This is the Court's second judgment in these proceedings, dealing with applications relating to monies paid into Court under Uniform Civil Procedure Rules 2005 ("UCPR"), r 55. In the Court's first judgment, the Court dealt with a Motion by the plaintiff, the Council, for payment of its costs and a Motion brought by other claimants to the funds in Court against the Council: An Application by the Council of the City of Sydney [2021] NSWSC 979 ("the first judgment"). This judgment should be read with the first judgment. Events, matters and persons are referred to in both judgments in the same way.
This judgment deals with the Chadhope parties' application that I disqualify myself from continuing to hear these proceedings based on the apprehension of bias principle. The application was made orally in the course of a directions hearing on the morning of 18 October 2021 and was refused. The Chadhope parties requested reasons for the refusal. These are those reasons. Upon the Court refusing the application for disqualification, the applicant asked for a stay of proceedings. The Court's reasons for declining that application are also given below.
[2]
Applicable Legal Principles
The applicable law is not in doubt. It is stated in Ebner v Official Trustee (2000) 205 CLR 337; (2000); 75 ALJR 277; (2000) 17 ALR 644; [2000] HCA 63 ("Ebner"). In Ebner the High Court stated the applicable principle in the following terms (at [6]):
"…[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. That principle gives effect to the requirement that justice should both be done and be seen to be done, 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."
The High Court said (Ebner at [7]) that the apprehension of bias principle is justified in "the importance of the basic principle, that the tribunal be independent and impartial". So important indeed is that principle that the High Court said "even the appearance of a departure from it is prohibited less the integrity of the judicial system be undermined" (Ebner at [7]).
The High Court further explained (Ebner at [8]) that the application of the apprehension of bias principle requires two steps:
"The apprehension of bias principle admits of the possibility of human frailty. Its application is as diverse as human frailty. 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".
The application of these principles in the present case is not complex. Mr de Robillard, speaking on behalf of both the Chadhope parties, argued that I should be disqualified from any further hearing of these proceedings on a proper application of the apprehended bias principle. I dismissed the application because it did not satisfy the first of these two steps in such an application: that is, it did not identify any matter which said might lead me to decide the case other than on its legal and factual merits. It was not necessary to consider the second step, but it was equally lacking in this case.
[3]
The Application to Disqualify
The context of the application is important. After a hearing on 5 July 2021, the Court gave a judgment of some 71 paragraphs, including orders on 5 August 2021, deciding a number of matters and adjourning the Council's Motion and the Chadhope parties' Motion for further hearing. That further hearing was to be on 12 August 2021. But the matter was not ready on that occasion and was adjourned to 18 October 2021. The Council's Motion and the Chadhope parties' Motion have now been adjourned for final hearing to 4 November 2021 for a further period of one hour and thereafter on the papers.
For the reasons given in the first judgment, the Court has declined to join either of the Chadhope parties as defendants to the Council's Summons and declined on procedural grounds to permit the Chadhope parties to pursue broad claims for relief against the Council in these proceedings: first judgment at [61] - [65]. The Court has also declined to join Maddocks Lawyers, the current solicitors for the Council as parties to the proceedings.
What now remains for determination on 4 November 2021 is limited. The Court will hear the part of the Chadhope parties' Motion which would reinstate Chadhope Pty Ltd to the register of companies under Corporations Act 2001, s 601AH(2) if the evidence in support of that application is in order on the adjourned date of the 4 November 2021. And the Court will consider whether the Council is entitled to deduct Maddocks Lawyers' fees from the funds in Court.
The application for my disqualification relates to the remaining issues in the proceedings, not to the first judgment. No application for me to disqualify myself was made before I gave the first judgment.
The Chadhope parties' contentions on their application for me to disqualify myself contain several general themes. They argued that my first judgment was wrong. That in of itself does not demonstrate bias; it merely demonstrates that the Chadhope parties have identified what they believe is in error in the first judgment that may lead to an appeal. The Chadhope parties also sought to identify as matters demonstrating bias, matters that I have not yet decided, and which are still open questions and upon which I have not expressed any views.
The Chadhope parties' submissions seek to identify several specific matters that they submit indicate that I might not decide the rest of the case on its legal and factual merits. Each of those matters will now be dealt with in turn.
First, the Chadhope parties argue that the first judgment proceeded upon an incorrect assumption that the Council is a trustee holding funds. Mr de Robillard argues that the Council's own accounts demonstrate that it does not control those funds and it is not a trustee.
Even if there is substance to the submission that the Council was not a trustee of the funds in question, the incorrectness of the first judgment on that issue would not demonstrate bias. If the Chadhope parties contend that the first judgment is not correct in this respect, they are free to seek to correct it on appeal, should they be granted leave to appeal. But it should also be observed that the first judgment does not decide whether the Council will be reimbursed for its costs on a trustee basis, or any other basis. That issue is expressly left open in the first judgment at [69].
