Ceccattini v ICM 2000 Pty Ltd

Court of Appeal (NSW)|2000-12-05|Before: Mason P, Giles JA, Heydon JA, Santow J, Young J

CITATION : Ceccattini v ICM 2000 Pty Ltd [2000] NSWCA 357 FILE NUMBER(S) : CA 40053/00 HEARING DATE(S) : 5 December 2000 JUDGMENT DATE : 5 December 2000

PARTIES : Gualtiero Ceccattini, Emilion De Michelis and TPC Nominees Pty Ltd (Appellants) ICM 2000 Pty Ltd and Wespac Industries Pty Ltd (Respondents) JUDGMENT OF : Mason P at 63; Giles JA at 64; Heydon JA at 2

LOWER COURT JURISDICTION : Supreme Court - Equity Division LOWER COURT ED 2696/97 FILE NUMBER(S) : LOWER COURT Santow J JUDICIAL OFFICER :

COUNSEL : B W Rayment QC/D L Warren (Appellants) T E F Hughes QC/W Haffenden (Respondents) SOLICITORS : Lapaine Pomare & Forster (Appellants) Smits Leslie (Respondents)

LEGISLATION CITED : Administrative Decisions Judicial Review Act 1977 (Cth) Commonwealth of Australia v Human Rights and Equal Opportunity Commission (1995) 133 ALR 629 Dovade Pty Ltd v Westpac Banking Group (1999) 46 NSWLR 168 Eagland v Favretto (NSWCA, unreported, 11 March 1996) Gascar v Ellicott [1997] 1 VR 332 CASES CITED: Northern NSW FM Pty Limited v Australian Broadcasting Tribunal (1990) 26 FCR 39 R v Australian Broadcasting Tribunal, ex parte Hardiman (1980) 144 CLR 13 Scott v Nurmurkah Corporation (1954) 91 CLR 300 Unstead v Unstead (1947) 47 SR (NSW) 495 Webb v R (1994) 181 CLR 41 DECISION : Appeal dismissed; the appellants are to pay the respondents' costs of the appeal

THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

CECCATTINI & Ors v ICM 2000 PTY LTD & Anor JUDGMENT

1 MASON P: I ask Heydon JA to deliver the first judgment. 2 HEYDON JA: Background The first two appellants owned units in two unit trusts, the ICM 2000 Unit Trust and the Plumpton Unit Trust. The third appellant, which was not joined as a party to the proceedings until 15 April 1999, was trustee of two trusts for the families of the first two appellants. 3 A dispute broke out between two groups of unit holders in the two unit trusts. One group consisted of the appellants, the other consisted of the respondents. The dispute was settled on the basis that the appellants' group would buy out the 35% of the units owned by the other group at a valuation as at 1 August 1995 on the assumption that certain assets agreed to be sold to the unit trusts before 1 August 1995 and transferred in October 1995 were part of the assets of the unit trusts. The assets were employed in a precast concrete business owned by two companies in receivership, namely, real estate comprising land known as "the Plumpton Property", work in progress, plant and equipment, and the goodwill of the business. The agreements for sale were made in some haste between 18 April 1995 (when the receivers, Messrs A G Sherlock and M R Brown of Coopers & Lybrand, were appointed) and 3 July 1995. Though the receivers received some expressions of interest, they received only one offer, from a Mr Wong, who was associated both with the vendors and with the eventual purchasers.

Young J's orders 4 On 30 October 1997 Young J ordered, by consent, that the second defendant should purchase the units in the two unit trusts owned by the first two appellants and the third appellant. (How an order could be made affecting the third appellant at a time when it was not party to the proceedings was not apparently a matter which engaged the attention of those who were parties to the proceedings.) The price to be paid for the units was to be their value as at 1 August 1995. The court also ordered that the valuation of the relevant units as at 1 August 1995 be referred to Mr F O Fischl of Messrs Price Waterhouse ("the Referee") for inquiry and report pursuant to Pt 72 of the Supreme Court Rules. Paragraph 8 of the Orders was (Red 5E-H): "For the purpose of valuation the Trusts shall be deemed to include all of the assets that were purchased from the Receiver and Manager of Mercap Pty Ltd (Receiver and Manager Appointed) ACN 003556376 and Industrial Concrete Manufacturing Pty Ltd (Receiver and Manager Appointed) ACN 003563626 by the Trusts and due allowance for such liabilities as were incurred by the Trusts to acquire those assets."

The Referee's first error 5 On 12 March 1999 the Referee provided his Report and concluded that the value of the units was nil. On 9 April 1999 the first two appellants stated grounds for objection to the adoption of the Referee's 12 March 1999 Report. Three grounds were stated. The only relevant one is the first. That first ground of objection fastened onto a matter disclosed in Appendix A of the Report (CAB 27Q-28H): "At the time of the Court's referral to me (on 30 October 1997) pursuant to Part 72 of the Supreme Court rules, I was a partner of Price Waterhouse. On 1 July 1998, Price Waterhouse and Coopers & Lybrand merged to become PricewaterhouseCoopers. As noted in paragraph 3.3 above, the Receivers and Managers of Mercap and ICM were from Coopers and Lybrand. As such, I have availed myself of the opportunity to review relevant files of the receivership for the purposes of satisfying myself that the conclusions that I have reached in relation to the value of the Plumpton Property, the work in progress, the plant and equipment, and the goodwill of the business were not inconsistent with either the available documentation at the time of the receivership or my knowledge of the precast concrete industry which commenced in late 1974 when I was involved with the then receivership of Rescrete Industries Pty Limited. That company has for some time now been a highly regarded participant in the industry. My firm has continued to be involved with the Rescrete group of companies since then, as indeed have I other than for a period of some 4 years (1981-1985) when I was with Price Waterhouse in Fiji." 6 The first objection was put thus in paragraphs 3-5 of the document (Red 6Q-7M): "3. Without advising any of the parties the referee took it upon himself to review the files of the receivers. 4. That he did so without giving the parties the chance and opportunity to comment on the files, was a breach of the rules of natural justice. The referee if he considered a matter of sufficient importance to warrant looking at a file should have afforded the parties an opportunity to put their contentions relating to that matter. This is especially so where the referee is availing himself of the powers contained in Pt 72 r 8(2)(b). - Telecomputing PCS Pty Ltd v Bridge Wholesale Acceptance Corporation Pty Ltd (1991) 24 NSWLR 513. 5. If the parties were given an opportunity to look at the files it may, subject to what the files contained, have been necessary to reopen the case and call the receivers to explain or expand upon what was contained in the files. If that were necessary then the question of whether Mr Fischl, as a partner of the receivers, should have continued acting in the reference would be an issue."

