reciprocity exists, we conclude that s 19(2) does not provide a jurisdictional basis for an award of interest in relation to a costs award against the Crown under s 5 of the Costs in Criminal Cases Act.

Interest under s 5 of the Costs in Criminal Cases Act

[44] Fogarty J said at [22] of the judgment under appeal that it was not necessary to consider the argument that the amount of costs otherwise quantified should be increased by a sum equivalent to the award of interest by applying s 5 of the Costs in Criminal Cases Act. He did, however, make the obiter statement that he was satisfied that an award of interest was just and reasonable by reference to s 5. Mr Pike took issue with that observation. He argued that an award under s 5 can be only a sum which the Court thinks is just and reasonable “towards the costs of [the defendant’s] defence”. He pointed to the definition of “costs” in s 2 of the Costs in Criminal Cases Act, which is:

“Costs” means any expenses properly incurred by a party in carrying out a prosecution, carrying on a defence, or in making or defending an appeal.

[45] He said that interest on the sum ordered under s 5 could not be categorised as an expense of carrying on a defence or conducting an appeal, and therefore the Judge was wrong to indicate that interest could be awarded under s 5 itself.
[46] Ms Khouri urged us to uphold the Judge’s observation. She said that s 5(1) confers a broad discretion, citing R v Rada Corporation Ltd [1991] 2 NZLR 122 (HC) and Solicitor-General v Moore [2000] 1 NZLR 533 (CA). She said that the Judge in this case was required to take a broad view of what was “just and reasonable”. The delays in making payments of the amounts due to the defendants made an award in the nature of an interest top-up “just and reasonable”, given that the delay in payment of the costs being made was attributable to the Crown’s decision to appeal against Fogarty J’s decision. She said that, having reserved leave in the costs judgment, Fogarty J remained seized of the matter and was entitled to make such further orders as necessary to ensure that the intended financial consequences of the original costs order were not defeated.
[47] We do not consider that Ms Khouri’s argument meets the point made by Mr Pike that the jurisdiction to make an award under s 5 is expressed as being a sum towards the costs of the defence, which does not include an interest component on the sum so awarded. We do not question that the defendants are deserving of an interest award in this case, but the issue before us concerns the jurisdiction to make such an award, not the merits of making one if jurisdiction exists.
[48] In our view it was not open to the Judge to make an award of interest or an award in the nature of interest under s 5. Having said that, we do not believe that the Judge did, in fact, do so: rather, he simply made an observation that he thought he could have done so.

Section 87 of the Judicature Act

[49] Fogarty J did not deal with the argument made on behalf of Mr Connelly that interest could be awarded under s 87. In this Court, counsel for Mr Connolly, Mr Fulton renewed the s 87 argument. In our view s 87 is not applicable in this case. It provides for an award of damages in proceedings for recovery of any debt or damages, and, importantly, provides for interest to be awarded for the period “between the date when the cause of action arose and the date of the judgment”. In this case the period at issue is the period after the date of the judgment, up to the date of payment. That is, in the civil context, dealt with in r 528 of the High Court Rules, not s 87. We do not think that it is correct to characterise a claim under the Costs in Criminal Cases Act as “proceedings in the High Court for the recovery of any debt or damages”, and as we noted earlier, it is clear that proceedings under the Costs in Criminal Cases Act are criminal proceedings not civil. For all these reasons, we do not see s 87 as providing any jurisdiction to award interest on costs in the circumstances of this case.

Result

[50] We conclude that the High Court did not have jurisdiction to award interest on the costs awards made in favour of the respondents. We therefore allow the appeal and quash the orders that interest be paid on the costs awards. We make no award of costs in this Court.

Leave to appeal

[51] The Solicitor-General sought leave to appeal under s 379CA of the Crimes Act in this case. Whether such leave is needed is something of an enigma, as explained in this Court’s decision in R v Connolly, to which we referred at [3] above, at [10]. We adopt the position taken in that decision to the effect that, despite some indications to the contrary in s 379CA, it confers a right of appeal to this Court and leave is not required.

Solicitors:
Crown Law Office, Wellington
McCabe & Co, Wellington for Respondent Connelly
Gilbert Walker, Auckland for Respondent Reid