Brown v DML Resources

THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

3830/00 - MARTIN RUSSELL BROWN & 1 OR v D M L RESOURCES PTY LIMITED (IN LIQ) & 1 OR

JUDGMENT (ex tempore; revised 2 April 2001) 1 HIS HONOUR: On 4 September 2000 the plaintiff applied to this Court seeking an extension of time in which to bring proceedings to challenge certain transactions as unfair and voidable preferences. The application came before me in the Corporations List. I entertained it as an application ex parte for reasons advanced by counsel but, in view of the fact that the orders that I was asked to make would affect creditors who may wish to appear and make submissions, I made provisions in the orders to ensure that they were served and given an opportunity to appear. I granted the extension of time sought by the plaintiff under s 588FF(3)(b) of the Corporations Law, but I directed the plaintiffs to serve copies of the originating process and affidavit, and my orders, on a number of corporations including BP Australia Holdings Limited. I granted those corporations liberty to file and serve an application to set aside my orders within 28 days. BP availed itself of that leave within the time specified. 2 On 18 October 2000 the solicitors for the plaintiffs wrote to the solicitors for BP saying, amongst other things, that in their view BP's application should be listed before me for directions and ultimate determination. They wrote a further letter on 24 October 2000 proposing that BP's application would be listed before the Corporations List judge on 11 December 2000, noting that I would be the Corporations List judge on that day. They said that, in their view, I would need to hear the application given that it was an application by BP to vacate orders that I had made. I should say at once that I do not regard it as necessary in the circumstances of this case for the judge who made the initial ex parte orders to hear the application to set them aside, although there may be reasons of convenience to the Court for that to occur, all other things being equal. 3 On 11 December 2000 the Deputy Registrar made orders for the issue of examination summonses in the principal liquidation proceedings in which the plaintiff was appointed liquidator (proceedings number 4928/00). An application was made by BP to set aside some of those summonses or to stay them pending the determination of its application to challenge my orders of 4 September 2000 in the present proceedings. I heard and determined the application with respect to the examination summonses on Friday 9 February 2001. My ex tempore judgment, revised on 12 February 2001, sets out my reasons for deciding that BP's application should fail. 4 When BP's application in the present proceedings came before me in the Corporations List on 11 December 2000, I was informed that there were also live issues between the parties as to questions of discovery of documents, which counsel and I described as 'the subpoena issues', raising matters of confidentiality and privilege. Subsequently, the subpoena issues were sorted out between the parties and it was not necessary for the Court to make any determination of those matters. 5 However, on 11 December 2000 there was an exchange between me and the legal representative of BP, the general purpose of which was for me to decide what matters could be heard within the Corporations List and what matters needed to be stood over for another occasion. The legal representative of BP said words to the following effect: 'With regard to the substantive motion in these proceedings we agree that your Honour should hear it.' I responded to the following effect: 'I am not persuaded as to that. It depends on other cases before the Court, but I may hear the subpoena issues today.' 6 The context was that counsel and I believed that the subpoena issues could be disposed of more quickly than BP's application to set aside the ex parte orders. As I have said, it subsequently became unnecessary to hear the subpoena issues. But BP's application to set aside the ex parte orders returned to me for mention on 30 January 2001 when it was adjourned for further mention on 6 February 2001. 7 By that time the application to set aside the examination summonses was the most pressing matter, and the estimate of counsel for BP was that it would take two days to hear the application to set aside the ex parte orders. I, therefore, fixed the application with respect to the examination summonses for hearing on 9 February 2001 and stood over the application with respect to the ex parte orders to that day for further mention. On 9 February 2001, having dealt with the examination summonses matter, I set down the application to set aside the ex parte orders for hearing on 19 and 20 April 2001. 8 On 20 March 2001, the solicitors for BP wrote directly to me, sending a copy of their letter to the solicitors for the plaintiffs. They said that their client had expressed concern that the same judge who made the ex parte orders would be hearing what their clients saw as an 'appeal' against those orders. They pointed out that one of the grounds for setting aside the ex parte orders was that the orders should never have been made in the absence of their client and without notice to it. They submitted that a fair-minded observer would apprehend bias, because I might be affected by the decision I had already made. They cited some observations by Kirby P in Australian National Industries Ltd v Spedley Securities Ltd (1992) 26 NSWLR 411, 417 and 419. Those passages refer to the bias which attends the natural human desire for consistency of thought and action and the usual inclination of any human being to uphold an opinion earlier expressed. The solicitors invited me to disqualify myself and to arrange for some other Supreme Court judge to hear the application. The letter acknowledged that I may wish to deal with its subject matter in the presence of the representatives of both parties in open Court. 