DUKE GROUP (IN LIQ) v PILMER & ORS

Supreme Court of SA|2001-08-13|Before: Duggan J, Bleby J, Doyle CJ

Judgment No. [2001] SASC 215

DUKE GROUP LIMITED (IN LIQUIDATION) v PILMER & ORS

DOYLE CJ An application has been made to me by the first defendants in an action in this Court (they are the partners of a firm of accountants in Perth, who practised under the name of Nelson Wheeler, and to whom I will refer as "NWP"), calling on me to decide that I am disqualified from taking any further part in the appeal to which they are a party before the Full Court. In the alternative, the application is made to the Full Court which has already partly disposed of the appeal. That Court comprises Duggan J, Bleby J and me. Submissions in support of the application were put to the Full Court.

The Full Court has before it an application by Mr Quilty, one of the second defendants in the action, Mr Somes, one of the fourth defendants in the action, and by the plaintiff, Duke Group Limited (In Liquidation) ("Duke"). The application made to the Court is that the Court should reopen and reconsider its decision on an issue decided by the Court after it had published reasons dealing with the substance of the appeal from the trial Judge.

NWP submits that matters of fact raised by an affidavit filed by the solicitors for Duke mean that my son's employment by Fisher Jeffries, the solicitors for Duke, and his involvement as a solicitor working on the case, have acquired a significance that they did not have before. NWP submits that the association between me and my son has now become a disqualifying factor, even though NWP and other defendants had earlier waived any objection to me sitting on the case.

What follows is a simplified summary of the proceedings so far. Further detail can be found in the decision of the trial Judge, Duke Group Limited (In Liq) v Pilmer & Ors [1998] SASC 6529; (1998) 144 FLR 1; in the judgment of the Full Court on appeal: Duke Group Limited (In Liq) v Pilmer & Ors [1999] SASC 97; (1999) 73 SASR 64, in the further reasons of the Full Court dealing with the issue which the Court is now asked to reopen: Duke Group Limited (In Liq) v Pilmer & Ors (No 2) [2000] SASC 418, (2000) 78 SASR 216 and in the decision of the High Court on appeal from the first decision of the Full Court: Pilmer & Ors v The Duke Group Limited (In Liq) & Ors [2001] HCA 31; (2001) 75 ALJR 1067.

Duke was originally called Kia Ora Gold Corporation NL. I will continue to refer to it as Duke. Duke sued the defendants for loss suffered by it as a result of a takeover by it of Western United Ltd. NWP was a firm of accountants who prepared a report, at the request of Duke by its directors, to be put before a meeting of shareholders of Duke, which meeting was asked to, and did, approve of the takeover. The report dealt with the price to be offered by Duke for the shares of Western United Ltd. The report advised that the price was fair and reasonable. The other defendants, who included Mr Quilty and Mr Somes, were the directors of Duke at the time.

Duke alleged that the report by NWP was prepared incompetently, and that the Directors breached duties that they owed to Duke.

The trial of the action is thought to have been the longest civil action in this Court, and possibly in Australia. It occupied some 471 sitting days. The Judge found for Duke against all defendants, and assessed damages at $93,863,796.81 including interest. The Judge published his reasons on 30 January 1998.

The action began as an action in which Duke was plaintiff and NWP was defendant.

Early in the proceedings NWP joined two directors of Duke, Mr Quilty and Mr Singleton, as first third parties. Later NWP joined another three directors of Duke, Mr Abbott, Mr Somes and Sir Ernest Lee-Steere as second third parties. Later still Duke joined the five directors as second, third and fourth defendants respectively.

On 15 April 1994 the Judge made a number of procedural orders. The effect of these orders may later fall for consideration. What follows is my summary of the orders made, without the benefit of full submissions.

The Judge ordered that the Defences filed by the directors to NWP's third party Statements of Claim stand as Defences filed by the director defendants to the Statement of Claim filed by Duke in the action. That avoided the need for the director defendants to file Defences.

The Judge also made orders relating to the position as between NWP and the directors in their capacity as third parties joined by NWP. He ordered that the pleadings between NWP and the director third parties have effect as "Contribution Notices and pleadings thereon" between NWP and the directors as defendants. On its face that order appears to provide for reciprocal contribution claims as between all of the defendants, but it may be that the order was intended to have some other effect.