Despite the objection, the Referee's recourse to the files was conduct which could only advantage the first two appellants: further inquiry could only improve, not reduce, the Referee's valuation of nil. 7 On 21 April 1999 Santow J made the following orders (Red 9E-P): "1a. Pursuant to Part 13 Rule 13(1)(c) of the Supreme Court Rules remit for further consideration by the Referee the whole of the matter referred for a further Report, and b. Further direct the Referee to take into account in his further Report the evidence and submissions referred to in Order 3 herein and the Judge's reasons; and c. Note that the purpose of the further Report is to resolve whether the evidence and submissions referred to in Order 3 herein impact in any way upon the findings contained in the Referee's Report dated 12 March 1999 and if so, what the impact is. 2. Direct the Referee to provide to the Parties' solicitors by 12 noon on Tuesday 27 April 1999 copies of the documents inspected by him from the files of the Receivership of Mercap and ICM referred to in Appendix A page 27 of his Report. 3. Direct the parties to submit any evidence and submissions to the Referee by 10 May 1999 in respect of the documents provided pursuant [to] Order 2 herein or such further date, subject to there being no delay in relation to the time provisions in Order 4, as the Referee may direct, provided that such evidence in submissions must be directly relevant to the matter referred for determination before the Referee. 4. Direct the Referee to provide his further Report referred to in Order 1(a) herein on or before 28 May 1999 by delivering the same to the Registrar of the Equity Division of this Court and the parties." 8 On 17 May 1999 Santow J delivered the reasons for judgment relating to the making of the 21 April 1999 orders. Paragraph 4 stated (Red 14C-G): "After I gave my decision but before delivering these reasons, the Plaintiffs, after initially stating that they were considering whether or not to make application for the referee to be disqualified on the ground of apparent bias, indicated that they would not be doing so. This was however based on the material so far inspected from the receivership files; clearly if further material comes to light, the Plaintiffs reserve their position. If such an application were to be contemplated, it should be made promptly . The orders I have earlier made proceed on the basis that no such application is anticipated" (emphasis added). 9 The reason why Santow J made the orders of 21 April 1999 was that the first two appellants had been denied natural justice in the sense that there had been denied to them (Red 24P-Q): "the proper opportunity of putting before the Referee particulars of the contentions relied upon and an opportunity to comment on the materials reviewed by the Referee in the relevant files of the receivership."

This may be described as "the Referee's first error". 10 As Santow J noted, the first two appellants abandoned any contention that the Referee's first error required his disqualification.

The Referee's second error 11 The Referee resumed his task pursuant to the 21 April 1999 orders. On 27 April 1999 he supplied to the parties the documents referred to in Order 2 of the 21 April 1999 orders on his reading of them, namely those he had looked at closely. On 4 May he wrote another letter to the parties in the following terms (Red 69N-70I): "You will note that in section 6 of the documents forwarded to you on 27 April 1999 that there is correspondence from both Kevin Curran of Corotec Pty Limited and John Burke of Rescrete Industries Pty Limited in respect of the business that was advertised for sale by the receiver and manager. To the extent that it may be relevant to you in so far as submitting any evidence and submissions to me, I am advising you that as I knew both John Burke and Kevin Curran, I called them. Notwithstanding that the above correspondence indicated that neither of them was going to proceed with an offer, I nevertheless made the calls on the basis that information not known to me at the time may have come to light which may have given me cause to consider reassessing upwards the value I was intending to, and ultimately did, adopt for each of the goodwill, plant and equipment, work in progress and the Plumpton property. No such information came to light. I did not prepare a file note of my calls. My recollection of what John Burke said was that he advised me of the environmental problems with the site and that the business suffered from quality control problems, some of which still existed. It is my recollection that Kevin Curran may not have returned my telephone call until after I had issued my report of 12 March 1999. When I did speak to him, he advised me that he had been looking to invest in a business and that what was offered for sale did not meet his criteria."