9 By letter of the same date, the solicitors for the plaintiffs wrote to my Associate saying that they did not agree that I should disqualify myself, but that it was not appropriate to provide any detailed response to a communication addressed to me. 10 In the circumstances, the matter was brought before me for mention on 26 March 2001, when I made directions for the parties to file submissions on the question of bias so that I could hear the matter in open Court today. 11 In making my directions on 26 March I had in mind the observations of Mahoney JA in Bainton v Rajski (1992) 29 NSWLR 539 at 541ff. His Honour said that where a question arises as to the proper procedure for a judge to consider and determine a question about his or her own apprehended bias, the judge may follow any of a variety of procedures ranging from a full formal hearing (including a determination of facts and the hearing of argument) to a decision by the judge without any hearing at all. Mahoney JA warned against the former approach, because a full hearing may involve contested facts, induced apprehensions and difficulties with respect to contempt of Court, which his Honour then explained. 12 Having made inquiries of the parties on 26 March 2001, I was satisfied that the difficulties referred to by Mahoney JA simply will not arise in this case. The legal representative of BP confirmed to me on that occasion, and again today, that there is no apprehension of actual bias relating to my own individual circumstances or attitude, but rather BP raises the general question whether a judge who made orders, of the kind I made on 4 September 2000, should ever hear an application to set them aside, of the kind that BP has now made. 13 It seemed to me then, and it seems to me now, that an issue of that kind is entirely appropriate to be considered and determined as if it were an application by notice of motion in the proceedings. However, I did not make a direction that a notice of motion be filed and served. As Mahoney JA said at 544, it is a matter for the judge in question to determine whether he or she should hear a particular proceeding and that determination can and, indeed, ought to be made by the judge before the hearing commences regardless of whether the issue is raised by a party formally or informally. Further, a decision by the judge to proceed to hear the matter need not involve the making of any order. The rights of appeal of the parties are not directly rights with respect to that decision, but rather rights of appeal arising out of the judge's determination of the substantive matter after the judge has decided to hear and determine it. 14 Although there was no notice of motion, it was clear to both sides exactly what BP was seeking - namely, a decision by me to disqualify myself so that another judge would hear the case on 19 April or such other date as may be arranged. 15 When a question is raised about apprehended bias, it is a natural tendency of the judge concerned to disqualify himself or herself so as to avoid any doubt about the judicial process and the validity of the decision which emerges from it. In a sense, disqualification is the easy way out of the difficulty raised by an allegation of apprehended bias. But in my view it is not in the interests of the administration of justice for the judge to allow his or her natural inclination to hold sway. It is very important that an issue, once it has been raised by a party, is resolved in accordance with the law and the proper application of principle. It is inappropriate to yield as soon as the question of apprehended bias is raised, because the practical effect of doing so is to give litigants a right of veto over the identity of the judge assigned to their case. That cannot be allowed to happen. 16 The principles governing the question before me have been enunciated and repeated in many recent cases. Where a judicial officer has been involved in pre-trial interlocutory proceedings which have involved a judgment on the credibility of witnesses or parties, it is generally accepted that a fair-minded observer might entertain an apprehension of bias by reason of the prejudgment of those issues of credibility: Livesey v The New South Wales Bar Association (1983) 151 CLR 288; Australian National Industries Ltd v Spedley Securities Limited (1992) 26 NSWLR 411. But that is not this case. The general test for disqualification for perceived bias was stated by the High Court in R v Watson ex parte Armstrong (1976) 136 CLR 248 at 258-263, and was restated in the Livesey case at 249: 'The 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 an unprejudiced mind to the resolution of the questions involved.' 17 In the Spedley Securities case, Samuels JA at 26 NSWLR 411, 427 referred to the Livesey test and the qualification made by their Honours by reference to Re JRL ex parte CJL (1986) 161 CLR 342 at 352, and drew attention to the use by Mason J in the latter case of the word 'will' rather than 'might', speculating that there may have been a shift away from the Livesey principle in later judgments. The question whether the Livesey principle remains an accurate statement of the law need not detain me in the present case. Here it does not matter whether the test be formulated in the terms of the word 'will' or the word 'may', since the test is not satisfied on either formulation. The rule against apprehended bias is not transgressed if it can be seen that any views expressed by the judge are tentative and the judge retains an open mind on the relevant question: R v Commonwealth Conciliation & Arbitration Commission ex parte Angliss Group (1969) 122 CLR 546 at 553-4; Kartinyeri v The Commonwealth (No 2) (1998) 72 ALJR 1334; Johnson v Johnson (2000) 74 ALJR 1380. 