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[1999] NSWCA 113
Court of Appeal (NSW)
1998-12-10
Mason P, Sheller JA, Stein JA, Rolfe J
Original judgment source is linked above.
Reported Decision : 46 NSWLR 168 150 FLR 336
New South Wales Court of Appeal CITATION : DOVADE PTY LTD & ORS v WESTPAC BANKING GROUP & ANOR [1999] NSWCA 113 FILE NUMBER(S) : CA 40805/95 HEARING DATE(S) : 8-10 December 1998 JUDGMENT DATE : 30 April 1999
PARTIES : Dovade Pty Ltd & 14 Ors v Westpac Banking Group & Anor JUDGMENT OF : Mason P; Sheller JA; Stein JA
LOWER COURT JURISDICTION : Supreme Court LOWER COURT FILE NUMBER(S) : CD 50291/94 LOWER COURT JUDICIAL OFFICER : Rolfe J
COUNSEL : C J Stevens QC/A J McQuillen (Appellants) TEF Hughes QC/JE Marshall (Respondents) SOLICITORS : Central Law Solicitors and Attorneys (Appellants) Clayton Utz (Respondents) CATCHWORDS : MISREPRESENTATION; negligent advice; loan agreement; misleading and deceptive conduct; damage; s52 Trade Practices Act ; BREACH OF DUTY OF CARE; whether breach of fiduciary duty; claim for equitable damages; cross-claim; APPREHENSION OF BIAS; waiver; alleged failure to disclose; judge's customer relationship with bank; wife's shareholding; whether direct pecuniary interest in outcome of proceedings; scope of pecuniary interest disqualification DECISION : Appeal dismissed with costs
THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40805/95
MASON P SHELLER JA STEIN JA
DOVADE PTY LTD & ORS v WESTPAC BANKING CORPORATION & ANOR The appeal is from proceedings heard and determined by Rolfe J in 1995. The respondents are related financial institutions. Bill Acceptance Corporation Ltd ("BACL") is a merchant bank. It is a wholly owned subsidiary of Australian Guarantee Corporation Ltd, which is a wholly owned subsidiary of Westpac Banking Corporation ("Westpac"). The respondents sued Mr and Mrs Jury and several companies in the "Jury Group" for moneys lent or in relation to guarantees of loan agreements. Each of the defendants was found liable. The principal matter litigated at trial was a cross-claim propounded compendiously by each defendant against each of the plaintiffs. Judgments dismissing the cross-claim took effect on 21st November 1995.
In 1989, Mr Whitbread persuaded Mr Jury that the takeover of Trinity Properties Pty Ltd would be a good business opportunity. Mr Jury intended to sell most of Trinity's real estate once the takeover had been effected in order to repay moneys borrowed through Dovade Pty Ltd, one of the Jury Group, for the acquisition. Loan monies were furnished by Westpac and BACL. Proceeds of the sale of the Trinity assets came only slowly. It was alleged that BACL had given financial advice to the defendants which promoted the takeover scheme by upholding its feasibility. The appellants claimed that the advice was negligent, as well as misleading and deceptive. Rolfe J found that the alleged representations were not made, that such statements as were made were neither representational nor advisory, that the appellants placed no reliance upon what they were told by any officer of BACL in deciding to enter the transaction, and that no damages were proved.
Some years prior to his judicial appointment, Rolfe J had acted as counsel in the preliminary stages of criminal proceedings involving Mr Whitbread. This involvement was known to counsel for the appellants at the trial who indicated no difficulty with the matter. The appellants submitted that this involvement gave rise to a well-founded apprehension of bias in the current proceedings.
At the time when the trial took place and judgment was given, the judge was a customer of Westpac. He operated a cheque account with the Bank and the Bank held a registered mortgage over land belonging to the judge. There was no evidence as to the status of the account. It was also established that Mrs Rolfe, the wife of Rolfe J, held 16,600 ordinary shares in the Bank. (It was common ground that the value of these shares would not be affected by the outcome of the litigation.) A company called Lochiely Pty Ltd had granted a fixed charge in favour of Westpac in 1988. Rolfe J and another person each held one share in the company on trust for other persons. The appellants relied on these matters individually and cumulatively. They also contend that the judge's non-disclosure of these relationships itself raised an apprehension of bias.
a) In relation to allegations of misrepresentation, negligent advice and misleading and deceptive conduct: That the findings of Rolfe J were based on credibility findings adverse to Mr Jury. The claim for damages based on negligent advice failed because the alleged positive representations were not made, or at least were not made in a "representational or advisory" context. They were not found to be relied upon by Mr Jury and no damage was proved.
b) In relation to the allegation of breach of fiduciary duty: That the claim for equitable damages was unfounded and failed on its merits. The case for damages fought at trial was tort-based and failed because of findings on causation and damages. These findings were not appealed from and prevent the appellants from attempting to fall back on a fiduciary-based case.
Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447, Coulton v Holcombe (1986) 162 CLR 1; Water Board v Moustakas (1988) 180 CLR 491 (Refd)
c) In relation to the allegations of apprehension of bias: The appellants clearly waived any objection based on Rolfe J's earlier role as counsel which may have been available to them.
