British American Tobacco Australia Services Ltd v Laurie & Ors

British American Tobacco Australia Services Ltd v Laurie & Ors - [2010] HCATrans 132 - HCATrans 2010 case summary — Zoe

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Thursday 17 December 2009 BRITISH AMERICAN TOBACCO AUSTRALIA SERVICES LTD v LAURIE & ORS Judgment 1 ALLSOP P: I have the misfortune to disagree with both Tobias JA and Basten JA about the result of this appeal and application. Given that I am in the minority, I can deal with the matter shortly. 2 The disagreement that I have is not one reflected in the expression of principle. No argument was put to the Court that the learned judge in the Dust Diseases Tribunal (Curtis J) mis-stated legal principle. 3 The test to apply is that set out in Livesey v New South Wales Bar Association [1983] HCA 17; 151 CLR 288 at 293-294; Johnson v Johnson [2000] HCA 48; 201 CLR 488 at 492 - 493 [12]-[13]; and Ebner v Official Trustee in Bankruptcy [2000] HCA 63; 205 CLR 337 at 334 [6]. I do not understand what this Court said in Kwan v Kang [2003] NSWCA 336 as restating the settled principle from these High Court authorities. No submission was put that it did; nor was there authority for the Court to do so. The reasons in Kwan explain the result that the Court came to in that case given the terms used by Santow J (as his Honour then was) in his reasons at first instance at that case: [2001] NSWSC 698. 4 It is unnecessary to state, but comity and respect for Curtis J encourage me to make clear, that there is no criticism of his Honour in the view to which I have come. 5 The fictitious "fair-minded lay observer" and what he or she might think is a mechanism deployed by the courts for protecting the respect and integrity of the judicial system through a test employing a reasonable member of the public. That test involves an evaluation by judges as to how the public, through the posited "fair-minded lay observer", would view the working of the legal system in the particular instance under consideration. Minds may differ about conclusions drawn in this respect, as they do in this case. Though I understand and respect the conclusions to which my colleagues have come, I do not agree with them. This is not because I think they have mistaken or mis-stated a principle of law. Rather, it is because we differ as to how we think the lay observer would view what has happened. 6 In Re Mowbray (No 8) [2006] NSWDDT 15; 3 DDCR 580, Curtis J found the applicant to have undertaken and implemented a business policy that was dishonest and fraudulent. 7 Curtis J was at pains to make clear that the view he took was based only on the evidence led before him in that case. The position could not have been otherwise. 8 The finding was one of fraud. It was not provisional. It was not merely a conclusion that the evidence before him was sufficient to characterise the case as sufficiently strong such that at trial the evidence, if accepted, may ground such a finding. A relevantly unqualified finding of dishonesty and fraud was made. In making it, Curtis J recognised the seriousness of the conclusion to which he had come and what was necessary before he could express that conclusion. The conclusion required him to be actually persuaded in his mind of the existence of the fraud: Rejfek v McElroy [1965] HCA 46; 112 CLR 517 at 521. 9 I have referred to the finding of fraud as not being provisional and as being unqualified. The judge did call it an "interlocutory finding" (see 600 [50] of the Mowbray reasons); he used the phrases "present state of the evidence" (602 [56] of the Mowbray reasons) and "in the absence of evidence to the contrary" (602 [57] of the Mowbray reasons). At 607 [69] of the Mowbray reasons the judge said: "I find that on the evidence of Mr Gulson, Mr Welch, and Dr Wigand presented on this application, Brambles has sufficiently discharged an onus of demonstrating, prima facie, that it can make good the allegations pleaded in the amended statement of claim summarised in paragraph 12 above. …"

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10 If that is all his Honour did, it might be that his findings were limited to characterising the evidence as capable, if accepted, of establishing fraud. In such circumstances, there would be much to be said for concluding that his Honour had reached no concluded view one way or the other about the alleged fraud. It is clear, however, that his Honour went further. Having recognised (without specifically referring to them) the role of cases such as Briginshaw v Briginshaw [1938] HCA 34; 60 CLR 336 and Rejfek v McElroy in the task before him (see 600 [48] of the Mowbray reasons), the judge, based on the evidence before him, including the oral evidence of Mr Gulson that was, to a degree, the subject of cross-examination, found (at 602 [56] of the Mowbray reasons) that the applicant had engaged in a fraud involving actually dishonesty. His Honour was "persuaded"; this was an actual persuasion of the mind that the applicant was sufficiently morally delinquent to have its actions characterised as dishonest and fraudulent. This was more than the analytical counting or weighing of evidence. It was the personal persuasion of the trial judge of the correctness of the grave conclusion. The fact that this conclusion was reached "on the present state of the evidence" does not make the finding in any way provisional. It was relevantly unqualified. 11 A trial judge persuaded in his or her mind of the fraud and dishonesty of a litigant and who, properly discharging the curial task before him or her, announces to the parties and to the world his or her conclusion as to that grave fact does more than merely find a relevant fact. The grave quality of such a finding by a trial judge and the necessity for the trial judge to be persuaded in his or her mind as to its truth informs my view that a fair-minded lay observer might reasonably think that a judge, who has been so persuaded, might not be able to a bring a mind free of the effect of the prior conclusion, so solemnly reached, to bear in dealing with the same issue in respect of the same party on a later occasion. 12 The express and clear recognition by the judge that he would examine the same question at a later date by reference to the evidence then laid before him does not alter my view. If I may so say so without intended disrespect to Curtis J, one would expect nothing less. 13 The problem lies in the character and gravity of the finding and the actual persuasion of the mind of the trial judge of the moral delinquency of the party to a degree to warrant the expressed conclusion of fraud. In my view, a fair-minded lay observer might reasonably think that a trial judge might not be able to eradicate the effect of this conclusion from his or her mind in attempting to deal fairly and impartially with the issue on a later occasion. 14 I would make orders as sought in the summons for prerogative relief. 15 TOBIAS JA: Claudia Jean Laurie (the first respondent) is the widow and administratrix of the will of Donald Henry Laurie (Mr Laurie) who died on 29 May 2006. On 15 March 2006 Mr Laurie instituted proceedings in the Dust Diseases Tribunal (the Tribunal) against a number of defendants including the appellant, British American Tobacco Australia Services Limited (BATAS). He alleged that BATAS had breached its duty of care to him in that at all material times BATAS knew or ought to have known that the smoking of its tobacco products could cause lung cancer and that as a consequence of smoking those products Mr Laurie contracted that disease. 16 In her Amended Statement of Claim filed on 13 July 2007 the first respondent pleaded against BATAS that not only did it know that the smoking of its tobacco products could cause lung cancer, but also that it had, pursuant to a document destruction or retention policy, intentionally destroyed documents that tended to prove this knowledge with the intention of placing those documents beyond the reach of potential litigants such as Mr Laurie. 17 Brambles Australia Limited (Brambles) had pleaded the same allegations in an amended cross-claim against BATAS in the matter of Re Mowbray; Brambles Australia Ltd v British American Tobacco Australia Services Ltd (the Brambles proceedings). In those proceedings Mr Mowbray alleged that due to the negligence of his former employer, Brambles, he had contracted lung cancer as a consequence of inhaling asbestos fibres contained in the brake pads upon which he was required to work. Brambles cross-claimed against BATAS asserting that Mr Mowbray's cancer was also caused by his smoking of the cigarettes it manufactured. Brambles sought contribution from BATAS pursuant to s 5(1)(c) of the Law Reform (Miscellaneous Provisions) Act 1946. 18 In the Brambles proceedings, Brambles sought an order for further and better discovery by BATAS. That interlocutory application came before Curtis J of the Tribunal for determination in April and May 2006. 19 An issue in that application was whether certain otherwise privileged evidence given in an American action by Mr Frederick Gulson could be adduced in the Brambles proceedings. His Honour resolved that issue by finding that the evidence in question constituted communications "in furtherance of the commission of a fraud" within the meaning of s 125(1)(a) of the Evidence Act 1995: Re Mowbray; Brambles Australia Ltd v British American Tobacco Australia Services Ltd [2006] NSWDDT 15; (2006) 3 DDCR 580 (Mowbray). That finding was based substantially upon his Honour's acceptance of the evidence of Mr Gulson, which had been admitted in the form of two written statements and oral testimony. 20 As identified by his Honour, the allegation of fraud was not simply that BATAS had destroyed prejudicial documents for the purpose of suppressing evidence in anticipated litigation but that it had "dishonestly concealed this purpose by pretence of a rational non-selective housekeeping policy." 21 The proceedings instituted by Mr Laurie on 15 March 2006 were, on 20 April 2006, allocated to Curtis J. On 26 April 2006 Mr Laurie's evidence was taken by his Honour at his residence in Texas, United States of America. That evidence was transcribed and videotaped. 22 Since then there have been a number of directions hearings before the primary judge. However, by Notice of Motion filed on 9 March 2009, BATAS sought an order that his Honour disqualify himself from further hearing or determining the proceedings. 23 That application came before his Honour on 15 May 2009 and on 27 May 2009 he declined to disqualify himself and ordered that the motion be dismissed with costs.

