FEDERAL COURT OF AUSTRALIA

Re.Group Pty Ltd v Kazal (No 5) [2018] FCA 546

ORDERS

THE COURT ORDERS THAT:

1.    The Second Respondent is to pay the Applicants’ costs of the contempt proceedings on an indemnity basis.

2.    A Registrar is to assess the quantum of those costs on a lump sum basis pursuant to a procedure determined by that Registrar.

3.    Upon the determination by the Registrar of the sum referred to in Order 2, the Applicants be at liberty to enforce the sum so determined without the need for any further grant of leave by the Court.

4.    The contempt proceeding stand over for a case management hearing on 19 June 2018 at 9:30am at which time the Applicants are to inform the Court of the extent to which the costs have been paid.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

PERRAM J:

I. Introduction

1    On 25 September 2017 I concluded that the Second Respondent was guilty of civil contempt: Re. Group Pty Ltd v Kazal (No 4) [2017] FCA 1084 (‘Kazal (No 4)’). On 3 October 2017 I made orders giving effect to that conclusion. The relevant orders were:

‘THE COURT DECLARES THAT:

1.     The Second Respondent is guilty of civil contempt of the Federal Court of Australia by his conduct in breaching order 6 of the orders made by Griffiths J on 6 December 2016 (Orders), by publishing on the website http://www.kazalfamilystory.com (Website), after 6 December 2016, the following representations, or representations substantially the same as the following representations:

(a)     the Second Applicant is a corporate thief;

(b)     the Second Applicant committed crimes by stealing from Charif Kazal and Tony Kazal, being crimes which warranted his imprisonment;

(c)     the Second Applicant stole $180 million from Charif Kazal and Tony Kazal;

(d)     the Second Applicant stole the company Global Renewables Limited from Charif Kazal and Tony Kazal.

2.     The Second Respondent is guilty of civil contempt of the Federal Court of Australia by his conduct in breaching order 2 of the Orders, by publishing on the Website, after 6 December 2016, the photograph of the Second Applicant which is Annexure “A” to these orders (Photograph) in a manner that infringed copyright in the Photograph, and without the permission or license of the owner of the copyright in the Photograph.

3.     The Second Respondent is guilty of civil contempt of the Federal Court of Australia by his conduct in breaching order 4 of the Orders, by failing to remove the Photograph from the Website within 48 hours of being notified of the terms of the Orders.

THE COURT ORDERS THAT:

4.     The Second Respondent is convicted of civil contempt in respect of each of the contempts referred to in Declarations 1, 2 and 3 above.

…’

2    It will be seen that Mr Kazal was, in effect, convicted on three charges. The particulars to the charges show that the Applicants only relied upon breaches of the orders on Thursday 8 December 2016, Friday 9 December 2016 and Monday 12 December 2016. None of the charges was particularised by reference to what occurred on the weekend of 10-11 December 2016.

3    The issues now to be resolved are, first, whether Mr Kazal’s contempt was contumacious so that what was involved was a criminal contempt; and, secondly, what the appropriate penalty should be.

4    The Applicants submit that Mr Kazal’s conduct was contumacious and that it is open to the Court to impose a custodial sentence upon him (although they make no submission on what the duration of any such custodial sentence should be). They submit, in the alternative, that even if the contempt is not criminal or the Court otherwise decides not to impose a custodial sentence, it should nevertheless sentence Mr Kazal to pay a significant fine. They also submit that, regardless of the manner in which the Court decides to punish Mr Kazal, he should be ordered to pay their costs of pursuing him for contempt on an indemnity basis.

5    For Mr Kazal it is submitted that his conduct had not been contumacious and that no question of criminal contempt therefore arises. It is said that the objective seriousness of the contempt is at the lower end of the spectrum and that the Court should impose only a modest fine or, if indemnity costs are awarded, perhaps no fine at all.