Vakauta v Kelly (1989) 167 CLR 568, Re Jury & Anor; ex parte Westpac Banking Corporation Federal Court of Australia, Lockhart J, unreported, 22 May 1997, Jury v Westpac Banking Corporation Federal Court of Australia, Full Court, unreported, 18 March 1998 (approved)
The trial did not miscarry on the basis that the judge failed to disclose both his wife's shareholding relationship with the Bank and his own customer relationship with the Bank.
The principle of automatic disqualification for direct pecuniary interest in the outcome of a case is clear. However it does not extend to situations where a judge holds shares in a litigant party where the value or income stream of shareholding could not possibly be affected by the outcome of the litigation; or where a family member, however close, has a non-direct pecuniary interest in the proceedings. The pecuniary interest of a family member, however close, cannot be equated automatically with that of the judge.
Webb v The Queen (1994) 181 CLR 41 per Deane J at 74-5 (followed); Grand Junction Canal Co v Dimes (1852) 3 HLC 759, 10 ER 301 (discussed and distinguished); R v Bow Street Metropolitan Stipendiary Magistrate; Ex parte Pinochet [1999] 2 WLR 272 (considered)
In relation to the claim of reasonable apprehension of bias, the test to be applied is whether, in all of the circumstances of the particular case, the parties or the public might entertain a reasonable apprehension that the judge might not bring an impartial and unprejudiced mind to the resolution of the question involved. A reasonable apprehension of bias will generally arise in a case where a close member of a judge's family owned an asset such as a parcel of shares, to the knowledge of the judge, in circumstances where the outcome of the dispute might affect the value of that property. But this was not the case here. The suggestion that the mere relationship of banker and customer could give rise to a reasonable apprehension of bias is rejected. Only in exceptional cases of dependent obligation towards or animus against a bank will there be the appearance of bias to a reasonable observer.
Livesey v The New South Wales Bar Association (1983) 151 CLR 288 (applied), Bank of New South Wales v Commonwealth (1948) 76 CLR 1 (followed); The Queen v The Industrial Court & Ors [1966] Qd R 245, Gascor v Ellicott [1997] 1 VR 332 (followed); Auckland Casino Ltd v Casino Control Authority [1955] 1 NZLR 142 (distinguished)
THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40805/95
MASON P SHELLER JA STEIN JA
DOVADE PTY LTD & ORS v WESTPAC BANKING CORPORATION & ANOR JUDGMENT 1 THE COURT: Overview of the trial 2 The respondents are related financial institutions. Bill Acceptance Corporation Limited ("BACL") is a merchant bank. It is a wholly owned subsidiary of Australian Guarantee Corporation Ltd, which is a wholly owned subsidiary of Westpac Banking Corporation ("Westpac"). 3 In the proceedings below, which were heard and determined by Rolfe J in 1995, the respondents sued Mr and Mrs Jury and several companies in the "Jury Group" for moneys lent or in relation to guarantees of loan agreements. After a trial spanning 24 days, each of the defendants was found liable. 4 The principal matter litigated at trial was a cross-claim propounded compendiously by each of the defendants against each of the plaintiffs. The dismissal of that cross-claim resulted in the following judgments (which took effect on 21 November 1995):
Westpac relationship 56 The appellants also submitted that the trial judge's failure to disclose his relationship with Westpac meant that the trial miscarried. This argument was advanced in different ways, some suggesting that his Honour should have disqualified himself because of a direct pecuniary interest in the outcome of the litigation, others suggesting that a reasonable apprehension of bias arose due to either or both of the objective circumstances of the relationship or the failure of the trial judge to have disclosed it. (a) The objective facts 57 The original notice of appeal did not contain grounds relating to apprehended bias. So far as concerns a challenge based upon the judge's relationship with Westpac this was because the appellants' managing director, Mr Jury did not become aware of any such relationship until early 1998. It does not necessarily follow that the appellants or their legal advisers may not have considered the possibility of some relationship existing (after all, Westpac is one of the four major banks carrying on business in Australia) but regarded the matter as irrelevant unless and until the relationship was considered by the trial judge to be such that disclosure was called for. The respondents have submitted that this was the case, but we find it unnecessary to determine the question. 58 Throughout 1998, the proposed grounds of appeal touching this matter were formulated and re-formulated. In part, this was due to difficulties and uncertainties experienced by the appellants in clarifying the evidence. In part, the legal submissions underwent a process of continuing reformulation which extended into the hearing of the appeal. 59 The appellants read a number of affidavits which proved in some cases and failed to prove in others various relationships existing between the judge, his wife and companies in which he was said to have an interest and/or an office. Some of this material was deficient in that it did not squarely address the situation in 1995. 60 On 14 October 1998 Mason P refused the appellants the leave which they sought to issue a particular subpoena to Westpac. There was a renewed application with a reformulated subpoena. The President declined leave at that stage to issue this further subpoena for reasons set out in his judgment of 26 November 1998. However, the application for leave to issue the subpoena was stood over and it was renewed at the hearing of the appeal. The application was refused by the Court on 9 December 1998. At that time we identified the further grounds of appeal for which leave to amend was granted and those for which such leave was refused. 