procedural. Order 2 was varied to require the plaintiff to pay all defendants’ costs of the proceedings, including the costs ordered by Davies J on 7 September 2018, on an indemnity basis.
Key principles
An indemnity costs order is compensatory, not a punishment for an unsuccessful party. It may be justified where the party's conduct connected with the litigation is sufficiently...
The Court found indemnity costs justified on three grounds: Mr Kazal should have known that the proceedings had no prospects of success; he made serious allegations of malice and...
A litigant's self-represented status is relevant to the costs discretion, but does not by itself prevent an indemnity costs order where the circumstances otherwise justify one.
On the facts found, indemnity costs applied from the commencement of the proceedings and included costs previously ordered by Davies J concerning the notice to produce.
Issues before the court
Whether the defendants' costs should be assessed on an indemnity basis after summary dismissal.
Whether Mr Kazal's self-represented status weighed against indemnity costs.
Plain English Summary
The Court had already dismissed Mr Kazal's claims. This decision concerned whether the defendants should receive ordinary or indemnity costs. The Court ordered indemnity costs because it found that he should have known the claim had no prospects, made serious allegations without a proper basis, and unreasonably rejected genuine offers to end the case without a costs order. The order also covered costs of the earlier notice-to-produce motion. This is general legal information, not legal advice. Zoe can make mistakes. Before acting on or relying on it, have a qualified Australian lawyer check it.
AI-generated legal information, not legal advice. Zoe can make mistakes. Check the cited source, and for advice about your situation consult a qualified Australian lawyer.
Deep Dive
2,310 words · generated 02/10/2026
What happened
This is a costs decision, not the judgment that first dismissed the underlying proceedings. N Adams J had summarily dismissed Mr Kazal's proceedings against the Independent Commission Against Corruption (ICAC), David Ipp QC and the State of New South Wales. The principal dismissal decision is identified as [2019] NSWSC 556. The question left over was whether the defendants' costs should be paid on the ordinary or indemnity basis.
Whether rejecting the defendants' offers supported indemnity costs.
Whether the costs of the notice-to-produce motion should also be assessed on an indemnity basis.
Cited legislation
3 cited instruments linked from this judgment.
Kazal v Independent Commission Against Corruption
The underlying dispute arose from ICAC's Operation Vesta investigation. In 2011, ICAC found that Mr Kazal had acted corruptly by paying a SHFA employee $11,170 in travel expenses, intending to influence the employee in a way favourable to Mr Kazal's business interests. Possible charges were referred to the Director of Public Prosecutions, but no charges were laid. Mr Kazal's earlier judicial review challenge was unsuccessful in 2013.
In December 2017, Mr Kazal began the proceedings considered in the principal judgment. He sought declarations that the defendants had committed misfeasance in public office, declarations concerning the legality of ICAC's report, and damages. The claims relied on later-obtained material, including correspondence between Mr Ipp and the DPP, a witness statement not provided during the ICAC public hearing, a report by Acting ICAC Inspector John Nicholson, and a later report co-authored by Mr Ipp.
The principal judgment found no underlying cause of action for misfeasance in public office and no basis for the requested judicial review declarations. The costs decision recounts those conclusions, including that the claims based on the DPP correspondence and the witness statement were manifestly groundless, and that the Nicholson and National Integrity Committee reports did not advance Mr Kazal's case.
The defendants then sought indemnity costs. Their arguments were that Mr Kazal should have known the case could not succeed, that he had made serious and unsupported allegations of malice and misconduct, and that he had unreasonably rejected open offers to discontinue without a costs order. The Court accepted all three grounds. It also ordered indemnity costs for the notice-to-produce motion previously dealt with by Davies J.
Why the court decided this way
The Court began from the statutory and procedural framework. Section 98(1)(a) of the Civil Procedure Act 2005 (NSW) gives the Court discretion over costs. The decision cites Oshlack v Richmond River Council for the requirement that the discretion be exercised judicially, according to established principle and factors connected with the litigation. UCPR r 42.1 supplies the usual rule that costs follow the event. Because the defendants had succeeded, the ordinary costs order was already in place. The issue was whether the conduct justified the more extensive indemnity basis.
The judge emphasised that indemnity costs are not imposed to punish an unsuccessful plaintiff. They compensate a successful defendant for costs incurred in particular circumstances. The decision refers to authorities concerning proceedings continued when a party, properly advised, should have known there was no chance of success, and to the broader inquiry into whether it was unreasonable to subject another party to the expenditure of costs.
On the first ground, the Court acknowledged the context in which Mr Kazal had acted. ICAC had publicly found corruption, the DPP had laid no charges, and there was no public forum available to him to clear his name. The Nicholson report had been critical in some respects, and the judge recognised that Mr Kazal may have felt vindicated by it. However, the judge concluded that he must have known the elements of misfeasance in public office could not be made out on the available evidence. The Court also treated his decision to abandon paragraphs 6 to 13 of the statement of claim only after the defendants had filed submissions as an indication that he recognised those allegations were unsustainable.
The second ground concerned serious allegations, including assertions of malice, knowing conduct beyond power, and an intention to harm or publicly humiliate Mr Kazal. The Court considered the seriousness of these allegations and the absence of supporting evidence at the hearing. It concluded that making such allegations without a proper basis was improper and unreasonable litigation conduct. The judge stated that the Court could mark its disapproval of that conduct, while maintaining that the purpose of indemnity costs was not punishment.
The third ground concerned the defendants' open offers. Mr Ipp's offer of 27 February 2018 and ICAC's offer of 6 March 2018 proposed discontinuance, with each side bearing its own costs. The Court found that these were genuine compromises because the defendants would give up recovery of costs already incurred. The judge considered the defences and the matters raised in the offers, and concluded that Mr Kazal ought to have accepted an offer because he could not establish the tort. The Court considered his explanation that he did not have to accept his opponents' assessment of his case, but did not accept that explanation as sufficient on these facts.