The Judge also ordered that the pleadings between NWP and the directors as third parties have effect as "Third Party Notices and pleadings thereon" as between NWP and the director third parties. This order recognised the third party claim by NWP against the directors, and does not appear to provide for such claims by the directors against NWP.

The other order that the Judge made related to the position as between the fifth defendant and the director defendants, but as the fifth defendant has been found not to be liable, that order can be put to one side.

In his reasons (144 FLR at 131-132) the trial Judge dealt with the claim by NWP by third party proceedings for contribution or indemnity from the director defendants. He dealt with this claim by ordering, on the third party proceedings, that there be judgment for NWP for contribution to the damages payable to Duke as to 50 per cent by Mr Abbott, and as to 5 per cent each by the Mr Somes, Mr Quilty, Sir Ernest Lee-Steere and Mr Singleton. The effect of this was that, if all parties were able to meet their liabilities, NWP would have been liable for 30 per cent of the amount of the judgment.

The Judge also noted (144 FLR at 132) that the director defendants had not formally sought contribution from NWP, or from each other. In saying this, the Judge may have overlooked the order he had made on 15 April 1994, summarised above. In any event, the Judge gave liberty to each of the director defendants to apply for contribution against NWP and the other director defendants.

It appears that the director defendants did not pursue the application that they were given liberty to make, although this is not to say that that application is to be treated as abandoned. I note that Mr Quilty filed a submission dated 2 March 1998 in which he sought an indemnity or alternatively contribution from NWP.

Most of the defendants appealed against the trial Judge's decision, although some appeals fell by the wayside. The appeal was heard by the Full Court over fourteen days in November 1998. Mr Quilty did not appeal against the trial Judge's decision.

The reason for this is that in February 1998, four weeks after the trial Judge's decision, Mr Quilty and Duke had reached a settlement. The Full Court was informed of the fact of the settlement, and that Duke no longer sought an order against Quilty. The Full Court was reminded of the fact of the settlement during submissions on the question of contribution on 10 August 1999.

The Full Court upheld most of the findings of the trial Judge, and increased the amount of the damages awarded to Duke. We published our reasons in May 1999. We invited further submissions on the appeal by NWP against the contribution orders and on the question of contribution as between the defendants generally. The procedural position in relation to contribution between the defendants was not clear, but it is not necessary to go into the reasons for that at this stage.

The Full Court heard submissions on the question of contribution and other outstanding issues on 10 August 1999. The submissions put were quite brief, although they were supported by earlier written submissions. NWP, Mr Quilty and Mr Somes, sought to vary the contribution orders made by the trial Judge.

Mr Quilty did not appear at the hearing, although he had put in written submissions. Mr Quilty's written submissions appear to seek a reduction in the percentage of the liability apportioned to him, by reference to the 35 per cent reduction for contributory negligence that the Full Court would have ordered had it been open to it to do so. (In our reasons we found that Duke had been guilty of contributory negligence, that its damages in tort should be reduced by 35 per cent on account of its own fault, but that the contribution provisions in the Wrongs Act 1936 had no application because Duke's claim was for damages for breach of contract: see Duke Group Limited (In Liq) v Pilmer & Ors [1999] SASC 97 at [1080]; [1999] SASC 97; 73 SASR 64 at 300.) The submission did not challenge the approach that the trial Judge had taken in allocating a specific percentage to each defendant.

Mr Somes did appear at the further hearing, and he also filed a written submission. That written submission also referred to the apportionment of liability as between NWP and Duke the Full Court would have made had it the power to do so. By reference to that he argued that liability should be apportioned as to NWP 65 per cent, as to the defendant Abbott 17.5 per cent, and as to each of the other director defendants 1.75 per cent. In the alternative he argued that the apportionment of liability as found by the trial Judge should not be disturbed.