6    The facts are set out in Kazal (No 4) and these reasons assume a familiarity with those reasons.

7    The issues calling for resolution are:

(a)    whether Mr Kazal’s contempt was contumacious;

(b)    relevant matters to the exercise of the sentencing discretion;

(c)    contrition, character and antecedents;

(d)    indemnity costs; and

(e)    the appropriate penalty.

II. Were Mr Kazal’s actions contumacious?

8    At [77] in Kazal (No 4) I accepted that Mr Kazal’s actions had been deliberate in the sense that what had happened was not accidental. However, I did not find that Mr Kazal had deliberately breached the Court’s orders. Every step he took was deliberate in the sense that each was not accidental but this is not the same as saying he was wilfully breaching the orders. Mr Kazal’s instructions to Dabab and his rather lacklustre attention to the Court’s orders did not form part of an intention actually to flout those orders. I did consider whether I should conclude to the contrary in Kazal (No 4). At [31] I set out some of the difficulties thrown up by the evidence and at [32] said this:

‘32     These matters might well justify the serious conclusion that Mr Kazal’s erroneous interpretation was confected in order to allow him to continue his campaign against Mr Singh even whilst seeming to be attempting to comply with the Orders. I have contemplated making that finding but have come to the view that I cannot be sure about it beyond reasonable doubt. The doubt principally relates to the size of the Website and the fact that a great deal of the damaging material is indeed contained in the emails to Mr Singh. It is a reasonable hypothesis that Mr Kazal had developed a misconception that the material about Mr Singh was contained only in the emails to him and that he thereafter interpreted everything that was told to him in light of that assumption (an example, perhaps, of confirmation bias).’

(emphasis in original)

9    This finding was related to a particular debate about a limited number of emails in a confined date range. Nevertheless, it rather suggests that Mr Kazal’s actions were not in open defiance of the authority of the Court: Louis Vuitton Malletier SA v Design Elegance Pty Ltd [2006] FCA 83; 149 FCR 494 at 497-498 [6]. Consequently, this appears on its face to be a case of civil rather than criminal contempt: Witham v Holloway (1995) 183 CLR 525 at 530.

10    The Applicants submit that a contrary view should be taken. In considering this contention it is important to be clear about the charges of which the Court has convicted Mr Kazal. These are, in summary, that he failed to comply with the Court’s orders on Thursday 8 December 2016, Friday 9 December 2016 and Monday 12 December 2016. The matters of which Mr Kazal has been convicted do not include any finding that he breached the orders on the weekend of 10-11 December 2016.

11    This is important because, as will be seen, I do accept that Mr Kazal’s conduct over that weekend was in wilful defiance of the Court’s orders. However, he has not been convicted of contempt in respect of those days. By contrast, as I explain below, his conduct on the Thursday, Friday and Monday involved a lack of sufficient diligence in obeying the Court’s orders but I do not think it exhibited wilful disobedience. On those days, Mr Kazal’s failure to comply with the orders derived from a lack of application.

12    Turning then to the detail, the Applicants submitted that the wilful nature of Mr Kazal’s action might be inferred from a number of matters.

13    First, Mr Kazal understood what the orders required him to do. I accept this submission which is borne out by a passage in Kazal (No 4) at [72]:

‘72    …Without in any way wishing to suggest that the way the Orders were drafted by those who applied for them is in a style ever to be emulated, I think that the Orders were sufficiently clear to tell Mr Kazal what he was to do. I am satisfied beyond reasonable doubt that a failure by Mr Kazal to remove the offending material from the Website was disobedient to the Orders and he could not reasonably have been in any doubt as to what those Orders required of him.’

14    In relation to one aspect of Order 6 I concluded that Mr Kazal had an erroneous understanding of what it required. However, that conclusion does not impact on Mr Kazal’s knowledge that the orders required him to stop his accusations against Mr Singh on the website.