This instance of investigation by the Referee of his own motion without notice to the parties is referred to hereafter as "the Referee's second error". (The fact that the Referee may not have actually spoken to Mr Curran until after 12 March 1999 does not in my opinion weaken the appellants' case on this appeal.) 12 On 12 May 1999 the solicitors for the first two appellants indicated to the solicitors for the respondents that the 4 May 1999 letter was causing some concern. 13 The first two appellants failed to comply with the time fixed in Order 3 of the 21 April 1999 orders, but on 10 June 1999 further orders were made to the following effect (Red 82G-K): "1. The Plaintiffs to submit any evidence and submissions to the Referee on or before 11 June 1999. 2. The Defendants to submit any evidence and submissions to the Referee on or before 9 July 1999. 3. The Plaintiffs to submit any evidence and submissions in reply to the Referee on or before 20 July 1999. 4. The Referee to provide his further Report on or before 13 August 1999." 14 On 11 June 1999 the first two appellants supplied further submissions to the Referee in relation to the documents he had made available pursuant to the orders of 21 April 1999. 15 Neither the orders of 10 June nor the submissions of 11 June voiced or contemplated any complaint about the Referee's second error, though it seems that the first two appellants had reserved their position in oral argument on 10 June 2000 (Red 109F). However, on 29 June 1999 the first two appellants filed a Notice of Motion seeking removal of the Referee. 16 On 4 November 1999 Santow J heard and dismissed (or indicated that he would dismiss) the 29 June 1999 Notice of Motion, and on 8 December 1999 he gave his reasons for that course. On 17 December 1999 Santow J made orders as follows (Red 111G-112L): "1. The Plaintiffs' Notice of Motion heard before his Honour Mr Justice Santow on 4 November 1999 be dismissed. 2. The Plaintiffs pay the Defendants' costs of the Notice of Motion. 3. (a) Pursuant to Part 13 Rule 13(c)(c) of the Supreme Court Rules, remit for further consideration by the Referee the whole of the matter referred for a further Report; and (b) Further direct the Referee to take into account in his further Report the evidence and submissions referred to in Order 5 herein and his Honour Mr Justice Santow's reasons in his Honour's Judgment handed down on 8 December 1999; and (c) Note that the purpose of the Referee's further Report is to resolve whether the evidence and submissions referred to in Order 5 herein impacted in any way upon the finding contained in the Referee's Report dated 12 March 1999 and if so, what the impact is. The Court Directs That:- 4. the Referee to conduct a hearing of evidence from John Burke and Kevin Curran (referred to in the Referee's facsimile to the parties' solicitors dated 4 May 1999). 5. the parties to submit any submissions to the Referee in respect of the evidence of John Burke and Kevin Curran upon such date as the Referee may direct provided that such submissions must be directly relevant to the Referee's determination of the matter before him. 6. the Referee to provide his further Report referred to in Order 3 herein on or before 27 May 2000 by delivering the same to the Registrar of the Equity Division of this Court and the parties. The Court Further Orders That:- 7. Stand over the matter for further mention before his Honour Mr Justice Santow on 30 March 2000 at 9.30 am." 17 On 9 March 2000 the first two appellants filed a Notice of Motion seeking a stay of Santow J's orders of 17 December 1999. On 10 March 2000 he refused the application, largely on the grounds of the delay of the first two appellants. On 15 March 2000 the solicitors for the first two appellants informed the Referee that they did not require the attendance of Messrs Burke and Curran for cross-examination and relied on their submissions of 11 June 1999. On 17 March 2000 Santow J varied his orders of 17 December 1999, but the order that the Referee report on or before 27 March 2000 remained. He did in fact report on that day. Again he reported that the units had a nil value. On 30 March 2000 Santow J adopted that report.

The Notice of Appeal 18 The Notice of Appeal commences with the following words (Red 123C-F): "The proceedings appealed from were heard on 4 November 1999 and decided on 8 December 1999 and 30 March 2000 with orders being made by the Court on 17 December 1999 and 30 March 2000." 19 Paragraph 10 of the appellants' Written Submissions, on the other hand, states: "It is from the orders made on 17 May, 1999, 8 December, 1999 and 30 March, 2000 that the Appellants appeal." 20 In fact: (a) Santow J made no orders on 17 May 1999; rather he delivered reasons on that day for the orders made on 21 April 1999. The Notice of Appeal does not complain about either the "orders" of 17 May 1999 or the orders of 21 April 1999. It is hard to see how it could, since the orders of 21 April 1999 were wholly favourable to the interests of the first and second appellants. There was no order disqualifying the Referee, but no such order had been pressed, and the first and second appellants indicated before 17 May 1999 that no such order would be sought.

(c) The Appellants' Written Submissions conclude by asking only that the orders of 30 March 2000 be set aside. 21 Thus it seems to follow from the structure of the Notice of Appeal that there is no complaint about the orders flowing from the Referee's first error by itself; that is, the position of the appellants is that though Santow J was right not to disqualify the Referee on 21 April 1999 because of the Referee's first error, he was wrong on 17 December 1999 to dismiss the first and second appellants' Notice of Motion which sought his disqualification by reason of a combination of the Referee's first and second errors.

The issues in the appeal 22 The appellants' Written Submissions identified three issues in the appeal as follows (Orange 4H-R): "1.1 What is the effect of a referee, appointed under SCR Part 72, consulting documents or third parties and including consideration of the result of such consultation in his or her report to the Court without first having given the parties notice of either his or her intention so to consult or the opportunity of addressing the subject matter by inspecting the documents or cross-examining the third parties ('the Scope of the Rules/Issue')?; 1.2 Has the referee here given an appearance of bias ('the Natural Justice Issue')?;