NWP appeared at the hearing, and also filed a written submission. Its written submission argued that the Directors should bear the primary liability, and that their contribution to the overall loss of Duke ought to be no less than 85 per cent. It was submitted that liability should be divided according to the ratio NWP 15 per cent, and the defendant directors 85 per cent. It was further submitted that Mr Abbott should bear 25 per cent "of the primary loss" and that Lee-Steere, Somes, Quilty and Singleton should bear 15 per cent each. I take that latter submission to be a reference to the manner in which the 85 per cent apportioned to the Directors should be apportioned as between the Directors.

The Full Court published further reasons in December 2000. On the claim by NWP for contribution from the directors, we ordered that the directors contribute to the extent of fifty percent of the liability of NWP. In this respect we departed from the basic approach of the trial Judge. This was a majority decision. The majority noted (78 SASR at [21], 222) that this order might be less favourable to NWP than the order made by the trial Judge, the effect of which was that NWP could recover in total seventy percent of its liability from the directors. Our reasons stated that we would allow NWP to consider whether, in light of that, it wished the Court to interfere with the order for contribution made by the trial Judge. We dismissed the appeals brought by two of the directors against the making of contribution orders against them. The Court invited the parties to prepare minutes of order to effect its decision.

The Full Court did not, during the submissions before it, intimate that it might depart from the trial Judge's approach of allocating a particular percentage to each defendant.

On 13 May 2001 the High Court published its reasons dealing with an appeal by NWP against the Full Court decision. The effect of that decision is that NWP remains liable to Duke, but the damages are reduced to an amount of about $20m plus a claim for loss of use of the money and for interest. The High Court remitted the matter to the Full Court to make orders consistent with the High Court's reasons. The parties have not yet asked the Full Court to do so.

Application to reopen appeal against the order apportioning liability

On 8 February 2001 Mr Quilty filed an application for an order that the Full Court reopen the hearing of the appeal in relation to contribution as between defendants. When we published our reasons in December 2000 we did not make orders, and so far have not done so. Mr Somes filed a similar application on 15 February 2001, and Duke filed its supporting application on 28 February 2001.

It is convenient to focus on the application by Mr Quilty. Mr Quilty submits that the approach that the Full Court took to the question of contribution was not one sought by any party in submissions to the Full Court. He submits that he is substantially prejudiced by the order made, an order on which he was not heard. He is now liable to contribute to NWP to the extent of fifty percent, not five percent as before. None of the written submissions having foreshadowed that an order would be sought on the basis made by the Full Court, he did not appear and has not had the opportunity to be heard.

An affidavit filed by Mr Quilty's solicitor shows that the terms of settlement between Duke and Mr Quilty, contained in a Deed dated 27 February 1998, contained an indemnity by Duke in favour of Mr Quilty, including an indemnity in respect of any liability on the part of Mr Quilty by way of a third party claim or contribution claim against him. The Full Court was aware of the fact of the settlement, but unaware of the terms and was unaware of this indemnity. The effect of the indemnity is that NWP may be able to recover fifty percent of the damages payable to Duke, through its claim against Mr Quilty for contribution. That is, NWP may be able to recover, through its claim against Mr Quilty, from Duke.

In support of the application filed by Duke to have the Full Court reconsider its decision, an affidavit sworn by Mr Sheahan, the liquidator of Duke, on 27 February 2001 was filed.

That affidavit states that after Duke had settled with Mr Quilty, NWP sought to restrain Mr Quilty from dealing with his assets. The application was not pursued when Duke (through Mr Sheahan) agreed that any entitlement of NWP against Mr Quilty by way of contribution could be set off against the liability of NWP to Duke under the judgment of the trial Judge. That arrangement was reached in August 1998, before the Full Court heard the appeal.

The relevant correspondence, which is exhibited to the affidavit, indicates that in August 1998 NWP was aware that Duke had agreed to indemnify Mr Quilty against any liability in the action by Duke, although NWP was apparently not aware of the other terms of the settlement agreement.

In October 1999, after the Full Court decision on the appeal, Duke reached a settlement with NWP and some only of NWP's professional indemnity insurers. Mr Sheahan says that Duke accepted "a substantial discount over the face value" of the judgment amount against NWP. Mr Sheahan says that he caused Duke to enter into this agreement relying on the manner in which the proceedings had been conducted by NWP to that stage, presumably a reference to its approach to the issue of contribution.

