AJH Lawyers Pty Ltd v Careri & Ors [2011] VSCA 425

Court of Appeal (Vic)|2011-12-15|Before: Mr P, Warren CJ, Hansen JA

AJH Lawyers Pty Ltd v Careri (Unreported, County Court of Victoria, Judge Lewitan, 7 April 2009)

COURTS - Judges - Reasonable apprehension of bias - Prejudgement of issues in a review of a taxation of costs - Review judge refused recusal application before counsel could make submissions - Review judge refused second recusal application without permitting counsel to make submissions - Appeal allowed.

1 This is an appeal against a decision made by a County Court judge on an application for review of a taxation of costs.

2 The appellant sued the respondents but the claim was settled after orders for discovery. As part of the settlement, the respondents agreed to pay the appellant's costs.

3 The Taxation of Costs Registrar taxed off approximately 87 per cent of the appellant's amended bill of costs. The appellant objected to the Registrar's order and applied to the County Court for a review under r 63A.57 of the County Court Rules of Procedure in Civil Proceedings 1999. Throughout the review, the learned judge made a number of strongly worded remarks directed towards the appellant and its counsel. The appellant twice applied to her Honour to recuse herself from further hearing the review on the ground of apprehended bias. Her Honour rejected both applications and reserved her reasons. Subsequently, her Honour published two written judgments. The first judgment provided reasons for her Honour's refusal to recuse herself.[1] The second judgment dealt with the merits of the review.[2] The latter affirmed the Registrar's determination, save for a minor variation that allowed an additional $310 to be taxed on.[3]

4 The appellant appeals against her Honour's order giving effect to the two judgments. It also appeals against a subsequent costs order her Honour made in favour of the respondents.[4]

5 The appellant's first ground of appeal contends that her Honour erred in refusing to recuse herself from hearing the matter, while grounds two, three, and four allege errors in her Honour's decision on the merits of the review.

6 For reasons that follow, we will allow the appeal on the first ground. Accordingly, in our view it is neither necessary nor appropriate to consider the remaining grounds.[5]

7 The appellant AJH Lawyers Pty Ltd, is a firm of solicitors providing 'legal and migration law services'.[6] The first and second respondents, Pina Careri and Jacqui My Hui Yang were employed by AJH Lawyers before leaving in September 2005.[7] The third respondent, Careri, Yang & Associates Pty Ltd, is a company that, AJH Lawyers alleges, was incorporated by Ms Careri and Ms Yang in July 2005.[8] In October 2005, AJH Lawyers commenced a proceeding against the respondents (collectively, 'the Careri parties'). In essence, AJH Lawyers claimed that Ms Careri and Ms Yang used confidential information obtained through their employment with AJH Lawyers to set up a competing business and poach AJH Lawyers' clients. The statement of claim pleaded a raft of various breaches and wrongs allegedly committed by the Careri parties, including breach of contract, breach of duty of confidentiality, inducing a breach of contract, and breach of employees' duties under the Corporations Act 2001 (Cth).[9] AJH Lawyers sought damages (limited to the County Court's then jurisdictional limit of $200,000), injunctions, and other relief.[10]

8 AJH Lawyers acted as its own solicitors in the proceeding.

9 The case management judge, his Honour Judge Anderson, ruled that the statement of claim was unsatisfactory and required amendment.[11] AJH Lawyers delivered a proposed amended statement of claim seeking damages of $768,318.13 and applied to transfer the proceeding to the Supreme Court.[12] But the proceeding settled before the question of leave to amend the statement of claim and the question of transfer to the Supreme Court were decided.[13]

10 Prior to settlement, there had been a number of interlocutory hearings in the proceeding. Various discovery orders were made. Among them were orders that provided for AJH Lawyers' computer experts to inspect copies of the Careri parties' computer hard drives.[14]

11 The proceeding settled on 4 January 2007 when AJH Lawyers accepted the Careri parties' offer of compromise.[15] The terms of the settlement were that the entire proceeding (including Ms Careri's counter-claim for $18,126.30 in allegedly unpaid employment entitlements[16]) was compromised in return for the Careri parties agreeing to pay AJH Lawyers $49,000, plus costs.[17]

12 Following settlement, AJH Lawyers delivered a bill of costs for $704,701.88 and taxation of the bill commenced before the Registrar.

13 The taxing Registrar referred a number of questions to his Honour Judge Anderson. Following a hearing, Judge Anderson delivered a written judgment answering these questions. In the judgment, his Honour found that 'during 2006 [AJH Lawyers] pursued issues of discovery against the [Careri parties] in a way which appeared at times to be indiscriminate.'[18] He also found that 'the litigation was directed by [AJH Lawyers] (as solicitors) and not by counsel. Counsel appeared at hearings and drafted Court documents, but it seemed clear that the primary judgment was exercised by the solicitors. It did not appear to be simply a case of the 'vigorous' or 'robust' conduct of the litigation, as [AJH Lawyers'] counsel Mr Best suggested. However, there is insufficient evidence that the litigation was conducted improperly, rather than, perhaps, inappropriately. There appeared to be an indiscriminate pursuit of every potential dispute rather than seeking a final resolution of the proceeding.'[19]

14 As a consequence of the answers given by Judge Anderson, the original bill of costs was withdrawn by consent and an amended bill of costs was filed for $558,771.00.[20] Taxation of the amended bill then took place before the Registrar over eleven days or part days. Of the $558,771.00 claimed in the amended bill the Registrar allowed only $70,929.43.[21]

15 For reasons that will become apparent, it is necessary to note that the Registrar was highly critical of the costs associated with the 'computer inspection', calling them 'extortionate'.[22] These costs represented the bulk of the amended bill.[23]

16 For example, AJH Lawyers claimed $30,372 (plus 40 per cent loading for 'care, skill, attention and responsibility') for 'scanning' Ms Careri's 'document list' and another $114,855 (plus 40 per cent') for 'scanning' Ms Yang's 'document list'. The total amount claimed, including loading, was thus $203,317.80. It appears that each 'document list' consisted of a table listing computer files found on the hard drives belonging to Ms Careri and Ms Yang. Each file was apparently represented by a row in the table. For each file, the table listed the file name, and various technical characteristics of the file, such as file size, the date when the file was created, 'attributes', and 'MD5'.[24] The two document lists were 10,124 pages and 38,285 pages long respectively.[25] According to AJH Lawyers' counsel, Mr Sandbach, the word 'scanning' in the bill of costs meant a quick examination.[26] The document lists were apparently 'scanned' on the screen, without printing them.[27] AJH Lawyers 'scanned' the 48,409 pages of the two document lists over the course of a single day, charging $3 per page, plus 40 per cent loading.[28]

17 The relevant principles governing the issue of apprehended bias are well-settled. Essentially, there are eight relevant principles.

