EFG v Secretary, Department of Communities and Justice

1. [1]

   BELL CJ: I agree with Mitchelmore JA.

2. [2]

   MITCHELMORE JA: This is an appeal from a decision of Basten AJ dismissing the appellant’s challenge to the validity of a decision of the first respondent (Secretary) that an amount of $188,172.20 be paid by way of costs pursuant to a certificate granted under the Costs in Criminal Cases Act 1967 (NSW) (Costs Act): EFG v Secretary, Department of Communities and Justice [2025] NSWSC 164.

3. [3]

   In the court below, the appellant contended that the Secretary’s decision as to the amount of costs was legally unreasonable on a number of bases, each of which the primary judge rejected. On appeal, the appellant alleged that his Honour erred in the following respects:

   1. (1)

      His Honour failed to “identify adequately” the purpose of the Costs Act (ground 1).

   2. (2)

      His Honour misconstrued s 4 of the Costs Act (ground 2).

   3. (3)

      His Honour failed to determine the legal standard of reasonableness in relation to the Secretary’s reliance upon the Attorney General’s payment rates for solicitors and counsel engaged by Government departments and agencies (the AG’s rates) (ground 3).

   4. (4)

      His Honour failed to hold that the Secretary’s discretion was exercised “in a manner that fell short of the necessary legal standard of reasonableness”.

4. [4]

   As was the case in the court below, the appeal ultimately turns on the proper construction of s 4 of the Costs Act. For the following reasons, the primary judge’s construction was correct, as was his Honour’s conclusion that the Secretary’s decision was not legally unreasonable in any of the respects that the appellant maintains on the appeal. The appeal must be dismissed.

5. [5]

   As only the second respondent, the State of New South Wales, took an active role in the appeal (the Secretary filed a submitting appearance), references below to “the respondent” are to the second respondent.

Factual background to the Secretary’s decision

1. [6]

   There was no dispute about the background leading to the Secretary’s decision, and it suffices for present purposes to refer to the primary judge’s summary at [2]-[6].

2. [7]

   In 2019, the appellant was charged with three counts of sexual intercourse without consent and one count of attempted sexual intercourse without consent. The appellant entered pleas of not guilty. In May 2022, following a trial in the District Court, the appellant was acquitted: at [2].

3. [8]

   Following his acquittal, the appellant applied for a certificate under the Costs Act. He relied on fifteen matters to satisfy the statutory precondition, in s 3(1)(a), that if the prosecution had been in possession of the relevant evidence before instituting the proceedings, it would not have been reasonable to institute them: at [3]. On 6 July 2022, the trial judge directed that a certificate under the Costs Act be granted: at [3]. His Honour accepted that the matters on which the appellant relied, in combination, satisfied the criterion in s 3(1)(a). His Honour was also satisfied that for the purposes of s 3(1)(b), there were no acts or omissions of the appellant that contributed to the institution or continuation of the proceedings: at [3].

4. [9]

   On 9 October 2023, the appellant’s solicitors applied for payment of costs pursuant to the certificate, seeking an amount of $515,423.66. Section 4 of the Costs Act provides:

5. [10]

   On 25 June 2024, the Secretary determined that the amount to be paid was $188,172.20. The Secretary notified the appellant of that decision in a letter to his solicitors dated 26 June 2024. Following receipt of correspondence from the appellant’s solicitors disputing aspects of the decision, the Secretary sent a further letter, dated 14 August 2024, which provided additional reasons for the determination. In the court below, the parties agreed that both letters constituted the reasons for the Secretary’s decision: at [6].

6. [11]

   As the primary judge summarised at [5], in determining the amount to be paid, the Secretary adopted a two-stage process:

7. [12]

   As his Honour observed at [9], there was no challenge in the court below in relation to the first step in the Secretary’s process. The appellant’s contention that the Secretary’s decision was legally unreasonable rested on the second step.

The application for judicial review and the decision of the primary judge

1. [13]

   The appellant advanced seven particulars in support of the contention that the Secretary’s decision was unreasonable. The primary judge observed at [14] that three of the seven particulars focused solely on the Secretary’s application of the AG’s rates (particulars (c), (d) and (e)). Relatedly, particular (g) alleged that the decision was “contrary to the practice of the Department over many years from the commencement of the [Costs Act], which was to pay such costs on a party and party basis”. As his Honour said at [15], that particular implied that the change from that policy to adopting the AG’s rates was capricious or arbitrary.