15    Secondly, the Applicants note Mr Kazal was aware at some point after 4:10am Sydney time on 8 December 2016 that the orders were not being complied with. This too is correct. Dabab’s email at that time told him that the offending materials were still visible to the public. It is to be observed, however, that at the same time Dabab told Mr Kazal that the material was visible to the public he also told him that the ‘tech team’ were working on the issue ‘urgently’. ‘Urgently’ in this context meant 48 hours according to Dabab. A slightly more nuanced statement would be, therefore, that by the time of Dabab’s email Mr Kazal knew that the orders were not being obeyed but had a reasonable basis for thinking that the problem was being urgently addressed and, in any event, within a 48 hour window.

16    However, that 48 hour window had expired by early on the morning of Saturday 10 December 2016, a fact of which Mr Kazal was also certainly aware. By that time Mr Kazal had returned from China. It is true that it was over the weekend that Mr Kazal was encumbered by the family situation to which I referred at [62] but, as I there observed, those circumstances ‘whilst no doubt distressing, [the circumstances] cannot have consumed all of Mr Kazal’s time or come close to providing circumstances sufficient to justify ignoring Federal Court orders’. In fact, Mr Kazal really only began to attend to the problem of complying with the Court’s orders on the Monday when he returned to the office and, for the first time, read the orders for himself. And, as I noted at [66], it was only on Tuesday 13 December 2016 that he finally threw himself fully into the task of getting the material down from the website. What this means is that from the morning of Saturday 10 December 2016, when the 48 hour window first expired, Mr Kazal, did nothing to comply with the orders until the Monday (despite knowing what was required of him and despite knowing that the orders were not being obeyed).

17    The Applicants then said, thirdly, that Mr Kazal’s failure to take the straightforward step of telling Dabab to take down the website, exhibited a failure so egregious that it should be construed as involving a deliberate defiance of the Court’s orders. I accept that Mr Kazal could easily have complied with the orders from the Saturday morning by telling Dabab (or any suitably qualified person) to take down the whole website.

18    Mr Leopold SC who, with Mr Jedrzejczyk, appeared for the Applicants, submitted that I could conclude that such a breach of the Court’s orders was contumacious. He placed particular reliance upon a passage in the Full Court’s recent judgment in Kazal v Thunder Studios Inc (California) [2017] FCAFC 111 (‘Thunder Studios’) at [106]:

‘106    Aggravation by way of conduct and a state of mind found to be contumacious can be seen to be on a sliding scale. For example, it may range from deliberate and wilful defiance, to an unsuccessful attempt to get around a prohibition, to an unsuccessful attempt to comply with a prohibition. Proven recklessness or carelessness may be seen not to be contumacious at all. This process of characterisation is inevitably driven by close attention to what was done. This includes what can be said about state of mind able to be ascertained from all of the evidence, including by way of inference.’

(emphasis added)

19    This shows that there can be a distinction between out-and-out disobedience to Court orders and a wilful breach of them resulting from a failure to give proper priority to their obedience. Even so, I do not think that one could say until the Saturday morning that Mr Kazal’s conduct was contumacious. He gave instructions to Dabab which were, no doubt, imperfect and heard back from Dabab in due course that there was a problem which would be fixed within 48 hours. These were not the actions of a man seeking to disobey the orders. They were the actions of a man seeking, somewhat imperfectly perhaps, to obey.

20    But by the time that the 48 hour window had expired different considerations had come into play. Mr Kazal knew by then not only that the orders were not being obeyed but that whatever hopes he had that Dabab would resolve the issue within 48 hours had not borne fruit. He also knew that this was not a state of affairs which was about to change. In the face of this clear picture of non-compliance, Mr Kazal did nothing for the balance of the weekend. He had his reasons for inaction, principally, the family situation which had developed but these were not adequate as excuses although they are, to an extent, explanatory. I believe his process of reasoning was that he and his family’s own convenience over the weekend justified him in putting over to the Monday any question of sorting out compliance with the orders.

