Cennzeal Pty Ltd & Anor v Dawson Properties

Apprehended Bias

1. As I understand it there is no allegation of actual bias.
2. The test for determining whether a judge should disqualify himself or herself by reason of apprehended bias is whether a fair minded lay observer might reasonably apprehend the judge might not bring an impartial and unprejudiced mind to the resolution of the question the judge is required to decide; Johnson v Johnson (2000) 201 CLR 488 (Johnson) at [11]. This decision has been affirmed in a number of cases including Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337 and Michael Wilson & Partners Ltd v Nicholls (2011) 244 CLR 427.
3. The defendants, in addition, have referred me to the principles recently stated by the NSW Court of Appeal (Ward JA (as her Honour then was) with Payne JA agreeing) in Crossman v Sheahan [2016] NSWCA 200 at [169]-[171]: [167] The applicable test where there is an allegation of apprehended bias is that stated by the plurality in Ebner (at [6]), namely whether "a fair minded lay observer might reasonably apprehend that the judge might not bring an impartial mind to the resolution of the question the judge is required to decide". … [169] The application of the Ebner test requires two steps: first, the identification of what it is said might lead the decision-maker to decide a question other than on its merits; and, second, the articulation of the logical connection between the matter identified and the feared deviation from the course of deciding the question other than on its merits (Ebner at [8], [16], confirmed in Michael Wilsonat [31]; [63]). [170] All the relevant circumstances of the particular case may be taken into account in applying the test, though only such knowledge of matters of legal or other specialist practice and process as can reasonably be attributed to the lay observer (including, perhaps, matters of which the observer would inform him or herself before reasonably forming any firm apprehension) will be taken into account (Vakauta v Kelly [1989] HCA 44 ; (1989) 167 CLR 568 at 584-585 per Toohey J; Najjar v Haines( 1991) 25 NSWLR 224 at 240 per Clarke JA). The hypothetical observer is taken to be a rational person who is neither complacent nor unduly sensitive or suspicious; and is aware of the oath or affirmation taken by judges and their judicial obligations more generally. [171] I accept, as the appellants emphasise, that the test of apprehended bias does not focus on whether or not there is actual prejudgment. That is made clear by the plurality in Michael Wilson (Gummow ACJ, Hayne, Crennan and Bell JJ) at [67]): …An allegation of apprehended bias does not direct attention to, or permit consideration of, whether the judge had in fact prejudged an issue. To ask whether the reasons for judgment delivered after trial of the action somehow confirm, enhance or diminish the existence of a reasonable apprehension of bias runs at least a serious risk of inverting the proper order of inquiry (by first assuming the existence of a reasonable apprehension). … And, no less fundamentally, an inquiry of [that] kind moves perilously close to the fallacious argument that because one side lost the litigation the judge was biased, or the equally fallacious argument that making some appealable error, whether by not dealing with all of the losing side's arguments or otherwise, demonstrates prejudgment. (emphasis in original)
4. There is no doubt that an application for disqualification can be made without the filing of a formal motion. The application should however be determined by the judge whose disqualification is sought and should not involve a contest on the facts: Barton v Walker [1979] 2 NSWLR 740; Australian National Industries Ltd v Spedley Securities Ltd (in liq) (1992) 26 NSWLR 411 at 436; Wentworth and Graham [2003] NSWCA 240.
5. A mere indication by a party that it wishes a judge to disqualify himself or herself is not of itself a proper ground for the judge to recuse. Judges are required to discharge their professional obligations unless as a matter of law they are disqualified. They should not accede too readily to an application for disqualification.
6. Further, any application should be made as soon as reasonably practicable after the party seeking disqualification becomes aware of the relevant facts; Royal Guardian Mortgage Management Pty Ltd v Nguyen [2016] NSWCA 88 per Basten JA at [23]-[34].
7. I will set out in detail below the complaints which are made by Mr Smits in the 13 July Letter and which are said to give rise to the relevant apprehension. However, in short, they refer to "many case management directions" various "orders" and "case management directions" made over time. They also involve allegations that I had expressed negative views upon the conduct of the principal of the plaintiff at least on 30 March 2017.
8. It is certainly true that the conduct of a trial judge even during interlocutory skirmishes or directions hearings could at least theoretically amount to a proper basis for disqualification. Judges however especially in the case management of commercial matters are not only entitled but indeed obliged sometimes to express their views in order genuinely to engage in constructive debate on crucial issues. Part of a judge's obligation in that regard is to be drawn from section 56 of the Civil Procedure Act 2005 (NSW).
9. Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ said in Johnson at [13]-[14]: "Judges are not expected to wait until the end of a case before they start thinking about the issues, or to sit mute while evidence is advanced and arguments are presented. On the contrary, they will often form tentative opinions on matters in issue, and counsel are usually assisted by hearing those opinions, and being given an opportunity to deal with them …. 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." (emphasis added)
10. In R v Watson; Ex parte Armstrong (1976) 136 CLR 248 at 264, Barwick CJ, Gibbs, Stephen and Mason JJ said: "The remarks on which the wife's submission were founded were made during argument in an interlocutory application. One must be careful not to exaggerate the importance of remarks of that kind. During the course of argument a judge will often follow the common, and sometimes necessary, course of formulating propositions for the purpose of enabling their correctness to be tested, and as a general rule anything that a judge says in the course of argument will be merely tentative and exploratory." (emphasis added)
11. Further, as noted by the High Court (Brennan, Deane and Gaudron JJ) in Vakuata v Kelly (1989) 167 CLR 568 at 572: Where such comments which are likely to convey to a reasonable and intelligent lay observer an impression of bias have been made, a party who has legal representation is not entitled to stand by until the contents of the final judgment are known and then, if those contents prove unpalatable, attack the judgment on the ground that, by reason of those earlier comments, there has been a failure to observe the requirement of the appearance of impartial judgment. By standing by, such a party has waived the right subsequently to object. The reason why that is so is obvious. In such a case, if clear objection had been taken to the comments at the time when they were made or the judge had then been asked to refrain from further hearing the matter, the judge may have been able to correct the wrong impression of bias which had been given or alternatively may have refrained from further hearing. It would be unfair and wrong if failure to object until the contents of the final judgment were known were to give the party in default the advantage of an effective choice between acceptance and rejection of the judgment and to subject the other party to a situation in which it was likely that the judgment would be allowed to stand only if it proved to be unfavourable to him or her.