61 The facts relevant to the grounds of appeal concerning the relationship between the trial judge and Westpac can now be summarised. At the time when the trial took place and judgment was given, the judge was a customer of Westpac in that he operated a cheque account with Westpac. There was no evidence as to the state of the cheque account in 1995. On more than one occasion it was made clear that the appellants regard this as irrelevant. They submitted that the mere relationship of banker-customer was sufficient, at least in a situation where the banker had the security of a mortgage. 62 Since 1983 the Bank had held a registered first mortgage over land belonging to the judge. The mortgage does not secure any particular advance, but covers any and all forms of accommodation present and future. Senior counsel for the appellant described it in argument as a "come and go" facility. It contained frequently encountered "all moneys" provisions. 63 It was also established that Mrs Rolfe, the wife of Rolfe J, held 16,600 ordinary shares in the Bank in 1995. It was established that the total issued capital of Westpac at 30 September 1995 was 1906 million shares and that its market capitalisation in September 1995 was $10,197 million. Mrs Rolfe's parcel of shares would have then been worth approx $89,000. It was common ground that the matters in dispute in the litigation could not have had any likely effect on the value of Mrs Rolfe's shareholding. 64 A company called Lochiely Pty Ltd granted a fixed charge in favour of Westpac in 1988. Rolfe J and another person each held one issued share in the company. The company is the trustee for a family trust relating to persons outside the judge's family, and the share held by the judge was also held on trust. There is no evidence as to any customer relationship between the company and Westpac. 65 The appellants rely upon these matters individually and cumulatively. They also contend that the judge's silence about them was significant in itself as raising a reasonable apprehension of bias. (b) Claim of direct pecuniary interest in the outcome of the proceedings 66 In Webb v The Queen (1994) 181 CLR 41 Deane J stated the relevant principles (at 74-5, omitting footnotes) The area covered by the doctrine of disqualification by reason of the appearance of bias encompasses at least four distinct, though sometimes overlapping, main categories of case. The first is disqualification by interest, that is to say, cases where some direct or indirect interest in the proceedings, whether pecuniary or otherwise, gives rise to a reasonable apprehension of prejudice, partiality or prejudgment. The second is disqualification by conduct, including published statements. That category consists of cases in which conduct, either in the course of, or outside, the proceedings, gives rise to such an apprehension of bias. The third category is disqualification by association. It will often overlap the first and consists of cases where the apprehension of prejudgment or other bias results from some direct or indirect relationship, experience or contact with a person or persons interested in, or otherwise involved in, the proceedings. The fourth is disqualification by extraneous information. It will commonly overlap the third and consists of cases where knowledge of some prejudicial but inadmissible fact or circumstance gives rise to the apprehension of bias. Within the first category of case, i.e. disqualification by interest, the general rationale underlying the doctrine is reinforced by the principle expressed in the maxim that nobody may be judge in his own cause. Indeed, there is one special class of case within that first category in which, subject to the possible operation of the rule of necessity, the effect of that principle is that disqualification is automatic without there being any "question of investigating, from an objective point of view, whether there was any real likelihood of bias, or any reasonable suspicion of bias, on the facts of the particular case". That special class consists of cases in which the judge, juror or statutory officer has a direct pecuniary interest in the outcome of the proceedings . In such cases, public confidence in the administration of justice requires that there be disqualification regardless of the particular circumstances. (emphasis added) [In a footnote, Deane J explained that the expression "direct pecuniary interest", in the penultimate sentence quoted, was used "in the sense of an interest sounding in money or money's worth". He cited Reg v Gough [1993] AC 646 at 673 ("pecuniary or proprietary interest").] 67 Deane J was in dissent in Webb, but the appellants correctly submitted that his Honour's approach to the relevant principles was on all fours with that of the other members of the High Court. 68 There was a period in legal history when pecuniary interest was the only basis of disqualification of a judge (Frank, "Disqualification of Judges" (1947) 56 Yale LJ 605 at pp609-10). 69 The leading case is Dimes v Proprietors of Grand Junction Canal (1852) 3 HLC 759, 10 ER 301, in which the House of Lords set aside a decree of Lord Cottenham LC who had decided a case despite being a shareholder in the canal company concerned. The Dimes litigation was prolonged litigious warfare between a determined plaintiff, who was a solicitor, and a substantial corporation. The litigation was waged in practically every court in England between 1836 and 1853. Mr Dimes had some significant victories. He was not the first or last highly motivated litigant who established several points of principle in protracted litigation which was ultimately fruitless. The author of a fascinating history of the litigation correctly observes that the litigation provides "a remarkable example of the problems which the law and legal system could produce when fully exploited by a determined litigant" (Frank Sharman "Feudal Copyholder and Industrial Shareholder: the Dimes Case" (1989) 10 Journal of Legal History 71). 