The judge also considered Mr Kazal's self-represented status. The authorities discussed recognise that courts should make allowances for litigants in person, while also ensuring proceedings are conducted fairly and without significant difficulty. The decision held that self-representation did not outweigh the grounds for indemnity costs in this case. The order ran from the commencement of the proceedings and included the costs of the earlier notice-to-produce motion, in light of the warning about that notice and the possibility of a costs application.
Before and after state of the law
The decision did not purport to create a new general test for indemnity costs. It applied existing statutory discretion and costs principles to the particular conduct and procedural history before it. The statutory starting point was s 98(1) of the Civil Procedure Act 2005 (NSW), while UCPR r 42.1 stated the ordinary event-based costs rule. UCPR r 42.5 was relevant to the consequences of an indemnity-basis assessment. The decision also set out UCPR r 42.15A in discussing the costs consequences associated with an offer by a defendant that is not accepted and is followed by a judgment no less favourable to the defendant.
The authorities cited describe different circumstances in which an indemnity order may be justified. Fountain Selected Meat is referred to in connection with continuing proceedings when a party, properly advised, should know there is no chance of success. Hamod is cited concerning unreasonable exposure of another party to litigation costs. Insurance Australia Ltd v Dent is cited for the description of conduct as delinquent or unreasonable. Obeid Snr v Ipp is considered in relation to serious allegations of misconduct that were abandoned without explanation.
The judgment also addresses the position of self-represented litigants. It notes the general reluctance to make indemnity costs orders against them and the need to allow for their lack of legal expertise, drawing on Macedon Ranges Shire Council v Thompson and Vink v Tuckwell (No 3). But it also considers Bhagat and Westpac Banking Corporation v Barber as examples where indemnity costs were ordered despite self-representation and serious litigation deficiencies or allegations.
The practical contribution is therefore an application of established principles, rather than a reported change in the law. The Court treated the combination of no prospects, unsupported serious allegations and unreasonable rejection of genuine offers as sufficient in this case. It did not say that any one of these circumstances automatically requires indemnity costs in every case.
Key passages with plain-English translation
The judgment's central statement about the nature of indemnity costs is: “An order for indemnity costs is not made to punish an unsuccessful plaintiff for persisting with a case that fails, but to compensate a successful defendant for costs incurred in certain circumstances.” In plain English, the Court treated the order as a way to compensate for costs arising from particular litigation conduct, not as a penalty merely because a claim lost.
The Court concluded that “all three of the possible bases for making an indemnity costs order in this matter have been established.” The three bases were the lack of prospects, the serious allegations without proper support, and the rejection of the offers. The conclusion was specific to the evidence and conduct in this case.
On self-representation, the judge said that Mr Kazal's being unrepresented was not a basis for declining indemnity costs. This did not mean that self-represented status is irrelevant. The Court considered it, alongside authorities discussing allowances for litigants in person, but found that it did not displace the other factors.
The offers mattered because they required the defendants to forego their costs incurred up to that point. The judge described that as a significant compromise. In practical terms, the Court did not regard the offers as merely demands that Mr Kazal concede the defendants' view of the case. It found that they offered a real costs concession, and that rejecting them unreasonably caused further expense.
The decision also linked the notice-to-produce costs to the correspondence warning Mr Kazal of defects in the notice and the possibility that a motion and costs application would follow if it was maintained. Davies J had struck out the notice and ordered costs, while reserving whether they should be indemnity costs. N Adams J resolved that remaining issue in the defendants' favour.
The supplied judgment text does not provide a consistent paragraph numbering sequence for this costs decision. Pinpoint paragraph numbers are therefore not assigned here. The references to numbered paragraphs in the text, such as [121] or [128]-[130], refer to the principal judgment where expressly identified.
What fact patterns trigger this precedent
This decision is most relevant to costs applications after a successful defendant has obtained summary dismissal, where the court is asked to assess whether litigation conduct justifies indemnity costs. Its reasoning is tied to a combination of features: the court's view that the claim had no prospect of success on the available material, serious allegations of malice and misconduct without a proper evidentiary basis, and open offers that the court regarded as genuine compromises.
The offer aspect may be relevant where a defendant offers to discontinue proceedings with each party bearing its own costs, after having already incurred costs, and warns that the offer may be relied on in a later costs application. The decision treated the amount of costs already incurred and what the defendant was giving up as part of the assessment. It also considered the time available to respond and whether the plaintiff had requested more time.
The decision may also be relevant where a party abandons serious pleaded allegations late in the process. The Court treated the timing of the abandonment in this case as evidence that the plaintiff must have realised those aspects were unsustainable. That was an inference on the evidence before the Court, not a categorical rule that every amendment or abandonment warrants indemnity costs.
Self-represented status is another relevant feature, but the decision does not treat it as a complete defence to an indemnity costs application. It should be read with the Court's recognition that litigants in person may lack legal expertise and that courts generally exercise caution. The result turned on the assessed conduct and circumstances overall.
The judgment does not establish that every dismissed claim, unsuccessful allegation, or rejected offer warrants indemnity costs. It makes clear that ordinary failure is not enough by itself. The question remains whether the conduct and circumstances meet the established threshold for an indemnity order.
How later courts have treated it
The judgment was delivered on 3 February 2020. The supplied source contains no decisions after that date and therefore does not establish how later courts have treated Kazal (No 2). No claim about later application, approval, distinction or criticism can be made from the material provided.