21    This was deliberate disobedience. That said, it occurred in a context in which Mr Kazal was always intending to obey just not at that exact moment. Nevertheless, I do not think that his overarching and ultimate purpose of obedience to the orders prevents his actions on the weekend from being contumacious. On the other hand, it seems clear that by the Monday Mr Kazal had moved obedience to the Court’s orders back on to his agenda, albeit with little initial success.

22    I conclude therefore that Mr Kazal’s actions (or inactions) over the weekend were contumacious, but I do not accept that outside the weekend his actions had that character.

23    In reaching this conclusion I do not disregard the Applicants’ further point that Mr Kazal had given conflicting and unsatisfactory accounts of the reasons for his failure to comply with the orders. This is true as I found at [62] and [63]. But it remains the case, nevertheless, that so long as the account of Dabab’s actions remains unchallenged it is difficult to conclude that Mr Kazal was not telling the truth about that central aspect of his evidence. In my opinion, Mr Kazal’s contradictory evidence as to why he did not ask Dabab over the weekend whether there were other ways of getting the material down is not evidence that he was trying to flout the orders. It is evidence that he knew his efforts had been too little but was not minded to admit it. In truth, the unsatisfactory nature of his evidence about this matter only shows that his attempts to make himself appear more diligent than he was were ultimately unconvincing.

24    In summary, there are three episodes to consider. The first consists of Mr Kazal’s conduct on the Thursday and Friday. His behaviour at that time consisted of a failure to take down from the website the photograph of, and the statements about, Mr Singh. No doubt, on the facts that I have found, Mr Kazal encountered difficulties: he was overseas and the person responsible for managing the website reported the existence of technical problems. But these difficulties were readily surmountable. Mr Kazal was not deliberately breaching the orders but he was failing to do sufficient to comply with them.

25    The second episode commences on the Saturday morning when the 48 hour window expired. I am satisfied that over the weekend Mr Kazal’s failure to do anything to comply with the orders was relevantly defiant of the Court’s orders. He chose to deal with the family situation he had at that time rather than comply with the Court’s orders. This involved a choice which undoubtedly had a human aspect to it but a choice nevertheless it remained. Consequently, it involved a defiance of the Court’s authority and was relevantly contumacious.

26    The third episode commences on the Monday morning when Mr Kazal read the orders. He had turned his mind to obedience on that day but failed to shut the website down. Whilst his actions were not sufficient on that day neither did they involve wilful disobedience.

27    It will be apparent then that because Mr Kazal has not been charged or convicted in respect of the events of the weekend that the second episode has no direct relevance. It is possible nevertheless that his attitude on the weekend could assist in the characterisation of his conduct on the Monday. Here the argument would be that but for his contumacious behaviour on the weekend he would not have found himself in the situation he did on the Monday. I do not think I should proceed this way. The question is whether the conduct of the Monday was, in the requisite sense, deliberate. That Mr Kazal might have found himself having to deal with the issue that day (rather than earlier) because of his wilfully deliberate conduct over the weekend cannot transform on the Monday what was not deliberate into conduct that was. That is a factual question to be determined by reference to his state of mind on Monday. How he came to be in that situation on Monday is not relevant to that inquiry.

28    Accordingly, I proceed on the basis that the conduct on 8, 9 and 12 December was inadequate attendance to the Court’s orders but not wilful disobedience. The contempts are therefore civil contempts. Mr Kazal’s actions on the weekend were contumacious but he was not charged with or convicted of that conduct.

III. Matters relevant to sentencing

29    A useful list of the relevant matters appears in Matthews v ASIC [2009] NSWCA 155 at [129]:

‘1.    The seriousness of the contempt proved.