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The nature of the challenge by BATAS to the primary judge's decision 24 On 24 June 2009 BATAS filed two summonses in this Court. The first sought leave to appeal from his Honour's order pursuant to s 32(4)(a) of the Dust Diseases Tribunal Act 1989 (the DDT Act) which provides that an appeal from an interlocutory decision of the Tribunal may be made only by leave of the Supreme Court (the summons for leave to appeal). The second sought an order under s 69 of the Supreme Court Act 1970 prohibiting the fourth respondent to that summons, Judge Curtis, from further hearing or determining the proceedings (the s 69 summons). It is apparent that the s 69 summons was filed as there was some doubt as to whether an appeal lay to this Court from the primary judge's decision dismissing BATAS' motion that his Honour disqualify himself as an appeal from a decision of the Tribunal is confined by s 32(1) of the DDT Act to one "in point of law". 25 In this respect the only ground of appeal asserted in the draft Notice of Appeal was that the Tribunal "erroneously declined to find that a fair-minded lay observer might reasonably apprehend that Judge Curtis might not bring an impartial and unprejudiced mind to the resolution of document destruction allegations Judge Curtis is asked to decide in [the first respondent's] proceeding no. 6057 of 2006." 26 It was submitted by the first respondent that the sole ground of appeal identified in the draft Notice of Appeal did not disclose or identify any error of law. There was no challenge by BATAS asserting that his Honour had misstated the relevant law in relation to his consideration of the application then before him or that he had failed to correctly refer to the relevant test laid down by the High Court in a number of authorities which he had cited and from which he had quoted. 27 However, BATAS submitted that a decision by a judge to refuse to disqualify him or herself must involve a point of law as the consequences of that refusal would taint any subsequent operative decision of that judge. This argument was refined to a submission that a refusal by a judge to disqualify him or herself would inevitably result in an erroneous assumption by that judge of a jurisdiction which he or she did not have. Thus the decision to refuse to disqualify was one in point of law. 28 With respect to the resolution of this issue, I have now had the benefit of reading in draft the remarks of Basten JA at [127] to [129] with which I agree. Accordingly, it is only necessary to deal with the s 69 summons.

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I interpose that BATAS submitted that in this paragraph his Honour was stating that BATAS had been on notice of the relevant allegations since 2002 and, therefore, had had plenty of time in which to respond to them if it was able and wished to do so. 32 At [15] his Honour referred to the reliance by Brambles on evidence with respect to the events that occurred during the operation of what was referred to in evidence as BATAS' Document Management Policy as it existed between 1985 and 1992 and to further events that occurred during the operation of a similar Document Management Policy operating in 1993. 33 The effect of the amendment by Brambles of its cross-claim whereby it asserted the allegations summarised by his Honour at [12] was that those allegations required further discovery by BATAS. In support of its application for further discovery Brambles tendered before his Honour the evidence of Mr Gulson, who was the Company Secretary and in-house solicitor to BATAS between October 1989 and November or December 1990 at a time it was known as W D & H O Wills Australia Limited (Wills). 34 At [19] his Honour noted that the first of Mr Gulson's statements comprised a transcript of the evidence given by him in the matter of United States of America v Philip Morris USA Inc (the Philip Morris proceedings), extracts of which he then set out adding his own emphasis to portions of Mr Gulson's answers. Those answers, and particularly the parts of them emphasised by his Honour, constituted responses that were adverse to the interests of BATAS and which, if accepted, tended to establish that it had adopted a Document Retention Policy intended to destroy or otherwise make undiscoverable documents that would be harmful to BATAS in any tobacco litigation. I give but one example: "(Page 18)Q: Other than the destruction of documents, are you aware of any other aspect of the Document Retention Policy? A: Yes. Another important component of the Policy was routing of documents through lawyers for the purpose of 'privileging' the documents, that some documents should include a notation to the effect of 'for the purpose of legal advice' and be routed through a lawyer, so that a document which would not otherwise attract privilege would now attract privilege . (Page 19)A: The Document Retention Policy was a contrivance designed to eliminate potentially damaging documents while claiming an innocent 'housekeeping' intent . While I was uncertain about whether the ruse was legal or not, I knew that it was a ruse and that made me uncomfortable. The policy didn't pass the smell test. The whole purpose was to keep evidence out of the courts ." 35 Mr Gulson's second statement comprised an affidavit sworn 14 February 2003, which his Honour extracted at [20] and which supported the answers previously extracted by him from Mr Gulson's evidence in the Philip Morris proceedings. His Honour's reproduction of [21] of that affidavit contains some words that were emphasised but does not indicate whose emphasis it is. 36 At [21] his Honour recorded BATAS' submission that Mr Gulson's evidence contained in his two statements was inadmissible because, as he himself conceded in cross-examination, he did not personally destroy any documents and his evidence relied upon the hearsay statements of others. His Honour rejected this submission, referring to s 75 of the Evidence Act which provides that in an interlocutory proceeding the hearsay rule does not apply to evidence if the party who adduces it also adduces evidence of its source. 37 At [22] his Honour referred to the fact that Mr Gulson had identified the sources of his information as to the Document Management Policy and then continued: "He [Mr Gulson] has been subjected to cross-examination on his evidence. BATAS has had the opportunity to investigate his claims and call evidence in rebuttal. Further, the hearsay exception created by s 75 applies not only to first hand, but to more remote hearsay." 38 I again interpose that BATAS submitted that the second sentence of the above passage was redolent of his Honour's statement at [13] (recorded at [31] above) that BATAS had known about the allegations relating to its Document Management Policy for a considerable period of time and thus had possessed, but had not taken, the opportunity which his Honour had identified. 39 His Honour's judgment then relevantly proceeded under the heading "Excluded evidence of Mr Gulson, s 125 of the Evidence Act …". At [23] he noted that he had ruled on previous occasions that certain passages of Mr Gulson's statements be excluded from the tender as prima facie the subject of client legal privilege protected by ss 118 and 119 of the Evidence Act. He then recorded the submission by Brambles that those passages might nevertheless be introduced into evidence by virtue of s 125 of that Act, the terms of which he then set out. Relevantly, s 125(1)(a) and (b) provided that the privilege protected by ss 118 and 119 did not prevent the adducing of evidence of a communication made or the contents of a document prepared by a client or lawyer (or both) "in furtherance of the commission of a fraud" (s 125(1)(a)) or "in furtherance of a deliberate abuse of a power" (s 125(1)(b)). 40 Of some present relevance is s 125(2)(a) which relevantly provided as follows: "(2) For the purposes of this section, if the commission of the fraud … or the abuse of power is a fact in issue and there are reasonable grounds for finding that: (a) the fraud … or the abuse of power was committed, and (b) a communication was made or document prepared in furtherance of the commission of the fraud …or the abuse of power, the court may find that the communication was so made or the document so prepared." (Emphasis added) 41 His Honour then embarked upon a discussion of the correct interpretation to be given to the word "fraud" in s 125 holding (at [29] and [30]) that a finding of fraud sufficient to enliven s 125 must involve an element of dishonesty. 42 The primary judge then posed for himself the question: "What is the allegation of fraud with which we are presently concerned?" He stated that in responding to this question it was legitimate to consider the further evidence of Mr Gulson over which the claim for privilege was originally upheld. Reference was made to a document entitled "Amatil Ltd. Policy on Document Retention/Destruction", Amatil being a former name of BATAS. 43 At [36] his Honour observed that this Policy, evidenced by a copy bearing the date of 29 September 1986 and entitled "Policy on Document Retention/Destruction", was "a model of brevity". He then continued at [37]: "What is remarkable about this document is that it replaced in two pages the previous Document Management Policy, which operated from the 1950s to 1985, and which established, in 45 pages of detailed instruction, 14 categories of documents with various mandatory retention and destruction periods within each category. It was in 1992 replaced in turn by a Records Management Program which again contained detailed schedules for retention and destruction of documents."