18 First, when one of the grounds of appeal is based on actual or apprehended bias, the Court of Appeal needs to deal with that ground first. If the appellant establishes actual or apprehended bias, the Court will set aside the decision below and remit the matter back.[29] This is so even if the Court is satisfied that the decision below is correct on the merits.[30]

19 Secondly, as noted in Antoun,[31] judges should not 'too readily accept recusal because a party has demanded it'.[32] Further, as held in Ebner,[33] '[j]udges have a duty to exercise their judicial functions when their jurisdiction is regularly invoked and they are assigned to cases in accordance with the practice which prevails in the court to which they belong. ... If one party to a case objects to a particular judge sitting, or continuing to sit, then that objection should not prevail unless it is based upon a substantial ground for contending that the judge is disqualified from hearing and deciding the case.'[34] That being said, the principle that a judge should not disqualify him or herself too readily is not a 'blanket that smothers the effect of disqualification where it has already arisen'.[35]

20 Thirdly, the test for a reasonable apprehension of bias was stated in Johnson[36] as being 'whether a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial and unprejudiced mind to the resolution of the question the judge is required to decide'.[37] The word 'might' in the phrase 'might not bring an impartial and unprejudiced mind' was clarified in Ebner as referring to 'possibility (real and not remote), not probability'.[38] On the basis of Ebner, where, as in this case, 'the matter has already been decided, the test is one which requires no conclusion about what factors actually influenced the outcome. No attempt need be made to inquire into the actual thought processes of the judge'.[39]

21 Fourthly, the apprehension in question is apprehension that the judge will not decide the case impartially, not merely an apprehension that he or she 'will decide the case adversely to one party'.[40]

22 Fifthly, the application of the test involves two steps. The first step is 'the identification of what it is said might lead a judge ... to decide a case other than on its legal and factual merits'.[41] The second step is the 'articulation of the logical connection between the matter and the feared deviation from the course of deciding the case on its merits'.[42] Contrary to AJH Lawyers' submission,[43] the two-step approach is applicable to cases of apprehended bias on the ground of pre-judgment.[44] In such a case, the matter to be identified in the first step is the conduct of the judge said to give rise to apprehension of bias. And the logical connection that needs to be articulated in the second step is the logical connection between the conduct of the judge and the feared prejudgment of a question the judge is required to decide.[45]

23 Sixthly, 'the perception of a lay observer will not be as informed as the perception of a lawyer, particularly a litigation lawyer'.[46] The fictional lay observer 'is not to be assumed to have a detailed knowledge of the law, or of the character or ability of a particular judge'.[47] Yet the fictional observer is taken to understand the dynamics of modern judicial practice. Modern judges 'are not expected to wait until the end of a case before they start thinking about the issues, or to sit mute while evidence is advanced and arguments are presented. On the contrary, they will often form tentative opinions on matters in issue, and counsel are usually assisted by hearing those opinions, and being given an opportunity to deal with them'.[48] '[T]he expression of tentative views during the course of argument as to matters on which the parties are permitted to make full submissions does not manifest partiality or bias'.[49]

24 Seventhly, '[a] line is drawn between forthright and robust indications of a trial judge's tentative views on a point of importance in a trial and an impermissible indication of prejudgment that has the effect of disqualifying the judge from further conduct of the proceedings'.[50] A key factor determining whether that line has been crossed is the extent to which the views expressed by the judge appear to be final rather than merely tentative.[51]

25 Finally, ['j]udges do not have to devote unlimited time to listening to unmeritorious arguments. Sometimes, a brief hearing will suffice'.[52] That having been said, when a party makes an application, the judge must normally give the party some reasonable opportunity to make submissions in support of that application.[53] This is so even if the judge's preliminary view is that the application will be unmeritorious.[54] If the judge refuses an application before receiving any submissions, the impression created by that conduct is not erased if the judge, after having announced his or her decision, agrees to listen to the party's submissions under sufferance.[55]

Conduct of the judge on the second day of the hearing

26 Here, the costs review took place over eight days and part days.[56] On the first day, the hearing was adjourned shortly after it started because the Careri parties' counsel, Mr LaPirow, needed time to review a document produced by AJH Lawyers' counsel, Mr Sandbach, during the hearing.[57] Shortly after the review resumed next morning, her Honour expressed her astonishment at the size of AJH Lawyers' bill:[58]

HER HONOUR: Before we get to that, I was looking through these documents last night and I came to that end figure which was the instructions for breach [sic] which was about $480,000.

MR SANDBACH: Yes, I think that's right Your Honour.

HER HONOUR: I have never seen anything like that in my life, that is quite extraordinary.

MR SANDBACH: It is a large bill for this court.

HER HONOUR: No it's not a large bill for this court, it's a large bill for any court Mr Sandbach. I mean, you don't want to waste my time do you?

MR SANDBACH: No certainly not Your Honour.

HER HONOUR: It just seems to me to be extraordinary. Absolutely extraordinary.

MR SANDBACH: I have just come from receiving last week a decision of Justice Byrne in a case where the defendant was seeking security for costs and in a case which is just now reaching discovery point, they swore affidavits ---

HER HONOUR: I don't want to hear what has happened in that case, we are talking about this case, in this court and there's a bill for $480,000. Mr Sandbach, there is also a duty on counsel to exercise their judgment.

MR SANDBACH: Absolutely Your Honour.

HER HONOUR: I just think that it is extraordinary, absolutely extraordinary. And because of the fact that the plaintiffs are solicitors, really.

MR SANDBACH: The difficulty in this case Your Honour, was, as Your Honour will see by looking at ---

HER HONOUR: I am sure there were plenty of difficulties in this case but not 480,000 difficulties.

MR SANDBACH: There were every cent of $480,000 worth of difficulties Your Honour.

HER HONOUR: Mr Sandbach.