2.    The contemnor’s culpability.

3.    The reason or motive for the contempt.

4.    Whether the contemnor has received, or sought to receive, a benefit or gain from the contempt.

5.    Whether there has been any expression of genuine contrition by the contemnor.

6.    The character and antecedents of the contemnor.

7.    The contemnor’s personal circumstances.

8.    The need for deterrence of the contemnor and others of like mind from similar disobedience.

9.    The need for denunciation of contemptuous conduct.’

30    This list has been endorsed by the Full Court: Thunder Studios at [103]. It is useful to consider each of these matters raised by it in turn.

(a) The Seriousness of the Contempt

31    The result of Mr Kazal’s contempt was that the criticisms of Mr Singh (and his photograph) remained visible on the website on 8, 9 and 12 December 2016. I also concluded they were visible over the weekend of 10-11 December 2016. As I observed at [70], complete compliance with the orders only occurred on 15 December 2016 but the charges do not go beyond 12 December 2016. One is therefore only dealing with a three day period. This was not a trivial breach of the orders but it was not a large breach of them either. In the scheme of things, and in the absence of evidence about the quantity of traffic across the website, I would rate the seriousness of the contempt at the lower end.

(b) The Contemnor’s Culpability

32    Mr Kazal’s attitude to the orders until the Saturday morning was nonchalant, although essentially obedient. Over the weekend, it was deliberately disobedient albeit for reasons which, whilst not constituting an excuse, do provide something of an explanation. On the Monday and Tuesday his conduct was obedient but ineffectual. However, it is only the conduct on Thursday, Friday and Monday which is to be assessed.

(c) The reason or motive for the contempt

33    As I have already explained the contempt arose from Mr Kazal’s failure to afford sufficient priority to the need to obey the Court’s orders.

(d) Has the Contemnor benefitted or received a gain from the contempt?

34    If one allows that the continuation of Mr Kazal’s campaign against Mr Singh was a benefit to him, then this question should be answered in the affirmative. I propose to do so but also to note that the benefit was minor in nature given the small number of days of the offences.

(e) Contrition

35    Mr Kazal gave evidence before me at the sentencing hearing that he was sorry to the Court for what he had done and that he had brought great suffering upon his family and himself.

36    Mr Leopold developed a submission that Mr Kazal’s evidence of contrition focussed rather too much on the suffering caused to himself and rather too little on the position of Mr Singh. There were really two aspects to this. First, his evidence had not included an apology to Mr Singh or the First Applicant. Secondly, it was apparent from one of the references given on his behalf that his focus was on himself.

37    As to this first matter, Mr Coleman SC who appeared with Mr Strickland for Mr Kazal, submitted that in context Mr Kazal’s evidence should, in effect, be understood as involving an apology to Mr Singh. I do not accept this submission. I thought it was striking that Mr Kazal did not apologise to Mr Singh. As to the second matter, Mr Leopold relied on the following portion of a reference provided by a Mr Sheridan (of whom more later):

‘I am aware that Mr Kazal had been charged with contempt of court. It surprises me greatly that Mr Kazal has committed this offence. This offending to me seems out of character for Mr Kazal, because during the time that I have known him I have always considered Mr Kazal to have great respect for Australia’s legal system. I know that Mr Kazal has suffered great anxiety in the perception of himself by others regarding these matters.’

38    I am not going to place any weight upon the Applicants’ submission in that regard. I do not know what Mr Kazal said to Mr Sheridan or whether Mr Sheridan has reported everything Mr Kazal has said to him.

39    It was also said against Mr Kazal that he had only expressed his contrition in the witness box at the sentencing hearing. I reject this submission. Mr Coleman attempted to elicit the same evidence at the liability hearing but Mr Leopold objected to it. Although I allowed the questioning to continue it is apparent from the transcript that this was on the limited basis that it went only to the issue of intention. In light of that ruling, Mr Coleman did not further seek to seek to elicit the evidence I have now received.