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I again interpose that BATAS submitted that this exercise in contrasting the length of these documents was indicative of his Honour's attitude to BATAS which culminated in his acceptance of Mr Gulson's evidence. 44 After referring to other evidence of Mr Gulson relating to communications with two firms of solicitors in Sydney, the primary judge then continued in the following terms (at [44]): "The sting in Mr Gulson's evidence is not simply that BATAS destroyed prejudicial documents for the purpose of suppressing evidence in anticipated litigation. Whether such destruction is contrary to public policy may be, as I indicated earlier, a moot point. The substance of the complaint by Brambles, and that which, on the present evidence before me , may trigger the operation of s 125 of the Evidence Act , is that BATAS dishonestly concealed this purpose by pretence of a rational non-selective housekeeping policy pursuant to which individual documents were not selected for destruction because they may be prejudicial to the company in its defence of any legal proceedings." (Emphasis added) 45 Importantly, in the immediately following paragraph his Honour stated: "I should make it plain that BATAS has at all times maintained that its document management policies and practices at no time permitted selective destruction of prejudicial documents. The assertion by Brambles to the contrary remains a live issue for the trial . " (Emphasis added) 46 At [48] and [49] his Honour observed: "48. I accept that to a large extent the evidence of Mr Gulson is vague and consists of his impressions, interpretations and conclusions as to what he was told. I also accept that the standard of proof required when dishonesty is alleged must take into account the importance of the evidence to the proceedings and the gravity of the matters alleged. 49. The evidence of Mr Gulson is vitally important to Brambles in the present application. Without that evidence it can establish no ground for discretionary relief in a case which will rely extensively upon the discovery process." 47 I again interpose two observations with respect to his Honour's remarks at [48]. First, in the first sentence of that paragraph his Honour referred to the nature of Mr Gulson's evidence which, generally speaking, as a matter of form and substance would be inadmissible except in interlocutory proceedings as would his hearsay evidence but for the exception to the hearsay rule in respect of such proceedings referred to in s 75 of the Evidence Act. Second, in the second sentence of that paragraph his Honour was conscious of applying what was in effect the Briginshaw standard to any finding by him of fraud for the purpose of s 125: Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336. 48 The point I seek to make is that his Honour made clear the particular discovery-related issue with which he was dealing and that it was only an interlocutory proceeding and not the ultimate trial of the proceedings, which would be determined on evidence which was strictly admissible. 49 At [51] his Honour referred to attacks made on Mr Gulson's credit in cross-examination in which he had made concessions with respect to two matters, neither of which related either directly or indirectly to his evidence on BATAS' Document Retention Policy. With respect to those matters his Honour rejected BATAS' submission that those two matters made it unsafe and unsatisfactory to accept Mr Gulson's evidence on the central issue which he was required to decide. 50 His Honour then continued at [52] in the following terms " Mr Gulson's evidence stands uncontradicted. He has not yet been tested by a contrary version of events . Mr Middleton QC for BATAS in cross-examination of Mr Gulson did not directly put to him that his evidence was untruthful, unreliable, or actuated by malice. Nor did he suggest that the persons named by Mr Gulson did not explain to him the actual workings and purpose of the Document Retention Policy. In particular he did not suggest to Mr Gulson that Nick Cannar, who he identified as 'senior counsel at BATCo', did not say to him that 'all documents at Wills that were potentially damaging to the BAT Group had been destroyed or otherwise put beyond the reach of discovery' (page 20) or that Mr Cannar did not tell him that 'there were instructions under the Policy that some documents should include a notation to the effect of "for the purpose of legal advice" and be routed through a lawyer, so that a document which would not otherwise attract privilege would now attract privilege'." (Emphasis added) 51 Of particular relevance to his Honour's subsequent refusal to disqualify himself in the present proceedings was the following paragraph of his judgment (at [53]): "There may be good reasons why BATAS has not yet joined issue with, and called evidence to contradict, Mr Gulson, however I must determine the proceedings now before me on the evidence now before me ." (Emphasis added)

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BATAS submitted that the foregoing paragraph was another example of his Honour implicitly asserting, as he had at [13], that BATAS had been on notice since 2002 of the allegations with respect to its Document Retention Policy. 52 At [54] his Honour referred to Mr Gulson's personal attendance upon the scientific library of BATAS at its premises at Pagewood for the purpose of checking whether the Document Retention Policy had been implemented there. At [55] he continued: "Mr Gulson also says that he personally introduced the lawyers to the staff at Pagewood. This is direct evidence which has not been challenged or contradicted . In the absence of evidence from BATAS , I find it difficult to understand how it was thought necessary that three English lawyers attend a scientific library to implement a Document Retention Policy which only permitted destruction of documents which were not 'valuable business documents'. If BATAS was not selectively destroying scientific documents prejudicial to its position in future litigation, how is it that lawyers rather than scientists were assigned to judge the value of research material? This may be explained at the trial, however, the evidence of Mr Gulson gives rise to an obvious inference that has not yet been rebutted by BATAS ." (Emphasis added) 53 BATAS submitted that the effect of the last sentence of [55] was that his Honour was conveying that it was for BATAS to, in effect, show cause at the trial as to why the "obvious inference" to be drawn from the then relevantly unchallenged evidence of Mr Gulson should not be accepted, thus reversing the onus of proof. I shall return to this submission below at [107]. 54 Under the heading "Findings of fact relevant to s 125" his Honour relevantly stated: "56. I am persuaded on the present state of the evidence that BATAS in 1985 drafted or adopted the Document Retention Policy for the purpose of a fraud within the meaning of s 125 of the Evidence Act . Those passages of Mr Gulson's evidence in respect of which privilege is claimed refer to communications made in respect of legal advice upon that Policy. The terms of the policy would appear to be so contrived that BATAS may secure legal sanction for the stated policy, while nevertheless selectively destroying prejudicial documents. … Such proof could raise an inference that the destruction of documents was selective and in aid of a forensic advantage, rather than an orderly administration of a policy instituted for the legitimate purpose of records management. 57. In the absence of evidence to the contrary , I infer that legal advice to the effect that destruction of documents pursuant to the terms of the policy was not contrary to law, was integral to the decision by BATAS to persist with its policy of selective destruction. … I find that the communications made for the purpose of obtaining that advice were communications in furtherance of the commission of a fraud within the meaning of s 125. (Emphasis added) 55 BATAS placed some emphasis on the finding in the last paragraph of the above passage which, it submitted, was absolute and unconditional. In particular, BATAS asserted that the primary judge went further than was necessary for the purposes of s 125(1) given that s 125(2) only requires that there be reasonable grounds for finding that a fraud has been committed. However, it is clear from the terms of s 125(2) that once there are such reasonable grounds, the Court may in fact find that the communication was made in the commission of a fraud. 56 Nevertheless, the point made by BATAS is that the finding gave an appearance of finality which, if accepted, required his Honour to disqualify himself in accordance with the authorities to which reference is made hereafter. 57 The primary judge then turned to the evidence of a Mr John Welch who had been Chief Executive Officer of the Tobacco Institute of Australia (the Institute) between January 1991 and April 1992. His examination in the Philip Morris proceedings in the United States was attached as an exhibit to Mr Vorbach's affidavit sworn in support of the application that his Honour disqualify himself. The Institute was a creature of four Australian tobacco companies including Wills. 58 At [62] his Honour observed that Mr Welch had given direct evidence in the Philip Morris proceedings of document destruction. This evidence, his Honour noted at [63], "has not yet been challenged. He was not required for cross-examination". The only objection taken to Mr Welch's evidence was on the ground of relevance, which his Honour rejected. He found that that evidence was "in general terms corroborative of the evidence of Mr Gulson". BATAS' membership of the Institute and active participation in the circumstances described by Mr Welch was, his Honour said "incompatible with the maintenance by BATAS of an independent and non-selective document retention policy." 59 His Honour then turned to the evidence of Dr Jeffrey Wigand who was Vice President of Research and Development at Brown and Williamson, a subsidiary of BATCo in the United States, between 1989 and 1993 and whose examination in the Philip Morris proceedings was also an exhibit to the affidavit of Mr Vorbach. His Honour dealt with the evidence of Dr Wigand relevantly in the following terms (at [68]): "… That evidence is inconsistent with BATAS, as a subsidiary of BATCo, maintaining an independent and innocent document retention policy administered non-selectively. It is corroborative of the evidence of Mr Gulson that the Document Retention Policy of BATAS was created by BAT Industries and distributed to its subsidiaries including BATAS for consistent implementation. It is also corroborative of Mr Gulson's assertion that it was Nick Cannar of BATCo who explained to him the operation of the document retention policy." 60 Finally, under the heading "Findings of fact relevant to the operation of the BATAS Document Management Policy 1985-1992" his Honour said (at [69]): "I find that on the evidence of Mr Gulson, Mr Welch, and Dr Wigand presented on this application, Brambles has sufficiently discharged an onus of demonstrating, prima facie , that it can make good the allegations pleaded in the amended statement of claim summarised in paragraph 11 above. …" (Emphasis added)