Secondly, the Chadhope parties contend that the first judgment also incorrectly assumes there was a dispute inter partes for the Council to resolve. The Chadhope parties submit that there was no dispute to resolve and that the Council should have simply passed the funds to ASIC, as the Council had already decided by September 2020 that Ms McAndrews' claim could be dismissed.
But the Court has already given its reasons why it was open to the Council to file a Summons rather than pay the surplus sale proceeds to ASIC and this was discussed in the first judgment at [26] - [28]. The Court has decided that issue for the reasons given. Those reasons do not demonstrate that I would not decide the remaining issues on their legal and factual merits.
Moreover, it is to be remembered that all that remains in these proceedings is for the Court to deal with whether the Council will be paid its costs from the funds paid into Court and whether Chadhope Pty Ltd will be reinstated. The Chadhope parties' submissions do not show how the matter that they have sought to identify as an indicator of apprehended bias is logically connected with the remaining issues to be decided. None of the material relied upon here, or indeed in the Chadhope parties' other points, bears upon those remaining issues.
Thirdly, the Chadhope parties say that the only way to determine this matter "would have been to determine the Summons first" and then to decide later whether the Council was entitled to costs. But the Court has decided in the first judgment that the Council has availed itself of a legally available procedure to pay the money into Court. As the Court pointed out in the course of argument, it is possible when costs are being assessed in this case for the Chadhope parties still to argue that those costs were unnecessarily incurred such that the Council's claimed costs should be reduced to nil. That argument is not precluded, and the Court will hear it on 4 November, if it is raised. What is in substance a procedural criticism of the Court's reasoning in the first judgment can be questioned on appeal but does not raise the spectre of bias.
Whilst advancing this last argument the Chadhope parties submitted that there is no evidence that the Council has paid any money into Court. But this is not correct. As the Court pointed out during argument, the Court's records indicate that the Council has paid money into Court. The Court's records currently indicate that the sum of $51,171.66 is held in Court.
In a related submission, the Chadhope parties contend that they wish to investigate from which account the money was paid into Court by the Council. The first judgment decides not to enquire into that issue for the reasons it gave. If the first judgment is wrong, that can be demonstrated on appeal. But merely to observe that there is an argument that the first judgment is wrong does not enliven the apprehension of bias principle in this case.
Fourthly, the Chadhope parties submit that there is no agreement between Maddocks Lawyers and the Council such as would justify Maddocks Lawyers' fees being deducted from the funds in Court.
But this does not engage the apprehension of bias principle in this case. The quantification of any costs incurred by and allowed to the Council has yet to take place. Ancillary to that quantification the Court has made orders for Maddocks Lawyers to produce their fee agreements. The Chadhope parties complained on 18 October that the Council had not given full production of those costs agreements. The Court agreed with that submission and ordered Maddocks Lawyers and the Council to produce the complete costs agreements to the other side. Whether those costs agreements justify the charges that have been made has neither been finally argued nor decided. The Court has allowed the Chadhope parties to test this issue. Nothing in any of this could create an apprehension of bias on the part of a reasonable lay observer.
Fifthly, the Chadhope parties criticise the Court's apparent approval of the Council proceeding under Trustee Act 1925, Part 4, contending that is wrong, and that the Council has only relied upon UCPR, r 55.9. This does not show an apprehension of bias. The Court has set out its reasoning in the Court's first judgment (at [62]) that because the Council stands in the position of a trustee under Local Government Act 1993, s 720 that the Council has appropriately availed itself of the Trustee Act, Part 4. That is either right or it is wrong and if it is wrong, it can be corrected on appeal. But for the Court to state this in the judgment does not indicate that the Court might not decide the balance of these proceeding on their legal and factual merits. There is no ground for disqualification here.
Sixthly, the Chadhope parties next argue that the Court has "made numerous remarks during the first judgment that the Council has done nothing wrong in relation to the sale" and that "there is nothing improper about the sale and even if there were procedural problems, it is of no legal consequence". This is apparently a reference to what the Court has said in the first judgment at [44], applying Local Government Act, s 725. The Court has given its logical reasoning for reaching its conclusion on the subject. That reasoning can be made subject to appeal but does not engage the apprehension of bias principle.
Seventhly, the Chadhope parties submit that the Court in the first judgment is wrong in deciding that the "Council sought and obtained legal advice before proceeding with the sale". The Chadhope parties argue that the Council did not seek legal advice. The first judgment says what it does and if it is wrong, it is amenable to a properly argued appeal. It does not demonstrate that the remaining issues in the proceedings will not be determined on their merits.
Finally, the Chadhope parties argue that the Court has so far in the first judgment "interpreted facts almost to the point of unreasonableness". But this complaint seems to add little more to the previous complaints. In short, none of the matters raised provide any foundation for engaging the apprehension of bias principle in these proceedings.
[4]
Application for a Stay
Finally, upon my indicating that I would not disqualify myself from hearing the remainder of these proceedings, the Chadhope parties applied for a stay on the proceedings so that they could pursue an appeal against my decision not to disqualify myself.