With reference to that agreement, Mr Sheahan says in his affidavit:

"Had I understood that Kia Ora was liable to have set off against its judgment against Nelson Wheeler, responsibility for all of the conduct of the common directors, including Harold Abbott, I would not have agreed to settle the proceedings with Nelson Wheeler and its professional indemnity insurers as I did."

Mr Myers QC, counsel for NWP, submits that it was improper of Duke to put before the Court the claim by Mr Sheahan made in the paragraph of his affidavit set out above. I understand that, when the application for the Full Court to reconsider its decision is heard (it has not yet been heard), he will object to the whole of Mr Sheahan's affidavit. On the other hand, as I understand it, he does not object to the affidavit filed on Mr Quilty's behalf which informs the Court of the fact of the settlement between Duke and Mr Quilty, and of the terms, including the indemnity.

For the purposes of the disqualification application, Mr Myers relied, however, upon the disclosure made by Mr Sheahan's affidavit.

It is necessary to record one further matter, in relation to the disqualification application. An affidavit sworn by Mr DeRuvo, one of the solicitors acting for NWP, states that my son is a solicitor employed by Fisher Jeffries and has worked on the claim by Duke since 1998 under the supervision of a partner in the firm, Mr Lipman. The affidavit states that my son was an instructing solicitor during the hearing of the appeal in November 1998, and had been involved in applications for a stay of the judgment of the Full Court, on some of which he appeared as junior counsel. The affidavit states that he appeared as junior counsel in the appeal to the High Court. The affidavit records that before the appeal was heard, I raised the issue of whether I should sit on the hearing of the appeal, in view of the fact that my son was employed by Fisher Jeffries and had been involved in the matter. The affidavit notes that counsel for NWP stated that NWP did not object to me sitting on the appeal.

Mr Myers advances two submissions based on the matters set out above.

The first is that Duke apparently relied on the understanding, deposed to by Mr Sheahan, about how Nelson Wheeler had conducted its case in relation to the issue of contribution, when Duke reached a settlement with certain of NWP's professional indemnity insurers. I take him to refer to an anticipated submission that Mr Sheahan made decisions on the basis that there would be no departure from the basis of the contribution order made by the trial Judge. Mr Myers submits that my son is a possible witness in relation to Mr Sheahan's understanding. The submission is put on that basis, that there is a possibility that my son might be called. Mr Myers said in the course of submissions that the "safe course" in such a case is for a judge not to sit, if a close relative is a possible witness.

In relation to this point, Mr Myers accepted that there was no reason to anticipate that my son would be called. He proposed to object to the tender of Mr Sheahan's affidavit. If it were tendered, he did not intend to cross-examine on it as things stood. Mr Whitington QC, counsel for Duke, said that my son would not be called. The possibility of him being called as a witness is clearly a remote one but cannot be excluded. Just what he might be able to say about Mr Sheahan's belief was never elaborated, and remains unclear to me.

The second submission by Mr Myers is that there is a possibility that Mr Sheahan might later sue Fisher Jeffries, claiming that he was not adequately advised about the implications of the indemnity given to Mr Quilty. Mr Myers submits that any such action would arise out of advice given in connection with a matter in which my son had been involved as a solicitor. He made it clear that, but for that, there would be no objection taken on this ground. In other words, the submission is not simply that there was a possibility of an action against Fisher Jeffries, my son's employer. Although Mr Myers did not spell it out, I proceed on the basis that underlying his submission is the assumption that a decision favourable to Mr Quilty, on the application by Mr Quilty now before the Court, might diminish the prospect of such an action being brought against Fisher Jeffries. In other words, the application by Mr Quilty is one which, if successful, might diminish the prospect of an action against Fisher Jeffries in the course of which, if any relevant advice had been given by my son, his advice might be impugned. As well it is a possibility, I suppose, that my son might become a defendant in the action. There is no evidence at all as to whether my son gave any relevant advice nor as to the extent of any dealings that he might have had with Mr Sheahan on any relevant matter.