1.3 To what relief are the Appellants entitled ('the Relief Issue')?" 23 For my part, there appear to be only two issues. The first is whether the Referee gave an appearance of bias. The second concerns what relief the appellants are entitled to. It is not clear whether the second issue is seen by the parties as arising in any event, or whether it only arises if the first is answered favourably to the appellants: in my judgment it does not matter. 24 The Referee's first error was evidently conceded by the respondents to be procedural unfairness before the end of the argument in front of Santow J which led to his orders of 21 April 1999 (see Red 58B-F). On this appeal the respondents said it "was clear" that a referee could not obtain access to documents of his own motion without informing the parties and giving them an opportunity to participate. 25 The Respondents' Written Submissions conceded (Orange 16N-P) that the Referee's first error "was an obvious error, constituting a lack of procedural fairness and a denial of natural justice". No parts of the Appellants' Written Submissions rely on the first error (other than those going to the issue of relief, namely paragraphs 20-22, 26, 30, 31.2 and 31.5). And, as has been noted, no request for the disqualification of the Referee was pressed before the 21 April 1999 orders were made, and the first and second appellants indicated before 17 May 1999 that no such request was made. 26 As to the Referee's second error, the Respondents' Written Submissions conceded that this "was another example of procedural unfairness on the part of the Referee" (Orange 17W-X). They also said that "a Referee may not take such a course without informing the parties of what he proposes to do and giving them an opportunity to participate in his evidentiary exercise" (Orange 20S-T). 27 The trial judge found a denial of "natural justice by reason of procedural unfairness" in relation to the Referee's first error (Red 97L-P). He also assumed the same conclusion in relation to the Referee's second error (Red 106K-P and 107B-F). But he said that not every denial of procedural fairness gave rise to a reasonable apprehension of bias (Red 106N-P). In theory that left open two issues: first, had the Referee's conduct given rise to a reasonable apprehension of bias; and, secondly, would remission of the matter to the Referee for further report give rise to a reasonable apprehension that he might not bring a genuinely impartial mind to bear. 28 On occasion these two issues became blurred. But, on the first issue, Santow J concluded that the Referee's two errors which constituted procedural unfairness did not give rise to a reasonable apprehension of bias. He said (Red 106V-107F): "The question is therefore whether the circumstances that gave rise to the procedural unfairness are such as to rise to the level where a reasonable and informed observer has a 'reasonable apprehension' of bias. First, I am satisfied that there is not sufficient in the two stage production of documents from the Receiver's files to justify a reasonable apprehension of bias. In particular, I do not consider the two conversations tip the balance; that is to say, taking all the circumstances in their context and considering their cumulative effect on a fair-minded observer, I do not consider there would be an apprehension of bias. The volunteering of the details of the two conversations reinforces rather an impression of candour." 29 That left a choice between, on the one hand, disqualifying the Referee and appointing another person to conduct the inquiry, and, on the other hand, remitting the matter to the Referee. A need to make the choice raised the second issue. Santow J expressed the following views about it (Red 107J-T): "The second issue is whether the Referee's prior finding in those circumstances, coupled as it was by procedural unfairness though unwitting, would lead a fair-minded observer to conclude that the Referee was parti pris , and thus might not bring a genuinely impartial mind to bear on any new evidence or submissions so generated, however hard he tried. While we all know that psychologically, admitting error is not easy, here the Referee is simply required to take account of new evidence and further submissions. If it be the case that, with all the other circumstances, a different conclusion by the Referee were warranted, there can be no embarrassment such as to disincline the Referee from that course. That is reinforced by the strictures expressed in this judgment of the importance of giving fair and proper weight to all relevant facts and submissions, retaining an open mind free of prejudgment. In saying that, I do not of course express any view one way or the other on the subject matter of the Referee's determination or whether the further facts and submissions will require a different conclusion to the Referee's previous one. The Referee must simply do his job in an impartial, open-minded way." 30 Santow J stated his conclusion on both issues in the following fashion (Red 108C-H): "I am satisfied that there should be no reasonable apprehension by a fair-minded observer that the question of value now to be revisited will not be objectively and impartially determined by the Referee. The earlier procedural unfairness was not a model of (quasi) judicial behaviour and in that sense, was unappealing … . But it was not 'appealable' in the sense of requiring the Referee's disqualification. Apprehension of bias must be 'firmly established' as reasonable. I am satisfied that it has not been in the present case." 31 The question is thus whether the appellants have demonstrated any error in the reasoning leading Santow J to his conclusions.

The submissions in general 32 Many parts of the Appellants' Written Submissions are devoted to advancing submissions which are either common ground or immaterial. Thus it is common ground that the Referee's two errors denied procedural fairness, and those parts of the Appellants' Written Submissions which lament that fact are superfluous. The respondents did not contradict the appellants' contention that the correctness of the Referee's selection of the prices paid for the plant and equipment and land sold in 1995 as sound guides to their value (CAB 21J-K and 23K-L) depended on the efficiency of the receivers, and material reviewed from the receivers' files could bear on that; hence that too appears to be common ground. Further, it is immaterial whether or not a referee can call a witness of his or her own motion. It is immaterial because even if the Referee's conduct in this case amounted to doing so, and even if he had no power to do so, the court's orders remitted the matter to him, and the only question is whether his conduct in all the circumstances was such that the order does not conform to law. Whether the Referee acted intra vires or ultra vires does not matter. What matters is whether he has behaved so as to cause a reasonable apprehension of bias and whether in the second hearing he could not bring an unbiased mind to bear. It is also immaterial whether, as the appellants submitted, the first report of the Referee was invalid from its inception: the respondents do not dispute the proposition that it cannot stand; indeed they point out that unlike an administrative decision affected by a breach of the rules of natural justice, a referee's report has no force until accepted, and the respondents simply contend that a remitter of the reference to the Referee was not contrary to law. 33 The Appellants' Written Submissions do not fasten attention on any particular passages said to reveal error.