Within this judgment, N Adams J relied on and discussed earlier decisions, including Oshlack, Fountain Selected Meat, Hamod, Tabbaa, Luo, Insurance Australia Ltd v Dent, Obeid Snr v Ipp, Macedon Ranges Shire Council v Thompson, Vink, Bhagat and Westpac Banking Corporation v Barber. Those citations show the sources the judge considered when applying the costs principles. They do not establish how later courts treated the present decision.
For research purposes, a separate search of authorised and reliable case-law databases would be needed to identify post-2020 treatment. The present analysis does not rely on or assert any such later treatment.
Still-open questions
The decision leaves the indemnity costs inquiry highly dependent on the facts. It does not provide a numerical threshold for when a claim is so weak that a litigant should have known there was no prospect of success. It also does not state that a defendant's warning that a claim is hopeless is, by itself, enough. The Court assessed the material, pleadings, defences, abandonment of allegations and procedural history together.
The treatment of a self-represented litigant also remains contextual. The judgment recognises both the need to make allowances for lack of legal expertise and the possibility of indemnity costs where litigation conduct warrants them. It does not specify a fixed rule for balancing those considerations in other cases.
The offer analysis is similarly tied to the terms and timing of the offers, the costs already incurred, and the potential costs concession. The judgment discusses the applicable UCPR provisions, but it does not resolve every question that might arise about the interaction of formal offers of compromise and open offers in different procedural settings.
Finally, the decision's findings depended on its assessment of the underlying claims and evidence. It should not be read as a general conclusion about ICAC findings, the effect of no criminal charges being laid, or the merits of other misfeasance claims. The underlying summary dismissal decision dealt with those substantive matters; this decision addressed the costs consequences of the proceedings and the parties' conduct.
This is general legal information, not legal advice. Zoe can make mistakes. Before acting on or relying on this analysis, have a qualified Australian lawyer check it.
Catchwords
[2003] WASC 122 (S
Fountain Selected Meat (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401[1988] FCA 364
Hamod v State of New South Wales (2002) 188 ALR 659
Judgment (11 paragraphs)
[1]
Judgment
Both the first defendant, the Independent Commission Against Corruption ("ICAC") and the second defendant, the Hon Mr David Ipp QC, have applied for their legal costs to be paid on an indemnity basis. The defendants were successful in their application to have these proceedings summarily dismissed. It had been foreshadowed by them that, if successful, they would be seeking that their costs be paid on an indemnity basis.
On 24 May 2019, I delivered the principal judgment in this matter: Kazal v Independent Commission Against Corruption [2019] NSWSC 556. I made the following orders at that time:
1. The proceedings are summarily dismissed under the Uniform Civil Procedure Rules 2005 (NSW) r 13.4.
2. The plaintiff is to pay the defendants' costs.
3. The question of whether the costs are to be paid on an indemnity basis is reserved.
The parties agreed that the indemnity costs application could be dealt with on the papers and a timetable was agreed upon. I subsequently received written submissions from all parties. ICAC's written submissions, together with the affidavit of Angus Blyth Nicholas dated 24 May 2019, were filed on 5 June 2019, the Hon Mr Ipp's written submissions were filed on 7 June 2019 and Mr Kazal's written submissions were filed on 25 June 2019.
[2]
Factual background
The background and facts relating to the proceedings are set out in the principal judgment and span the period from 2011 to the present. These reasons assume some familiarity with that decision. In short, following an investigation (Operation Vesta), including public hearings, ICAC made a finding on 16 December 2011 that Mr Kazal had acted corruptly in paying a SHFA employee $11,170 in travel expenses, with the intention that this would tend to influence him to exercise his official functions in a manner favourable to Kazal business interests Although possible charges were referred to the Director of Public Prosecutions ("DPP"), no charges were ever laid. Mr Kazal unsuccessfully sought judicial review of the ICAC findings in 2012: Kazal v Independent Commission Against Corruption [2013] NSWSC 53.
On 14 December 2017, Mr Kazal filed a statement of claim commencing new proceedings against ICAC as well as against Mr Ipp and the State of New South Wales (the third defendant). He sought the following declaratory relief:
1. That each of the defendants engaged in misfeasance in public office.
2. A declaration that the Operation Vesta Report was:
1. ultra vires;
2. to the extent that it concerned Mr Kazal, ultra vires;
3. to the extent that it made findings of corruption against Mr Kazal not made according to law and is a nullity; and
4. to the extent that it made findings that Mr Kazal gave false or misleading evidence to the ICAC, not made according to law and is a nullity.
In addition, Mr Kazal also sought general damages, aggravated damages, special damages, exemplary damages, interest and costs.
Mr Kazal was unrepresented in these proceedings. He commenced them based on matters which had to his attention after the decision of the Court of Appeal in 2013. That material fell into four categories:
1. Correspondence between Mr Ipp and the DPP on the subject of whether criminal charges ought to be brought against Mr Kazal (see [24]-[31] of the principal judgment);
2. The discovery that a particular witness statement (Mr Neilsen) was not provided to Mr Kazal during the public hearing (see [33]-[40] of the principal judgment);
3. The publication of the report into the complaint made by Mr Kazal to the then Acting ICAC Inspector John Nicholson pursuant to ss 57B and 77A of the Independent Commission Against Corruption Act 1988 (NSW) on 29 June 2017, which included criticism of the manner in which Mr Kazal had been treated by ICAC, (see [41]-[47] of the principal judgment); and
4. The publication of a report headed "Implementation Plan for a National Integrity Commission" in late 2017. This report was co-authored by Mr Ipp in his capacity as a member of the National Integrity Committee ("NIC"). It was published after these proceedings were commenced. In it, Mr Ipp and his co-authors discussed Mr Kazal's case and were critical of the Nicholson report (see [48]-[51] of the principal judgment).