70 Dimes was the owner in fee of copyhold land. His predecessor in title had sold portion of the land to the Grand Junction Canal Co and that portion had become part of a major canal with its associated towing-path. The canal had been used by public traffic since 1797. Dimes challenged the Canal Company's title to the freehold. He lost at first instance in a trial before Lord Abinger CB, but was successful on appeal to the Court of Queen's Bench where he obtained possession under a writ of possession. He placed a bar across the canal and threw a large quantity of bricks into the canal to prevent the passage of barges. When he threatened to stop navigation entirely unless the company submitted to his demand for £5,000, the company went to equity. Proceedings were commenced for injunctive and other relief. In 1838 an interlocutory injunction was granted by the Vice Chancellor. That order was confirmed by Lord Chancellor Cottenham on appeal the following year. The substantive proceedings in equity then languished, but eventually came to trial in 1846 when a perpetual injunction was granted by the Vice Chancellor. Dimes' petition of rehearing came before Lord Chancellor Cottenham but the appeal was dismissed in 1848. 71 Dimes then discovered that Lord Cottenham had held 92 shares in the company. The reporter of the decision in which the Lord Chancellor sought to explain his position states that 17 of these shares were held in the Lord Chancellor's own right and 75 shares as trustee for other persons though with also a beneficial interest in some of these (see The Grand Junction Canal Co v Dimes (1850) 2 Mac & G 285 at 298, 42 ER 110 at 115). Dimes set about attempting to impugn the decree on that ground. There was full argument before Lord Langdale MR, with particular attention being paid to the difficulties which arose from the Lord Chancellor being technically the sole judge in the Court of Chancery. The motion was dismissed. 72 Dimes then commenced several actions of trespass against persons who had engaged in navigation. The Company obtained a further injunction. Dimes placed a chain across the canal and dug a deep trench across the towing path. He was committed for contempt by Shadwell V-C. An application to discharge this order was refused by the Lord Chancellor. As indicated above, the Lord Chancellor's decree in the suit was set aside by the House of Lords. 73 Dimes stands incontestably for the proposition that a judge who has a "direct pecuniary interest in the outcome of the proceedings" (Webb at 75 per Deane J) is disqualified automatically from sitting. No additional question arises as to whether there is any likelihood or reasonable apprehension of bias because "in such cases, public confidence in the administration of justice requires that there be disqualification regardless of the particular circumstances" (ibid, citing R v Gough [1993] AC 646 at 661. See also Dickason v Edwards (1910) 10 CLR 243 at 259; R v Watson; Ex parte Armstrong (1976) 136 CLR 248 at 263). 74 In R v Bow Street Metropolitan Stipendiary Magistrate; Ex parte Pinochet (No 2) [1999] 2 WLR 272 ("Pinochet"), these principles were extended to a case where a judge had a non-pecuniary interest in the cause. The Full Federal Court has recently pointed out that it may be that the reasonable apprehension test would lead to the same result in Australia as that reached by the House of Lords, without the need to extend the concept of automatic disqualification outside the area of direct pecuniary interest (Ebner v Official Trustee in Bankruptcy [1999] FCA 110 at 58. Cf also Trustees of the Christian Brothers v Cardone (1995) 57 FCR 327). There is no need to pursue this issue in the present appeal. 75 The obligation to disqualify does not apply if statute permits the judge to sit in the particular matter, if the principle of necessity applies, or if there is waiver. Subject to these exceptions, failure to recuse will render the decision voidable on appeal regardless of its substantive merits (Dimes, Pinochet). The possibility of fourth and fifth exceptions - de minimis, and where the judge is ignorant of the pecuniary interest (eg because of a blind trust) - can be considered if the point ever arose (cf R v Hammond (1863) 9 LT(NS) 423; R v Rand (1866) LR 1 QB 230 at 232 per Blackburn J, obiter ("any direct pecuniary interest, however small, in the subject of inquiry"); Auckland Casino Ltd v Casino Control Authority [1995] 1 NZLR 142 at 148; Ebner at 37-39; Thomas, Judicial Ethics 2nd ed p54). United States law takes the position that a direct pecuniary interest in the subject matter of litigation disqualifies the judge no matter how small or trifling it may be (48A Corpus Juris Secundum, "Judges" s120). See also the remarks of Latham CJ in the Bank Nationalisation Case (par 95 below). 76 The principle of disqualification for direct pecuniary interest is clear and unbending. But what is its scope? 77 In Webb (at 75, note 33) Deane J described a pecuniary interest as an interest sounding in money or money's worth. Pecuniary interest may take many forms. Extreme examples include the receipt of a fine imposed by the judge (as in Dr Bonham's Case (1609) 8 Co 107a, 77 ER 638) or the receipt of a fee in cases resulting in a conviction as distinct from an acquittal (Tumby v Ohio 273 US 510 (1927)). 78 The idea of having a "direct interest" in "the outcome of the proceedings" is capable of both enlarging and restricting the scope of the pecuniary interest disqualification. Gough and Webb have emphasised that this means an interest in the outcome of the particular litigation; see also Pinochet at 283. Dimes itself illustrates the proposition that the judge need not be a party in the case or have a legal or equitable interest in the assets of a party. A shareholding does not give a legal or equitable interest in the company's assets (Macaura v Northern Assurance Co Ltd [1925] AC 619; In re Webster (1975) 132 CLR 270). Nevertheless, the Lord Chancellor's decree in Dimes was overturned. As Lord Campbell pointed out in Dimes (at 793, 315) the maxim that no man is to be a judge in his own cause…is not to be confined to a cause in which he is a party, but applies to a cause in which he has an interest. 79 It is possible to imagine the converse situation where a judge might be a party but where the matter at issue in the proceedings did not touch the judge's pecuniary interest. We would doubt, however, that it would be sufficient to avoid preclusion that the judge held the interest in trust for another, although the authorities are not uniform on the point: cf Dimes at 770-1, 306; R v Recorder of Cambridge (1857) 8 E & B 637, 120 ER 238 (Deputy Recorder had sold shares, but transfer not completed); R v Rand. Of course, very many cases in that situation would involve a duty to disqualify based upon reasonable apprehension of bias. 80 In Pinochet, Lord Goff (at 286) referred to Dimes as authority for the proposition that ownership of shares in a litigant party established the necessary interest. He described the ratio decidendi of Dimes as the principle that the holding of shares in a party means that the judge "has by virtue of his shareholding an interest in the cause". (See also Lord Hope of Craighead at 288, citing Sellar v Highland Railway Co 1919 SC(HL) 19; Ebner at 39-40). 