When the appeals against the decision of the trial Judge were instituted, it was necessary for me to consider how they would be dealt with. In this Court the practice has been for the Chief Justice to supervise the listing of cases before the Full Court. It was obvious that the appeal would be a long one. I was aware that a number of members of the Court would be disqualified because of earlier involvement as counsel in connection with the litigation. The appeal being one that would require considerable preparation time by the Judges hearing it, and considerable time to prepare the judgment, it was necessary to allow for commitments by other members of the Court that might mean that it was not appropriate to list them to sit on the appeal. The end result was that the number of judges available to hear the appeal was relatively small, although it was possible to constitute a Full Court without me sitting on it.

In accordance with the usual practice for appeals that require special consideration, I held a number of informal management or directions hearings. Before the first of those, my Associate wrote to the parties on 12 March 1998 asking them to indicate which judges were disqualified, and to give brief reasons.

At a directions hearing on 2 April 1998, the parties gave me information about judges who might be disqualified. On that occasion I informed the parties that my son was working for Fisher Jeffries. The transcript of the directions hearing records that I said:

"My son is working for Fisher Jeffries and I think he is doing some work on this matter, although for obvious reasons I don't discuss it with him, but I think from odds and ends I've heard he is."

I assumed that the parties could and would obtain any details they required from Fisher Jeffries. I told the representatives of the parties that I wanted them to inform any parties not attending the directions hearing about this matter. Not all of the parties attended the directions hearings. No objection was made to me sitting on the appeal, and counsel for certain parties stated that their clients did not object. At a directions hearing on 28 April 1998 I told the parties' representatives that the Court was likely to comprise Justices Duggan and Bleby and me. At this further directions hearing I asked the legal representatives to check with their clients, once again, if there was any objection to me sitting on the appeal. I made the point that as the hearing of the appeal got closer, it would become more difficult to change the composition of the Court. I asked the parties to confirm in writing that there was no objection to me sitting. I reminded those present of my son's employment at Fisher Jeffries and of the fact that he had done work on the matter. Subsequently the solicitors for NWP wrote to my Associate on 24 April 1998 informing the Court that NWP had no objection to me sitting on the appeal.

Ordinarily, these events would amount to a waiver of any objection by NWP to me sitting on the appeal. The present objection is based on a material change of circumstances, events that have occurred subsequently. It is necessary for me to consider whether circumstances occurring since NWP said it had no objection to me sitting are such that there is now a proper basis for an objection to me sitting, that has not been waived by NWP.

Decisions of the High Court state authoritatively the principles to be applied in a case like this. In Ebner v Official Trustee In Bankruptcy [2000] HCA 63; (2000) 75 ALJR 277, Gleeson CJ, McHugh, Gummow and Hayne JJ said at [6]:

"Where, in the absence of any suggestion of actual bias, a question arises as to the independence or impartiality of a judge (or other judicial officer or juror), as here, the governing principle is that, subject to qualifications relating to waiver (which is not presently relevant) or necessity (which may be relevant to the second appeal), a judge is disqualified if 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 (R v Watson; Ex parte Armstrong [1976] HCA 39; (1976) 136 CLR 248; Re Lusink; Ex parte Shaw (1980) 55 ALJR 12; Livesey v New South Wales Bar Association [1983] HCA 17; (1983) 151 CLR 288; Re JRL; Ex parte CJL [1986] HCA 39; (1986) 161 CLR 342; Vakauta v Kelly 91989) [1989] HCA 44; 167 CLR 568; Webb v The Queen [1994] HCA 30; (1994) 181 CLR 41; Johnson v Johnson [2000] HCA 48; (2000) 74 ALJR 1380). That principle gives effect to the requirement that justice should both be done and be seen to be done (R v Sussex Justices; Ex parte McCarthy [1924] 1 KB 256 at 259, per Lord Hewart CJ), a requirement which reflects the fundamental importance of the principle that the tribunal be independent and impartial. It is convenient to refer to it as the apprehension of bias principle."

"Deciding whether a judicial officer (or juror) might not bring an impartial mind to the resolution of a question that has not been determined requires no prediction about how the judge or juror will in fact approach the matter. The question is one of possibility (real and not remote), not probability."