I was satisfied that, having regard to the evidence before me, those parts of Mr Kazal's claim that relied upon non-disclosure of Mr Neilsen's statement (see at [106]) and the DPP correspondence (see at [112]) were manifestly groundless. As for the Nicholson report, I was satisfied that many of the findings made by Mr Nicholson were beyond his power as an Acting Inspector to investigate. Those which were not did not assist Mr Kazal. Nor were Mr Nicholson's opinions relevant to the question of whether Mr Kazal could establish the intentional tort of public misfeasance.
As for the NIC report I made the following finding at [121]:
"It seems to me that the timing of the publication of the NIC report was most unfortunate. Mr Kazal had already commenced these proceedings alleging specifically that Mr Ipp acted maliciously in relation to him and relying heavily on the recommendations made in the Nicholson Report. The extracts from the NIC report show the authors' rejection of any criticism of the Kazal inquiry. Despite this unfortunate timing, the fact remains that there is nothing in the report that supports Mr Kazal's case that Mr Ipp acted maliciously back in 2012-2013. It does not advance the claim he has brought any further."
My conclusion (at [128]-[130]) was as follows:
"[128] The real issue in summary dismissal proceedings is whether there is an underlying cause of action, not simply whether one is pleaded. I am simply not satisfied that there is any underlying cause of action for the intentional tort of misfeasance in public office in this matter arising out of the facts relied upon by Mr Kazal. I am satisfied that the proceedings should be summarily dismissed. This means that I do not need to address the inadequacies in the way the tort was pleaded, as identified by ICAC and Mr Ipp.
[129] Turning to the proceedings for judicial review. The declaration sought in prayer 1 relied upon a finding of misfeasance in public office and cannot be made on the same basis. The declaration sought in prayer 2 was that ICAC's report was ultra vires and any adverse findings against Mr Kazal were not made according to law and a nullity. Following Mr Kazal's disavowal of any reliance on [6]-[13] of the statement of claim (which pertained to "Improper Conduct in Maintaining the Inquiry") the declarations in prayer 2 could only be made on the basis of the allegations made in the SOC of "Improper Withholding of Exculpatory Evidence" and "Improper Submission to the DPP that the Plaintiff Should be Prosecuted".
[130] Given my conclusions concerning any tort claim based on these two assertions, that part of the proceedings seeking declaratory relief must also fail as it is predicated on the same arguments. On this basis I do not need to consider the inadequacies in the way the judicial review proceedings were commenced or pleaded, whether UCPR 59.11 acts retrospectively, or the question of whether an extension of time should be granted. For the reasons I have already given, there is no basis for this court to exercise its supervisory jurisdiction to declare the ICAC findings to be ultra vires, not according to law and/or a nullity."
[3]
Evidence in support of an award of indemnity costs
In support of these applications for indemnity costs, the parties relied upon the principal judgment, the procedural history of the matter, including the filing of defences, a decision of Davies J (referred to below) and the timetable for submissions and evidence. In addition, ICAC relied upon Exhibit "SJL-1" to the Affidavit of Sasha Lowes dated 20 March 2008 and an affidavit of Angus Blyth Nicholas dated 24 May 2019 with a clarification that I shall return to. This material pertained predominantly to correspondence between Mr Kazal and ICAC after these proceedings were commenced. A significant letter was that dated 6 March 2018 to which I will refer below. Mr Ipp relied upon an affidavit of Brian James Whitaker affirmed on 20 March 2018. This affidavit annexed certain correspondence including a letter dated 27 February 2018 to which I will refer to below.
The procedural history of the proceedings was as follows.
Following the filing of the statement of claim on 14 December 2017, the defences of all defendants were filed on 9 February 2018.
On 26 February 2018, Mr Kazal served a notice to produce on the defendants.
On 27 February 2018, the solicitor for Mr Ipp made an open offer by letter in these terms:
"As you are aware, section 56 of the Civil Procedure Act 2005 (NSW) provides an overarching obligation on the parties to facilitate the just, quick and cheap resolution of the real issues in the proceedings. In light of this obligation we are instructed by our client to make an open offer to consent to you discontinuing the proceeding, on condition that each party bear their own costs."
On 6 March 2018, the solicitors for ICAC wrote to Mr Kazal noting the deficiencies in the statement of claim and stating:
"I am instructed to inform you that the ICAC makes an open offer to consent to the discontinuance of the proceedings on the terms that there be no order as to costs and each party bear its own costs. This offer is open for acceptance until 5 pm on 12 March 2018."
ICAC foreshadowed at that time its intention to seek summary dismissal of the proceedings should Mr Kazal not discontinue with the proceedings.
The deficiencies in Mr Kazal's notice to produce were also identified in this letter. Specifically, the letter advised Mr Kazal of the following:
"The Notice to Produce would require a person to produce material in contravention of s. 111 of the Independent Commission Against Corruption Act 1988: see e.g. Obeid v Ipp [2015] NSWSC 1755 at [12]-[13].
In addition, the Notice to Produce fails to comply with the requirements of the Uniform Civil Procedure Rules 2005, in that it:
(a) fails to clearly identify a specific document or thing, contrary to the requirements of r. 21.10(1)(b);
(b) seeks the production of documents which are not relevant to a fact in issue, also contrary to the requirements of r. 21.10(1)(b); and
(c) is plainly contrary to the intention underlying r. 21.10, which is not to subject parties to any kind of general discovery obligation or to permit 'fishing'."