81 It is not clear to us that Dimes establishes this proposition. It has been estimated that Lord Chancellor Cottenham owned 0.8% of the issued capital of the Grand Junction Canal Company and that the 92 shares in his name (17 held in his own right and 75 in a representative capacity) would have yielded £276 in 1848 (Sharman op cit, at p82). The shareholding was described by Lord St Leonards, LC as worth "several thousand pounds" (Dimes at 784, 311). £276 per annum would have been a tidy sum of money in the mid-nineteenth century even though it may not have been a very great element in Lord Cottenham's annual income. It is easy to see why no possibility of applying the de minimis principle occurred to the House of Lords or to the judges who gave unanimous advice to their Lordships. 82 Although nothing appears to have been said on the point in Dimes, it would have been quite apparent that the activities of Dimes which were restrained by Lord Chancellor Cottenham's decree were capable of diminishing the value of shares in the company as well as the income stream from dividends. It is hard to think of a more catastrophic event to befall a canal company than to have the passage of barges impeded by a boom gate. If, as we think it correct to do, Dimes is seen as a case involving pecuniary interest, or what Deane J in Webb described as "direct pecuniary interest", then that principle was satisfied without establishing the wider proposition that any undisclosed shareholding in a litigant party, however small, will effect automatic disqualification. Dimes does not establish that holding shares in a litigant party necessarily establishes that the judge has a direct pecuniary interest in the outcome of the litigation. 83 What then of the shareholding whose value or income stream could not possibly be affected by the outcome of the litigation? 84 American law does not take an absolute position on this matter. There are cases supporting the proposition that ownership of a small portion of issued stock will not necessarily disqualify on the basis of interest. Likewise with ownership of stock in a corporation which in turn owns stock in a second corporation (48A Corpus Juris Secundum "Judges" par 122; 25 ALR 3d 1131 s4(a)). See also Sir Thomas Bingham, "Judicial Ethics" in R Cranston ed, Legal Ethics and Professional Responsibility (1995) at pp40-1. In our view, this approach is consistent with the principle espoused by Deane J in Webb, and it is not inconsistent with Dimes as properly understood. 85 Accordingly, we conclude that the Dimes principle is not attracted simply by showing that a judge (or juror) owns a parcel of shares in a company whose pecuniary interests are in issue. If, as in the present case, the litigation could not possibly affect the value of the shares, then it cannot be said that the judge has a direct pecuniary interest in the outcome of the litigation. 86 The appellants submitted that the judge had such a community of economic interest with his wife that whatever affected the value of her interests affected his. This prompted the submission by the respondents that there was no evidence that Rolfe J knew the details of his wife's property holdings. Cf also Waterhouse v Bell (1991) 25 NSWLR 99. We reiterate that the facts of this case did not show that Mrs Rolfe's pecuniary interests were liable to be affected by the outcome of the litigation. But in any event, the appellants' submission overlooks the fact that for over a century Australian law has had a separate property regime for married couples. Section 79 of the Family Law Act 1975 (Cth) does not undermine this, because it confers no rights prior to a judicial determination following marital breakdown. 87 In Webb (at 75) Deane J stated that he saw great force in the view expressed by Lord Goff and Lord Woolf in Gough (see [1993] AC at 664, 673) to the effect that automatic disqualification should be confined to cases of direct pecuniary interest in the outcome of the proceedings. Deane J added that this did not deny that there will be cases where such a direct pecuniary interest does not exist but where the nature of the relevant interest and/or relationship is such that it is obvious that the person concerned is disqualified by reason of a reasonable apprehension of bias. His Honour gave, as an example of the latter category, the situation where a dependent spouse or child had a direct pecuniary interest in the proceedings (our emphasis). (See footnotes (35) and (28) in Deane J's judgment.) 88 The appellants did not shrink from the proposition that the holding of a single Westpac share would automatically disqualify a judge from determining a case involving a $5 debt. But, in the light of the foregoing discussion we must reject such a proposition, a fortiori where the share is held by the judge's spouse. 89 The common law necessarily proceeds by the application of concepts and principles. Some fact situations will fall into more than one category. Without suggesting any deficiency, the inherited structure of the common law is to distinguish between the judge or juror's direct pecuniary interest in the outcome of the litigation on the one hand and other bases for disqualification such as bias or apprehended bias. The automatic rule of preclusion in the former case does not apply in the latter. And the position of the pecuniary interest of a family member, however close, cannot be equated automatically with that of the judge. (c) Claim of reasonable apprehension of bias. 90 We have indicated why the facts of this case (including those relating to Mrs Rolfe's shareholding in Westpac) do not attract the "bright line" principle stemming from Dimes. The appellants' alternative submission is that a reasonable bystander would apprehend bias from the objective facts, alternatively from the non-disclosure of them by the judge. 