The Complaints

1. The first plaintiff's 13 July Letter contains the following paragraphs which are desirable to set out at length: 5. Your Honour has given many case management directions and made certain findings at the behest of the said Defendants, many of which, particularly when considered together and over the last two years, the Plaintiff submits would give rise to an affirmative answer to the question: "whether a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial and unprejudiced mind to the resolution of the question the judge is required to decide": Johnson v Johnson (2000) 201 CLR 488 at [11]. 6. It appears that some of the Orders and Case Management Directions made by your Honour were infected or faulty due to unfair, unfavourable or unjust findings, assumptions or inferences on credit, affidavit evidence and submissions of the parties and not by reason of the resolution of facts based upon admitted evidence, including critically the Defendants' Admissions of 28 August 2015 and the uncontested or incontrovertible evidence deposed to by Mr Mahommed in his four Affidavits and the uncontested or incontrovertible evidence and admissions of Mr Dawson for the Defendants and pertinent Submissions of my predecessor, Mr Glasson, to which his Honour attached no discernible or negligible weight. 7. One of the main facts in issue was the currency or not of a Project Management Agreement made on 2 October 2010 ("the PMA") in respect of which the only persons who attested to that issue were Mr Dawson (the sole Director of his corporate Defendants) and Mr Huxley (a renowned fraudster and alter ego of the Defendants). The case of the Defendants rests primarily upon the lofty proposition that the PMA was abandoned by the parties to it. Mr Glasson's Submissions of 4 December 2015 effectively killed off that notion until it was surprisingly resurrected by your Honour on 30 March 2017. It is considered by the principal of the Plaintiff to be an utterly absurd proposition. It is based upon the rejection of the evidence and credit of Messrs Licardy (a most Honourable Solicitor of this Court), Mr Arcuri (former Chairperson of FDL) and Mr Photios, the former CEO of the former Third Plaintiff (FDL). The documentary evidence leaves nothing open to question on the subject adverse to the Plaintiff's case. The credit of the latter witnesses was not relevantly impugned and should therefore be paramount. It is submitted that the credit of Messrs Dawson and Huxley (thrice Bankrupt) for the said Defendants is extremely doubtful and could not possibly be relied upon to justify the order for security for costs made on 30 March 2017.We have all seen many stronger defences struck out based upon a fraction of the weighty evidence and submissions put in favour of the Plaintiff. 8. Your Honour has expressed negative views upon the conduct of the principal of the Plaintiff and the conduct of the proceedings by the Plaintiff, at least on 30 March 2017, in respect of which I can recall that some adverse comments of your Honour were misconceived or ill informed and/or inappropriate. You Honour did not make the slightest adverse comment upon the seriousness of the frauds allegedly perpetrated by the Defendants and non-compliant conduct of the said Defendants with many Orders made over nearly 2 ½ years. 9. Your Honour might recall refusing to make an order for Costs in favour of the Plaintiff in relation to the Defendants' Motion for Summary Dismissal, which really had no chance of success given the currency of the Separate Questions and was withdrawn by the Defendants' Counsel, Mr Green in the hearing. That decision and some of your Honour's other comments on 30 March 2017 were extraordinary and prescient. 10. Included or implicit in the ex tempore Judgement of 30 March 2017, your Honour appears to have made or assumed findings upon matters not properly recorded, raised or rebutted in admitted or admissible evidence or submissions from Mr Green of counsel. This relates to the financial position of Mr Mahommed, bankruptcy and liquidation matters, the stultification of the proceedings, the merits of the Claim and prospects of success, the frequent dishonest conduct of the Defendants in the proceedings and the dubious credit of Mr Dawson and the un-impugned veracity of the Plaintiff's opposing witnesses. 