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The judgment of the primary judge under challenge 61 In his judgment of 27 May 2009 which is the subject of the present challenge, the primary judge set out at [7] to [12] the relevant principles with respect to the test of apprehended bias articulated by both the High Court and this Court. Relevantly, he referred to the now accepted test stated in the joint judgment of the High Court (Mason, Murphy, Brennan, Deane and Dawson JJ) in Livesey v New South Wales Bar Association [1983] HCA 17; (1983) 151 CLR 288 at 293-294 in the following terms: "[The] principle is that a judge should not sit to hear a case if in all the circumstances the parties or the public might entertain a reasonable apprehension that he might not bring an impartial and unprejudiced mind to the resolution of the question involved in it." (Emphasis added) 62 At [9] his Honour referred to the well-known passage in Re JRL; Ex parte CJL [1986] HCA 39; (1986) 161 CLR 342 where Mason J said (at 352): "There may be many situations in which previous decisions of a judicial officer on issues of fact and law may generate an expectation that he is likely to decide issues in a particular case adversely to one of the parties. But this does not mean either that he will approach the issues in that case otherwise than with an impartial and unprejudiced mind in the sense in which that expression is used in the authorities, or that his previous decisions provide an acceptable basis for inferring that there is a reasonable apprehension that he will approach the issues in this way." 63 At [10] his Honour referred to the judgment of this Court (Sheller JA, Ipp JA and myself) in Kwan v Kang [2003] NSWCA 336 at [82] to [87] to which I shall further refer hereunder. 64 After referring at [11] to a further passage from the judgment of Mason J in Re JRL at 352, his Honour referred to the statement of the High Court in Livesey at 300 that "a fair-minded observer might entertain a reasonable apprehension of bias by reason of prejudgment if a judge sits to hear a case at first instance after he has, in a previous case, expressed clear views either about a question of fact which constitutes a live and significant issue in the subsequent case or about the credit of a witness whose evidence is of significance on such a question of fact." (My emphasis) 65 At [13] his Honour stated the question for his determination in the following terms: "… whether a fair-minded observer might entertain a reasonable apprehension of bias by reason of prejudgment if, in Re Mowbray , I expressed myself in terms of such finality that a reasonable bystander might think that I might not bring an impartial and unprejudiced mind to the questions of whether Mr Gulson is a witness of credit, and whether BATAS intentionally destroyed documents tending to prove knowledge with the intention of placing those documents beyond the reach of litigants." 66 His Honour then referred in some detail to his reasons in Mowbray noting that his findings were both interlocutory and made upon the only evidence presented to him in those proceedings. He next referred to those parts of his reasons in that case at [45], [52], [53] and [55]-[57] which I have set out above and emphasised. To those citations can be added those parts of [63] and [69] of his Honour's reasons in Mowbray which I have italicised or emphasised at [58] and [60] above. 67 At [17] the primary judge referred to the submission on behalf of BATAS, repeated on this appeal, that notwithstanding the disclaimers in the text of his reasons, his opinion as to Mr Gulson's credit was formed in the context of him being cross-examined "in a red-blooded way" over a six day hearing in which the parties took full advantage of the opportunity to lead oral evidence and to cross-examine "in a mini trial". 68 At [18] his Honour referred to BATAS' submission, which he accepted as correct, that the fair-minded lay observer has access to, and could be presumed to have read, his Honour's reasons in Mowbray but that he or she should not be taken to have access to the pleadings, evidence, submissions or the transcripts save to the extent that they were set out in his judgment in that case. 69 Importantly, his Honour responded to those submissions in the following terms: "19. To the extent that Mr Sackar, unassisted by evidence, presses his factual assertions, it is apparent from my reasons that, far from being tested by cross-examination 'in a red-blooded way' Mr Gulson's credit was subjected to no more than a peripheral attack. It is also apparent that BATAS declined to take 'full advantage' of the opportunity to lead oral evidence and cross-examine. The issue of credit has not in any real sense yet been agitated. 20. Far from expressing my conclusions in terms of finality, I took pains to recognise that the assertions by Brambles as to a document destruction policy remained a live issue for the trial, that the evidence of Mr Gulson had not been tested in cross examination, and that there may be good reasons why BATAS, in an interlocutory proceeding, did not wish to take issue with, nor call evidence to contradict, Mr Gulson." 70 His Honour's conclusion at [22] was that having read his published reasons in Mowbray, he did not believe that "any reasonable observer might entertain a reasonable apprehension that I might not bring an impartial and unprejudiced mind to the resolution of the questions of whether Mr Gulson is a witness of truth, and whether or not BATAS engaged in a dishonest document destruction policy." 71 I pause here to note the submission of BATAS that the primary judge's explanation or interpretation of what he had said in his reasons in his decision in Mowbray was irrelevant for present purposes as it is only those reasons to which the fair-minded lay observer would have regard when considering the existence of any reasonable apprehension of bias. The first respondent submitted to the contrary, relying on the statements of Deane J in Webb v The Queen [1994] HCA 30; (1994) 181 CLR 41 at 73, Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ in Johnson v Johnson [2000] HCA 48; (2000) 201 CLR 488 at 494 [14] and Giles JA, with whom Spigelman CJ and Allsop P agreed, in Orleans Investments Pty Ltd v Mindshare Communications Ltd [2009] NSWCA 40; (2009) 254 ALR 81 at 94 [36] to the effect that a later statement or explanation of the relevant judge which bears upon an earlier statement which, if taken in isolation, might lead to an apprehension of bias, may itself be taken into account by the fair-minded lay observer. 72 For present purposes the most relevant statement of this principle is that from Johnson at 494 [14] where their Honours observed (omitting references to footnotes): "There was argument in this Court, prompted by Anderson J's explanation of what he intended to communicate, about whether the effect of a statement that might indicate prejudgment can be removed by a later statement which withdraws or qualifies it. Clearly, in some cases it can. So much has been expressly acknowledged in the cases. No doubt some statements, or some behaviour, may produce an ineradicable apprehension of prejudgment. On other occasions, however, a preliminary impression created by what is said or done may be altered by a later statement. It depends upon the circumstances of the particular case. The hypothetical observer is no more entitled to make snap judgments than the person under observation." 73 It is important to note that whether the later statement or explanation given by the primary judge in the present case will have the effect contended for by the first respondent depends very much on the circumstances in which it was uttered. In particular, the question arises whether the statement or explanation is one which it is reasonable in all the circumstances for the fair-minded lay observer to take into account. None of the decisions to which reference has so far been made hold that a judge's attempt to explain or qualify earlier statements upon which reliance is placed as indicating apprehended bias can be taken into account by the lay observer when they are made in a much later application in a different case for the judge to disqualify him or herself. 74 That is not to say that the subsequent statement or explanation made in the course of such an application can never be part of the context to which the reasonable, fair-minded lay observer is assumed to have regard. Thus, if a judge makes a statement which might indicate prejudgment and there is then an immediate application for the judge to disqualify him or herself which is refused on the expressed basis that the judge withdraws or qualifies the offending statement, then it would be reasonable for the relevant lay observer to have regard to this withdrawal or qualification. But that situation is far removed from the circumstances of the present case. 75 An appropriate contrast can, it seems to me, be made between the present case and that in Kwan v Kang [2003] NSWCA 336 to which further reference is made below. It is sufficient for present purposes to note that there the Court was dealing with a situation where the trial judge, in the course of a trial, held in an interlocutory judgment that certain documents to which access had been sought and in respect of which privilege had been claimed, should be produced as they had been prepared in furtherance of the commission of a fraud or an abuse of power within the meaning of s 125 of the Evidence Act. On the basis of that finding an application therefrom was made for the judge to disqualify himself on the ground of apprehended bias for prejudgment of the principal issues for determination in the proceedings. The judge refused to disqualify himself and revised his earlier judgment in an apparent attempt to ameliorate its effect. All this took place over two days of the trial. 76 At [69] this Court in Kwan, citing the relevant passage from the judgment of Deane J in Webb at 73, stated that the whole of the revised judgment as well as the judgment rejecting the application for disqualification, must be considered when determining whether the trial judge had prejudged the issue of fraud. 77 In my view the circumstances in Kwan are far removed from those in the present case given that the Mowbray judgment was delivered on 30 May 2006 whereas his Honour declined to disqualify himself in the present proceedings on 27 May 2009, three years later. In these circumstances, in my opinion BATAS' submission that the fair-minded lay observer should not be assumed to have read the judgment under challenge should be accepted with the consequence that that observer should be assumed to have only read the judgment in Mowbray.

[49]

A supplementary statement of the principles relevant to the resolution of the present case 78 The two "might" test of apprehended bias stated in Livesey (at 293-294) was confirmed by the High Court in Ebner v Official Trustee in Bankruptcy [2000] HCA 63; (2000) 205 CLR 337 at 344 [6] in the joint judgment of Gleeson CJ, McHugh, Gummow and Hayne JJ. As their Honours there said, the test gives effect to the requirement that justice should both be done and be seen to be done, which reflects the fundamental importance of the principle that the relevant tribunal be independent and impartial. 79 Furthermore, in the joint judgment in Ebner (at 345 [7]) their Honours observed that deciding whether a judicial officer might not bring an impartial mind to the resolution of a question that has not been determined requires no prediction about the how judge will in fact approach the matter. The question is one of possibility (real and not remote), not probability. 80 At 345 [8] their Honours relevantly continued: "The apprehension of bias principle admits of the possibility of human frailty. Its application is as diverse as human frailty. Its application requires two steps. First, it requires the identification of what it is said might lead a judge … to decide a case other than on its legal and factual merits." 81 In a case such as the present where the judge has made a finding on an interlocutory application based, in substantial part, on hearsay evidence which is admissible on such an application but not at trial, it is important to understand what is to be expected of the fictional fair-minded lay observer. Thus, in Johnson at 493 [12], after noting that the test is objective, the plurality observed: "At the same time, two things need to be remembered: the observer is taken to be reasonable; and the person being observed is 'a professional judge whose training, tradition and oath or affirmation require [the judge] to discard the irrelevant, the immaterial and the prejudicial'." 82 At 493 [13] their Honours continued in the following terms: "Whilst the fictional observer, by reference to whom the test is formulated, is not to be assumed to have a detailed knowledge of the law, or of the character or ability of the particular judge, the reasonableness of any suggested apprehension of bias is to be considered in the context of ordinary judicial practice. The rules and conventions governing such practice are not frozen in time. They develop to take account of the exigencies of modern litigation." 83 The remarks of Kirby J in Johnson at 508 [53] should also be borne in mind. His Honour there said: "The attributes of the fictitious bystander to whom courts defer have therefore been variously stated. Such a person is not a lawyer. Yet neither is he or she a person wholly uninformed and uninstructed about the law in general or the issue to be decided. Being reasonable and fair-minded, the bystander, before making a decision important to the parties and the community, would ordinarily be taken to have sought to be informed on at least the most basic considerations relevant to arriving at a conclusion founded on a fair understanding of all the relevant circumstances." 84 Callinan J spoke in similar terms. At 517 [80] his Honour observed: "… it is important to keep in mind that the notional, fair-minded observer is a rational person not unacquainted with the legal process, the oath or affirmation that judges have taken and judicial obligations generally, and in broad terms what has occurred and may occur in the case before and after the challenged conduct."