The first issue 34 So far as the appellants' submissions appear to be directed to the first issue of whether the Referee's conduct created a reasonable apprehension of bias, the appellants refer to the following matters (Orange 5T-W, 7R-T, 8C-Q and 11E-12H): "6. The conversations between the referee and Messrs Burke and Curran were not made known to the parties before preparation of the First Report and only became apparent during the procedures ordered by Santow J following His Honour's refusal to adopt the First Report. … 13. In effect, here, the referee impermissibly [broadened] the evidence before him, and did so in the absence and without the knowledge of the parties. 14. Because of the actions of the referee including - 14.1 Contacting Messrs Burke and Curran, who were no mere strangers to him but were known to him; 14.2 The failure of the referee to notify the parties of such contact and invite them to make further submissions; 14.3 Only notifying the parties after the matter was ventilated before the Court concerning the adoption of the First Report; 14.4 Only notifying the parties when the question of access to all documents was pressed a reasonable minded observer might entertain a reasonable apprehension that a person to the proceedings would not get a fair hearing. 24. In substance, the referee embarked on his own investigations into the facts upon which his valuation ultimately came to be based without involving the parties. 25. Now, because of the merger which created PriceWaterhouseCoopers the referee became a partner of the receivers of the interests which had to be valued. The receivers sold those interests at the price the referee concluded was their value - a price which the claimants asserted throughout was too low. 26. But, regrettably, the referee used his new partnership to gain access to twelve files of the receivers with extensive documentation which he reviewed with varying degrees of detail. This led him to interview two persons who had been approached by the receivers but had not offered to purchase the interests to be valued. 27. Both of those persons were known to the referee. No notes exist of what was said, but Mr Burke was an officer of a long standing client of the referee's old and new firms and he had had an involvement with that client. 28. The referee in effect called two witnesses - without the parties' consent or knowledge - a course which was not open in the circumstances of the case referred under SCR Pt 72. 29. The referee judged or decided the issues referred to him and in doing so caused the reference to miscarry because of the matters identified by Santow J." 35 The trial judge's reasoning which led him to his conclusion on the first issue may be summarised as follows. In relation to the Referee's letter of 27 April 1999, the trial judge said (Red 101F-J): "In relation to the earlier quoted correspondence, I am satisfied that there is no suggestion of concealment by the Referee; indeed quite the contrary. Though in the first instance he was offering to provide simply those documents into which he had looked closely, he made quite clear that there were other documents. When he was asked for them he readily provided them. This was perfectly reasonable given that there were twelve files to be inspected." 36 In relation to the Referee's letter of 4 May 1999 the trial judge said (Red 101K-W): "Nor is his conduct in writing the letter of 4 May 1999 fairly to be considered other than forthcoming. The Plaintiffs' complaint however is that the Referee should have referred to these oral exchanges between the Referee and Messrs Curran and Burke much earlier; that is, at the time of his original report if not when made. This is particularly as they bore upon a matter of central importance to the valuation of the units, namely the potential availability of offers other than from Mr Wong. But for the initial challenge to the adoption of the Referee's report and the orders that I made, these further, and in the Plaintiffs' submission, important, conversations would never have come to light. That much can be accepted. However, I do not consider that this reflects on the Referee's frankness or willingness to be forthcoming once the orders made brought home to him that the substance of those conversations was required to be made known to the parties. He did this thereafter unprompted. There would have been no way of knowing whether or not those conversations had occurred unless the Referee had volunteered them, as he did. Nor for reasons I develop below, do I consider that this sequence of events makes it reasonable to apprehend that the Referee would now close his mind to any further evidence or submissions that might bear on those oral exchanges and their significance in terms of the valuation." 37 He also said (Red 103S-U): "The Referee in his letter of 4 May 1999 quotes his recollection of what Mr Burke and Mr Curran had said. I should add that the Referee makes clear that the informants were not mere strangers, though that fact does not make consulting them suggestive of bias." 38 All this must be read against the background of the fact that the only reason why either of the Referee's errors was revealed was his frankness in Appendix A of the first report about what documents he had consulted. 39 Had the Referee been covert, clandestine and secretive - had he deliberately concealed the facts relating to his two errors - it might have been easier reasonably to conclude that bias was to be apprehended. But his openness negates that conclusion. Nothing in the Appellants' Written Submissions supports the conclusion that Santow J erred on the first issue. The process by which the facts came to be known was, contrary to what appears to underlie some of the appellants' submissions, not sinister. The Referee appears to have behaved entirely innocently. Indeed, so far as the second error is concerned, the Referee's calls to Mr Burke and Mr Curran were made with a view to seeing whether there was "cause to consider reassessing upwards" the unit value he had in mind and eventually arrived at (Red 69S). That is, his motivation was not hostile to the appellants.

The second issue 40 On the second issue of whether Santow J erred in remitting the matter to the Referee the appellants relied on the factors going to the first issue, but also put the following (Orange 8R-9F, 10L-M and 12K-13V): "15. In the circumstances of this reference a fair minded observer might reasonably doubt that the questions which Santow J, in effect remitted to the referee, after he had produced the First Report, could be dealt with by him:- 15.1 Either without bias by reason of pre-judgment; 15.2 By giving the appearance that the rules of natural justice or procedural fairness had not been followed. … 21. This could not cure matters because, however honestly he has acted, the referee made up his mind adversely to the claimants. … 30. The solution is not to send the matter back to the same referee any more than where a trial court has taken into account evidence not before it, one does not remit the matter to the same judge or judicial officer. 31. The problem with Santow J's orders are that:- 31.1 No one could be required to call either Messrs Burke or Curran; 31.2 The referee knew what is in the files and what those persons told him, which the parties may choose not to tender wholly or in part; 31.3 The referee was confronted with the possibility of finding a higher value which could or should have been obtained if his new partners had conducted the sale differently; 31.4 Mr Burke is an officer with a current client of the referee's firm; 31.5 The referee had already found against the claimants on (at least some of) the material now sent back to him. 32. The requirement of public confidence in the administration of justice cannot be met here by Santow J's orders. 33. The case is clearly within the test of apprehension of bias in Livesey v New South Wales Bar Association because the referee had expressed clear views about the very issue of facts remitted by Santow J. How the claimants may have wished to conduct the further proceedings would or might be influenced by the identity of the referee. 34. Accordingly, as with the results discussed above in appeals from trial judges who took into account irrelevant material or material not put in evidence by or addressed by the parties, the referee's decision must be set aside and a new hearing or reference must be had." 41 In the Appellants' Supplementary Written Submissions supplied to the court on 4 December 2000 the following observation of Davies and Foster JJ in Northern NSW FM Pty Limited v Australian Broadcasting Tribunal (1990) 26 FCR 39 at 42 was cited: "If a decision has been set aside for error and remitted for rehearing, it will generally seem fairer to the parties that the matter be heard and decided again by a differently constituted tribunal. This is because the member constituting the Tribunal in the original inquiry or hearing will already have expressed a view upon facts which will have to be determined in the rehearing. The aggrieved party may think that a rehearing before the Tribunal as originally constituted could be worthless, for the member's views have been stated."