They also made an important point about how the apprehension of bias principle should be applied. They said at [8]:

"Its application requires two steps. First, it requires the identification of what it is said might lead a judge (or juror) to decide a case other than on its legal and factual merits. The second step is no less important. There must be an articulation of the logical connection between the matter and the feared deviation from the course of deciding the case on its merits. The bare assertion that a judge (or juror) has an 'interest' in litigation, or an interest in a party to it, will be of no assistance until the nature of the interest, and the asserted connection with the possibility of departure from impartial decision making, is articulated. Only then can the reasonableness of the asserted apprehension of bias be assessed."

In the present case the matter relied on is the association of parent and child that exists between me and a solicitor employed by Fisher Jeffries, the solicitors for Duke. To that is added the fact that there is a possibility that the solicitor will become a witness in relation to an application now before the Court, and the further possibility that advice given by Fisher Jeffries to the liquidator of Duke, in which advice the solicitor might have been involved, might become the subject of a negligence claim by the liquidator of Duke against Fisher Jeffries, if the application made to the Court is not successful. It can be said that the application before the Court is one which, if decided in a certain manner, would diminish the possibility of a claim against Fisher Jeffries.

What then is the connection between this association, assessed in its context, and a reasonable apprehension that I might not bring an impartial mind to the resolution of the applications by Mr Quilty, Mr Somes and Duke?

As to the first matter, the submission is presumably that a judge should not decide a question of a witness's credit or reliability, if that witness is a close relative of the judge. A fair-minded observer might reasonably apprehend that the Judge might be inclined to accept the credibility or reliability of testimony given by a close relative. As to the second matter, I assume (although it was never spelt out), the submission is that because a decision to restore the Judge's decision as to the extent of Mr Quilty's liability to contribute, or a decision that reduces the extent of his liability to contribute, would reduce the risk of a negligence action that might involve a consideration of the soundness of advice given by my son, a fair-minded observer might have a reasonable apprehension that I might not bring an impartial mind to the resolution of the application. Such an observer might apprehend that I would be inclined to grant Mr Quilty's application (and the other applications) because that would reduce the risk of litigation raising the soundness of advice that might have been given by my son.

It is generally accepted that a judge should not sit in a case in which a person who is a close relative will be a witness, except, perhaps, if the person is a witness only to formal matters or matters not in dispute. The reason is obvious - a fair-minded observer might apprehend that the judge would favour the credibility and reliability of such a witness.

The principle is clear. It is its application in the circumstances of the case that requires consideration here.

The likelihood of my son giving evidence before the Full Court on the applications by Mr Quilty, Mr Somes and Duke is very slight. No one anticipates that he will be called. As things stand, I cannot envisage any admissible evidence that he could give about Mr Sheahan's reasons for reaching a settlement with the insurers or, if this matter is raised also (I did not understand Mr Myers to raise it) for reaching the settlement with Mr Quilty. The prospect of my son being a material witness on the applications is slight indeed.

The decision that I must now make is not made on a "now or never" basis. Should it later happen that my son is to be called, I could then reconsider the question of disqualification. Nor am I in the position of a Judge deciding, at the outset of a matter, the safer or more convenient course to follow before the case begins. It is my duty to continue to sit on this case unless I am disqualified.

I am satisfied that the prospect of my son becoming a witness on anything of substance in relation to Mr Quilty's application is sufficiently remote for me to say that I should not disqualify myself on the basis of my association with a person who is a possible witness, but most unlikely to be a witness.

Association with a person whose interests might be affected by the decision of the Court

In considering the second basis upon which Mr Myers advanced his submissions, it is necessary to be a little more precise about the issue.

As I have said, what is raised is my close association with a person whose prospects of being involved in other possible proceedings might be affected by the decision of the Full Court. A decision that Mr Quilty's contribution to the judgment against NWP should be limited to five percent would restore the position as it was when Mr Sheahan agreed to settle with him, and appears to me to rule out any possible action against Fisher Jeffries. A decision to take the same approach as the trial Judge (the assessment of a separate percentage for each defendant) but to assess Mr Quilty's contribution at a figure greater than five percent, would expose Duke once again to the risk of a greater reduction in its damages than the five percent that it faced when it settled with Mr Quilty, but this is a possibility that must have been contemplated when Duke agreed to give Mr Quilty an indemnity. Adherence to our original decision will expose Duke to the risk of having its damages reduced by 50 per cent, in circumstances that Mr Sheahan says were not foreseen by him when, in October 1999, he caused Duke to reach a settlement with NWP and some of its insurers.