2. [14]

   His Honour further observed that two of the particulars appeared to allege errors of law, respectively contending that in making the decision the Secretary failed to comply with the purpose of the Costs Act (particular (a)) and reduced the amount to be paid to significantly less than the amount already determined to be reasonable costs (particular (b)). The remaining particular alleged, in substance, an error of fact, namely that the Secretary took the view that senior counsel appeared in the trial with a junior, when senior counsel appeared alone (particular (f)). The appellant did not pursue this particular on the appeal.

3. [15]

   Noting the centrality of s 4(2) of the Costs Act, his Honour considered that when read with s 4(3), s 4(2) incorporates three discretionary elements (or “evaluative judgments”) (at [12]), the second and third of which I have reordered to reflect their practical operation:

   1. (1)

      The first involves the Secretary forming an opinion as to whether the making of a payment “is justified”: at [11].

   2. (2)

      The second involves determining the cap, being “the maximum amount referred to in subsection (3)”. The primary judge placed this element third but recognised that it is an antecedent exercise to the operative determination because it sets a limit on the amount which should be paid: at [12].

   3. (3)

      The third involves determining “the amount of costs that should be paid”, subject to the cap: at [12].

4. [16]

   The Secretary determined, in the appellant’s favour, that a payment was justified (the first element), and the appellant did not take issue with the Secretary’s determination of the maximum amount (the third element). The appellant’s complaint of unreasonableness was directed to the second discretionary element. The appellant took issue with the Secretary applying the AG’s rates and the ultimate decision to award less than the maximum amount.

5. [17]

   The primary judge concluded that in its terms, s 4(2) of the Costs Act “envisages payments which do not reach the maximum amount of reasonably incurred costs”: at [41]. His Honour later observed that the subsection empowered the Secretary to pay a lesser amount than that identified as the maximum amount by reference to s 4(3), and s 4 did not expressly constrain how that lesser amount was to be determined: at [54]. His Honour accepted that s 4 impliedly required that the amount to be paid should be determined by reference to the circumstances of the individual case: at [55]. However, his Honour did not consider it was possible to imply a requirement that the costs be subject to the kind of assessment made in civil cases, for example in accordance with the terms of legislation governing the legal profession: at [56].

6. [18]

   The primary judge could discern “no constraint expressed in the Costs Act which precludes the Secretary from adopting any scale which he or she, acting reasonably, considers appropriate”, including the AG’s rates: at [41]. There was a published policy that indicated that the Secretary’s approach to s 4(2) would involve applying those very rates, although his Honour considered that even if that were not the case there would be no reason why the Secretary could not apply them: at [41]. The policy document, which was in evidence before the primary judge, stated:

7. [19]

   The Department drew the policy document to the appellant’s attention at the outset of the Secretary’s assessment process. Both in his submissions and in the letter sent after receiving the Secretary’s determination, the appellant strongly objected to the AG’s rates. As his Honour noted at [35], the Secretary’s letter of 14 August 2024, which formed part of the reasons, stated:

8. [20]

   In light of the above matters, in so far as the appellant alleged that the AG’s rates were an irrelevant consideration (particular (c)), his Honour rejected this allegation, describing it as misconceived: at [40], [60].

9. [21]

   As to particular (d), by which the appellant contended that in applying the AG’s rates the Secretary failed to take into account features of the proceedings that required particular expertise, his Honour considered that applying fixed rates could not of itself have given rise to that problem, as it was “precisely the approach adopted by solicitor and counsel in specifying a set of rates which they would charge”: at [61]. Addressing the substance of the complaint, his Honour stated:

10. [22]

    His Honour also rejected the allegation that the decision was unreasonable because adopting the AG’s rates resulted in costs in a criminal proceeding being paid at a much lower rate than costs in a civil proceeding (particular (e)). Apart from the fact that the AG’s rates were also to be applied in civil matters in assessing costs for a certificate granted under s 6 of the Suitor’s Fund Act 1951 (NSW), his Honour saw nothing in the Costs Act that required the Secretary to adopt a level of hourly and daily rates which would be adopted in conducting a party and party assessment of costs in a civil proceeding: at [43]. His Honour stated that implying such a requirement “would be inconsistent with the express language envisaging a power to determine a lesser amount than the ‘reasonably incurred costs’, which, on one view, might require such an assessment”: at [43]; and see also [63]-[64].