Other authorities to the same general effect were referred to. The submission continued: "In the present case either for reasons for apprehended bias or the perception of fairness as discussed in the above authorities, the matter ought not to have been referred back to the referee particularly because: (i) of the matters referred to in the Appellant's submissions (Orange AB p.12 para. 31); (ii) the breaches were of a fundamental nature and did not merely consist of the wrongful admission of evidence (cf Santow J Red AB 105B); (iii) a litigant may more readily perceive and reasonably so bias or unfairness in these circumstances of the matter being referred back to the referee as opposed for example to a matter being referred back to a judicial officer (by way of retrial) who by reason of his training and experience can overlook impermissible evidence; (iv) this is a case where the referee expressed a view on value unfavourable to the plaintiffs in his first report having taken into account the very matters which were being referred back to him for further consideration." 42 In oral argument the appellants submitted that this Court ought to adopt in relation to referees the same approach as the Federal Court of Australia adopts when it sets aside decisions of tribunals under the Administrative Decisions Judicial Review Act 1977 (Cth); that is, when the decision of a tribunal or administrator is overturned, the matter should be reconsidered by a differently constituted tribunal or a different administrator. Alternatively, it was submitted that that should be the position at least where the referee is not a lawyer, for example a retired judge. 43 The trial judge's reasoning in relation to the second issue is as follows (Red 104K-105G, 105J-106J): "The Plaintiffs' complaint is that, as with the Referee's consultation of the Receivers' files, had the Referee advised the Plaintiffs that these conversations had occurred with Messrs Curran and Burke prior to finalising their report, they would have been in a position then to make submissions to the Referee. Those submissions could then conceivably have influenced the Referee's mind before he finalised his report. The Plaintiffs further contend that, based on Mr Curran's letter of 4 May 1995, the real reason why no further offer was forthcoming was that there was an insufficient extension of time to enable Mr Curran to put in an offer, given as he says in his letter of 4 May 1995 that he 'would need to carry out a lot of investigations in relation to the Council and the EPA requirements for the site'. I agree that the Plaintiffs should have had the opportunity to put these submissions at the time. However, accepting those contentions is not to accept the inevitable consequence said by the Plaintiffs to follow. That consequence is that the fair-minded observer would reasonably apprehend that the Referee, having already reached his conclusions, might not bring to bear an impartial mind in revisiting those conclusions in light of such further evidence and submissions. That is to say, having once expressed his view, he would close his mind to further evidence or submissions. Such a consequence would be surprising, for it is not, for example, the assumption that is made when a case is remitted back to the trial judge by an appellate court finding error, as for example where evidence was wrongly included. Nor is it in conformity with the proposition that in the interlocutory stage of a case at least, a prior finding on credit does not lead to a reasonable apprehension of bias, at least where the finding is not expressed in such outspoken terms as to throw doubt on the ability to approach the case with an open mind … . Thus I do not accept such a consequence automatically follows; it needs to be tested by the particular circumstances and their likely impact on the hypothetical observer. It is to that that I now turn. I start with the procedure contemplated by the Defendants - and by my original orders in relation to the Receiver's files. Messrs Curran and Burke would be asked to give evidence, if necessary by subpoena, as to why they did not proceed with an offer. Then any submissions would be heard from the Plaintiffs and the Defendants. The Referee, like the jury in Webb v The Queen , would be warned that he must retain an open mind to any such new evidence. The question is whether a fair-minded and informed observer would nonetheless entertain a reasonable apprehension of a lack of impartiality on the part of the Referee, by reason of pre-judgment, notwithstanding that the procedures contemplate the taking of further evidence, the opportunity for further submissions and in a context where the Referee would be under no misapprehension as to his duty of impartiality. It is significant that the High Court in Webb by majority concluded, in the case of a juror who gave a bunch of flowers to the deceased's mother via a court officer during the trial, that in the circumstances a fair-minded observer would not have had an apprehension of lack of impartiality on the part of the juror. This conclusion emphasised that the judge had impressed on the jury the need to have regard only to the evidence, which they were to consider in a dispassionate manner putting aside all feelings of sympathy and emotion. It can be taken that a similar stricture is made by this Court to the Referee; to put aside any earlier conclusion and take into account any new facts emerging from that procedure as well as the submissions of the parties. Furthermore the Referee is not operating in a strict Livesey situation in that, while the task before him is the determination of the same matter of fact - the valuation of the units - ex hypothesi he will have additional facts before him. No-one suggests that a trial judge cannot deal with a case remitted back by an appeal court taking into account the appeal court's directions, by reason of pre-judgment. The Referee's position is no different. The Referee, if he changes his mind, is not necessarily admitting error but accommodating further evidence and submissions. While a referee is not to be treated as in the same position as a juror, nonetheless the supervisory role of the court in relation to the performance by a referee of his or her quasi-judicial function is such that it could be expected that such a stricture would be taken seriously." 44 He then said what appears at Red 107J-108H, which was quoted above. 45 So far as the appellants' arguments depend on the Referee's first error, they face the hurdle that in the hearing leading up to the orders of 21 April 1999 they did not press, and by 17 May 1999 they had abandoned, any suggestion that the Referee was unfit to hear the reference back to him. They only revived it, by way of reservation of rights, on 10 June 1999, and only filed the Notice of Motion on 29 June 1999. The trial judge said of the Referee's first error (Red 21H-L): "Clearly enough, what transpired is that by reason of the adventitious circumstance that Price Waterhouse and Coopers & Lybrand had merged on 1 July 1998, the Referee became a partner of the merged firm. He was thus able to avail himself of the opportunity to review relevant files of the receivership conducted by Mr Sherlock and Mr Brown of Coopers & Lybrand. I am not of course suggesting that there was anything improper in so doing. One may trust the independence of the Referee in the present circumstances, notwithstanding that the merger latterly brought him into partnership with the receivers."