40    The correct conclusion from these matters is that I am easily satisfied that Mr Kazal greatly regrets his actions but I am not satisfied that he is genuinely sorry for what he has done. This is perhaps simply a human outcome. The depth of hatred born by Mr Kazal towards Mr Singh, as revealed by what was posted on the website, is such that it is difficult to imagine Mr Kazal being able to apologise to Mr Singh under any circumstance. That he did not apologise to him in the current hearing is, therefore, unsurprising although it is not to his credit. Nor, in the same vein, can these contempt proceedings be thought to have drained for one moment the venom from the dispute between Mr Kazal and Mr Singh. Indeed, no great experience of human affairs is necessary to see that the opposite is most likely the case.

(f) Character and Antecedents

41    Mr Kazal was until these proceedings a successful business man. He has no criminal record and has never before been convicted of contempt of court. He is married with two young children. I have no reason to doubt his good character apart from what has occurred in this case. His good character was attested to by two references which were tendered. One was from Associate Professor Astin Lee. Associate Professor Lee is a cardiologist, the director of Cardiology at Wollongong Hospital and the Head of Cardiac Services for the Illawarra Shoalhaven Local Health District. He is also the Clinical Associate Professor at the School of Medicine, University of Wollongong.

42    Associate Professor Lee said that he had known Mr Kazal as a close family friend for about ten years. They have had no business dealings. He was aware of Mr Kazal’s conviction for contempt. He said this of Mr Kazal:

‘I am aware that Charif Kazal has been found guilty of contempt of Court in relation to Orders made by the Federal Court of Australia on 6 December 2017. I understand that those Orders required Mr Kazal to remove material from a website, and that the subject material was not immediately removed (and in some parts, not removed until about one week later) in breach of the Orders.

In the time that I have known Charif Kazal, I have always thought of him as a man of good character who is honest and honourable. I have utmost respect for him, and believe that he holds a position of good character in the community. He has never said or done anything in my presence, or to my knowledge, which would give me a different impression.

I see him as a family man – a loving father and husband, and our families have shared many meals together. He cares greatly for his family.

It comes as a great surprise to me that he would be found guilty of contempt of court. It does seem very much out of character for him.

I cannot imagine that Charif would, under any circumstances, deliberately ignore or contravene Court orders.’

43    Associate Professor Lee was not required for cross-examination. Mr Leopold submitted that the evidence might be downplayed on account of the closeness of the friendship. Given that Associate Professor Lee was not cross-examined it would, I think, be unfair to act on that basis.

44    Mr Kazal also relied upon a reference from Mr Craig Sheridan APM which I have referred to briefly above. Mr Sheridan is a retired Commissioned Police Officer, having been Commander of the State Planning Unit, Major Events and Incidents Group. Mr Sheridan has known Mr Kazal for about 25 years. He said this:

‘I have known Charif Kazal and his family for approximately 25 years. I have found Charif to be very personable and family orientated. He has been involved in numerous community activities over the years, giving up his time readily to assist others. I have always considered him to be a person of integrity. He has assisted numerous Community groups and has been presented with a letter of gratitude by NSW Police Force.

I am aware that Mr Kazal has been charged with contempt of court. It surprises me greatly that Mr Kazal has committed this offence. This offending to me seems out of character for Mr Kazal, because during the time that I have known him I have always considered Mr Kazal to have great respect for Australia’s legal system. I know that Mr Kazal has suffered great anxiety in the perception of himself by others regarding these matters.

I believe that Mr Kazal’s contempt for the Court on the occasions described in the reasons for judgment will not be repeated in the future. The whole matter has been very distressing for Mr Kazal. He has young children and a wife and is extremely concerned about their welfare and wellbeing. Mr Kazal has expressed to me his deep regrets about the repercussions his actions are having on his loved ones.

I offer my support to Mr Kazal and his family during this time.’

45    Mr Leopold wished to cross-examine Mr Sheridan but he was not available. I admitted his reference in any event since the rules of evidence to do not apply to sentencing proceedings: Evidence Act 1995 (Cth) s 4(2). That said, the fact that the material has not been tested means I should be a little circumspect in handling it. I propose to accept Mr Sheridan’s evidence which is consistent with what did not really seem to be in dispute, namely, that until this litigation Mr Kazal was well-regarded by his friends who thought of him of good character. I therefore accept Mr Kazal is of good character. Nothing was placed before the Court to suggest to the contrary.