MR SANDBACH: Part of the reasons was that Judge Anderson's orders prevented the solicitors from looking at the documents themselves or at least some of them, required the solicitors to engage independent experts, requires the solicitors to engage computer consultants and required the solicitors ---

HER HONOUR: So they may have done that but $480,000 for the solicitors to do that? I mean, really, who are these solicitors, what are they doing?

MR SANDBACH: Your Honour, they are endeavouring to deal with an extremely recalcitrant defendant who had gone to great lengths to destroy evidence, conceal evidence ---

HER HONOUR: You have told me about that and even in that context it doesn't give the solicitors a licence to incur $480,000 worth of costs, they would never have been able to get away with it had they had a client and it just smacks ---

MR SANDBACH: Your Honour, sadly the costs do seem to be escalating in litigation these days ---

HER HONOUR: Not to that extent Mr Sandbach and if they are, then it's time that we should reign them in and if solicitors are intent on charging people $480,000, they should not be doing so. You have got parliament, you've got all sorts of people saying that solicitors' costs are getting out of hand and this is just ridiculous.

MR SANDBACH: Your Honour, the bottom line is large although it is, as I say, small by comparison ---

HER HONOUR: I suppose we are going to hear you, there is a two day estimate and I hope that you are going to keep within that, two days prior to Christmas on this argument and I will hear it but I want your instructors to be aware of what it looks like and I want you to exercise some sort of judgment in this matter Mr Sandbach.[59]

27 After some further discussion, the following exchange took place:[60]

MR SANDBACH: The defendants were in default of their discovery obligations at that point and Judge Anderson ordered by consent on that day that on or before 31 May the defendants file and serve further affidavits of documents which specifically address each category in the approved schedule of documents, specify the numbers applied to each document within each migration file. In relation to the computer generated printouts identified in Schedule 2 --

HER HONOUR: I hope this isn't all going to be documents that I am going to have to look at.

MR SANDBACH: No, no Your Honour, the point simply is ---

HER HONOUR: I mean, this is just ridiculous.

MR SANDBACH: --- the defendants were in default, they acknowledge that, they consented to order for further and better discovery against themselves ---

HER HONOUR: Just one moment. I mean, if these solicitors want to indulge in a frolic of trying to whatever it is ---

MR SANDBACH: It is a matter Your Honour of ---

HER HONOUR: I just wonder if it is a matter that can be referred to the Ethics ---

MR SANDBACH: I am sorry, to?

HER HONOUR: ES. [sic] So are you looking at the minutes of consent orders made on 19 May?[61]

28 Shortly thereafter Mr LaPirow, interrupted Mr Sandbach's submissions to indicate that the defendants denied breaching Judge Anderson's orders. During the ensuing discussion with Mr LaPirow, her Honour again inquired whether she had power to refer AJH Lawyers for investigation by disciplinary authorities:[62]

MR LAPIROW: ... To indicate the conduct of the parties where the Registrar used the most unusual terms, I'm not saying they are inappropriate but I will say they are unusual for taxation, where he used the term "Extortionate on costs", which is about as far removed from necessary or proper as once [sic] can possibly imagine and one will not find the word extortionate used in the submissions which my client put before the Registrar; that was the Registrar's view, having conducted a taxation over many days and looking at each item in detail; looking at each letter, looking at each facsimile, looking at whether or not it was justified.

HER HONOUR: Do I have the power to refer this matter to the Law Institute?[63]

29 The Careri parties point out before this Court that at the commencement of the review, her Honour had before her a large number of documents, encompassing the determination of the taxing Registrar and several outlines of submissions from AJH Lawyers, including submissions filed at the initial taxation of costs as well as submissions filed for the purposes of the review.[64] The Careri parties submit that by the second day of the review, when the exchanges extracted above took place, her Honour had read at least some of these documents.[65] In particular, the Careri parties highlight that by the second day of the hearing, her Honour was aware of the following matters:[66]

that the original proceeding settled for $49,000, plus costs;
that two weeks prior to settlement, the plaintiff applied to have the proceeding transferred from the County Court to the Supreme Court on the basis of the quantum it was claiming;
that at the time the proceeding was settled, no rules-compliant statement of claim had been filed by the plaintiff;
that the plaintiff was effectively a self-represented party;
that the plaintiff submitted an initial 96-page bill of costs for $704,701.88;
that subsequently the plaintiff submitted a revised 71-page bill of costs for $558,771.00;
that after an 11-day taxation of costs, the taxing Registrar taxed off 87 per cent of the revised bill and ordered the Careri parties to pay AJH Lawyers $70,929.43.

30 We assume, as the Careri parties' suggest, that her Honour was aware of all of these matters. Nothing was said to the contrary by AJH Lawyers. That being said, the Careri parties do not contend that by the time her Honour made the comments extracted above, she had read all of the relevant materials and submissions and had a detailed understanding of the facts of the review. Indeed, a number of exchanges on the transcript make it clear that her Honour was not, at the time, familiar with the details of the review. More particularly, the transcript indicates that, at the time she made the remarks extracted above, her Honour:

might not have read the amended notice of review;[67]
had not read all of the parties' submissions;[68]

had not read (or at least had not read in full) the judgment of Judge Anderson answering the questions referred by the Registrar;[69]

was not familiar with the hard drive examination orders made by Judge Anderson;[70]
was not familiar with the details of the proceeding[71] and, in particular, was not familiar with the statement of claim;[72]
was not familiar with the details of the review.[73]

31 The Careri parties submit that her Honour's comments represent 'a genuine reaction from an experienced County Court Judge to a claim of $704,701.88 in legal costs (later reduced to $558,771.00) when the case settled for $49,000 without a sustainable statement of claim'.[74] The Careri parties contend that 'such figures would be considered manifestly excessive in the mind of any judge with experience in such matters, and her Honour referring to it as 'quite extraordinary' [is] a perfectly reasonable response, and this might also be the response of a fair-minded lay person'.[75]

32 A bill of costs in excess of $500,000 purportedly accrued at a stage in the proceeding where a statement of claim in an acceptable form had not yet been filed, in a matter where the total amount claimed was under $800,000, would understandably have alarmed and concerned the learned judge. That concern could have only been heightened by the knowledge that the proceeding settled for $49,000, that the initial bill claimed costs in excess of $700,000, and that AJH Lawyers was acting as its own instructing solicitors.