The trial judge repeated that view in his reasons for judgment dated 8 December 1999 (Red 98J-L). The appellants have never appealed against the 21 April 1999 orders or complained of that statement appearing in both judgments. 46 What difference did the second error make? If the trial judge was correct in concluding that the Referee's conduct in relation to the second error was entirely innocent, it is hard to see how adding the two errors together makes the appellants' present posture more soundly based than their posture in April-May 1999. If the Referee's conduct was innocent, there is no reason to suppose that he would not have been willing to reconsider the issues dealt with in his first report after taking into account any material submission provided to him pursuant to the orders of 21 April 1999 and 17 December 1999. 47 The respondents submitted that the Referee's second error was "of the same kind as" his first error. "It was all of a piece with it and obviously the product of an innocent failure by the Referee to understand a relevant legal principle." They submitted that in view of the fact that the appellants did not seek an order for the disqualification of the Referee in relation to the first error, it would be inappropriate to disqualify him because of the second error. In my judgment there is force in this submission. 48 Though the first two appellants reserved their rights on 10 June 1999, the fact is that they did not unequivocally seek to disqualify the Referee until 29 June 1999, three and a half months after the first error became apparent and seven weeks after the second error became apparent. These delays betoken a lack of anything in the Referee's conduct which could justify any reasonable apprehension of bias: that the first two appellants, with the benefit of having access to advice from senior and junior counsel and solicitors, and after being reminded by Santow J on 17 May 1999 of the importance of making any disqualification application promptly, did not regard the Referee's conduct as calling for his disqualification until 29 June 1999, points against a reasonable bystander forming the view that the Referee might be prejudiced. It is true that Santow J found that the appellants had not waived their rights, and that there is no notice of contention challenging this; but their conduct speaks with some eloquence against a reasonable bystander being likely to arrive at an impression of prejudgment. 49 The matters referred to in paragraph 31 of the first written submissions of the appellants fall into three groups. The first proposition asserted is that no party could be compelled to call Mr Burke or Mr Curran, or to tender any particular part of the file. That is not an answer to the merits of the course adopted by Santow J: his reasoning does not turn on any assumption that any party could be compelled to call any witness or tender any document. Santow J made plain in his reasons for judgment of 8 December 1999 that it would be up to the parties to call Messrs Burke and Curran (Red 107Q-U). The second proposition contended for is that the Referee is affected by some form of self-interest, in that for him to find a higher value for the units would involve a criticism of his new partners, the receivers, who should have conducted the 1995 sale differently, and Mr Burke's role as an officer of a client of one of the Referee's partners would affect his ability to be disinterested. There is no trace of any such submission to Santow J, and no development of any argument which would give the submission any reality. The third proposition, that the Referee had already found against the appellants on the issue sent back to him (which appears not only in paragraph 31.5 of the first submissions of the appellants, but also in paragraph 7(iv) of the second submissions), merely restates the problem rather than supporting the merits of any particular solution of it. 50 The submission that "the breaches were of a fundamental nature and did not merely consist of the wrongful admission of evidence" must be evaluated in the light of the following matters. The test is whether there is a "reasonable" apprehension of bias, not a "fanciful or fantastic apprehension"; and the apprehension which is examined is that of a "fair-minded", i.e. "reasonable" observer: Gascar v Ellicott [1997] 1 VR 332 at 342; Dovade Pty Ltd v Westpac Banking Group (1999) 46 NSWLR 168 at 188 [92]. Further, it is "the court's view of the public's view, not the court's own view, which is determinative": Webb v R (1994) 181 CLR 41 at 52 per Mason CJ and McHugh J. In assessing whether a fair-minded member of the public would have the relevant apprehension, knowledge of all the material objective facts is to be imputed to that person: Webb v R (1994) 181 CLR 41 at 67. The relevant facts are, first, that the Referee's errors are innocent; secondly, that their existence was openly disclosed without any prevarication or concealment; thirdly, that at least the second error arose from attempting to see whether there was "cause to consider reassessing upwards" the unit value he had in mind, which would be to the advantage of the appellants, and the first error could only have operated to their advantage; fourthly, that the appellants did not persist in any contention that the first error compelled disqualification until after the publication of Santow J's reasons for judgment of 17 May 1999, and sought to deal with the relevant documents on their merits in their submissions of 11 June 1999; and, fifthly, that the calm, temperate and rational tone of the Referee's first report reasonably suggested at the time of the hearing in late 1999 that a further inquiry by the Referee would be carried out objectively. In my opinion these facts reveal that, clear though the Referee's errors were from a legal point of view, they were not likely to be seen by a reasonable member of the public as "fundamental" or so serious as to preclude remission of the issues to the Referee. 51 The next submission to consider turns on the difference between a Referee and a judge, appeal being made to the fact that the latter's training and experience supposedly equip him or her to avoid the risk of prejudgment and to approach the task afresh. The valuation of units is a relatively narrow field of forensic activity turning on the application of expert skill; it did not here turn on the formation of any opinion about the credibility of witnesses; and there is no reason to suppose that the Referee, an accountant of considerable experience, would not have responded appropriately to the orders of the court and the reasons for judgment which led to them. 52 There is one special argument deployed by the appellants on the second issue. They cited Unstead v Unstead (1947) 47 SR (NSW) 495 at 498, Scott v Numurkah Corporation (1954) 91 CLR 300 at 313-315 and Eagland v Favretto (NSWCA, unreported, 11 March 1996). The first two cases were cases in which a view had not been correctly employed at trial; the last was a case where the trial judge took into account material which had not been tendered. In the last two a new trial was ordered. These citations appear to be without point. They say nothing about whether a new trial should be before the same judge. In the last case, for example, the matter was remitted to the Commercial Division without any order as to the identity of the trial judge. 53 Santow J in effect ordered a new trial in the sense of a further hearing. The relevant issue is only whether the further hearing should be before the Referee or someone else. The cases cited state no principle relevant to deciding it. 54 I turn to the submission based on Northern NSW FM Pty Ltd v Australian Broadcasting Tribunal. In outline the argument was as follows. First, Pt 72 r 9 of the Supreme Court Rules gives the court power to make directions about a reference. Secondly, s 16(1)(b) of the Administrative Decisions Judicial Review Act 1977 (Cth) gives power to make directions when considering an order for review of a decision. It provides: "On an application for an order of review in respect of a decision the Court may, in its discretion, make all or any of the following orders: … (b) an order referring the matter to which the decision relates to the person who made the decision for further consideration subject to such directions as the Court thinks fit."