I accept that a decision by the Full Court on the application by Mr Quilty is capable of affecting the possibility of an action of the kind identified by Duke against Fisher Jeffries. I also accept the possibility of my son's advice being raised in that action, and the possibility of the competence of that advice being questioned, if all these things come to pass. There is nothing before the Court indicating whether or not he was involved in the giving of relevant advice. Therefore, I consider that I should approach the application made by Mr Myers on the basis that a close relative possibly has an interest in the outcome of the application, the interest of that close relative being a financial one and a personal one, in the sense of reputation.

That possible interest exists because of the possibility of, and depends on, my son having been involved in the giving of the relevant advice to Mr Sheahan about settling with Mr Quilty and about settling with NWP and some of its insurers. The strength of the possibility depends upon the likelihood of Mr Sheahan later claiming that the advice given to him by Fisher Jeffries was not competent advice, and deciding to make a claim against Fisher Jeffries on that basis. In assessing the strength of the possibility it is relevant to recall that at the time my son was a junior solicitor in the firm.

One way to approach the matter is to apply the approach taken by the majority in Ebner to an assertion that the Judge had a pecuniary interest in the outcome of the case. In Ebner the majority said at [36]:

"..... the primary factual consideration [to be] addressed was whether there was a realistic possibility that the outcome of the litigation would affect the value of the relevant judge's shareholding in the Bank."

Applying that approach to this case, one can pose the question whether there is a realistic possibility that the Full Court's decision on the application by Mr Quilty will affect my son's financial or personal interests. I emphasise, as did the majority in Ebner that this is ".... a relevant factual consideration", not the ultimate test.

This is a question that has to be answered now. There is no indication that any further relevant information will come to light.

There is a possibility that the outcome of the application will affect my son's financial and personal interests, although it seems a slight possibility. It is a possibility that, on the facts, I cannot dismiss as fanciful or extremely remote. I have difficulty quantifying the possibility beyond that.

On the other hand, I must set against this the fact that once I sat on the case, I was sitting on a case in which a close relative had a professional involvement. A fair-minded observer must be taken to know this. In that setting there is always a possibility of that involvement giving rise to a claim against the close relative, if a decision of the Court on some aspect of the case is adverse to the litigant with whom the close relative has a professional involvement. There is also the possibility that in the course of dealing with the case, some aspect of the close relative's professional conduct will have to be considered by the Court, for example, if that person failed to take a required procedural step within the required time. In identifying this point I do not say that NWP has waived the objection now raised. But the objection now raised is an objection of a kind that has always been a theoretical possibility in the case, and the principle stated in Ebner is to be considered in that context.

In my opinion a fair-minded lay observer would not regard it as a real possibility that I might not bring to Mr Quilty's application an impartial mind, merely because of the slight possibility that the Court's decision on that outcome might affect my son's financial and personal interests. I consider that the hypothetical observer would take account of the fact that the possibility is slight. The hypothetical observer would also take account of the fact that the matter raised by Mr Myers crystallises as an actual possibility what was always a possibility, that is, the possibility of a decision by the Court in connection with the case affecting the personal or financial interests of the solicitors involved in the case. In Ebner the majority said at [19] that an objection to a Judge should not prevail "unless it is based upon a substantial ground for contending that the Judge is disqualified from hearing and deciding the case". In my opinion the present case raises, as a ground for disqualification, the possibility of an effect on the interests of a person with whom I am associated, which possibility is sufficiently remote for one to say that a fair-minded observer would not reasonably apprehend that I might not bring an impartial mind to the resolution of the question before the Court.