18 Counsel for the plaintiffs submitted that for a case of apprehended bias to be made out there should be 'strong grounds for supposing that the judicial officer has acted in such a way so that he cannot be expected fairly to discharge his duties' (relying on R v Australian Stevedoring Industry Board ex parte Melbourne Stevedoring Company Pty Limited (1953) 88 CLR 100, 116). With respect, I am not sure that it is helpful, in order to state and apply the current law, to speak in terms of the strength of the grounds for supposing that the judicial officer cannot discharge his or her duties. This may be one respect in which the law has shifted over time, as Samuels JA noted in Spedley Securities at 427. Again, however, nothing in the present case depends upon whether the 'strong grounds' formulation is or is not adopted. I regard this as a clear case whether or not 'strong grounds' for apprehended bias need be shown. 19 Essentially the question for me here is whether there is a reasonable apprehension of bias where a judge makes an order that would finally dispose of the proceedings on an ex parte basis, but for the fact that the judge directs service upon an affected person and expressly reserves leave for that person to apply to the same judge to set the order aside. Built into the orders is a procedure for the person affected to remove the prejudice that the initial order may have created. And implied in an order of that kind is the proposition that, after hearing both sides, the judge may be persuaded that the plaintiff was not entitled to the order made in its favour on an ex parte basis. A reasonable bystander, aware of the whole terms of such an order, would understand that the judge had expressly left open the possibility of changing his or her mind when both sides of the story had been told. 20 BP makes its case essentially on two grounds. The less substantive ground asserts that BP is placed in a difficult position by the orders, because it was not present at the hearing on 4 September 2000 and had no notice of that hearing. It seems to me however, that what transpired at the ex parte hearing was of no consequence to BP, as long as it has been provided with the text of the orders and the documentary evidence upon which the orders were based. My directions of 4 September 2000 were intended to achieve that outcome, except as regards some documentary evidence which was asserted by the plaintiff to be confidential and was excluded from the direction for service accordingly. Since there is no longer any issue about this confidential evidence (that was part of 'the subpoena issues' which have been resolved), in my opinion there is no ground for apprehended bias arising out of this submission. 21 The second, and more substantive, submission is that there is an apprehension of bias arising out of the natural human desire for consistency of thought and action and the usual inclination of any human being to uphold an opinion earlier expressed. On the face of it, the natural human desire to which the submission refers is not triggered by what has happened so far. As I have said, my orders and directions of 4 September 2000 were made on the implied basis that I might change my mind as to the plaintiff's entitlement to relief, if an affected party were to take advantage of the leave expressly reserved and challenge the orders that I had made. There is no more a natural human desire to maintain the earlier order in such circumstances than there is a natural human desire to continue an ex parte injunction when the matter returns to the judge who made the initial order on a contested basis. 22 BP says that the decision to be made at the hearing on 19 and 20 April 2001 is partly an 'appeal' or a review of the decision made on 4 September 2000. It draws attention to the fact that one of the grounds it proposes to advance for setting aside the previous order is that there was procedural unfairness in my making the order on an ex parte basis without notice. In my opinion, a submission of the kind that BP proposes to make is expressly catered for by the orders and directions I made on 4 September 2000. Every aspect of what occurred on 4 September 2000 was on the basis that only one side of the case had been presented and that, therefore, care was needed in order to allow affected persons to reverse any prejudice flowing from the ex parte orders. It is true that the orders of 4 September 2000 were made on the basis that the Court may act under s 588FF3(b) ex parte, but the orders themselves allowed that proposition to be contested inter parties should an application subsequently be made. 23 There was debate before me today as to whether the orders of 4 September 2000 are properly to be characterised as final or interlocutory orders. In a sense, those orders were not final because they expressly allowed for an alteration to the position of the parties should an application be made in accordance with them. Again, it cannot be said that, having made those orders, the judicial officer has thereby become functus officio. As counsel for the plaintiffs pointed out, if the orders were strictly final, the application to be considered on 19 April would be before the Court of Appeal, and BP's application to be heard by a single judge on 19 April must fail in limine. 24 However, it could be said that the orders were of a final rather than an interlocutory nature, in another sense of the word. This is because, unless an application was made within the time specified, the orders would finally dispose of the present proceedings. Further, the principal order granting leave under s 588FF(3)(b) was not expressed to be limited as to time or in any other way. 25 In my opinion, nothing of significance to the present question turns on the mere classification of my orders of 4 September 2000 as final or interlocutory. But there is lurking beneath the classification a more substantial question - is it right to treat orders of the kind that I then made as equivalent to an ex parte injunction or other clearly interlocutory order for the purpose of deciding the question of apprehended bias? 26 The legal representative of BP submitted that there were important distinctions between an ex parte injunction and my ex parte orders of 4 September 2000. For one thing an ex parte injunction is normally very closely limited as to time. For another, it is normally made upon the basis of an undertaking as to damages. Further, the considerations for the Court are limited to whether there is a serious question to be tried and whether the balance of convenience (taking into account the undertaking as to damages) favours the granting of the relief sought. My orders of 4 September 2000 had none of these characteristics. 