11. It is capable of being assumed or inferred that your Honour might have engaged in some extra-curial fact finding mission in order to establish some relevant matters, and proceeded to make or assumed findings based upon that extra-curial fact finding mission or inferences which were not fairly available on the admitted or admissible evidence or contained in submissions for 30 March 2017. 12. Your Honour stated on 30 March 2017 that you had read Mr Glasson's Submissions of 4 December 2015, such that it was not necessary for me to go there again. However, the scant, if any, treatment given or accorded to those important Submissions in deciding the Security Question is a serious matter for concern. Your Honour also gave me the opportunity "to get everything off my chest", as your Honour strangely put it, because the Motions were not about me, as I had consented to my removal as a Plaintiff. 13. It is submitted that the foregoing matters, in and of themselves raise sufficient apprehended bias to entitle the Plaintiff to succeed upon this application, but, additional, serious concerns were also identified and summarized in the Affidavit affirmed by Mr Mahommed on 13 July 2017. Given the extensiveness and currency of that Affidavit, it is assumed that your Honour would be well appraised of the specific grounds, the articulation of which in the Affidavit underpins the Application. That should satisfy the disqualification test prescribed for apprehended bias conduct in Re Ebner v Official Trustee in Bankruptcy [2000] HCA 63; 205 CLR 337; 176 ALR 644; 75 ALJR 277 (7 December 2000). I do not therefore propose, unless directed to do so, to repeat the specific grounds. I cannot see that your Honour will be assisted by mere repetition. Essentially and generally, the nature of the complaint is that the case management has been conducted extensively on a one sided basis, that the Security Question was decided unjustly and that unfair prejudice to the Plaintiffs has been largely and frequently disregarded over an extended period, with the said Defendants and their legal team having in effect unfettered access to the use of the liquid Trust Assets.

The parties' submissions

1. In making this application, Mr Smits, who appears for the first plaintiff, relied upon what he had said in the 13 July Letter, amplified in oral submissions. He also relied upon the affidavit of Mr Peter Shah Mahommed dated 13 July 2017.
2. In written submission, the defendants maintain the first plaintiff has not identified anything that might lead me to decide a question other than on its merits. To support this proposition, the defendants point to the fact the majority of matters I have heard during the course of this case have been by consent or not seriously contested. As for the contested interlocutory hearing before me regarding the variation of McDougall J's freezing orders, the defendant notes I was not required to resolve any contested factual issues, and hence no factual findings materially adverse to any party, including the Plaintiffs, were made.
3. The defendants also submit that in any event, the first plaintiff has waived any right to make this application based on matters that arose prior to the security for costs application, given the plaintiffs made no application during or prior to the security for costs application for me to disqualify myself.

The evidence before me

1. The first plaintiff made no attempt whatsoever to tender any transcripts. As I have said, apart from the assertions in the 13 July Letter, he relied on the affidavit of Mr Mahommed dated 13 July 2017.
2. This affidavit is a collection of summarised and/or extracted orders I have made from time to time. In addition, the affidavit can best be described as a detailed submission and it is in large part argumentative. It makes numerous complaints, not limited to my conduct.
3. Mr Mahommed's means to fund security for costs is dealt with, as is his purchase of numerous shares in the allotment. The affidavit also contains complaints about the judgment handed down by me on 30 March 2017.
4. In my view, the matters dealt with in the affidavit of Mr Mahommed are largely irrelevant to the current application.