33 It would be understandable, and proper, for her Honour to make her concerns known to AJH Lawyers and counsel. Indeed, had the learned judge failed to do so, it is possible that AJH Lawyers 'might have had a legitimate complaint of a different kind'.[76] It follows that if all her Honour had done was to comment that the size of the bill seemed 'absolutely extraordinary' and that she was concerned about some possible impropriety on the part of AJH Lawyers, as self-represented solicitors, in running up a bill of that size, and if her Honour had made it apparent, by express words or by context and implication, that these were simply her preliminary initial reactions and that she was keeping an open mind, her Honour's conduct would have been entirely appropriate.

34 Unfortunately, her Honour went much further than that.

35 Significantly, AJH Lawyers' case on review was that the disputed items on the bill, which represented over 75 per cent of the bill,[77] were 'necessary or proper for the attainment of justice or for enforcing or defending [its] rights'.[78] This is because, leaving aside the principles governing the scope of permissible challenge to the Registrar's decision,[79] ultimately, her Honour could only allow the disputed costs if she was satisfied that the costs were 'necessary' or 'proper'. Bearing this in mind, it is easy to see a logical connection between her Honour's italicised remarks, extracted above, and a possible concern that her Honour may have pre-judged the questions she was required to decide at the review.

36 The remarks we emphasised earlier in the transcript extracts can be divided into three categories.

37 First, her Honour said: 'I am sure there were plenty of difficulties in this case but not 480,000 difficulties'. Shortly afterwards, she remarked that the alleged recalcitrance of the Careri parties did not give AJH Lawyers 'a licence to incur $480,000 worth of costs'. These comments suggest that her Honour may have come to a view that the bill was so large that, ipso facto, the majority of the costs must have been unnecessary. That view would, of course, be inconsistent with AJH Lawyers' case that the disputed costs were 'necessary' or 'proper'.

38 Secondly, her Honour also said, referring to the size of the bill: 'And because of the fact that the plaintiffs are solicitors, really'.[80] She then said that AJH Lawyers 'would never have been able to get away with it [ie, incurring $480,000 of costs] had they had a client and it just smacks ---'.[81] She later said: 'I mean, if these solicitors want to indulge in a frolic of trying to whatever it is ---'.[82] These remarks suggest that her Honour may have formed a view that AJH Lawyers billed the large amount that it did only by virtue of being self-represented, because an external client would never have permitted AJH Lawyers to run up a bill of that size. Such a view would be quite inconsistent with the proposition that the costs were 'necessary' or 'proper'.

39 Thirdly, the learned judge said to Mr Sandbach: 'I just wonder if it is a matter that can be referred to the Ethics ---'.[83] Not long after that, her Honour asked Mr LaPirow: 'Do I have the power to refer this matter to the Law Institute?'[84] These remarks, made in the context of a discussion of AJH Lawyers' bill, would indicate that her Honour had formed a strong suspicion that AJH Lawyers had breached its professional obligations by incurring excessive costs. Referring a legal practice for investigation by disciplinary authorities is a very serious step that courts do not take lightly. Her Honour's inquires about her power to do so suggest that, at the time she made the inquiries, her Honour may have already formed a view that her suspicion would not be dispelled by the end of the review. Yet, AJH Lawyers' case on review was that each of the disputed items was 'necessary or proper for the attainment of justice or for enforcing or defending [its] rights'. It seems unlikely that AJH Lawyers could have breached its professional obligations by performing and billing for services that were 'necessary' or 'proper'. So if AJH Lawyers were to succeed on review, they would also succeed in dispelling her Honour's apparent suspicion. It follows that her Honour's inquiries about her power to refer AJH Lawyers to disciplinary authorities indicate that her Honour may have, at the time she made the inquiries, already formed a strong view that AJH Lawyers would be substantially unsuccessful in establishing its case on review.

40 The Careri parties submit that the sole issue her Honour had to decide was 'whether the discretion of the Registrar, exercised in the taxation, had miscarried'.[85] They submit that 'not one of the remarks complained of' by AJH Lawyers was directed to that issue.[86] Hence, the Careri parties submit, the remarks do not give a fair-minded observer any grounds for fearing that that her Honour would not bring an impartial and unprejudiced mind to the resolution of the questions that she was actually required to decide.[87]

41 We are unable to accede to this submission. In order to succeed on review, AJH Lawyers had to establish that the disputed costs were 'necessary' or 'proper'.[88] Whatever may be said about some of the other remarks that AJH Lawyers complains of,[89] the italicised remarks that we have been discussing do appear, for reasons we have given, to convey her Honour's views on that very issue.

42 Two important observations should be made about these remarks.

43 First, her Honour made the remarks extremely early in the review. All of the remarks were made within the first ten pages of transcript of the second day of the review. The first day of the review was cut short after Mr LaPirow requested an adjournment. This happened very soon after the start of the hearing, after only 16 pages of transcript. Thus the italicised remarks were made after Mr Sandbach had only just started to make his oral submissions. Further, it was apparent that her Honour had not, at the time, read all of the materials and was not familiar with the details of the review. Her remarks appear to be wholly reactive to the amounts explained to her.

44 Secondly, leaving aside one comment that we will discuss shortly, nothing her Honour said makes it apparent that she was expressing tentative rather than concluded views. The comments were emphatic and unqualified. Her Honour's comment that AJH Lawyers 'would never have been able to get away with it had they had a client' illustrates this point. It is difficult to interpret this comment as expressing anything other than a fairly concluded view. At no point does her Honour say words to the effect that her comments about the bill are merely expressing a preliminary view or that she is keeping an open mind.

45 Similarly, her Honour's inquiries about whether she had power to refer AJH Lawyers to disciplinary authorities were not qualified or conditioned in any way. Her Honour could have prefaced her inquiries with some conditional opening statement, such as: 'if at the end of the review I consider that the costs were excessive ...', or 'if I find that the Registrar was right when he described some of the costs as "extortionate" ...'. But she did not qualify her inquires in that way, or in any other way.

46 Her Honour did, at one point, say: 'I will hear [your argument] but I want your instructors to be aware of what it looks like and I want you to exercise some sort of judgment in this matter Mr Sandbach'.[90] The phrase 'what it looks like' suggests that her Honour's previous comments were expressing a preliminary reaction rather than a concluded view. Unfortunately, that qualification, standing in isolation, is not enough to overcome the impression created by the strong and unqualified language used by her Honour before and after.