Thirdly, the majority in the Northern NSW case said that exercise of the power under s 16(1)(b) to make directions did not depend on questions of apprehended bias, but on a broader notion of fairness. 55 The court was taken to various parts of the reasoning in that case. It was taken first to the short judgment of Burchett J and it was taken to passages in the joint judgment of Davies and Foster JJ appearing on pages 39-43. The effect of the reasoning is most clearly summarised in the passage quoted by the appellants in their written submissions. In that passage and in the passage that immediately follows it at the bottom of page 42 and the top of page 43 it is apparent that the principle, if that is what it is, is subject to exceptions. The passages referred to do not elucidate the limits of the principle. There will no doubt be some occasions on which it would be right for the court to direct that the original decision-maker should not be the decision-maker who reconsiders the issue. There will be other cases, on the other hand, where it is not appropriate that the original decision-maker should reconsider the issue. Each case must depend on its own circumstances. 56 I am not convinced that there is any principle or settled rule of practice which operates in relation to the Administrative Decisions Judicial Review Act. In particular the direction-making power to which appeal is made itself contemplates that the reviewing court will make an order referring the matter to "the person who made the decision for further consideration" which rather undercuts the idea that there is any paramount principle or settled course of practice which operates. I am not seeking to deny that the appellants are correct to point to the line of authorities in which often the matter is not referred back to the original decision-maker. 57 Whatever the position in relation to decisions under the Administrative Decisions Judicial Review Act, I am not presently minded to recognise in relation to referees any equivalent notion. 58 What the appellants appeal to was a certain type of discretion. In those circumstances Santow J is not to be criticised for having failed to exercise the discretion or to exercise it in the manner which the appellants would wish. 59 As Santow J pointed out, the reason given by the High Court in R v Australian Broadcasting Tribunal, ex parte Hardiman (1980) 144 CLR 13 at 35-36 why tribunals should not take an active part in upholding their own decisions is that this endangers the impartiality of the tribunal in later proceedings; and this implies that such tribunals, including tribunals composed of the same members who made the earlier decision, may re-hear the dispute. See also Commonwealth of Australia v Human Rights and Equal Opportunity Commission (1995) 133 ALR 629 at 639-40 and 641. The merits of competing courses must depend on the circumstances of each particular case. In my opinion the submissions of the appellants do not warrant the conclusion that the discretionary decision to take the course ordered by Santow J was wrong. There is one particular factor which, while it is not determinative, points strongly against the course suggested by the appellants. A long time elapsed between Young J's order of 30 October 1997 referring the valuation question to the Referee and his first report of 12 March 1999. None of that delay was the fault of the Referee. According to Santow J, the delay was occasioned by the appellants: Red 96P-V. The better part of two more years has passed since 12 March 1999. The work done by the Referee ought not to be wasted if that outcome can be avoided. In evaluating the appellants' arguments against remittal of the reference to the Referee, it must be borne in mind that if they succeeded the result would be a complete waste of the work done so far by the Referee. The strength of the appellants' arguments is not such that in law they compel that outcome. 60 It was submitted by the appellants that at the hearing before Santow J in April 1999 some documents which the Referee had referred to were handed to the defendants' counsel who showed them to the plaintiffs' counsel. The appellants, who were the plaintiffs below, submitted that the documents appearing in the Red Book pages 75-81 were not in those bundles and were not seen until they were produced on 27 April or perhaps made available for inspection after 4 May 1999. There was no evidence of this. Mr Rayment QC who appeared for the appellants informed the court that his junior, Mr Warren, who appeared below, had no recollection of what documents he had seen at the hearing before Santow J, but in effect had an impression that reading pages 75-81 of the Red Book came to him as a fresh experience on some occasion after that. In my opinion this controversy need not be determined. Even if the appellants are correct (and I am not seeking to cast doubt on the recollection of Mr Warren), it does not matter. The real issues are whether, by reason of the 12 March 1999 report, the Referee's conduct was such as to create a reasonable apprehension of bias and whether the further report should be given by the Referee or someone else. The question of the occasion on which pages 75-81 were first seen is not decisive in determining those issues.

Notice of Contention 61 The respondents this morning were granted leave to file a Notice of Contention out of time. In the circumstances it is not necessary to deal with it.

Orders 62 In my opinion the following orders should be made:

The appellants are to pay the respondents' costs of the appeal. 63 MASON P: Not every denial of procedural fairness or procedural default evidences bias, nor does it evince an appearance of bias according to the well established test of whether a fair-minded lay observer might reasonably apprehend that the decision-maker might not bring an impartial and unprejudiced mind to the resolution of the question. For the reasons given by Heydon JA with which I agree, I agree that Santow J did not err in his decision to adopt the Referee's reports or his decision on 8 December 1999 to dismiss the Notice of Motion that he heard on 4 November 1999. 64 GILES JA: I agree with the orders proposed and with the reasons given for them. 65 MASON P: The orders will be as indicated by Heydon JA.

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Administrative Decisions Judicial Review Act 1977(Cth)

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Judgment (28 paragraphs)

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Cases Cited (7)

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