[50]

His Honour then referred to the following passage from the judgment of Mason J in Re JRL at 352 (and cited by the primary judge in the judgment under challenge at [9]): "It needs to be said loudly and clearly that the ground of disqualification is a reasonable apprehension that the judicial officer will not decide the case impartially or without prejudice, rather than that he will decide the case adversely to one party. There may be many situations in which previous decisions of a judicial officer on issues of fact and law may generate an expectation that he is likely to decide issues in a particular case adversely to one of the parties. But this does not mean either that he will approach the issues in that case otherwise than with an impartial and unprejudiced mind in the sense in which that expression is used in the authorities or that his previous decisions provide an acceptable basis for inferring that there is a reasonable apprehension that he will approach the issues in this way." 85 Callinan J returned to this aspect of the relevant principle in Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd [2006] HCA 55; (2006) 229 CLR 577 at 635 [177] observing: "It is axiomatic that the perception of a lay observer will not be as informed as the perception of a lawyer, particularly a litigation lawyer. But the notional lay person should not be taken to be completely unaware of the way in which cases are brought to trial and tried." 86 This last-mentioned passage was referred to with approval by Basten JA with whom, on this issue, Hodgson and Bell JJA agreed, in Lee v Cha [2008] NSWCA 13 at [44]. At [45] his Honour observed that the hypothetical lay observer should be assumed at least to have "such knowledge as would allow the person to place the comments of the trial judge in their proper context", an observation which in my view is apt to be applied to the present case. 87 The foregoing principles were also referred to by Giles JA in Orleans where at 93 [32] his Honour relevantly observed: "But the hypothetical lay observer is taken to be reasonable, and although the observer does not have a detailed knowledge of the law or the character or ability of the particular judge, reasonableness involves appreciation of ordinary judicial practice and of the judge's professional training and obligations of dispassionate decision-making." 88 The decision which has particular significance to the resolution of the present appeal is that of this Court in Kwan. In that case, the second and third respondents invited the first respondent to reside in the second respondent's house and to work for them. This he did and in the process he carried out extensive work on the house. 89 The first respondent commenced proceedings in the District Court claiming payment for the work he had performed and was held to be entitled to judgment against the second and third respondents for a substantial sum, which remained unsatisfied. Later the appellant and the second respondent executed a registered mortgage over the relevant property wherein the second respondent acknowledged that she owed the appellant a sum of money in respect of a loan allegedly made to her and which exceeded the amount of the first respondent's judgment. The property was sold and the net proceeds paid to the appellant in discharge of the mortgage. 90 The first respondent commenced proceedings against the appellant in the Supreme Court asserting that the loan and the mortgage were spurious contrivances that were set up by the second respondent and the appellant solely for the purpose of frustrating any judgment that the first respondent might obtain against the second and third respondents. 91 In the course of the trial, the first respondent sought access to certain documents for which privilege was claimed. Attention was drawn to s 125 of the Evidence Act whereupon the trial judge proceeded to consider whether there were reasonable grounds for finding that a fraud or an abuse of power had been committed and that the documents had been prepared in furtherance thereof. In a written judgment his Honour held that the documents had been prepared in furtherance of the commission of a fraud and that s 125 therefore applied: Kwan v Kang [2003] NSWSC 698. On the basis of that judgment the appellant brought an application that the trial judge disqualify himself on the ground of apprehended or perceived bias, having prejudged the principal matters for determination in the proceedings, namely, whether the relevant documents had been spuriously contrived for the purpose of avoiding any judgment obtained by the first respondent against the second and third respondents. The judge refused to disqualify himself and revised his judgment. However, nothing presently turns on that revision. 92 There are two paragraphs in the trial judge's revised judgment in Kwan that are of significance to the issue to be determined by this Court. The first is [38] where the trial judge relevantly said: "For the purpose of answering the questions earlier posed and in particular as to whether s 125 does apply, I have, pursuant to s 133, inspected the relevant documents. It is clear from an examination of those documents insofar as they constitute communications made or the contents of a document prepared by a client or lawyer that a substantial number of them are 'in furtherance of the commission of a fraud' or involve 'a deliberate abuse of a power'. This is clear by applying the principles earlier set out in the context of the present litigation and by reference to the content of the documents themselves …" 93 The other paragraph of significance in the trial judge's revised judgment is [44] where his Honour had stated that the appellant was present at the hearing of the District Court proceedings where a barrister, on behalf of the second and third respondents, had made a statement to the Court which, the trial judge observed, "was seriously misleading". He then remarked: "to mislead the Court is a clear abuse of process, where the client retains the obligation to the Court though the client's counsel is unaware that the Court is being misled having regard to the extent of counsel's instructions. That in turn constitutes a deliberate abuse of power, namely, the power conferred by statute to bring legal proceedings. That independently provides the reasonable grounds for inferring a dishonest abuse of power within the meaning of s 125." 94 Finally, at [45] of his revised judgment the trial judge said: "There remains the question whether the communications were made or the documents prepared, in furtherance of the commission of the fraud or abuse of power earlier identified. With minor exceptions, I find that, in terms of s 125(2), the documents in respect of which there is still an extant claim of privilege were so prepared, there being no necessity that the lawyer be aware of there being an intention to commit fraud or abuse power so long as the clients have that intention."

[51]

95 At [44] of its judgment in Kwan this Court concluded that the ordinary meaning of the words used by the trial judge at the paragraphs which were the equivalent of [38], [44] and [45] of his revised judgment was that his Honour was making a finding "in absolute and unconditional terms; that is, that the documents in question were in fact prepared in furtherance of the commission of a fraud or involved a deliberate abuse of power." 96 After referring to the test to be applied in determining whether there was a reasonable apprehension of bias by reference, in particular, to the statements from Johnson which I have already recorded, the Court concluded its discussion of those principles in the following terms (at [83]): "There must be a reasonable apprehension on the part of the fictitious observer that the decision-maker's mind is so prejudiced in favour of a conclusion already formed that he or she might not alter that conclusion irrespective of the evidence or arguments presented to him or her ." (Emphasis added) 97 Under the heading "The need to prove the reasonable possibility of the decision being made unfairly or impartially or with prejudice" the Court further observed: "86 It is not unknown for judges to make findings on an interlocutory issue and to express those findings in a way that indicates that they have come to a final conclusion . If that conclusion is as to a significant issue on which the ultimate result of the trial depends, and further evidence is still to be led and final addresses are still to be made, the likely consequence is that the judge concerned will have to disqualify himself or herself. 87. The reason for this is that a finding expressed in terms of finality, when made at an interlocutory stage, will usually give the impression that the judge's mind is made up . If the judge's mind is made up before evidence and final addresses are complete, it will mean that a conclusion has been unfairly arrived at. There is then likely to be an apprehension that, when the time comes to give final judgment, the judge might not be impartial or might be prejudiced against the party who was unsuccessful in the interlocutory judgment. It will then not merely be an apprehension that the judge will decide the case adversely against that party." (Emphasis added) 98 At [91] the Court noted that the issues in the case before it were not dissimilar to those discussed by the Full Court of the Supreme Court of South Australia in Southern Equities Corporation Limited (in liq) v Bond [2000] SASC 450; (2000) 78 SASR 339. In that case the Full Court dealt with an appeal from a decision of Debelle J not to disqualify himself when it had been submitted to him that he should do so on the ground that he had made findings of fact and credit in an application for a Mareva injunction which gave rise to a reasonable apprehension of bias. 99 At [92]-[94] in Kwan this Court discussed Southern Equities in the following terms:

[52]

"92 Olsson J (with whom Bleby J, in effect, agreed - Williams J dissenting) observed (at 349) that one of the matters that Debelle J had been called upon to consider was whether it had been established that a danger existed that, if successful in the action, the plaintiffs would not be able to have the judgment satisfied. His Honour said at 350: 'Such an exercise may well involve issues of credibility. It almost inevitably requires the making of specific findings of fact on the evidence available. It follows that, even if those findings are expressed to be only provisional, they may, quite reasonably and naturally, engender an apprehension of pre-judgment as to other issues at trial, if the findings are made by the trial judge. Much, of course, will depend upon the precise nature of the findings and the manner in which they are expressed.' 93 The problem identified by Olsson J was that Debelle J had expressed his findings in absolute and unqualified terms, 'as the outcome of a hotly contested inter partes dispute and a close analysis of a considerable quantity of evidentiary material.' The same applies in the case with which we are presently concerned. 94 Olsson J considered that it was important that many of the factual issues to which Debelle J had regard 'were matters which were, or were proposed to be and now are, in issue on the pleadings; and would have to be traversed at trial'. His Honour said at 351-352: 'The findings made in relation to them were highly adverse to the appellants in a case in which their credibility and probity arise as paramount considerations. The very basis of the applications before the learned judge involved a direct attack upon the credit of both appellants (having regard to the content of their sworn testimony on examination, when contrasted with other evidence presented) against the background of an allegation of conspiracy - in relation to which credit and probity was all important. It was the specific case of the liquidator, on the applications before Debelle J, that the sworn evidence of the appellants was either false or deliberately misleading. The findings made unequivocally indicated a conclusion that they had not been witnesses of truth as to important matters; and that they had deliberately engaged in a course of highly improper conduct, contrary to their duty as directors. The relevant conduct would plainly arise for consideration at trial. With the wisdom of hindsight, it would have been preferable for applications of this type to have been dealt with by a judge other than the trial judge, so as to avoid the situation which has actually arisen. However, as matters now stand, it seems to me that the appellants have demonstrated a situation of apprehended bias. It is almost inevitable that, if Debelle J now embarks upon the trial, there will be a strong perception that he comes to his task from a particular point of view, and with a particular feeling towards the all important issues of the credibility and probity of the appellants - from which it is reasonably considered that he may find it intellectually difficult, if not impossible, to retreat.'"