47 For these reasons, we consider that on hearing her Honour's remarks, a fair-minded lay observer would have had some concern that her Honour may not bring an impartial and unprejudiced mind to the resolution of the question whether the disputed costs were 'necessary' or 'proper'. It is unnecessary to decide whether the level of that concern would have reached the requisite threshold of seriousness (ie a reasonable apprehension of a 'real and not remote' possibility that her Honour might have prejudged the issue). This is because the manner in which her Honour dealt with AJH Lawyers' subsequent recusal applications would in any event amplify the concern to the requisite level.

48 The second day of the review was Thursday, 11 December 2008. In the afternoon of that day, after returning from the lunch adjournment, the learned judge informed counsel that she was allocated to sit in the County Court's criminal jurisdiction for the first half of 2009. Her Honour told them that if the hearing did not finish that year, her next available date was 17 August 2009. Mr Sandbach suggested that it would be better to 're-list the matter' as 'there are trial dates available in the list'. Her Honour refused to re-list the review before another judge, pointing out that the matter was part-heard.[91] The learned judge told counsel that she could continuing hearing the review on Friday and then on Monday, Tuesday, and Wednesday of the following week.[92]

49 On Friday afternoon, immediately before adjourning until Monday, her Honour reminded counsel that she could not hear the matter beyond Wednesday of the following week.[93]

50 When the review resumed on Monday, Ms Sandbach immediately requested that the matter be stood down for ten minutes to enable him to speak with his instructor. Her Honour told Mr Sandbach that she would only stand the matter down if the instructions Mr Sandbach was seeking were instructions in relation to settlement, not instructions in relation to the matter generally. Mr Sandbach asked for 'an opportunity of seeking instructions about compromise' and the matter was stood down.[94]

51 When the hearing resumed, Mr Sandbach applied for her Honour to recuse herself from further hearing the matter:[95]

MR SANDBACH: Thank you for that time, Your Honour. I am afraid we have been unable to resolve the matter. An offer was put but it was not accepted.

MR LAPIROW: I don't think it is appropriate for anything to be said about that, nor do I think ---

HER HONOUR: Yes, very well. Mr Sandbach, you understand Wednesday is the last ---

MR SANDBACH: Yes, I do appreciate that, Your Honour. Your Honour, I should say that in light of my inability to reach resolution with my learned friend, I am instructed to make an application which may in fact foreshorten things very considerably and that is that Your Honour cease to hear the matter. Can I hand Your Honour an outline of submissions and a relevant authority. Would Your Honour prefer to read this ---

HER HONOUR: Is this on the basis of bias?

MR SANDBACH: Not actual of course but ostensible or possible, perceived by ---

HER HONOUR: I don't propose to grant you - I am going to hear this matter.

MR SANDBACH: Your Honour, in my submission, it would be appropriate that Your Honour hear the application.

HER HONOUR: Yes, so you understand that if this goes beyond Wednesday.

MR SANDBACH: Your Honour won't be able to hear it possibly until August, as I understand it, yes.

HER HONOUR: Yes.

MR SANDBACH: I appreciate that, Your Honour.

HER HONOUR: Make your application.

MR SANDBACH: Your Honour, the authorities in relation to the test which is applicable range from the earlier case of Livesy in New South Wales Bar Association [sic] where the High Court established the principle ---

HER HONOUR: I am familiar with the principles of the law, so what is your submission?[96]

52 Mr Sandbach then addressed her Honour on the facts for a relatively short period of time - about two and a half pages of transcript - before her Honour cut him off:[97]

MR SANDBACH: ... The effect of all that, Your Honour, if I could take Your Honour to the concluding passage in the last paragraph on p.2 ---

HER HONOUR: No, I am very well familiar with the law.

MR SANDBACH: Yes.

HER HONOUR: What do you say, Mr Lapirow?

MR SANDBACH: Sorry, Your Honour, I hadn't quite finished. I need to take Your Honour not only to the factual matters ---

HER HONOUR: I know what the law is, Mr Sandbach. Look, it's Monday, this case had - was an estimate of three days. It's now in the fourth day. I will have Mr Lapirow's submission now.

MR SANDBACH: Yes, Your Honour.

HER HONOUR: And I will indicate to you that I don't propose to accede to your application for disqualification for bias and I will incorporate my reasons into my judgment.

MR SANDBACH: If Your Honour pleases.

HER HONOUR: Thank you. Mr Lapirow, what do you say about the application that I disqualify, [sic] myself.[98]

53 Mr LaPirow then made submissions asking her Honour to continue hearing the matter. When Mr LaPirow finished, her Honour ruled that she would not disqualify herself:[99]

HER HONOUR: Yes, thank you. Mr Sandbach, so that I can

hear ---

MR SANDBACH: Your Honour, in my submission, what my friend has indicated, amplifies the basis for the application ---

HER HONOUR: Yes, thank you Mr Sandbach, would you continue. I am not going to accede to the application and I will give my reasons at a later stage.

54 AJH Lawyers submits that these excerpts show that her Honour peremptorily dismissed Mr Sandbach's recusal application before hearing any submissions. When Mr Sandbach urged the learned judge to hear the application, her Honour listened to Mr Sandbach's submissions under sufferance before cutting them short. AJH Lawyers submits that her Honour then ruled that she would not accede to the application and would incorporate the reasons into her judgment. Having already made the ruling, her Honour then asked Mr LaPirow: 'what what do you say about the application that I disqualify, myself'.[100]

55 The Careri parties dispute this interpretation of the transcript. They submit that the lead up to the application dealt with matters of timetabling, counsel's estimate of trial length and about a failed attempt at resolution. The Careri parties contend that her Honour did not immediately understand the 'context' of Mr Sandbach's application. They point out that shortly after saying 'I am going to hear this matter', her Honour also said 'so you understand that if this goes beyond Wednesday'. This shows, according to the Careri parties, that her Honour at that point still remained concerned with 'scheduling issues'. They submit that when her Honour comprehended 'the extent of the application to be made', she allowed Mr Sandbach to make submissions in support of the application.[101]

56 We reject the Careri parties' submissions. In our view, a fair-minded lay observer could not interpret her Honour's statement that she would 'hear this matter' as referring to 'scheduling issues'. This is apparent from the italicised segments of the transcript just recited. The exchange extracted above took place on Monday while Mr Sandbach's application to have the matter re-listed before another judge (due to her Honour's unavailability during the first half of 2009) was made on Thursday of the previous week. There was no discussion of 'scheduling issues' on the morning of the recusal application. In any event, as the Careri parties acknowledge,[102] her Honour was well aware that Mr Sandbach's application was based on bias. The learned judge asked: 'Is this on the basis of bias?' And Mr Sandbach replied that the application was based on ostensible bias. The very next thing her Honour said was 'I don't propose to grant you - I am going to hear this matter'. It is, in our view, abundantly clear that her Honour was responding to Mr Sandbach's recusal application, which she knew was based on apprehended bias.