91 It was common ground that the test to be applied was whether, in all of the circumstances of the particular case, the parties or the public might entertain a reasonable apprehension that the judge might not bring an impartial and unprejudiced mind to the resolution of the question involved (see Livesey v The New South Wales Bar Association (1983) 151 CLR 288 at 293-4; Webb v The Queen (1994) 181 CLR 41 at 47, 51-2, 67-8, 87). As Deane J pointed out in Webb (at 67-8), the fair-minded observer is assumed to know all of the material objective facts. See also S & M Motors Pty Ltd v Caltex Oil (Australia) Pty Ltd (1988) 12 NSWLR 358 at 380-1; Gascor v Ellicott [1997] 1 VR 332 at 340, 342-3. 92 In Gascor Tadgell JA observed (at 342) that: Although the criterion of apprehension of partiality or prejudice is possibility, not likelihood, a reasonable apprehension is to be established to the court's satisfaction: it is a reasonable and not a fanciful or fantastic apprehension that is to be established; and the apprehension is to be attributed to an observer who is "fair-minded" - which means "reasonable". As Mason CJ and McHugh J pointed out in Webb v R at 52 "… it is the court's view of the public's view, not the court's own view, which is determinative". Even so, the court is to be satisfied that the criterion is met not that it might be. In Builders' Registration Board of Queensland v Rauber (1983) 57 ALJR 376 at 384, Brennan J observed that: Each of the indicia which a party proves and relies upon to show a reasonable suspicion [which is to be substantially equated with a reasonable apprehension] of bias must be examined, and the Court is called on to determine whether, upon such indicia, a reasonable suspicion of bias arises. (The parenthetical clause in the passage cited from Brennan J is added by Tadgell JA.) 93 A claim of apprehended bias should be considered in the context of the judicial function and the public perception of it. There is a presumption that public officers have acted with honesty and discretion (Broom's Legal Maxims 10th ed p642). In the case of a judicial officer, this is no empty form. It is reinforced by the accountability necessarily inherent in the public processes of litigation and the disappointed litigant's right of appeal. Every judge swears to "do right to all manner of people according to law without fear or favour, affection or ill-will". This public oath is not a talisman against error, but it forms the constant back-drop to the way in which each judge functions on and off the bench. The history and reach of the oath were discussed by Sir Gerard Brennan on his swearing in as Chief Justice of the High Court of Australia (see 183 CLR at px.). The level of public confidence in the judiciary is based upon experience and a general perception of the rule of law. 94 The facts of no two cases are identical. But, with this proviso, it is instructive to examine the cases to which we were referred that involve a close member of a judge's family holding shares which, though possibly significant in value, could not have been affected in value by the outcome of the litigation. 95 In the Bank Nationalisation Case (Bank of New South Wales v Commonwealth (1948) 76 CLR 1) it was disclosed that Starke J's wife held shares in one of the plaintiff banks, and that Williams J was a holder of shares in two of the plaintiff banks, but that his holding was as bare trustee for his sister who lived abroad. In the course of argument, Latham CJ put to the Attorney General, Dr Evatt QC: You draw a distinction, do you not - an actual pecuniary interest and embarrassment in hearing the case? For example, if there is any degree of pecuniary interest, however small, a Judge is disqualified from sitting. If, however, there is no pecuniary interest, then it becomes a matter of a question in all the circumstances of the case whether there is any degree of embarrassment which would prevent a fair trial. In neither of the cases mentioned is there any actual pecuniary interest - none. My learned brothers have said that they do not regard the existence of the facts stated as in any way affecting a fair and impartial consideration of the issues in the case. It appears to me that that has to be accepted. 96 In The Queen v The Industrial Court & Ors [1966] Qd R 245, a decision of the Industrial Court of Queensland involving a dispute on a question of law arising in an industrial dispute was challenged in prerogative proceedings. The wife of the judge who determined the appeal (Hanger J) held 1235 shares in one of the litigant parties, Mount Isa Mines Ltd. This was a very small part of the issued capital and the judge had no pecuniary interest in his wife's shares. The Full Court of the Supreme Court of Queensland held that no real likelihood of bias was established. The ruling of Latham CJ in the Bank Nationalisation Case was applied, noting that it extended to the shareholding of Lady Starke. It was held that in cases outside those involving direct pecuniary interest, the test of real likelihood of bias should be adopted as the discrimen of the duty to recuse. The interest of Hanger J's wife was so small that, taking into account all of the circumstances of the case, there was no real likelihood of bias (see per Mansfield CJ at 268, per Mack J at 278, per Wanstall J at 278-80). The High Court refused special leave to appeal: see [1966] Qd R at 295. 97 We have not overlooked the fact that the test applied by the Queensland Full Court was that of real likelihood of bias, as distinct from that expressed in recent years by the High Court of Australia, namely that of reasonable apprehension (cf Webb at 47, 51-2, 67-8, 87). But this does not destroy the persuasive effect of the Queensland decision. 