[4]
Material disclosed but not relied upon
In addition to the above chronology, ICAC produced correspondence between its solicitor and Mitry Lawyers in November and December 2018. On 6 November 2018 Mr Kazal made an offer, through his then solicitor, that the proceedings be discontinued, that all prior costs orders be vacated and that Mr Kazal make an ex gratia payment towards costs for all defendants in the sum of $10,000 in total. This offer was not accepted. A counter-offer was made which was not accepted either. ICAC did not rely upon this correspondence but provided it for completeness. It was submitted that its rejection of this offer was not unreasonable having regard to Mr Kazal's poor prospects of success in the proceedings and the fact that ICAC had already incurred costs of just over $34,000 by that time.
Mr Ipp also relied upon a further affidavit of Mr Whitaker affirmed on 24 May 2009 annexing "without prejudice save as to costs" correspondence from Mr Kazal's solicitor in November 2018, in the same or similar terms to the correspondence between ICAC and Mr Kazal's then solicitor. Again, this correspondence was not positively relied upon, but in circumstances where Mr Kazal was not legally represented the material was put forward to avoid any suggestion that relevant information had not been disclosed. It was submitted that nothing relevant follows from these further counter-offers in November 2018.
[5]
ICAC submissions
There were three bases relied upon by ICAC contended its costs ought to be awarded on an indemnity basis.
First, it was submitted that Mr Kazal knew, or properly advised should have known, from 12 March 2018 at the latest, that the proceedings had no prospects of success. It was acknowledged that aside from a period in November to December 2018 Mr Kazal was self-represented. Despite this, it was submitted that self-represented litigants are not immune from indemnity costs being awarded: Macedon Ranges Shire Council v Thompson [2009] VSCA 209; 170 LGERA 41.
Reliance was placed on the fact that paragraphs [6] to [13] of the statement of claim were not ultimately relied upon and notice given of this after the defendants had already filed their written submissions. It was contended that this was in recognition that those aspects of the claim were unsustainable.
Reliance was also placed on the decision of Davies J to set aside Mr Kazal's notice to produce on the basis that he already had access to the materials necessary to argue and determine the proceedings: Kazal v Independent Commission Against Corruption [2018] NSWSC 1370.
The second basis upon which indemnity costs were claimed was the fact that Mr Kazal had made "baseless allegations of maliciousness against ICAC which should never have been made". Paragraphs [13], [16] and [24] of the statement of claim alleged that the conduct of ICAC was, inter alia, "malicious", "knowingly beyond power" and "intended to maximize harm" to Mr Kazal. Reliance was placed on the fact that Mr Kazal had obtained legal representation in November/December 2018 and persisted with those allegations after that time.
Other allegations made by Mr Kazal were that ICAC had formed the view that corruption findings would be made against him even before the enquiry was announced and that ICAC had acted with the intention to harm Mr Kazal and to publicly humiliate him and find him guilty of corruption, regardless of exculpatory evidence.
It was submitted that indemnity costs were appropriate given the serious allegations made. It was noted that no evidence was led in support of these allegations at the hearing.
The third basis upon which indemnity costs were sought was the fact that Mr Kazal unreasonably rejected an open offer made by ICAC on 6 March 2018 that he discontinue the proceedings with no order as to costs. It was foreshadowed at that time that the letter would be relied upon on the question of costs. It was submitted that an offer for discontinuance with each party to bear its own costs can be a genuine compromise: Fabre v Lui (No 2) [2015] NSWCA 312.
[6]
Mr Ipp's submissions
Reliance was placed on the principle that indemnity costs may be awarded in cases where an allegation is made which should never have been made: Colgate-Palmolive Co v Cusson Pty Ltd (1993) 46 FCR 225. It was submitted that this was the case here. The defence was filed on 9 February 2018 which set out why Mr Kazal's claims were baseless. It was submitted that this should have been readily apparent to him.
Reliance was also placed on the fact that unfounded allegations of bad faith, malice and dishonesty had been made. It was submitted that the court should mark its disapproval of the bringing of litigation of that kind: Flotilla Nominees Pty Ltd v Western Australian Land Authority (2003) 28 WAR 95 at [25].
It was noted that paragraphs [6] to [13] of the statement of claim were belatedly abandoned and that there is authority for the proposition that this can be a further basis for awarding costs on an indemnity basis. Those paragraphs included serious allegations and by abandoning them, it was submitted, Mr Kazal effectively conceded that he could not establish them.
It was submitted that Mr Kazal has been on notice for some time that indemnity costs would be sought, as indicated in the letter dated 27 February 2018. Mr Kazal was informed that his claim was hopeless but persisted regardless.
Reliance was also placed on the fact that Mr Kazal had unreasonably rejected the offer of settlement made in the 27 February 2018 letter. It was submitted that it was unreasonable to reject that offer because an offer to forego any entitlement to costs represented a genuine compromise. This was at a time after defences had been filed.
[7]
Mr Kazal's submissions
In his written submissions Mr Kazal set out the relevant principles applicable to such an application. He also relied upon the fact that he was, save for a short period during the proceedings, self-represented.
Mr Kazal submitted that just because the proceedings were summarily dismissed did not mean that his claim was "entirely baseless". He relied upon the Nicholson report, the statement of Mr Neilsen, the NIC report and the correspondence between ICAC and the DPP in this regard.
Mr Kazal placed particular reliance upon the "independent" report of the Acting Inspector of ICAC, Mr Nicholson SC. He submitted that that report "quite clearly" referred to conduct which had caused Mr Kazal damage. That report referred to Mr Kazal's lack of an opportunity to clear his name and to the interference with his presumption of innocence. He relied upon the fact that Acting Inspector Nicholson was critical of ICAC's comment that the DPP's approach had been "conservative".
It was submitted that if an individual of such importance and standing as the Acting Inspector of ICAC was of this opinion, it was not unreasonable for Mr Kazal to base his case upon it.