57 In our view, a fair-minded lay observer might reasonably apprehend that her Honour might have prejudged Mr Sandbach's recusal application. She announced her decision before Mr Sandbach could make any oral submissions. We acknowledge that the transcript suggests that Mr Sandbach had, at that point, already handed up his written submission. But the transcript invites the strong inference that her Honour had not read the submission before announcing her decision. She enquired whether the application was on the basis of bias. The answer to that question would have been apparent from the written submission, so it follows that she had not read the submission at the time she asked the question. When Mr Sandbach started to respond to the question, the judge cut him off with her decision before he even finished his sentence. Her Honour could not have had enough time to read the submission during the time that it took Mr Sandbach to say just ten words.

58 While the words 'don't propose to grant you' could suggest that her Honour was merely expressing a preliminary view, these words were followed by an emphatic refusal to recuse herself - 'I am going to hear this matter'. The overall impression is that her Honour was announcing her decision on the application. That impression is strengthened by the fact that when Mr Sandbach pressed the application, her Honour responded by reminding Mr Sandbach that she could not sit beyond Wednesday. The reminder suggests that her Honour had decided that Mr Sandbach's application would fail because if the application were to succeed, the result would be that her Honour would cease hearing the review immediately.

59 As the transcript shows, her Honour's initial reaction to Mr Sandbach's recusal application was that the application was unmeritorious. Our analysis of the events of the second day of the review suggests that this initial reaction was wrong and that the application was reasonably arguable. But, as we have explained,[103] even if her Honour was right and the application was unmeritorious, her Honour was still required to give Mr Sandbach some reasonable time to make submissions in support of his application. The judge was required to do so even if, as the Careri parties submit, her Honour suspected that AJH Lawyers was trying to forum 'shop'.[104] Unfortunately, her Honour announced her decision without giving Mr Sandbach an opportunity to make submissions in support of his application. The fact that her Honour subsequently permitted Mr Sandbach to make submissions does not erase the perception created by the initial peremptory refusal of the application.[105]

60 For these reasons, her Honour's conduct in relation to the first recusal application displayed apprehended bias.

61 On the sixth day of the review, her Honour asked Mr LaPirow why the original bill for $704,701.88 was withdrawn and substituted with an amended bill for $558,771.00.[106] Mr LaPirow responded by outlining the differences between the two bills. One of the differences, according to Mr LaPirow, related to Mr Sandbach's fees.[107] Mr LaPirow claimed that this difference 'reflects' on Mr Sandbach and that Mr Sandbach has 'always had a conflict [of interest] with respect to this matter'.[108] Mr Sandbach protested.[109] A discussion then ensued about the fees.[110] During that discussion, her Honour opined that Mr Sandbach may have a conflict of interest.[111] At the conclusion of Mr LaPirow's submissions about the fees, Mr Sandbach made a second recusal application:[112]

MR SANDBACH: Your Honour I have a fresh application to Your Honour that Your Honour should cease to hear this matter.

HER HONOUR: I am not ceasing to hear this matter Mr Sandbach.

MR SANDBACH: Your Honour in my submission it would be appropriate that Your Honour permit me to indicate to Your Honour the grounds of the application and those are as to the matters which have passed this morning.

HER HONOUR: Mr Sandbach all that I am doing Mr Sandbach is I'm investigating the reasons why the first bill - and this was something that I was entitled to do - I was investigating why the first bill was for some $700,000 and the second bill was for $500,000 odd dollars and I was investigating the reasons why. Now these were all matters before the Registrar and just because you chose not to question those matters I'm entitled to ask questions about the manner in which this taxation proceeded. Now, I haven't made any comments at all about your conduct and I haven't made any comments. The only thing that I said is that there may be. [Her Honour is presumably referring to conflict of interest.] I don't know whether there is or there isn't. So there's nothing in the fact that I've asked counsel to address certain issues to indicate that I may be in any way biased. I am just asking matters about matters which were properly before the Registrar and I am entitled to know about it.

MR SANDBACH: Of course Your Honour is entitled to know about the background.

HER HONOUR: Whether I take it into account or not I'll take into account your submission, that it's not relevant, and I'll take into account Mr Lapirow's submission that it is and I'll make up my own mind and if it's not relevant I won't take it into account.[113]

62 It is clear, particularly from the italicised segments above, that her Honour had, for the second time, refused Mr Sandbach's application without giving him any opportunity to make submissions.

63 The Careri parties submit that the second recusal application was 'misconceived' because her Honour had already 'ruled on the issue'. If AJH Lawyers were dissatisfied with her Honour's decision, the Careri parties submit, the appropriate course was to seek leave to appeal rather than to make a second application.[114]

64 We reject this submission. We will leave aside the question whether a party can make an application to a judge that she or he reconsider the initial decision on a recusal application. There is no doubt that a party can make a second and subsequent recusal applications based on fresh grounds.[115] In this case, Mr Sandbach had described the application as a 'fresh application' and her Honour refused it before giving Mr Sandbach an opportunity to explain the grounds for the application.

65 It follows that her Honour's conduct in relation to the second recusal application displayed apprehended bias.

66 We would further observe that it is surprising that counsel would appear in a case such as this knowing he would possibly have to justify his own fees. It would have been much better to have different counsel. It also avoids the awkwardness of personal embarrassment. In addition, if Mr LaPirow had misgivings about his opponent appearing in the matter, then that should have been appropriately resolved beforehand. The tenor of counsel's remarks was provocative and inflamed an already difficult hearing. One can have some sympathy for the judge.