(g) Personal circumstances

46    As I have said, the evidence shows that Mr Kazal is married with two young children. He lives in North Balgowlah in rented accommodation. His taxable income for the financial year ending 30 June 2017 was $93,318 and for the financial year ending 30 June 2016 was $116,503. It is apparent that he and his family are involved in a number of business ventures. Most of his income in both years has consisted of distributions of net income from a family trust. He told me he owned no property but had about $25,000 in a bank account. The businesses conducted by the family include at least a chocolate shop and it seems that Mr Kazal himself manages a restaurant. Mr Kazal has flown to China on account of the chocolate business at the family business’s expense. It is not without relevance that the underlying dispute between the parties in this case itself springs from a very substantial commercial transaction.

47    In my opinion, Mr Kazal is a man of means when he wishes to be.

(h) Deterrence

48    I do not think that there is any risk of Mr Kazal failing to follow Court orders in the future. It was apparent from his evidence that the contempt proceeding has been a harrowing experience for him. Since I convicted him last September he has lived with the very real possibility that he might be sentenced to a term of imprisonment. At the conclusion of the sentencing hearing I indicated that I would not be imposing such a sentence. That was on 16 February 2018. But until then Mr Kazal would have regarded himself as facing a substantial risk of being imprisoned. Without doubt, the contempt episode has also been expensive. When Mr Kazal said in the witness box that the whole experience had been very distressing for him he was evidently telling the truth. I do not think that he is ever likely to disobey Court orders again. I therefore do not think the needs of specific deterrence require the imposition of any penalty on Mr Kazal.

49    However, there is the question of general deterrence. Those involved in litigation must know the consequences which are likely to flow from contempt of Court. The conduct to be deterred here by making an example of Mr Kazal is that of giving insufficient attention to timely and effective obedience of Court orders.

(i) Denunciation

50    The penalty will serve to denounce the conduct. In the scheme, of things, however, I note this factor as being of less importance and in this case, largely to be subsumed in the deterrence considerations.

IV. Indemnity costs

51    Differing views have been expressed as to whether there is a rule that the successful party on a contempt application is entitled to their costs on an indemnity basis. The current position in this Court seems to be that the successful party is not entitled as of right to indemnity costs but there are powerful considerations favouring the award of costs on that basis: Thunder Studios at [195].

52    In this case, it seems to me appropriate to award costs on an indemnity basis. The Applicants had secured injunctive relief from this Court. They were entitled to expect that the Court’s orders would be obeyed. They should not be out of pocket for the effort involved in getting Mr Kazal to behave as a law-abiding citizen. The Applicants have saved the public purse from the expense of the Registrar pursuing Mr Kazal for the contempt. It is appropriate therefore that the Applicants be indemnified for their costs by Mr Kazal.

53    The more difficult question is whether it is appropriate to take into account the likely magnitude of any costs order when assessing the appropriate fine.

54    The Full Court’s decision in Construction, Forestry, Mining & Energy Union v BHP Steel (AIS) Pty Ltd [2003] FCAFC 13 (‘CFMEU v BHP’) establishes that the making of an indemnity costs order is a relevant matter to take into account in assessing the penalty. All three judges were of that view: [13] per Moore J; [53] per Tamberlin and Goldberg JJ. However, Tamberlin and Goldberg JJ also said:

‘53.    … In the light of the authorities referred to by [Moore J], we accept that in exercising the wide discretion given as to the amount of any penalty, the consideration that indemnity costs have been awarded is a relevant matter to take into account. Nevertheless, given the underlying principle that disobedience to court orders must be discouraged, in a case such as the present, simply to impose a minimal penalty on the basis that indemnity costs have been ordered, may be perceived to downplay the significance of the contempt. The contempt here was public, serious and substantial and the penalty should reflect these matters. Taking into account all the circumstances, including the consideration that indemnity costs have been awarded below, we consider the appropriate penalty is $50,000.’