When the application by Mr Quilty and Mr Somes is heard, it may be that the affidavit of Mr Sheahan will be held to be inadmissible, or inadmissible at least as to the part of it that has given rise to the objection to me sitting. Submissions have not yet been put on that matter, although Mr Myers has foreshadowed an objection to the affidavit. Even if that were to happen, the Court has now had the relevant matters of fact drawn to its attention and I consider that a later decision that the affidavit is not admissible would not remove the basis of the objection to me sitting.

This is not a case in which the objection can be disposed of on the grounds that it is necessary for me to continue to sit. The Full Court can be constituted of two or more Judges. The remaining Judges can deal with the applications in question, and once they have done so, I can continue to sit on the matter, subject to any further objection that might be made. It is inconvenient for the Court to be constituted of two Judges only, in particular because that raises the possibility of an evenly divided Court. However, I consider that something more than that is required before it can be said that necessity overrides a proper objection to me continuing to sit.

There is another matter which arose relatively recently, to which I should refer. Some time back I heard applications by some of the defendants in the action for orders staying the enforcement of the judgment against them. Those orders were granted on terms. The applications were vigorously contested, and the hearing of them occupied some time. On the stay applications, for reasons which are not presently material, the relevant defendants were represented by solicitors other than the solicitors acting for NWP during the action. I will refer to these solicitors as the stay solicitors. On 4 July 2001 the stay solicitors filed an application for an order discharging the stay that I granted, ordering that amounts that I required to be paid into Court be returned to the defendants, and discharging or terminating other orders which were a condition of the stay granted to the first defendants. The stay solicitors requested that the application be made returnable before me. In the ordinary course of things that was the appropriate thing to do, bearing in mind that I had heard and dealt with the stay applications, and that they were sufficiently complicated for it to be desirable that the same judge should deal with the further application, were that practical.

In due course the solicitors for Mr Quilty became aware of the application. Mr Quilty's solicitors then filed a submission to the effect that the making of this further application to me amounted to an acquiescence on the part of NWP in my continued involvement in the action, and, presumably, a waiver of any objection that might otherwise exist to me continuing to sit. They made the point, quite rightly, that in submissions before the Full Court Mr Myers had indicated that NWP objected to me taking any further part in the proceedings, and not just to me sitting on the application by Mr Quilty. The stay solicitors then wrote to my Associate stating that they applied to have the application made returnable before me because of my previous involvement in the stay application, and that if there was any difficulty about me dealing with the stay application, they wished another judge to deal with the matter.

In the circumstances, I am firmly of the view that the application by the stay solicitors does not amount to a waiver of any objection that there might be to me continuing to participate in the main proceedings. The application for a variation of the orders staying enforcement of the judgment is a separate matter, and as things stand I am not disposed to accept the submission by Mr Myers that I am disqualified from taking any part at all in the main proceedings. My present view is that if I am disqualified, I am disqualified only in relation to the application now made by Mr Quilty. In any event, I would not regard the mere making of an application to have a matter specially returnable before me, which never went beyond that, as amounting to a waiver of an objection to me sitting, if there were a proper objection to me sitting.

It is implicit in everything that I have said that I take the view that the challenge to me continuing to sit should be determined by me, and not by the Court as a whole. That was said to be the usual practice and the correct practice in Ebner at [74], admittedly in the context of an application made to a single Judge.

In a number of cases reference is made to the course that should be followed by a judge when an application is made to a judge that the judge should cease to sit in a matter. Were it not for the fact that the Full Court, as it is presently constituted, has had a lengthy involvement in this matter, I would have taken the view that it was preferable that I should not sit, and would have made arrangements for another judge to sit. I would have done so, not because I consider that the matters relied upon by Mr Myers constitute disqualifying circumstances, but because as a matter of prudence, had the matter arisen at an early stage of the proceedings, it would have been preferable not to sit on the matter if there is a basis for arguing that I am disqualified, and if any possible objection to me sitting has not been waived. However, as is apparent, the issue with which I am now dealing has arisen at a relatively late stage in the case, and it is for that reason that it is not appropriate for me to follow what would otherwise be the prudent course.

For those reasons I propose to sit on the applications now before the Court made by Mr Somes, Mr Quilty and by Duke.

At a glance

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Judgment (86 paragraphs)

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Cases Cited (11)