Cumulative effect of the conduct of the trial judge

67 We have concluded that a fair-minded lay observer might reasonably apprehend that her Honour might not have brought an impartial and unprejudiced mind to the resolution of the two recusal applications. It is unnecessary to consider whether, as a matter of law, this necessarily vitiates her Honour's decision on the merits of the review. This is because, on the facts of this case, the manner in which her Honour dealt with the recusal applications would, in our view, heighten the fair-minded observer's concerns about her Honour's conduct on the second day of the review.

68 Her Honour's refusal to permit Mr Sandbach to make submissions in support of his applications before ruling on the applications displayed a certain unwillingness to entertain arguments advanced on behalf of AJH Lawyers. That unwillingness, albeit displayed on the fourth and sixth day of the review, in our view affects the way in which a fair-minded lay observer would perceive the remarks made by her Honour on the second day of the review. Armed with the knowledge of the manner in which her Honour handled the recusal applications, a fair-minded lay observer would, with the benefit of hindsight, take a much harsher view of her Honour's remarks on the second day. The result is that, in our view, the observer might reasonably apprehend that, on the second day of the review, there was a real and not remote possibility that her Honour did not bring an impartial and unprejudiced mind to the resolution of the question whether the disputed costs were 'necessary' or 'proper'.

69 It follows that the appeal should be allowed on ground 1.

70 The excerpts of the transcript we have extracted represent a small subset of the conduct of the learned judge that AJH Lawyers complains of. The learned judge had many robust exchanges with Mr Sandbach, using colourful expressions such as 'absolute scandal'[116] and repeatedly referring Mr Sandbach to a decision of the Court of Appeal concerned with misconduct by counsel[117] - Rees v Bailey Aluminium Products Pty Ltd.[118]

71 Many of the later exchanges appear to convey her Honour's increasing exasperation with the conduct of Mr Sandbach. That conduct included providing an extremely inaccurate estimate of the duration of the review,[119] and describing the amount subject of the review in a way that was quite disingenuous.[120]

72 A brief perusal of the transcript reveals that the behaviour of counsel on both sides during the review left much to be desired. Throughout the review both counsel engaged in incessant bickering, constantly interrupting each other and regularly accusing each other of improper conduct.[121] Again, one might sympathise with the learned judge, who had to endure this behaviour for eight days.

73 Be that as it may, for the reasons outlined above we have concluded that her Honour's remarks on the second day of the review, together with the manner in which the judge dealt with AJH Lawyers' recusal applications, created a reasonable apprehension of bias. Accordingly, it is unnecessary to examine other comments made by her Honour. In particular, it is unnecessary to consider whether her Honour had crossed the line by expressing her understandable frustration with Mr Sandbach in the robust way that she did.

74 We would add that the judge was placed in a difficult position. Her Honour was confronted with a factual situation that would provoke surprise, in all likelihood incredulity, namely a seemingly disproportionate claim for costs. Her Honour also encountered a party that was not conducting a case in accordance with estimates given. In managing the matter and moving the parties along, particularly counsel, the judge was acting properly and in accordance with the principles espoused in AON.[122] It is most regrettable that counsel did not fulfil the paramount duty owed to the court and respond to her Honour's urging to get on with the matter. The unfortunate remarks made by the judge may well have been provoked by the conduct of Mr Sandbach. In any event, it all remains regrettable.

75 Finally, on the bias question we would say that it will always behove a judge to conduct her or himself with measure, dignity and patience. Ultimately, it is the protection of the administration of justice that is at stake. Whilst occasions may arise where counsel, even self-represented litigants, act unreasonably, a judge must retain control of the proceeding in a firm but fair and impartial manner.

76 Because AJH Lawyers succeeds on the issue of apprehended bias, it is neither necessary nor appropriate to consider the grounds of appeal dealing with the merits of the review.[123] We reiterate that having so found, this Court is obliged to set aside the decision and order remitter.

77 We have not commented or expressed a view on the amount of the costs claimed by AJH Lawyers, quite deliberately. To do so would involve us in predetermining the review or possibly influencing the judge who will re-hear the matter. However, our silence on the matter should not be taken to amount to approval or disapproval of the costs charged. That is a matter wholly for assessment by the different judge on the remitted review.

78 For reasons given, we order that the appeal be allowed on ground one and the matter be remitted back to the County Court for hearing and determination by a different judge in accordance with law.

[1] AJH Lawyers Pty Ltd v Careri (Unreported, County Court of Victoria, Judge Lewitan, 7 April 2009), ('Bias Decision').

[2] AJH Lawyers Pty Ltd v Careri (Unreported, County Court of Victoria, Judge Lewitan, 7 April 2009), ('Merits Decision')

[4] Notice of Appeal (14 August 2009), 1.

[8] Statement of Claim (24 October 2005), [9].

[11] AJH Lawyers Pty Ltd v Careri [2007] VCC 832, [6] ('Judge Anderson's Decision'); Merits Decision, [4].

[12] Judge Anderson's Decision [2007] VCC 832, [7]-[8].

[14] Order of Judge Anderson (5 July 2006); Order of Judge Anderson (7 July 2006); Order of Judge Anderson (No 2) (7 July 2006); Order of Judge Anderson (18 July 2006).

[15] Judge Anderson's Decision [2007] VCC 832, [8].

[17] Offer of Compromise (21 December 2006).

[18] Judge Anderson's Decision [2007] VCC 832, [27].

[21] Taxation of Costs - Order (4 September 2008).

[22] Determination in Relation to Item No 583, Instructions for Brief (2 July 2008).

[23] Merits Decision, [40], [98], [134]

[24] At the review, AJH Lawyers' counsel could not explain what most of these characteristics meant: Merits Decision, [105].

[25] Merits Decision, [98], [104]; Amended Bill of Costs (29 August 2007), 64.

[28] Amended Bill of Costs (29 August 2007), 64.

[29] Subject to qualifications not presently relevant: see, eg, Vakauta v Kelly [1989] HCA 44; (1989) 167 CLR 568.

[30] Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd [2006] HCA 55; (2006) 229 CLR 577, [2] (Gummow ACJ), [117] (Kirby and Crennan JJ) ('Concrete'); Antoun v The Queen [2006] HCA 2; (2006) 224 ALR 51, [2]-[3] (Gleeson CJ) ('Antoun').

[31] Antoun [2006] HCA 2; (2006) 224 ALR 51, [34] (Kirby J).