I refused this application. The remaining issues in the proceedings are listed for hearing on 4 November 2021, which is over two weeks away. No decision will be made that would prejudice the interests of the Chadhope parties before then. If the Chadhope parties' wish to seek leave to appeal before then, they may do so, and if they are given leave to appeal then they can request the Court of Appeal to grant a stay. Nothing will happen to prejudice the Chadhope parties' position before 4 November 2021. There is no basis to grant a stay now.
[5]
Conclusions and Orders
For these reasons the Court will dismiss the recusal application. On 18 October 2021 the Court made several other procedural directions in preparation for the hearing on 4 November 2021. These are included below in addition to the order dismissing the recusal application. The Court makes the following orders and directions:
1. Note that for the purposes of these orders, the Motion of the plaintiff ("the Council") dated 18 May 2021 is referred to as "the Council's Motion" and the Motion brought by Cecilia McAndrew and Roger de Robillard as applicants and dated 5 July 2021 will be referred to as "the Chadhope Motion" and the applicants on the Motion will be referred to as the "Chadhope parties".
2. Note that the application by the Chadhope parties made orally today for me to disqualify myself is dismissed.
3. Note the Court has been asked for reasons for the decision to refuse the application to disqualify myself and they will be given this week by Friday, 22 October 2021.
4. The oral application made today by the Chadhope parties to stay the proceedings pending an application by them to appeal is also dismissed.
5. Note the Court has declined to allow the Chadhope parties to call on a Notice to Produce dated 5 July 2021, because it deals with the production of documents which relate to issues which the Court has determined in its judgment of 5 August 2021 that it will not be dealing with in these proceedings.
6. Direct the Council by 4pm on Wednesday, 20 October 2021 to produce to the Chadhope parties in full the costs agreement made between the Council and Maddocks Lawyers upon which the Council relies to justify the fees it has charged in these proceedings and which it seeks to recover under the Council's Motion.
7. The costs agreement referred to in these orders is produced upon terms that the Chadhope parties may not publish or disclose it to any third party and may only use it for the purposes of these proceedings.
8. Direct the Council by 4pm on Friday, 22 October 2021 to put on all the additional evidence on which it will seek to rely in relation to the costs it claims, including an estimate of costs for the proposed hearing on 4 November 2021.
9. Direct the Chadhope parties by 4pm on Monday, 1 November 2021 to put on all the evidence upon which they seek to rely on the issue of costs.
10. Note that the Court will extend time for the Chadhope parties to comply with Order 9 of the orders made on 5 August 2021 and the Court directs the Chadhope parties by 4pm on 1 November 2021 to send to the Associate to Slattery J and the solicitors for the Council a schedule clearly identifying the legal charge-out rate, disbursements and other items in the Council's claimed legal fees that the Chadhope parties dispute and argue should not be claimed from deduction from the Court.
11. If the Chadhope parties wish to proceed with the application to reinstate Chadhope Pty Ltd, (a) they should have evidence ready and filed by 1 November 2021; (b) their submissions should also be filed on that day setting out the basis for the reinstatement and explaining that they have complied with the relevant provisions of the Corporations Act 2001, and (c) if the application to reinstate is not ready to proceed on 4 November 2021, it will be adjourned into the Corporations List.
12. Direct the parties by 12pm on Wednesday, 3 November 2021 to exchange submissions on the issues of costs and to provide a list of affidavits upon which they seek to rely at the hearing on 4 November 2021.
13. List these proceedings for a final hearing of one hour in duration commencing at 2pm on Thursday, 4 November 2021.
14. The Court notes that it is contemplating making an order under Civil Procedure Act 2005, s 98(4)(c) by way of a gross sum costs order in respect of any costs that may be awarded to the Council and the Court expects the parties to include in their submissions any contentions in relation to the making of such an order.
15. The Court notes in relation to the hearing on 4 November 2021 that because of the amount in issue in these proceedings, the Court will (as requested by the Chadhope parties) permit the cross-examination of Mr Lucas on the question of costs but pursuant to Civil Procedure Act 2005, s 62(3)(a) the Court will limit that cross-examination to 45 minutes and the Chadhope parties should prepare their cross-examination economically in advance to comply with that limit.
16. The Court further notes if a good reason is given to apply for some minor variation to that time limit for cross-examination at the time of the hearing on 4 November 2021, the Court will hear that application on the day but the parties should anticipate that the Court will seek to adhere to that time limit as far as is reasonably practicable given the confined issues that are to be determined.
[6]
Amendments
26 October 2021 - [1] line 5 - "funds" instead of "fund".
[11] line 4 - "in" inserted before "error".
[19] line 4 - "money" inserted after "paid".
[23] line 2 - duplicate "that" deleted; line 8 - ", it" inserted after "wrong".
[28] line 6 - "to" instead of "can".
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Decision last updated: 26 October 2021