[53]

100 At [95] this Court observed that the same considerations applied to the case before it and continued: "The effect that his Honour's remarks might have on a reasonable bystander has to be judged not only by the language used in the various judgments, read as a whole, but also by bearing in mind that the fraud, in furtherance of which he was 'satisfied' that the documents had been prepared, was the very fraud the first respondent alleged in attempting to prove that the loan and mortgage were fraudulent shams and not genuine transactions. His Honour had stated that he was satisfied about the very allegation of fraud on which the first respondent was still to lead evidence and the appellant was still to rebut." 101 It is important to observe that in Southern Equities, as the passage cited from the judgment of Olsson J by this Court at [94] of its reasons in Kwan makes clear, in the application before Debelle J there was a direct attack upon the credit of both appellants and a finding that their sworn evidence was either false or deliberately misleading. That is to be contrasted with Mowbray where the primary judge made clear at [51] and [52] of his reasons in that case that there was no such direct attack. Further, as the first respondent submitted in the present case, Mr Gulson's credit was said by the primary judge to stand uncontradicted and he expressly acknowledged (at [45]) not only that BATAS had at all times maintained that its document management policies and practices at no time permitted selective destruction of prejudicial documents but also that the assertion of Brambles to the contrary remained "a live issue for the trial". 102 Returning to Kwan, at [97] the Court found that it could not be gainsaid that in the passages equivalent to paragraphs [38] and [45] of the trial judge's revised judgment he had expressed his findings "in emphatic language of absolute finality. There is no ambiguity or equivocation in the words used". 103 Accordingly the Court concluded (at [101]) that although it unreservedly accepted that his Honour was able to adjudicate impartially on the ultimate fraud issue before him, the insidious nature of bias was such that, applying the test laid down in Johnson, a reasonable apprehension of bias in the sense described in that case had arisen.

[60]

(f) Finally, a fair-minded lay observer might reasonably apprehend that a judge who had found a company to have been fraudulent is inherently unlikely in subsequent proceedings to conclude that the same conduct was innocent. Equally, having accepted evidence of witnesses on that issue, he was unlikely to reject those witnesses' evidence in subsequent proceedings. 105 In its oral submissions BATAS contended that the two "mights" were satisfied because of the quality and seriousness of the allegations and the manner in which they were contested, notwithstanding the qualifications which the primary judge provided in his reasons to the effect that he was determining the issue before him only on the evidence presented to him and in circumstances where BATAS had neither directly attacked the evidence of Mr Gulson which he was being asked to accept nor called any evidence to contradict it. 106 With respect to the primary judge's observation at [13] that the allegations against BATAS were not new and had, in effect, been known to it since 2002, it was asserted that when stating repeatedly that Mr Gulson's evidence stood uncontradicted and that BATAS had had the opportunity to investigate Mr Gulson's claims and to call evidence in rebuttal which it had failed to do, the fair-minded lay observer might reasonably conclude that his Honour was at least possibly implying that BATAS had no answer to those claims. 107 Accordingly, it was submitted that to a fair-minded observer, the primary judge was, in effect, semaphoring that although the assertion by Brambles that BATAS' document management policies permitted the selective destruction of prejudicial documents remained a live issue for the trial, nevertheless it would be for BATAS to prove otherwise given its failure to directly challenge Mr Gulson's evidence in the interlocutory proceedings. In other words, it was submitted that his Honour was conveying that the onus would lie upon BATAS at trial to elicit sufficient evidence to rebut his finding at [69] that, prima facie, Brambles had made good the allegations pleaded in the Amended Statement of Claim which his Honour had summarised at [12] of his judgment (see [30] above). His Honour was, so it was submitted, in effect issuing a show cause notice to BATAS as to why his finding of fraud should not be confirmed at trial. 108 It was thus submitted that to a lay observer, the primary judge was effectively saying that BATAS really had no answer to Mr Gulson's evidence as it had been on notice since 2002 of the allegations against it and had done nothing to counter them so that the issue was foreclosed. Furthermore, although in theory his Honour had been dealing with an interlocutory application, the manner in which it was conducted in terms of the adversarial process adopted by the parties would be seen by that observer to have been elevated beyond an ordinary interlocutory application into a mini-trial that had been hotly contested. 109 The first respondent's written submissions may be summarised as follows:

[66]

(f) Finally, the foregoing submissions illustrate that, in contrast to the position in Kwan , his Honour's conclusions were not couched in " emphatic language of absolute finality " or expressed in terms which left no room for " ambiguity or equivocation in the words used ". 110 In oral submissions the first respondent contended that the fair-minded lay observer would be assumed to have read and appreciated his Honour's reasons in Mowbray. On the face of those reasons, it would have been apparent to the lay observer that his Honour was dealing only with an interlocutory application in respect of which the hearsay rule (which would otherwise operate to exclude the relevant evidence as inadmissible) did not apply. The evidence of Mr Gulson, which his Honour had accepted for the purposes of the application in Mowbray, and which he had described (at [48]) as vague and consisting of impressions, interpretations and conclusions as to what he was told, was evidence which, both in terms of its form and hearsay characteristics, would at the very least be unlikely to be admitted at trial where the rules of evidence would be strictly observed. 111 A fair-minded lay observer would also have appreciated that in Mowbray there had been no direct attack upon Mr Gulson's evidence as being untruthful, unreliable or actuated by malice and that BATAS had not yet joined issue with and called evidence to contradict Mr Gulson. The fair-minded lay observer would reasonably assume that this would occur at trial given that at all times BATAS maintained that its document management policies and practices at no time permitted selective destruction of prejudicial documents. 112 In the foregoing circumstances it could not be said that once the hypothetical fair-minded lay observer had placed the primary judge's findings in their proper context, he would have apprehended that his Honour's mind was so prejudiced in favour of the findings he made, that he might not alter those findings irrespective of the evidence or arguments presented to him by BATAS at trial. In other words, a fair and proper reading of his Honour's reasons in Mowbray would positively indicate to that observer that his Honour had formed no fixed or final view as to the credibility of Mr Gulson's allegations nor that his findings had been expressed in language which was capable of producing an ineradicable apprehension of prejudgment.

[67]

BATAS' submissions should be rejected 113 In my view BATAS' submissions should be rejected and those of the first respondent accepted. I accept that the issue to be determined under s 125 of the Evidence Act, being an allegation of fraud, was serious as his Honour acknowledged when holding (at [48]) that the standard of proof required when dishonesty is alleged must take into account the importance of the evidence to the proceedings and the gravity of the matters alleged. I further accept that there was nothing provisional or tentative about his Honour's finding given the standard of proof to which he was required to be satisfied before making that finding. But his state of satisfaction was clearly influenced by his emphasis throughout his reasons on the fact that Mr Gulson's evidence relevantly stood uncontradicted and, as he noted at [52], "has not yet been tested by a contrary version of events". 114 Furthermore, his Honour made it clear in the same paragraph that in cross-examination of Mr Gulson it was not directly to put to him that his evidence was either untruthful, unreliable or actuated by malice. As I have noted, his Honour emphasised on a number of occasions that he was merely making findings based on the limited evidence before him. He did so in language which, as Basten JA points out at [148(d)], was neither objectionable nor emotive. On the contrary, it was qualified and guarded. 115 In my view, and consistent with the remarks of the justices of the High Court in Johnson and Concrete to which I have referred at [81]-[85] above, the hypothetical fair-minded observer would have some understanding of the nature of the application with which the primary judge was dealing and, in particular, an understanding of the fact that hearsay evidence in such an application was admissible whereas in other circumstances it was not and that his Honour's findings were only for the limited purpose of allowing inspection of documents which would otherwise be the subject of client legal privilege. That observer would thus be acquainted with the difference between an interlocutory proceeding and a trial and, in particular, of the significant difference between the evidence admissible in the former as distinct from that admissible in the latter. That observer would also understand that, perhaps for perfectly proper tactical reasons, BATAS had decided not to call evidence in the interlocutory proceedings to counter that of Mr Gulson which it might well call at trial, thus putting a completely different complexion on the issue of BATAS' document management policies. The primary judge expressly acknowledged as much in his reasons in Mowbray which, in my view, would not be lost on the reasonable fair-minded lay observer. 116 Accordingly, in the foregoing circumstances, in my opinion such an observer would not reasonably apprehend that his Honour might not bring an impartial and unprejudiced mind to the issue with respect to BATAS' document management policies once all admissible evidence had been elicited by all of the parties at trial and his Honour had had the benefit of full argument from counsel with respect thereto. 117 Finally, it needs to be again emphasised that contrary to the findings of the trial judge in Kwan and in contrast to the findings of Debelle J in Southern Equities and of this Court in Kwan, in my view his Honour did not express himself "in emphatic language of absolute finality" so that there would be a reasonable apprehension on the part of the fictitious hypothetical fair-minded observer that his Honour's mind was so prejudiced in favour of a finding adverse to BATAS that he might not alter that finding irrespective of the evidence or arguments that would be presented to him at trial. Rather, the language his Honour employed was, as I have said, repeatedly qualified to emphasise the evidentiary constraints under which he was labouring. It follows that in my view the challenge by BATAS to the refusal of the primary judge to disqualify himself fails.