[33] Ebner v Official Trustee in Bankruptcy [2000] HCA 63; (2000) 205 CLR 337 ('Ebner').

[34] Ibid [19] (Gleeson CJ, McHugh, Gummow and Hayne JJ).

[35] Antoun [2006] HCA 2; (2006) 224 ALR 51, [35] (Kirby J).

[36] Johnson v Johnson [2000] HCA 48; (2000) 201 CLR 488 ('Johnson').

[37] Ibid [11] (Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ). See also Ebner [2000] HCA 63; (2000) 205 CLR 337, [7] (Gleeson CJ, McHugh, Gummow and Hayne JJ).

[38] Ebner [2000] HCA 63; (2000) 205 CLR 337, [7] (Gleeson CJ, McHugh, Gummow and Hayne JJ)

[40] Re JRL; Ex parte CJL [1986] HCA 39; (1986) 161 CLR 342, 352 (Mason J).

[41] Ebner [2000] HCA 63; (2000) 205 CLR 337, [8] (Gleeson CJ, McHugh, Gummow and Hayne JJ).

[43] Appellant's (Plaintiff's) Outline of Submissions (30 November 2009), [12].

[44] Concrete [2006] HCA 55; (2006) 229 CLR 577, [110]-[111] (Kirby and Crennan JJ).

[46] Concrete [2006] HCA 55; (2006) 229 CLR 577, [177] (Callinan J).

[47] Johnson [2000] HCA 48; (2000) 201 CLR 488, [13] (Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ)

[49] Concrete [2006] HCA 55; (2006) 229 CLR 577, [112] (Kirby and Crennan JJ).

[50] Antoun [2006] HCA 2; (2006) 224 ALR 51, [29] (Kirby J).

[51] Antoun [2006] HCA 2; (2006) 224 ALR 51, [33] (Kirby J); Concrete [2006] HCA 55; (2006) 229 CLR 577, [177]-[178] (Callinan J).

[52] Antoun [2006] HCA 2; (2006) 224 ALR 51, [22] (Gleeson CJ)

[53] Ibid, [2], [21]-[23] (Gleeson CJ), [28], [30], [48] (Kirby J), [53], [56] (Hayne J), [83], [86]-[87] (Callinan J).

[55] Ibid, [2] (Gleeson CJ), [36] (Kirby J), [87] (Callinan J).

[64] Respondents' (Defendants') Outline of Submissions (13 May 2010), [20].

[67] Review Transcript, 17 (lines 3-14).

[68] Review Transcript, 54 (lines 5-9), 63 (lines 16-31), 64 (lines 1-13), 85 (17-18), 90 (lines 4-31), 91 (lines 1-2), 105 (lines 11-31), 106 (lines 1-7), 163 (lines 7-12), 164 (lines 26-31), 165 (lines 1-3), 466 (lines 1-19), 515 (lines 18-31).

[69] Review Transcript, 22 (lines 26-31), 23 (lines 1-5), 30 (lines 5-8), 32 (lines 1-6).

[70] Review Transcript, 87 (28-30), 405 (lines 23-28).

[71] Review Transcript, 22 (lines 14-17).

[72] Review Transcript, 40 (19-20), 66 (lines 9-31); cf Review Transcript, 5 (lines 8-31).

[73] Review Transcript, 34 (lines 16-31), 37 (lines 22-23), 77 (lines 13-18).

[74] Respondents' (Defendants') Outline of Submissions (13 May 2010), [31].

[76] Concrete [2006] HCA 55; (2006) 229 CLR 577, [105] (Kirby and Crennan JJ).

[78] County Court Rules of Procedure in Civil Proceedings 1999 r 63A.29.

[79] See, Australian Coal and Shale Employees' Federation v Commonwealth [1953] HCA 25; (1956) 94 CLR 621, 627-629.

[85] Respondents' (Defendants') Outline of Submissions (13 May 2010), [30].

[88] See [35] above.

[89] See [70] eq seq below.

[91] Review Transcript, 79. At one point her Honour said 'If it goes beyond that - there is a week in February that I can - just one moment - when was that the 17th was it?': Review Transcript, 80. This remark seems to hint at a possibility of sitting in February 2009 but her Honour did not elaborate on that. Her Honour later arranged for the matter to continue in January.

[100] Appellant's (Plaintiff's) Outline of Submissions (30 November 2009), [8].

[101] Respondents' (Defendants') Outline of Submissions (13 May 2010), [37].

[103] See [25] above.

[104] Respondents' (Defendants') Outline of Submissions (13 May 2010), [38].

[114] Respondents' (Defendants') Outline of Submissions (13 May 2010), [40].

[115] This is what happened in Antoun [2006] HCA 2; (2006) 224 ALR 51. None of the judgments delivered by the High Court suggested that appellant was precluded from making the second and subsequent recusal applications.

[117] Review Transcript, 28, 134-135, 337.

[119] On the first day of the review, Mr Sandbach provided an estimate of two days: Review Transcript, 9. When pressed for an updated estimate on the following day, Mr Sandbach said that the review is more likely to take four or five days: Review Transcript, 75-76. In fact, the review ended up taking eight days and part-days: Summary (3 June 2010), [11].

[120] On the second day of the review, Mr Sandbach stated that 'it's not at all the case that anything like the $500,000 is in issue on this review, the review related to a limited, much more limited scope'. In fact, the amount subject to challenge on review was over $437,000. On appeal, there was disagreement between the parties as the exact amount subject of the review. The respondent claimed that the amount was $453,561.42: Explanatory Memorandum Filed on Behalf of the Respondents Regarding Amounts Claimed by the Appellant (5 May 2011). The appellant claimed that the correct amount was $437,331.79: Appellant's Response to the Respondents' Explanatory Memorandum Filed on 5 May 2011 (6 May 2011). Mr Sandbach made the comment in the context of her Honour describing the size of the appellant's bill as '[a]bsolutely extraordinary' and 'ridiculous'. Seen in that context, neither $453,561.42 nor $437,331.79 can be realistically described as being not 'anything like the $500,000'.

[121] It is unnecessary to provide transcript references because examples of this behaviour can be found on practically every page of the transcript.

[122] Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175.

[123] See [18] above.

At a glance

Court

Decision date

Before

Source

Judgment (160 paragraphs)

Parties

Cases Cited (9)