11. [23]

    Relatedly, the appellant’s reliance on a past practice by which costs were assessed on principles adopted in assessing party and party costs in civil matters to establish unreasonableness (particular (g)) rested on a limited evidential basis: at [50]. In any event, there were more fundamental problems:

12. [24]

    His Honour further observed in this context at [57] that a reference to party and party costs was no more than an analogy, and was inapposite:

13. [25]

    It followed from the above reasons that his Honour rejected particular (b), which contended that the decision was unreasonable in awarding any other amount than that determined as the “reasonable costs incurred” (being the maximum amount as assessed under s 4(3)): at [58]. His Honour also concluded that the statutory purpose of the Costs Act did not assist the appellant (particular (a) alleged that the Secretary failed to comply with that purpose). The assumption that underpinned the appellant’s argument as to purpose was that the Costs Act was intended to indemnify the holder of a certificate for the reasonable costs incurred in the proceedings to which the certificate applied. Although his Honour accepted that the purpose of the Act was “to provide an element of indemnity in the circumstances in which a certificate is provided”, it was “no part of the statutory scheme to provide a full indemnity”. Nor was it the purpose of s 4 to provide a full indemnity for costs “reasonably incurred”. If that had been the intention, “the power would have been conferred in terms which did not distinguish between determination of the ‘maximum amount’, being the costs reasonably incurred, and the amount which might be provided at the discretion of the Secretary”: at [65].

The appeal from the decision of the primary judge

1. [26]

   The appellant accepted that s 4(2) of the Costs Act confers a discretion on the Secretary to determine the amount of costs to be paid pursuant to a certificate. However, he submitted that once the Secretary determined the “maximum costs” by reference to the costs reasonably incurred, there was no apparent reason why that amount should not be awarded in the ordinary course.

2. [27]

   The appellant submitted in writing that the discretion in s 4(2) as to the amount of costs to be paid accommodated a situation in which the costs actually incurred were less than the reasonable costs. In oral submissions, senior counsel for the appellant submitted that the discretion was limited to exceptional circumstances that undermined paying the maximum amount to which s 4(3) refers, such as where facts come to light subsequent to the grant of the certificate that impugn the applicant’s innocence.

3. [28]

   The appellant further submitted that reducing the amount of costs reasonably incurred by reference to the AG’s rates was unreasonable. Those rates were intended primarily for use between the State and its legal representatives and were not “a good fit” in terms of assessing costs in criminal cases under the Costs Act, and created “a massive difference” in the recovery of costs paid by the State as between civil and criminal cases. The Secretary’s routine (inflexible) reliance on the AG’s rates produced results that were contrary to the purpose of the Costs Act and was arbitrary, capricious and irrational. By contrast, the past practice by which costs were assessed on a party and party basis was “necessarily in accordance with the legal standard of reasonableness”. The reason for departing from that practice was unknown and, by implication, was also arbitrary and capricious.

4. [29]

   In both the written and oral submissions, the appellant described the Secretary’s approach, in exercising the discretion in s 4(2) of the Costs Act and adopting the AG’s rates, as contrary to “the rules of reason and justice”. It is the case that in Minister for Immigration and Citizenship v Li (2013) 249 CLR 332; [2013] HCA 18 (“Li”) at [24], French CJ referred to Kitto J’s observation, in R v Anderson; Ex parte Ipec-Air Pty Ltd (1965) 113 CLR 177 at 189; [1965] HCA 27, that a discretion conferred by statute has to be exercised according to the rules of reason and justice. However, the context is important. Kitto J referred to the exercise of a discretion according to the rules of reason and justice in contradistinction to a discretion that was exercised according to “private opinion”. His Honour went on to say that a discretion must be exercised “according to law, and not humour, and within those limits within which an honest man, competent to discharge the duties of his office, ought to confine himself”. The “rules of reason and justice”, the precise content of which Kitto J did not elaborate upon, do not constitute a standard that is independent of legal unreasonableness, against which the exercise of a statutory discretion is to be assessed.

5. [30]

   As the joint judgment in Li explained, a decision made in the exercise of a statutory power is unreasonable in a legal sense when it lacks an evident and plausible justification: at [76]. The legal standard of reasonableness is “the standard indicated by the true construction of the statute”: at [67]. Whether the requirements of legal reasonableness have been satisfied entails “a close focus upon the particular circumstances of exercise of the statutory power: the conclusion is drawn ‘from the facts and from the matters falling for consideration in the exercise of the statutory power’”: Minister for Home Affairs v DUA16 (2020) 271 CLR 550; [2020] HCA 46 at [26].