98 In Auckland Casino Ltd v Casino Control Authority [1995] 1 NZLR 142, the New Zealand Court of Appeal considered whether a decision of the Casino Control Authority to award a licence to Sky Tower Casino Ltd was vitiated by reason of shareholdings in Brierley Investments Ltd (which held 80% of the shares in Sky Tower) held by a member and the wife of a member of the Authority. The case turned on issues of waiver and discretion. However, there is discussion on the point of substance in the judgment of the Court (Cooke P, Hardie Boys J and McKay J). Blackburn J's dictum in R v Rand (1866) 1 LR 1 QB 230 at 232 (that any direct interest, however small, in the subject of inquiry disqualified a person from acting as a judge in the matter) was noted. Nevertheless, the Court was inclined to think that the words "however small" should be treated in the present day in New Zealand as an exaggeration and that there was scope for the de minimis rule. However, the interests held by the member and the member's wife via the parent company were sufficiently direct to be realistically within the disqualification rule concerning pecuniary disqualification. On an alternative challenge based upon apparent bias, the Court thought that there was a seriously arguable case based upon an aggregation of matters of which the shareholdings in Brierley Investments were part. We do not think that great weight can be placed upon this discussion (either way), because of the peculiar facts, including the probability of direct pecuniary interest. 99 If any general principle can be derived from the discussion in Auckland Casino Ltd, it is that a reasonable apprehension of bias may well arise in a case where a close member of a judge's family owns an asset such as a parcel of shares, to the knowledge of the judge, in circumstances where the outcome of the dispute might affect the value of that property. This is not to be seen as a categorical statement, or one incapable of being subject to proper exceptions. But this is clearly a situation where the Livesey principle may apply depending on the circumstances. 100 The suggestion that the mere relationship of banker and customer could give rise a reasonable apprehension of bias in accordance with the Livesey test should be firmly rejected (as it was in the Bank Nationalisation Case: see par 95 above). Whatever the situation in times past, the relationship that now exists between a banking corporation and its customers is necessarily highly impersonal and remote. Modern banking is, for most customers, a relationship in which the intercourse takes place at the ATM and through the mail and the telephone. It is analogous to that which exists with a telecommunications service provider, a motor vehicle or general insurer, or a large supermarket chain. No one would reasonably apprehend that the judge might be diverted from the judicial oath to do justice without fear or favour, affection or ill will by the mere existence of such a link. 101 And, as regards the judge who is a customer of a particular bank, telecommunications service provider, motor vehicle insurer or supermarket chain, nothing turns upon the state of accounts at any point of time, at least with a customer who pays accounts as they fall due. For many people, short-term indebtedness to the provider of goods or services is a relationship of pure convenience, which in no way places the debtor at the pecuniary mercy of the creditor or establishes any sense of obligation beyond the immediate indebtedness from time to time. 102 Obviously, there will be situations where the affairs of a particular bank branch or group of bank personnel are involved in litigation, or where the judge has some special association with the branch or bank personnel. And it is conceivable that a particular judge may be in such financial difficulty or may through some dealing with a present or former bank have a such a level of obligation towards or animus against a bank that there may be actual bias or at least its appearance to a reasonable observer. But these are exceptional cases. They are no different from the infinite range of adventitious relationships with litigants, counsel or witnesses that could arise in any piece of litigation, and which are dealt with (in the ultimate resort) by application of the Livesey principle to the particular facts of the case. 103 In Conkling v Crosby 239 P 506 (1925), the Supreme Court of Arizona held that a judge's indebtedness to a bank did not constitute bias or other ground for disqualification. Of course it may be different if the judge were a depositor in an insolvent bank (see 48A Corpus Juris Secundum,"Judges" s121). 104 One submission advanced by the appellants was that a relationship or association may exist which, if disclosed, would not cause disqualification, but which if left undisclosed by the judge would give rise to a reasonable apprehension of bias when the facts are brought to light. The submission was that in some cases a relationship may cross a "threshold" that prompts a duty of minimum disclosure by the judge. The duty of disclosure is said to require the judge to clear the air by inviting waiver on the litigant's part whether or not the facts would require recusal according to Livesey principles. It was suggested that another function of such disclosure would be to enable the otherwise unsuspecting litigant to interrogate the judge, or pursue further enquiries, or issue subpoenas in order to flush out the full facts or to allay subjective suspicion. One example of this category of disclosure was said to be where a banker-customer relationship exists, though presumably the principle would extend to other forms of relationship or association. The appellants sought to bolster this submission by pointing to examples where judges had erred on the side of caution by making disclosures of tangential relationships, or of banker-customer relationships. In our view this proposition is not supported by authority. It is capable of generating confusion and unnecessary suspicion where threshold disclosure does not lead to recusal in the absence of waiver. And it has the tendency to bring justice into disrepute by encouraging parties to believe that by seeking disqualification of a judge, they will be a step closer to getting the judge of their choice (cf Re JRL; Ex parte CJL (1986) 161 CLR 342 at 352 per Mason J). In the ultimate resort, a judge does not have a discretion as to whether to deal with a matter that regularly comes into his or her list for determination (see R v Brown (1989) 17 NSWLR 472 at 479). 