[69]

Conclusion 120 For the foregoing reasons I am of the opinion that BATAS' challenge to the primary judge's refusal to disqualify himself for apprehended bias should be rejected. I would therefore propose that each of the summons for leave to appeal and the s 69 summons filed on 24 June 2009 be dismissed with costs. 121 BASTEN JA: In two sets of proceedings before this Court, British American Tobacco Australia Services Ltd ("the applicant") sought to challenge the refusal of Curtis J, sitting in the Dust Diseases Tribunal of New South Wales ("the Tribunal"), to recuse himself on the basis of a reasonable apprehension of bias. The apprehension was said to arise because his Honour had, in an interlocutory judgment delivered on 30 May 2006 in other proceedings against the applicant, determined an issue which was one of those presented by the current proceedings brought by Claudia Jean Laurie as executrix of the estate of her late husband, Donald Henry Laurie. 122 The earlier proceedings arose in relation to a cross-claim between two defendants: (Re Mowbray) Brambles Australia Ltd v British American Tobacco Australia Services Ltd [2006] NSWDDT 15. Those proceedings had involved a claim by the late Alan Mowbray against Brambles Australia Ltd asserting that he suffered cancer caused by asbestos fibres released from brake pads and inhaled by him during his employment with Brambles. Mr Mowbray had also been a smoker and Brambles had cross-claimed against the applicant, seeking contribution in respect of a judgment entered in favour of Mr Mowbray's widow. An issue which had arisen at an interlocutory stage of that proceeding was whether documents should be discovered by the applicant in circumstances where, although they were putatively subject to client legal privilege, they had been prepared "in furtherance of the commission of a fraud", within the terms of s 125(1) of the Evidence Act 1995 (NSW) and hence were not protected by privilege: [2006] NSWDDT 15 at [56]-[57]. 123 The full context in which those findings were made have been set out by Tobias JA and need not be repeated. 124 It is appropriate to deal first with the jurisdictional issues raised by the dual proceedings.

[70]

Leave to appeal 125 The application for leave to appeal was brought pursuant to s 32 of the Dust Diseases Tribunal Act 1989 (NSW) ("the DDT Act"). That section permitted an appeal by a party dissatisfied "with a decision of the Tribunal in point of law": s 32(1). Leave was sought on the basis that the decision sought to be challenged was an interlocutory decision, leave being required pursuant to s 32(4). 126 The draft notice of appeal identified one ground, namely: "The Tribunal below erroneously declined to find that a fair-minded lay observer might reasonably apprehend that Judge Curtis might not bring an impartial and unprejudiced mind to the resolution of document destruction allegations Judge Curtis is asked to decide in proceedings no 6057 of 2006." 127 In Seltsam Pty Ltd v Ghaleb [2005] NSWCA 208; (2005) 3 DDCR 1 at [235], I accepted that a party to proceedings before the Tribunal who had reason to request that a particular member disqualify himself or herself might "[i]f such an application is not properly dealt with … challenge any operative decision of the Tribunal as one with which it is dissatisfied in point of law". In so stating, I was not seeking to say that any refusal to recuse would necessarily constitute "a decision of the Tribunal in point of law", for the purposes of s 32(1) of the DDT Act. Rather, those remarks were directed to the question whether, in the event that error were identified, the Court should remit the matter to the Tribunal with a direction that the Tribunal should be differently constituted: at [233]. In my view (a minority view) no such direction was appropriate, it being a matter for the internal administration of the Tribunal as to the member by whom it was to be constituted for particular proceedings and the parties having the right to seek recusal in the case of a reasonable apprehension of bias. 128 With most grounds of judicial review, there are likely to be questions of fact and law. For example, where it is alleged that a tribunal or decision-maker has failed to take a relevant consideration into account, the first question, namely whether the matter was not taken into account, will usually be a question of fact. A second question, namely whether as a matter of statutory construction the consideration was mandatory, will be a question of law: see Minister Administering the Crown Lands Act v New South Wales Aboriginal Land Council [2009] NSWCA 352; at [48] and [52]-[53]. In the present case, in order to determine the recusal application, it was necessary for the Tribunal to identify the legal test to be applied. That would involve a decision in point of law. The application of the test to the particular circumstances would, however, involve an evaluative judgment in the application of the relevant principles and would not itself constitute a decision in point of law. 129 The ground of appeal identified above did not in terms identify any decision of the Tribunal in point of law. Further, it being conceded that the Tribunal correctly identified the legal test to be applied, it was not demonstrated by the applicant that there was any decision of the Tribunal in point of law which it sought to challenge. Accordingly, the application for leave to appeal should be refused. 130 It is not necessary in these circumstances to consider whether, points of law aside, a refusal to recuse would itself involve an appellable "decision": see Lee v Cha [2008] NSWCA 13 at [13]-[23]. The operation of such principles in relation to the statutory appeal found in s 32 of the DDT Act may be contentious. In any event, if an operative decision were required, it may have been sufficient that the Tribunal ordered the applicant to pay the plaintiff's costs of the disqualification motion.

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Application for prohibition 131 The second proceeding before the Court was an application for prohibition brought pursuant to s 69 of the Supreme Court Act 1970 (NSW). It was not disputed that this proceeding was appropriate to raise the issue now sought to be agitated. 132 The application invoked the original jurisdiction of this Court and hence gave rise to a temporal issue which arguably differed from that which would have been raised by the proposed appeal. Thus, this Court is required to determine as of the date of its judgment, whether Curtis J should be prohibited from continuing to hear the proceedings in the Tribunal. That raises a question as to the relevance of his Honour's judgment refusing to recuse himself. In McGovern v Ku-ring-gai Council [2008] NSWCA 209; 72 NSWLR 504 at [81] I held (Spigelman CJ and Campbell JA relevantly agreeing) that it may be appropriate, depending on the circumstances of the case, to take into account statements by a decision-maker revealing the existence of potentially prejudicial material and indicating that it would have no influence on his or her decision. I suggested that the fair-minded observer would be entitled to take into account a statement that the offending material had not affected the decision-maker's approach to the decision, but need not be expected to accept the disclaimer, referring to Re JRL; Ex parte CJL [1986] HCA 39; 161 CLR 342, at 350-351 and 356-357 (Mason J). In Orleans Investments Pty Ltd v Mind Share Communications Ltd [2009] NSWCA 40; 254 ALR 81 at [36] Giles JA (with whom Spigelman CJ and Allsop P agreed) accepted that proposition, noting that it also had support in Johnson v Johnson [2000] HCA 48; 201 CLR 488 at [14] (Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ). 133 Accordingly, the fair-minded observer in considering the present application, would be expected to take into account the judgment of Curtis J refusing to recuse himself. No doubt the observer might be inclined to give it limited weight, reasoning that, if there were otherwise a reasonable apprehension of pre-judgment, the fact that the very judge who was said to be the subject of such a reasonable apprehension took a different view might merely reflect an unwillingness or inability to appreciate how another person might view his own capability of considering the issue afresh on the merits.