6. [31]

   The requirement of reasonableness “is not a vehicle for challenging a decision on the basis that the decision-maker … has made an evaluative judgment with which a court disagrees even though that judgment is rationally open to the decision-maker”: Li at [30] (French CJ). Where, as in this case, an exercise of power by an administrative decision-maker is legitimately informed by considerations of policy, there is a practical difficulty in a court being satisfied that the test of unreasonableness is met. In Li at [105], Gageler J identified this practical difficulty as one of two important constraints on the judicial determination of unreasonableness. The second constraint his Honour identified was the stringency of the test. As Kiefel CJ observed in Minister for Immigration and Border Protection v SZVFW (2018) 264 CLR 541; [2018] HCA 30 at [11], the test of unreasonableness is necessarily stringent “because the courts will not lightly interfere with the exercise of a statutory power involving an area of discretion”.

7. [32]

   It is convenient to consider grounds 1 and 2 of the notice of appeal together, given that the appellant relies on statutory purpose (the subject of ground 1) primarily as an aid to determining the scope of the discretion in s 4(2) (the subject of ground 2).

8. [33]

   Section 4(2) of the Costs Act confers a discretion on the Secretary to “determine the amount of costs that should be paid … not exceeding the maximum amount referred to in subsection (3)”. As the primary judge stated at [13], the conferral of the power to award costs subject to a cap tells against a construction of s 4(2) as permitting the Secretary “only to make the payment that, in the opinion of the Secretary, ‘would reasonably have been incurred for costs’” (original emphasis). The appellant’s criticism, in writing, that the legislative contemplation of an award below the maximum amount says nothing of the circumstances in which those lesser payments may be made was precisely the point his Honour was making. The subsection leaves consideration of those circumstances to the Secretary in determining the amount of costs that should be paid.

9. [34]

   The appellant accepted at the hearing that in its terms, s 4(2) of the Costs Act confers an unlimited discretion to award an amount less than the maximum amount. However, he sought to confine the operation of the discretion to exceptional circumstances that undermined the payment of the maximum amount (as outlined in [27]). As the respondent submitted, if the legislature had intended the discretion to be so limited, s 4(2) could readily have been drafted in that way.

10. [35]

    The appellant submitted that the limitation on the discretion that he advanced was consistent with the purpose of the Costs Act, which he identified as rectifying the injustice caused to innocent persons who were wrongly accused and acquitted and had incurred legal costs in defending themselves. In writing, the appellant reiterated arguments he made below about the extrinsic materials, an exercise that the primary judge found was unproductive, not least because the current form of s 4 was quite different from the form in which it was originally enacted: at [45]-[46].

11. [36]

    In oral submissions, senior counsel emphasised that the grant of a certificate under the Costs Act was subject to stringent requirements which were reflected in the form of the certificate (see ss 2-3). With that being the case, he submitted that it was impossible to imagine that paying less than all of the costs reasonably incurred would be justified “in a normal case” where a certificate is granted. Only partially rectifying the injustice would be “outside the range of possible acceptable outcomes which are defensible in respect of the facts and law”, and thus inconsistent with the statutory purpose.

12. [37]

    Complete indemnification, being the statutory purpose for which the appellant contends, is inconsistent with the imposition in s 4 of a cap on the maximum amount of costs that may be recovered pursuant to a certificate. Save for the circumstances in which a person’s actual costs are less than the cap, being the costs determined to have been reasonably incurred, recovery pursuant to a certificate will be partial by reason of the cap. That is why the primary judge described the purpose of the Costs Act as providing an “element” of indemnity in the circumstances in which a certificate is provided, but not full indemnity: at [65]. The appellant’s complaint that his Honour’s description of the statutory purpose in this regard was incomplete or inadequate must be rejected.

13. [38]

    As the respondent submitted, the primary judge’s description of the purpose of the Costs Act was consistent with at least one additional statutory objective, being the appropriate expenditure and maintenance of limited public funds. Apart from the statutory cap on the amount of costs payable, that purpose is evident in the conferral of the power in s 4 on the Secretary of the Department, a senior public official with oversight of public funds and a member of the Executive, rather than a member of the Court or a costs assessor. Gleeson CJ explained in Carr v Western Australia (2007) 232 CLR 138; [2007] HCA 47 at [5] that the general rule in favour of construing a provision so as to promote the purpose or object of an Act “may be of little assistance where a statutory provision strikes a balance between competing interests, and the problem of interpretation is that there is uncertainty as to how far the provision goes in seeking to achieve the underlying purpose or object of the Act”.