Consideration

1. The first observation to make about the complaints is that they are not confined to the proceedings on 30 March 2017. Paragraph 5 refers to "many ….directions" and certain "findings". No detail is provided as to what directions or findings are referred to or when they were made and whether they were opposed or by consent. It is said however they have been made over the last two years.
2. Paragraph 6 refers to "some of the Orders and Case Management Directions". Again no detail is provided as to what Directions are being referred to.
3. Paragraph 7 proceeds upon the basis there is no other view open factually on the material in particular whether the PMA was abandoned by the parties. That issue will turn on factual material as yet untested, and conversations. This is one of the allegations that will need investigation at trial. Reference is made back to Mr Glasson of Counsel who appeared in earlier times and who prepared some submissions dated 4 December 2015.
4. What is abundantly plain from paragraph 7 is that the question of abandonment will arguably loom large in the proceedings. It is a little premature, in my view, for any judge to be engaging with these issues except on an entirely tentative basis in the absence of having heard the witnesses who were privy to the relevant contractual arrangements and/or conversations. I note I have made an order that the question of abandonment be determined as a separate question. No hearing date has yet been fixed.
5. Paragraph 8 alleges that I have expressed "negative views". Again no detail is provided. There are no transcript references which could be analysed and addressed and most importantly placed in some sort of context.
6. Paragraph 9 refers to my refusal to make an order for costs in favour of the plaintiff on a summary dismissal application. Costs of course are very much in the discretion of the judge and again there is simply no detail provided. However there is an assertion that "some of your Honour's other comments on 30 March 2017 were extraordinary and prescient". Again there is no detail at all so that the matter can be properly and objectively examined. Indeed it is not entirely clear to me what is meant by this assertion.
7. Paragraph 10 refers to my having made assumed findings on matters "not properly recorded, raised or rebutted in admitted or admissible evidence or submissions". No detail again is provided. The comments which undoubtedly are being referred to are that Mr Mahommed did not provide any evidence that he would stand by the plaintiff or was able to do so and hence was a factor expressly referred to in the context of my granting the orders for security for costs. That is a fact and one relevant to the question of security. That observation is recorded in my judgment of 30 March 2017, in respect of which there has been no appeal.
8. Paragraph 11 asserts that it is to be "assumed or inferred" that I might have engaged in some extracurial fact finding. Again that submission is entirely opaque. It is not capable of being comprehended especially without any reference being made to part of the judgment on security for costs or indeed any part of the transcript before me on 30 March 2017. Leaving aside the obscure nature of the allegation, it is unhelpful because it cannot be appropriately analysed.
9. Paragraph 12 submits that, although I had apparently intimated that I had read Mr Glasson's submissions of 4 December 2015, because I did not give those submissions the weight they deserved somehow or other this would amount to a "serious matter for concern". Again no detail is provided. The weight to be given to any submission will vary according to its content.
10. Paragraph 13 adds that "essentially and generally" the nature of the complaint is that the case management has been conducted extensively on a one sided basis and that the security question was decided in an unfair and prejudicial way to the plaintiffs.
11. I reiterate at this point no appeal was lodged against my judgment of 30 March 2017 in which I ordered security. No complaint was made during the hearing and no application for disqualification was made or hinted at.
12. The manner in which this application has been formulated and put to the court simply does not permit any person to make an assessment of the complaints to detect whether or not the requisite test has been met. There is simply no work for a hypothetical observer to do by reason of the total lack of any detail.
13. Any party is perfectly entitled to make such an application as the present. A practitioner or person making such an application bears an onus at least to expose fairly and objectively and at a level of precision why it is that the complaints are to be sustained and the requisite test met. That has not been done in this case. In the circumstances it seems to me the application must be dismissed.
14. I am aware the defendants seek to have the plaintiff's claim dismissed and if I understand it correctly the plaintiff wishes to re-open with fresh materials on the security for costs question.
15. It seems to me appropriate however that I not proceed to hear any further matter at least for a short period to enable the plaintiff to make an application, if any, to the Court of Appeal. I therefore propose to stand all applications over for 14 days at which point I would expect to be updated on what the current situation is.

Amendments 18 July 2017 - typo Basten not Baston JA, para [16] 19 July 2017 - Delete - Line 1 - His Honour DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 19 July 2017