105 We acknowledge that the statements in the preceding paragraph are categorical in form, even when confined to disclosure by judges and the facts of this present case. Nevertheless, the propositions are (we believe) correct and consistent with remarks of Ormiston JA in Gascor at 353-362 with which we respectfully agree. That case deals with the disqualification of an arbitrator and, for that reason, the views expressed by Ormiston JA apply with even greater force to a Supreme Court judge. Like Ormiston JA (see at 356) we would not see it as controversial to assert that every judicial officer should feel obliged, if he or she does not decide to withdraw of his or her own accord, to bring to the attention of the parties as soon as practicable any fact or circumstance which could lead to disqualification for apprehended bias. Disclosure would only be required if the judge thought waiver was possible, for otherwise withdrawal would be imperative. It is common sense to require such disclosure if only because ordinarily the facts are not available to the parties and it is ordinarily desirable to bring to their attention any grounds for disqualification, in order to determine if the disqualifying facts will be waived, before the parties have expended time or effort in preparing for a dispute before a tribunal which must otherwise be reconstituted. It may also be appropriate if there is any possibility that the judge's shareholding might be affected in value by the outcome of the litigation. Disclosure in such circumstances would allow relevant facts to be brought to the attention of the judicial officer and submissions to be made. The disclosure should emphasise that it is not the party's consent that is being sought but assistance on the question of whether grounds exist for disqualification (absent waiver). 106 Ormiston JA suggested (at 361) that there may be circumstances where a failure to disclose may, as a matter of evidence, provide a basis for a reasonable apprehension of possible bias. We would prefer to reserve our position on that particular matter, contenting ourselves with remarking that we feel some distaste in applying the principles of Jones v Dunkel (1959) 101 CLR 298 to the assessment of the conduct of a judge as distinct from the context of resolving the rights of litigant parties. 107 Statements are to be found in judgments and writings to the effect that it would be good practice for judges who may be concerned that some matter or association could possibly give rise to an apprehension of bias ought in those circumstances to disclose the matter or association. Obviously this may be prudent. And, like judicial courtesy, it may serve the interests of justice in that it removes unnecessary obstacles and difficulties. However it is a different matter to elevate cautious or even good practice into a legal principle that the failure to disclose in such circumstances is itself a ground for setting aside a judgment. The party that succeeded in litigation has interests too. 108 The Court was invited to lay down certain minimum requirements for disclosure. We would decline this invitation for several reasons. In the first place it places the Court in the invidious position of being something of a law reform agency in a matter that does not affect legal rights (cf Bateman's Bay Local Aboriginal Land Council v Aboriginal Community Benefit Fund Pty Ltd [1998] HCA 49 at 81 per by McHugh J). More importantly, it is beyond the capacity of a court seized with the obligation of deciding this and many other cases with dispatch. The intricacies of human behaviour and the varieties of relationship are such that any set of principles are bound to excite controversy for their over-inclusiveness or under-inclusiveness, lack of practicality, or other reasons. We are not saying that the task may not be useful in some areas. But the complexities of the task are such that it should not be embarked upon in a case such as the present which does not call for it. One has only to observe the details of the American legislation and the American Bar Association Code of Judicial Conduct to see the range of contestable choices offered, and the risks of over - or under - inclusiveness, if the path of codification is chosen (see generally Cominsky and Patterson, The Judiciary - Selection, Compensation, Ethics and Discipline (1987) chapter 4; Shaman & Ors, Judicial Conduct and Ethics (1990) chapters 5 and 8). 109 We accept the appellants' entitlement to have the cumulative effect of all of the matters relied upon in the assessment of whether they provide a basis for reasonable apprehension of bias. Nor have we overlooked the importance of the appearance of justice as an element of justice itself (The Queen v Watson; Ex parte Armstrong (1976) 136 CLR 248 at 259). 110 Speaking of the test for apprehended bias, Aickin J said in Re Shaw; Ex parte Shaw (1980) 32 ALR 47 at 54: It is a test which is not always easy to apply for it may involve questions of degree and particular circumstances may strike different minds in different ways. In our view the objective facts, when applied to the circumstances of this case, do not provide a reasonable basis for apprehension that Rolfe J diverted from his sworn duty to try the case according to law and without fear or favour, affection or ill will. 111 For these reasons it is unnecessary to decide the correctness of the respondents' ultimate fall-back position, which was to submit that the judgment should stand, even if a reasonable apprehension of bias is established. This was because one of the grounds upon which the cross-claim failed was the complete absence of evidence of damages suffered by the cross-claimants in consequence of the conduct about which complaint was made. 112 Since preparing these reasons we have had the benefit of reading the judgment of the Victorian Court of Appeal in Clenae Pty Ltd & Ors v Australia and New Zealand Banking Group Ltd [1999] VSCA 35. That case deals with a judge's own shareholding in a litigant party and involves special circumstances relating to necessity which are absent from the present case. We respectfully agree with what the Victorian Court of Appeal has written in relation to the scope of the Dimes principle. 113 The appeal should be dismissed with costs.
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.
DOVADE PTY LTD & ORS
WESTPAC BANKING GROUP & ANOR
[1999] VSCA 35
(1983) 151 CLR 447
(1986) 162 CLR 1
(1988) 180 CLR 491
(1989) 167 CLR 568
(1994) 181 CLR 41
(1983) 151 CLR 288
(1948) 76 CLR 1
(1992) 175 CLR 514
(1995) 184 CLR 281
(1986) 160 CLR 371
(1991) 102 ALR 453
(1988) 14 NSWLR 51
(1990) 19 NSWLR 677
(1910) 10 CLR 243
(1976) 136 CLR 248
(1995) 57 FCR 327
(1975) 132 CLR 270
(1991) 25 NSWLR 99
(1988) 12 NSWLR 358
(1983) 57 ALJR 376
(1986) 161 CLR 342
(1989) 17 NSWLR 472
(1959) 101 CLR 298
(1980) 32 ALR 47
[1998] HCA 49