55    One difficulty in applying this with precision is that I do not know just how expensive the indemnity costs order I propose shortly to make will turn out to be. Another difficulty is that I cannot be sure that it will be paid by Mr Kazal. Someone else may pay it or Mr Kazal may be the subject of sequestration proceedings. Further, a fine is not a provable debt in a bankruptcy (Bankruptcy Act 1966 (Cth) s 82(3)) but an assessed sum for indemnity costs is. All of these considerations complicate the picture because the extent of the burden imposed by the indemnity costs order is itself at this stage unclear.

56    One solution would be to postpone the imposition of the fine until these issues were resolved. If that were done the size of the indemnity costs order could be assessed and the Court would know whether it had been paid and, if so, by whom. In this case, it was agreed on both sides that the costs order would be significant. The contempt proceeding has involved two days of argument on Mr Kazal’s no case submission, one day for the contempt trial itself and one day on the sentencing hearing. The Applicants have at all times been represented by a large law firm and junior and senior counsel. It is clear that the costs will be large.

57    In so saying, I have regard to the underlying rationale of the contempt power to uphold and protect the effective administration of justice and to demonstrate that the Court’s orders will be enforced: Australia Meat Industry Employees’ Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98 at 107. The interests of general deterrence may suggest that the penalty imposed should be independent of the size of the indemnity costs order: cf CFMEU v BHP at 53. Nevertheless, given the uncertainty of size of the indemnity costs order and the lower-end seriousness of the offence, the interests of general deterrence will still be served by taking into account the size of an indemnity costs order in assessing the final penalty imposed.

58    Given that and the fact that the contempt issue is essentially separate to the rest of the case I consider that I should award the Applicants their costs on indemnity basis and that they should be payable forthwith. I will direct that they be assessed by a Registrar on a lump sum basis rather than on a taxation.

59    Mr Coleman submitted that there should be some reduction in this to reflect the fact that at various points in the contempt proceedings Mr Kazal had succeeded. This is true. I ruled that Mr Kazal did not have a case to answer on some of the charges and I acquitted him in relation to some of the charged matters. Overall, these were minor victories in the scheme of things and I do not see I should approach the matter other than on the basis that the Applicants have succeeded.

V. Penalty

60    I have found that Mr Kazal’s contempts were civil rather than criminal. Mr Leopold nevertheless submitted that I could impose a custodial sentence. This would be so, he submitted, when it was necessary to ensure compliance with the Court’s orders. He relied upon the decision of Logan J in Plastec Australia Pty Ltd v Plumbing Solutions and Services Pty Ltd (No 4) [2012] FCA 657. Since I do not think that there is any future risk of Mr Kazal failing to comply with the orders which have been made I do not see that the suspended sentence imposed by Logan J would be useful in this instance.

61    I propose, therefore, to impose a fine. However, I will postpone the imposition of that fine until I know the magnitude of the indemnity costs order, whether it has been paid and, if so, by whom.

62    I make the following orders that:

1.    The Second Respondent is to pay the Applicants’ costs of the contempt proceedings on an indemnity basis.

2.    A Registrar is to assess the quantum of those costs on a lump sum basis pursuant to a procedure determined by that Registrar.

3.    Upon the determination by the Registrar of the sum referred to in Order 2, the Applicants be at liberty to enforce the sum so determined without the need for any further grant of leave by the Court.

4.    The contempt proceeding stand over for a case management hearing on 19 June 2018 at 9:30am at which time the Applicants are to inform the Court of the extent to which the costs have been paid.

63    After the case management hearing on 19 June 2018, the Court will shortly afterwards determine the fine.

Associate:

Dated:    23 April 2018