Mr Kazal relied upon [121] of the principal judgment where I noted that the timing of the publication of the NIC report was "most unfortunate". It was submitted that it was not clear from the material that he had "no prospects of success"; a mere weakness of his case is insufficient to warrant an exercise of the discretion to award indemnity costs: Wentworth v Rogers (No 5) (1986) 6 NSWLR 534.
Mr Kazal submitted that he ran his case, unrepresented, based on the evidence that was available to him in good faith. Given the Nicholson report, it was submitted, "it cannot be assumed that he knew that his case was hopeless and bound to fail."
In response to ICAC's submission that he should have known from 12 March 2018 at the very latest that his proceedings had no prospect of success, Mr Kazal submitted that it was not unusual in litigation for such assertions to be made. It was suggested that the letter may have been a tactic used in litigation to defer him and that ICAC and Mr Ipp made representations that reflected their own interests and understanding of the matter. He submitted that he was not obliged to heed their advice.
[8]
Consideration
As the above summary of the respective submissions reveals, Mr Kazal did not dispute the power of this Court to award indemnity costs nor did he dispute the relevant principles relied upon. Rather, his opposition to costs being awarded on an indemnity basis in this matter turned on the application of those principles to the evidence in this matter.
Section 98(1)(a) of the Civil Procedure Act 2005 (NSW) provides that costs are in the discretion of the court and s 98(1)(b) provides that the court has "full power to determine by whom, to whom and to what extent costs are to be paid". This discretion is subject to the qualification that it "must be exercised judicially in accordance with established principle and factors directly connected with the litigation": Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [65], per McHugh J.
Among the fetters on the discretion to award costs are the rules of the court contained in Part 42 of the UCPR. The usual rule is that costs follow the event, unless it appears to the court that some other order should be made: UCPR, r 42.1. There being no reason to depart from the usual rule in this case, I have already ordered that Mr Kazal is to pay the defendants costs. As for whether those costs should be paid on an ordinary or indemnity basis, UCPR r 42.5 relevantly provides that if the court determines that costs are to be paid on an indemnity basis then "all costs are to be allowed".
An order for indemnity costs is not made to punish an unsuccessful plaintiff for persisting with a case that fails, but to compensate a successful defendant for costs incurred in certain circumstances. The defendants have identified three bases upon which they contend that they should be compensated fully for the costs incurred by them. In circumstances where there is no significant difference between the arguments relied upon by the defendants, I propose to deal with them together.
The first argument relied upon in favour of an indemnity costs order was that by 12 March 2018, at the latest, Mr Kazal ought to have known that the proceedings had no prospects of success. In Fountain Selected Meat (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401; [1988] FCA 364 Woodward J explained that where an action is commenced or continued in circumstances where "the applicant, properly advised, should have known that he had no chance of success":
"…the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law".
[9]
The costs of the motion before Davies J
The defendants had sought indemnity costs on the motion to have the notice to produce set aside as well. Davies J awarded that Mr Kazal paid those costs to the defendants but deferred the question of whether they should be paid on an indemnity basis to me.
As stated above, at [18], a letter was written to Mr Kazal explaining why the notice to produce ought to be withdrawn and warning that failure to do so would lead to a notice of motion being filed and the letter being relied upon in the costs application. Having regard to the principles I have considered above and given the correspondence I have extracted above at [15], [16] and [18], I see no reason why those costs ought not be paid on any indemnity basis as well.
[10]
ORDERS
Order 2 of the six orders made on 18 April 2019 is varied as follows:
(2) The plaintiff is to the pay all the defendants' costs of these proceedings, including the costs ordered by Davies J on 7 September 2018, on an indemnity basis.
[11]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 03 February 2020
Order 2 was varied to require the plaintiff to pay all defendants’ costs of the proceedings, including the costs ordered by Davies J on 7 September 2018, on an indemnity basis.
In the letter Mr Kazal was invited to withdraw the notice to produce by 5 pm on 12 March 2018 and, If it was pressed, ICAC would file a notice of motion seeking to set aside the notice to produce and would rely upon that letter on the question of costs in relation to the notice of motion.
On 9 March 2018, Mr Kazal wrote to the solicitor for ICAC setting out further details of his claim.
Mr Kazal did not accept any offers of compromise.
On 7 September 2018, Davies J struck out Mr Kazal's notice to produce: Kazal v Independent Commission Against Corruption [2018] NSWSC 1370. In doing so he stated at [29]:
"Especially, given the width of the categories of documents in the Notices, there is no reasonable basis beyond speculation that the documents will materially assist in making out the particular issues pleaded. Even if the documents are said to relate to the assertions that the conduct pleaded was malicious, reckless or knowingly beyond power, and that was not submitted by the plaintiff, there is nothing to suggest that the documents would throw any light on those assertions."
On 7 September 2018, a timetable was fixed for the filing of evidence and submissions. The plaintiff's evidence in response to the notices of motion filed on 20 March 2018 by the first, second and third defendants was to be filed and served by 31 October 2018; the defendants' submissions along with any evidence in reply were to be filed and served by 16 November 2018; the plaintiff's written submissions were to be filed and served by 30 November 2018 and the defendants' written submissions in reply were to be filed and served by 7 December 2018.
On 13 December 2018, the plaintiff's time for filing and serving of the submissions was extended to 14 December 2018 and to 21 December 2018 for the defendants' submissions in reply.
In November/December 2018, Mr Kazal briefly obtained legal representation, Mitry Lawyers, but continued to appear for himself thereafter.