27 In order to make the orders, it was necessary for me to be satisfied, as I was, that there were grounds for making them on a final basis. It was also necessary for me to be satisfied, as I was, that making the orders ex parte, subject to the directions that I made, was proper. Consequently, BP's application does invite me to alter the views which led me to make the orders in the first place, whereas a contention by a defendant affected by an ex parte injunction that it be not continued is not, in the same sense, inconsistent with the judge's determination to grant the ex parte relief, since the judge acted in the first place only on the limited basis which I have described. Recognising that this is so, however, it still appears to me that there is no ground for me to disqualify myself for apprehended bias in this case. This is because, as I have said, my orders had expressly built into them the prospect of the revision of the views upon which I then proceeded. In a sense, they were 'provisional' views because I had heard the presentation of only one side, even though they would become final if they were not challenged. 28 Any doubt that I may have had about the application of the test of apprehended bias would be removed by additional circumstances arising out of the facts of this case. One circumstance is that as early as October 2000, it had been put by BP's solicitors that, in the view of the plaintiffs, it was appropriate that I should hear the case. BP did not demur. The proposition was raised again, specifically, at the hearing on 11 December when, as I have indicated, the legal representative of BP said that he agreed that I should hear the case. 29 BP now submits that all of those things happened at a time when the matter had not been set down for hearing and it was not clear which judge would determine the matter; and further, they occurred before BP failed in its application with respect to the examination summonses. 30 Accepting those points, it is appropriate, nevertheless, for me to take into account that no objection was raised to my hearing the matter until as late as 20 March 2001, and that strong indications were given that there was no objection, at the hearing on 11 December. In Vakauta v Kelly (1989) 167 CLR 568 and 577 Dawson J made it plain that, whether the conduct of a party amounts strictly to waiver or not, if a party over time raises no objection to the identity of the judge who is to hear the case, the party's conduct may be taken into account in determining, for the purpose of the test of apprehended bias, the attitude that a fair-minded observer might take. 31 I prefer not to make any determination of the waiver point as such. It appears to me that, regardless of whether the party now wishing to contend that I should disqualify myself has engaged in conduct which would constitute a waiver of its right to raise that matter, I have a duty to assess whether I am, in fact, disqualified having regard to the test of apprehended bias: See Rajski at 544 per Mahoney JA. I, therefore, base my decision on the substantive application of the test rather than any question of waiver. 32 It is also relevant, in the spirit of Dawson J's observations, to take into account that although BP failed in its application with respect to the examination summonses, I found it appropriate to consider whether BP's grounds for applying to set aside the ex parte orders constituted what I called a triable issue. I formed the view (at paragraphs 10-13 of my reasons of judgment of 9 February 2001) that the arguments BP had foreshadowed constituted triable issues. I believe a fair-minded observer would take these findings into account when considering the question of apprehended bias. 33 The questions that have been before me involve no finding as to credit, and in light of the terms of my orders and directions of 4 September 2000, my view is that there is no basis to suggest that I (or any other judge in my position) would approach the matter on 19 April with a view to justifying my earlier decision. I have therefore, decided not to disqualify myself, and to proceed with the hearing on 19 April. Accordingly, I have made pre-trial directions. * * * * * * * * * 34 After I delivered the above reasons for judgment, counsel for the plaintiffs drew my attention to an error in paragraph 3, which I also made in paragraph 4 of my reasons for judgment on the examination summonses delivered on 9 February 2001. The error is my assumption that the winding up was made in proceedings of the Court. I am informed by counsel that the plaintiffs became liquidators after a voluntary administration rather than by virtue of a Court order. Consequently, the examination summonses were issued in proceedings commenced for that purpose, rather than for the purpose of liquidation (proceedings number 4928/00). Of course, this correction does not affect my reasoning. 35 The plaintiffs have sought costs with respect to the challenge to my hearing the case on the ground of apprehended bias. The challenge was unsuccessful and, in my view, BP should be ordered to pay the plaintiffs' costs with respect to it. The fact that there is no formal notice of motion does not prevent me from dealing with the costs of the issue which, pursuant to the directions I made on 26 May, has been contested before me today. I direct that the applicant in the hearing on 19 April pay the plaintiffs' costs with respect to today's hearing and matters incidental to the issues raised by the applicant today. * * * * * * * * *

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