14. [39]

    In the face of the above reasons, the appellant’s characterisation of the Costs Act as beneficial legislation does not assist. That legislation may be broadly described as beneficial does not compel a construction of its provisions that is otherwise unsupported as a matter of text and context. As the Victorian Court of Appeal observed in Patton v Mareangareu (2021) 66 VR 577; [2021] VSCA 295 at [58], in certain cases describing legislation as having a beneficial purpose may “not only distract attention from the text, but offer little guidance as to its meaning”. The present is such a case.

15. [40]

    I would dismiss grounds 1 and 2 of the notice of appeal.

16. [41]

    The appellant submitted that in considering the constraints on the exercise of the discretion in s 4(2), the primary judge did not consider the requirement to act “reasonably”. Instead, he submitted, the judgment proceeded on an assumption that because the Costs Act contemplated an award less than the amount of costs reasonably incurred, the Secretary need not act reasonably in exercising the discretion to determine the amount of the award.

17. [42]

    Those submissions misunderstood his Honour’s path of reasoning. Far from making any assumption of the nature for which the appellant contended, the primary judge’s approach to the allegation of legal unreasonableness was orthodox. His Honour:

    1. (1)

       recognised, as a matter of construction, that s 4(2) of the Costs Act accommodated the Secretary applying a scale of fees when determining the amount of costs that should be paid, for the reasons set out at [17] to [20]; and

    2. (2)

       concluded that the Secretary’s selection of the AG’s rates fell “within the range of possible, acceptable outcomes which are defensible in respect of the facts and law” (Li at [105] (Gageler J)), noting that those rates were applied on a daily basis by the many lawyers in private practice doing State government work (see [21] above).

18. [43]

    In relation to the first aspect of this reasoning, the appellant’s complaints rested on a construction of s 4(2) that I have rejected in ground 2. In relation to the second aspect of his Honour’s reasoning, the Secretary’s application of a policy was not of itself legally unreasonable. As French CJ, Bell, Kiefel, and Gordon JJ stated in Plaintiff M64/2015 v Minister for Immigration and Border Protection (2015) 258 CLR 173; [2015] HCA 50 at [54]:

19. [44]

    In taking issue with the application of the AG’s rates in particular, the appellant submitted that those rates were ordinarily applied in very different circumstances, were not designed for the Costs Act, and were inconsistent with the concept of costs reasonably incurred to which s 4(3) of the Costs Act refers. Those submissions called to mind the following observations of Gleeson CJ in Re Minister for Immigration and Multicultural Affairs; Ex parte Applicant S20/2002 [2003] HCA 30; (2003) 198 ALR 59 at [5]:

20. [45]

    True it is that applying the AG’s rates resulted in the Secretary determining an amount for payment that was well below the amount of costs reasonably incurred that the Secretary relied on for the purposes of s 4(3). That difference does not render the decision unreasonable in the requisite sense. As the respondent submitted, it does not follow from a determination that $X is reasonable for a given purpose that any amount other than $X is legally unreasonable.

21. [46]

    There was also no substance in the appellant’s reliance on what he contended was formerly the practice of determining costs under the Costs Act, in the manner of assessing party and party costs in civil cases. Apart from the “flimsy” state of the evidence as to this practice (as the primary judge described it), there could be no unreasonableness in the present case on the basis of the change in policy (assuming such a change for present purposes). The appellant was on notice of the policy that would apply in his case.

22. [47]

    Nor was there any basis for the appellant’s contention that the decision was unreasonable because that policy was inflexibly applied. The correspondence between the Department and the appellant’s solicitors indicated that the policy was drawn to the appellant’s solicitors’ attention at the outset of the process, along with other documents, and the solicitors were invited to make submissions. The solicitors took up that opportunity in submissions dated 30 November 2023, in which they strongly objected to the policy being applied. The solicitors reiterated this objection in their letter of 8 July 2024, after receiving notification of the Secretary’s determination. The responsive letter of 14 August 2024, which formed part of the reasons, noted that in some assessments, the Secretary applied a higher rate than the AG’s rates, such that the policy is not inflexibly applied. That the present was not such a case did not render the decision unreasonable.

Conclusion

1. [48]

   I propose the following orders:

   1. (1)

      Appeal dismissed.

   2. (2)

      The appellant is to pay the second respondent’s costs of the appeal.

2. [49]

   KIRK JA: I agree with Mitchelmore JA.