Prior to the hearing Mr Kazal indicated that he no longer pressed [6]-[13] of the statement of claim. Those paragraphs concerned an allegation that ICAC had acted improperly in continuing the inquiry. At [13] it had been asserted that the conduct of ICAC and Mr Ipp as set out at [6]-[12] was:
"a. malicious, or reckless with intent to cause injury, reputational and financial harm to the Plaintiff;
b. conduct which the First and Second Defendants knew or ought to have known was beyond their power; and
c. had a foreseeable risk of harm."
It was submitted that the offer was made at a stage of the proceedings after which time ICAC that already incurred costs by investigating Mr Kazal's allegations, preparing its detailed defence and responding to Mr Kazal's notice to produce. It was submitted that by the time of the 6 March 2018 letter ICAC had incurred over $14,000 in fees and disbursements.
The offer was open for acceptance for six days but Mr Kazal was on notice of the problems with his claim since the defence was served on 9 February 2018. To the extent that it was submitted that insufficient time was given, at no time did Mr Kazal ever ask for further time to consider the offer. Instead, he responded on 9 March 2018 setting out further details of his claim. It was submitted that the terms of the offer were clear as were the consequences of not accepting it.
Mr Kazal also referred to [104] of the principal judgment where I noted that Mr Kazal "genuinely feels aggrieved by ICAC's failure to provide Mr Neilson's statement to him in 2012". He accepted that the Nicholson report found that ICAC acted within power but that there are "unfortunate aspects of the entire enquiry process". It was submitted that this shows his claim was not completely unfounded or baseless or maliciously pursued. He submitted that he had a genuine belief that he had been mistreated and that ICAC had acted inappropriately.
It was Mr Kazal's position that the letters of offer were not genuine offers of compromise because he was required to accept the opinion of the defendants as to the strength of his case. He submitted that he had to weigh up his opponents' opinions that his case was groundless in the face of his understanding of the Nicholson report and the other material before him. On this basis, it was submitted, it was not unreasonable for him to reject the offer.
Mr Kazal also relied upon the fact that the offers were made at a relatively early stage of the proceedings and were not left open for very long. It was submitted that it was not unreasonable for him to decline to rely on information provided to him by his opponents as to whether his claim should be pursued.
Mr Kazal accepted that a formal warning of an intention to claim indemnity costs can make such an award more likely, but submitted that such formal warning is not determinative. He noted that he himself had previously made without prejudice offers save as to costs.
In Hamod v State of New South Wales (2002) 188 ALR 659; [2002] FCA 424 at [20] it was held that indemnity costs can be ordered when the Court takes the view that it was unreasonable for the plaintiff to have subjected that party to the expenditure of costs. In Tabbaa v Nine Network Pty Ltd (No 11) [2018] NSWSC 389 Fagan J ordered that costs be paid on an indemnity basis in circumstances where the plaintiff's claim was pursued on a basis known to be false. His Honour referred to the following authorities:
"[76] In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 398 Woodward J found that an applicant had continued a proceeding past the point where it 'and its advisers must have known that they had no possibility of success'. His Honour considered that sufficient 'to provide the special circumstances which … are necessary before any order for costs other than 'party and party' costs should be made'. At 401 Woodward J identified 'wilful disregard of the known facts' as one available ground for awarding indemnity costs.
[77] The approach taken in the above authorities was reaffirmed in Chaina v Alvaro Homes Pty Ltd [2008] NSWCA 353 at [102]-[110] (Basten JA; Giles JA and Young CJ in Eq agreeing)."
In Luo v Carbone [2019] NSWSC 830 at [44], Darke J re stated the relevant principles, albeit in the context of settled proceedings, as follows:
"...the proper exercise of this discretion in circumstances where proceedings have settled will often be that there be no order as to costs, but it may be otherwise if it can be shown that "one of the parties has acted so unreasonably" in bringing the proceedings or defending the proceedings up until the time of settlement that "the other party should obtain the costs of the action" (Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622 at 624-5; see also Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84 at [25]-[30]). As has been said by this Court on a number of occasions, the use of the word "so" as prefacing the word "unreasonably" indicates a level of unreasonableness which is established by the circumstances in which the costs were incurred (see Renton v Kelly [2018] NSWSC 1377 at [56]; Tuitupou v Davies [2019] NSWSC 160 at [48]; see also Edwards Madigan Torzillo Briggs Pty Ltd v Stack [2003] NSWCA 302 at [5]). This enquiry is one that must take into account the parties' conduct throughout the whole course of the proceedings (Fordyce v Fordham (2006) 67 NSWLR 497; [2006] NSWCA 274 at [67])."
More recently in Insurance Australia Ltd v Dent [2019] NSWCA 134 Gleeson JA (at [51]) and McCallum JA (at [53]) described the relevant conduct required to ground an order for indemnity costs as "delinquency or unreasonableness on the part of the party".
To some extent, the question of Mr Kazal's "reasonableness" is to be considered from the situation in which he found himself: since 2011 he was subjected to reportage suggesting he was corrupt, ICAC publicly found him to have engaged in corrupt conduct and recommended that he be charged with lying to ICAC, no charges were ever laid against him and no public forum for exoneration was available to him. When the Nicholson report was published, he no doubt felt somewhat vindicated. It is most unfortunate that the Acting Inspector voiced his personal opinions in this regard in a public statutory report that was limited under s 57B of the ICAC Act. He ultimately made "no finding of maladministration or abuse of power or improper conduct" on ICAC's part. Despite this, Mr Kazal was no doubt comforted by Mr Nicholson's extraneous criticism of the ICAC legislation. As Mr Kazal submitted on this indemnity costs application, if the Acting Inspector of ICAC was of this opinion, how could Mr Kazal be said to be unreasonable for basing his case upon the same argument?