[72]

Application of relevant principles 134 The relevant legal principles have been identified by Tobias JA, and need not be repeated. The resolution of the present case turns upon their application to particular circumstances. However, it is convenient to identify a number of aspects of the established test. 135 First, it is not infrequently suggested that a test which only requires that the fair-minded lay observer "might" reasonably apprehend that the judge "might" not bring an impartial mind to the resolution of the case, imposes an undemanding burden on the applicant seeking prohibition. However, the epithet "undemanding" may be self-fulfilling if accepted unquestioningly. The expression of the test demonstrates that the fair-minded observer is not required to identify judicial incapacity as a probability, nor is the Court required to identify the observer's state of mind on the balance of probabilities. So expressed, the test reflects the underlying policy, not merely to protect impartial justice, but also to maintain public confidence in the impartiality of the administration of justice. 136 Secondly, this is an area (defamation being another) where the court, instead of assessing for itself the standards of reasonable behaviour, incorporates a circumlocution by reference to the state of mind of a "fair-minded lay observer". That construct reflects the importance of the element of public confidence in that it requires the Court to look beyond its own assessment of the circumstances and that of a lawyer who may have a greater understanding of the way in which justice is administered than would be expected of members of the general public. That point of distinction is, however, difficult to identify with any degree of precision as the test is usually explained as requiring a greater understanding of how justice is administered than would be expected of members of the public chosen randomly: see, eg, Johnson v Johnson at [13] (Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ), [53] (Kirby J) and [80] (Callinan J); Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd [2006] HCA 55; 229 CLR 577 at [177] (Callinan J) and generally, Aronson, Dyer and Groves, Judicial Review of Administrative Action (4th ed, Lawbook Co 2009) at [9.80]-[9.95]. 137 Thirdly, there is a degree of obscurity about the level of faith with which the observer is expected to view the administration of justice. He or she is not expected to have any knowledge of the particular character or ability of the judge in question, but is entitled to take into account statements made in the course of proceedings. One can only say that the description of the observer as "fair-minded" is designed to exclude the unduly gullible and the unduly cynical. 138 Fourthly, it is likely, and perhaps inevitable, that an appellate judge reviewing the circumstances at trial will form a view as to whether he or she holds a reasonable apprehension of the relevant kind. However, if satisfied that he or she does not hold such an apprehension, and in circumstances where the trial judge has disavowed any difficulty in dealing with the case on the merits, by what standard and process of reasoning does the appellate judge determine that the fair-minded lay observer would reach a different conclusion? The court does not poll public opinion and, if it did, it would undoubtedly discover a range of views. The fictional fair-minded lay observer is, of course, a construct, but it is not entirely clear whether he or she views the independence and objectivity of the judicial mind with greater or less trust than do lawyers and fellow judges. There appears to be an assumption underlying the judgments in this area that the public has less faith than do the legally trained themselves in the ability of legal training to restrain objectivity and avoid pre-judgment. 139 Fifthly, the test may operate somewhat differently depending on the kind of apprehension which is raised. In Webb v The Queen [1994] HCA 30; 181 CLR 41 at 74-75, Deane J considered four distinct though overlapping categories of case, identified as "disqualification by interest", "disqualification by conduct", "disqualification by association" and "disqualification by extraneous information". At least in this country, it is likely that the public would be thought to have little tolerance of a judicial officer who had received financial support from a party to proceedings. Different legal cultures may give rise to different sensitivities: cf Caperton v AT Massey Coal Co Inc 173 L.Ed.2d 1208 (2009), which involved the application of the Constitutional guarantee of due process in relation to a recently elected judge sitting on a case involving a major financial supporter of his election campaign. Further, disqualification by conduct is a broad category considered by Deane J to cover conduct both in the course of, and separate from, proceedings. The present case is concerned with conduct in the course of proceedings, albeit not the same proceedings. Further, it is concerned with conduct involved in an entirely proper determination of an issue in other proceedings, as compared with the expression of tentative views in the course of a hearing, or the use of intemperate language directed at a particular party or its lawyers. 140 Sixthly, care should be taken lest the application of the test, instead of enhancing public confidence in the administration of justice, actually undermines it. Consideration of a reasonable apprehension of bias assumes that there has been no actual pre-judgment. Where the trial judge expresses willingness and confidence in his or her ability to maintain an open mind and where that view is shared by the appellate judge, for reasons which are in each case articulated, to demand that the trial judge be disqualified tends to demonstrate lack of faith in the proper administration of justice, rather than the contrary. For the courts to adopt such a view does not self-evidently promote public confidence. In such a case, there is a real risk that the applicant is seen to be manipulating the system, not to avoid a prejudiced mind, but to avoid an adverse result based on a fair and unchallenged opinion, established by reference to the facts and circumstances then revealed in the evidence, and which may with proper consistency be maintained in the absence of evidence suggesting a different conclusion. Too ready a willingness to allow such a result would undoubtedly undermine public confidence in the administration of justice. 141 Seventhly, it is important to treat questions of pre-judgment as reflecting one set, albeit a very important set, of values in the administration of justice: other values must also be considered. Thus, the fact that a judge reads inadmissible evidence in order to rule on its admissibility should not give rise (generally) to any reasonable apprehension of pre-judgment on the basis of a tainted mind. On one approach, it may be said that the fair-minded observer will acknowledge the ability of a judicial officer to put aside prejudicial, even inflammatory, material, once it has been ruled inadmissible. The insidious effects of such material are, on that approach, to be ignored. On the alternative approach, the absolute value of impartiality is being tempered by the importance of the need for the administration of justice to proceed in a reasonably expeditious and orderly fashion without a risk of trials being routinely aborted. In relation to many civil proceedings, the need to take account of such values is mandated by provisions such as ss 56, 57 and 58 of the Civil Procedure Act 2005 (NSW). 142 Eighthly, in relation to the Tribunal, attention must be paid to the statutory scheme under which it operates. It is constituted by a judge of the District Court, or a person so qualified: DDT Act, s 7(2). Further, it is given particular powers which might be seen to affect any general expectation as to the manner in which it would operate. Thus, although the rules of evidence will generally apply (s 25(2)) the rules are relaxed in favour of the expeditious operation of the Tribunal by a number of provisions: " 25 Evidence in proceedings before the Tribunal … (3) Historical evidence and general medical evidence concerning dust exposure and dust diseases which has been admitted in any proceedings before the Tribunal may, with the leave of the Tribunal, be received as evidence in any other proceedings before the Tribunal, whether or not the proceedings are between the same parties." 143 There is a similar provision in respect of any material obtained by discovery or interrogatories in other proceedings: s 25A. Further, s 25B provides: " 25B General issues already determined (1) Issues of a general nature determined in proceedings before the Tribunal … may not be relitigated or reargued in other proceedings before the Tribunal without the leave of the Tribunal, whether or not the proceedings are between the same parties. (1A) If an issue of a general nature already determined in proceedings before the Tribunal (the earlier proceedings ) is the subject of other proceedings before the Tribunal (the later proceedings ) and that issue is determined in the later proceedings on the basis of the determination of the issue in the earlier proceedings, the judgment of the Tribunal in the later proceedings must identify the issue and must identify that it is an issue of a general nature determined as referred to in this section. (2) In deciding whether to grant leave for the purposes of subsection (1), the Tribunal is to have regard to: (a) the availability of new evidence (whether or not previously available), and (b) the manner in which the other proceedings referred to in that subsection were conducted, and (c) such other matters as the Tribunal considers to be relevant." 144 These provisions provide a statutory indication that issues can, in the circumstances identified, be pre-determined and may not necessarily be relitigated or reargued, even if the party adversely affected was not involved in the earlier proceeding. 145 These provisions were not relied upon the present case; indeed, on the contrary, the Tribunal was at pains to identify the fact that it had not determined particular issues adversely to the applicant on a final basis and would provide the applicant with an opportunity to call such evidence, engage in such further cross-examination and make such further submissions as it thought fit. Nevertheless, the fact that a different approach might be available in respect of "issues of a general nature" indicates a statutory intention that the Tribunal not be required to reassess such matters repeatedly. Further, ss 25(3) and 25A appear to limit the right of a party to relitigate questions of admissibility or exercises by way of discovery and interrogatories, in later proceedings. 146 Ordinarily, rules of procedural fairness would entitle a party to resist the admissibility of material or to reagitate issues of a general nature, despite the fact that determinations had been made by the Tribunal in earlier cases. However, the party adversely affected could not complain of pre-determination which is permitted by the statute. Where the party obtained leave to reagitate the issue, there may be no preclusion of an application for disqualification based on a reasonable apprehension of bias, but such an argument would need to be presented against the background of the special statutory provisions, and against the possibility that the grant of leave were seen as an indulgence. 147 All these are factors which the fair-minded lay observer should properly take into account as procedural characteristics of the particular tribunal in which the proceedings were brought. 148 In this statutory scheme, an applicant would have some difficulty in demonstrating a reasonable apprehension of bias where:

[76]

(d) the interlocutory application was not accompanied by any objectionable or emotive language otherwise casting doubt on the willingness or ability to reconsider objectively the position earlier adopted. 149 In the present case, it is not contended that Curtis J has pre-judged the issue or is in fact unwilling or unable to consider with an open mind such material and submissions as may be tendered by the applicant for further consideration. That his Honour may, absent fresh material or differently formulated submissions reach the same conclusion, adverse to the applicant, would demonstrate consistency of approach, not pre-judgment. His Honour expressed confidence in his ability to deal with the matter afresh on the materials presented to him. There is, no doubt, a chance that, even if unconsciously, knowledge of one's own previously formulated opinion could inhibit a fair consideration of fresh material. In my view that chance is remote and does not rise to a sufficient level to constitute a reasonable apprehension of pre-judgment. Given the appropriate understanding of the test and the underlying policy considerations identified above, I can formulate no reasonable basis for concluding that the fair-minded lay observer would reach a different conclusion. Rather, if the applicant were to succeed in the present application, there would be a real risk of a diminution in public confidence in the administration of justice, due to the perception that one litigant, facing an adverse outcome in the absence of persuasive material which would properly permit a different conclusion to be reached, has manipulated the system in the hope of obtaining a more favourable outcome from a different judge. 150 When the reasoning of Tobias JA is viewed against the statutory scheme described above and by reference to the reasons of the Tribunal in refusing the recusal application, his Honour's conclusion that prohibition should be refused is, in my view, strengthened. I accept his Honour's analysis and for these further reasons would also refuse the relief sought. The applicant must pay the respondent's costs of both proceedings in this Court. **********

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