Despite this, whatever Mr Kazal may have felt when he read the Nicholson report, I am satisfied based on the material before me that he must have known that the elements of the tort of public misfeasance could never be made out on the available evidence. He must have realised that he had no prospect of success. He is clearly an intelligent man. His written submissions on this cost application were clear and succinct insofar as the statement of principle and relevant considerations were concerned.
The fact that the defendants were only informed that paragraphs [6] to [13] of the statement of claim were not relied upon until after they had filed their written submissions indicates to me that Mr Kazal must have realised that those aspects of the claim were unsustainable.
The second basis upon which indemnity costs were claimed was the fact that Mr Kazal had made "baseless allegations of maliciousness against ICAC which should never have been made". It was submitted that indemnity costs were appropriate given the serious allegations. I have identified some of these serious allegations above.
In Obeid Snr v Ipp [2017] NSWSC 271 at [14] Hammerschlag J held at [14] that the conduct of the plaintiffs in making misconduct allegations against the Commissioner was "unreasonable, inappropriate or otherwise unjustifiable behaviour of significance in connection with the conduct of proceeding". Costs were awarded on an indemnity basis because, as his Honour explained at [19], "[t]hese allegations were abandoned without explanation. They were unmaintainable and irresponsibly made. The Plaintiffs have not seen fit to come to Court to defend their behaviour".
The difficulty for Mr Kazal is that, no matter how aggrieved he might feel at the way he has been treated, this court is not the appropriate forum for making allegations of the serious nature he did without a proper basis to do so. I am satisfied that although an order for indemnity costs is not made to punish an unsuccessful plaintiff for persisting with a case that fails, it is appropriate that the court mark its disapproval of the improper and unreasonable allegations made by Mr Kazal against the defendants.
The third basis upon which indemnity costs were sought was the fact that Mr Kazal rejected an open offer made by Mr Ipp on 23 February 2018 and by ICAC on 6 March 2018 that he discontinue the proceedings with no order as to costs. It was foreshadowed at that time that the relevant correspondence would be relied upon on the question of costs.
Offers of compromise are provided for in UCPR r 20.26. The consequences of such an offer not being accepted where the judgment is "no less favourable" are set out in UCPR r 42.15A as follows:
42.15A Where offer not accepted and judgment no less favourable to defendant
(1) This rule applies if the offer is made by the defendant, but not accepted by the plaintiff, and the defendant obtains an order or judgment on the claim no less favourable to the defendant than the terms of the offer.
(2) Unless the court orders otherwise -
(a) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, to be assessed on the ordinary basis, up to the time from which the defendant becomes entitled to costs under paragraph (b), and
(b) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, assessed on an indemnity basis -
(i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and
(ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made.
I am satisfied that had Mr Kazal had regard to the matters raised in the defences filed and the letters of 23 February and 6 March 2018 he ought to have accepted the offer of compromise on the basis that he could not establish the tort of misfeasance in public office. The defendants had already incurred costs by that time and the defences were filed. It was a significant compromise for them to forsake the costs incurred up until that time. I am satisfied that the offers were genuine and that the defendants have been put to further expense by the unreasonable rejection of them.
Thus, I am satisfied that all three of the possible bases for making an indemnity costs order in this matter have been established.
In determining that costs should be paid on an indemnity basis I have had regard to the fact that Mr Kazal was unrepresented for most of these proceedings. In Macedon Ranges Shire Council v Thompson, the plaintiffs (the respondents in those proceedings) brought claims of misfeasance in public office and fraud against the council. These claims were based on works related to two parcels of land which had been litigated and settled. Indemnity costs were sought against the self-represented plaintiffs on the basis that their claim had already been resolved in the earlier litigation.
At [16], Redlich JA and Beach AJA noted that, as a general rule, courts are reluctant to make an indemnity costs order against unrepresented litigants. Their Honours quoted Robson J's summary of the authorities in Vink v Tuckwell (No 3) [2008] VSC 316. In Vink v Tuckwell (No 3), his Honour at [103]-[107] outlined the competing interests when determining applications for indemnity costs against such litigants. On the one hand, the court must make allowances for litigants in person and their lack of expertise and knowledge. On the other hand, the court must ensure that trials are fair and ensure that proceedings are conducted without significant difficulties.
In Bhagat v Royal and Sun Alliance Life Assurance Australia Ltd [2000] NSWSC 159, Hodgson CJ in Eq observed at [5] that:
"…litigants in person can cause great hardship and expense to other parties, through making allegations and claims that lawyers would recognise as allegations and claims that could not reasonably or even properly be made, and through making proceedings much longer and much more expensive than they would otherwise be, by not focusing accurately on the real issues in the case."
In Bhagat, the plaintiff sought damages from the defendants for the tort of abuse of process. The trial judge had given the plaintiff a number of opportunities to plead acceptable causes of action, but the claim was eventually summarily dismissed because no causes of actions were disclosed. Costs were awarded against the plaintiff on an indemnity basis.
In Westpac Banking Corporation v Barber [2015] NSWSC 1606, claims of dishonesty were made by a borrower in litigation against Westpac. The borrower claimed that a bank officer was in "cahoots" with his agent and orchestrated a fraud on the bank, a fraud which involved forging his signature. At [32], Hammerschlag J held that indemnity costs should be awarded despite the fact that the borrower was self-represented.
Having regard to the principles derived from these decisions, I do not see that Mr Kazal being unrepresented in these proceedings is any basis for declining to make an order that the defendants' costs be paid on an indemnity basis. I am also satisfied that, for the same reasons as identified by Hammerschlag J in Obeid Snr v Ipp [2017] NSWSC 271 referred to above at [67], that the indemnity costs order should date from the commencement of these proceedings.